Current Events in January 2011

Most people who have a credit card are aware of their credit limit. But lately issuers have been providing some cards with No Pre-set Spending Limit (NPSL), which sounds like a good card to have.

Plenty of credit experts say it isn't.

The problem with unlimited credit is how it affect your credit, or FICO, score. CardHub.com produced a study of NPSL cards and how they dragged down FICO scores. The problem, they found, was in how these card issuers determined "credit utilization," a key part of the credit score.

The study also found:

• The way that most issuers report NPSL cards often creates high utilization ratios on these accounts.

• The credit card companies that were least transparent in disclosing this information were U.S. Bank and HSBC. These issuers declined to answer questions related to the study even though this information is readily available to their competitors.

• NPSL cards lack the predictability of traditional credit cards, and therefore consumers who use these cards run the risk of being declined at point of sale when making large purchases.

The issuers who have NPSL cards that get reported in a way that do not affect the credit utilization ratio that FICO uses are Chase and Citi.

A hassle

The credit reporting drawbacks of these cards, coupled with the fact that No Pre-Set Spending Limit does not mean unlimited spending power as the name suggests, make these cards much more of a hassle than traditional credit cards, the study concluded.

"Consumers who use these cards are not able to manage their accounts the way they can with traditional credit cards, making them vulnerable to hits in their credit scores," the authors wrote.

Because a NPSL card does not have a credit limit, it makes it difficult to determine a consumer's credit utilization ratio, which is an important variable in calculating consumer credit scores. The credit utilization ratio is the percentage of available credit that a consumer uses.

According to FICO, the "Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts)" is factored into the "Amounts Owed" portion of a consumer's score, a portion that counts for almost 30 percent of the total score.

Compounded confusion

The study says this confusion is compounded by the fact that each credit card issuer reports NPSL credit cards differently to the credit bureaus. In order to understand how the NPSL cards from different issuers affect customers' credit scores, the website contacted representatives from the 10 largest credit card issuers, based on outstanding balances. It also contacted a representative from FICO to understand what information FICO uses to calculate utilization ratios.

"Based on the results of these inquires, we found that not all NPSL cards are included in the credit utilization variable of consumers' credit scores," the authors write. "A FICO spokesperson confirmed that these cards are only included in the utilization ratio if their trade line is categorized as a revolving credit card and either a credit limit or high balance amount is reported. Additionally, if the account is reported as an open line of credit, as opposed to a revolving credit card, it will be excluded from utilization calculations."

The FICO representative explained that in the absence of a reported credit limit, FICO will look to the high balance to use as the 'limit' in utilization ratios. A high balance or high credit is the highest balance reported to the credit bureaus, sometimes within a certain time period and sometimes over the life of the account.

Is there any good reason to have a NPSL card? It depends. Some NPSL cards offer attractive rewards, like generous air miles, and include perks not available on other cards. Still, those benefits should be weighed against a possible hit to your credit score.

Killer drywall? The U.S. Centers for Disease Control and Prevention (CDC) says no. The CDC investigated 11 deaths of people who had lived in or visited homes that contained Chinese drywall that caused unpleasant odors, corroded metals and made homes uninhabitable.

The CDC reviewed each of the deaths, which occurred in Louisiana, Virginia and Florida but said it found no evidence that the drywall was a contributing factor in any of the deaths.

However, the CDC said government agencies should continue monitoring health reports involving exposure to imported drywall.

The problem was originally blamed on a shortage of American-manufactured drywall, ostensibly due to the housing boom and extensive construction in the wake of Hurricane Katrina. Recently, however, suspicions have arisen that the problem dates back further. Some Florida experts have suggested that the defective drywall was installed as early as 2004.

Many homeowners complained of headaches, dry eyes, and bloody noses, among other allergy-like symptoms, but the most serious documented damage was to wiring and appliances that were damaged by sulfuric gases emitted by the Chinese drywall.

In Louisiana, the CDC team reviewed five deaths involving persons aged 59-78. All five had multiple long-term, severe, preexisting chronic health conditions including heart disease, cancer, diabetes and lupus.

In Virginia, an 82-year-old person who suffered from chronic heart disease died of pneumonia. The medical examiner found no clinical evidence that exposure to sulfur gases played any role in the death.

In Florida, five deaths involved individuals aged 60-86. All had severe preexisting health conditions. Four had cancer, two had chronic obstructive pulmonary disease and another was suffering from Alzheimer's disease.

"Based on the review of the records and available information by the state public health authorities exposure to imported drywall was not believe to be a contributing factor in these deaths," the CDC's report said.

The CDC study was requested by the U.S. Consumer Product Safety Commission (CPSC), which has been leading the federal government's response to the problem. CPSC said it is "in the final stages of competing its scientific investigation" into the problem drywall.

Connecticut Attorney General George Jepsen today announced a $4.25 million settlement with one of the world’s largest reinsurance brokers, Guy Carpenter & Company, LLC, and Excess Reinsurance Company, ending a landmark antitrust case that began in October 2007.

The settlement resolves claims that Guy Carpenter orchestrated a series of conspiracies in the reinsurance industry that illegally inflated insurance and reinsurance costs nationwide.

Under terms of the agreement, Guy Carpenter and Excess Reinsurance deny all liability, but will pay the state $4.25 million to settle the lawsuit. In addition, Guy Carpenter will undertake significant nationwide business reforms, including enhanced disclosure and a formalized system for obtaining competitive quotes to ensure its clients receive the best rates and terms for insurance.

“Like the lawsuit, this settlement is ground-breaking in that it requires Guy Carpenter and a number of reinsurers to change the way they conduct business – not just in Connecticut, but on a nationwide basis,” Jepsen said. “As a result of the business reforms that Guy Carpenter has agreed to, the market for reinsurance will be more transparent, more competitive and, ultimately, may lead to lower prices for insurance.”

The litigation against the two companies was the first of its kind brought by an antitrust enforcement agency – state or federal—in the reinsurance industry, and previously resulted in a $1.3 million settlement with The Hartford Financial Services Group in October 2009. Terms of the latest settlement remain in effect for five years.

Reinsurance is purchased by insurance companies to cover exposure to claims on the policies they write. Because the cost of reinsurance is typically passed on to consumers, anti-competitive practices by reinsurers drive up prices to individuals and businesses purchasing the coverage.

Anti-competitive practices can also hurt other reinsurance companies seeking to compete for the business in an open market.

Jepsen commended Guy Carpenter and Excess Reinsurance for agreeing to the settlement. “Guy Carpenter has chosen to make significant changes to the way it does business. These changes will not only benefit its clients, but the reinsurance industry in general,” Jepsen said.

The state sued Guy Carpenter in 2007 for allegedly orchestrating a series of conspiracies with dozens of reinsurers, including Excess Re in which Guy Carpenter was a part owner, which illegally inflated costs for insurance companies and consumers nationwide over several decades.

According to the allegations in the complaint, Guy Carpenter created select groups of reinsurers, which it called “facilities,” and funneled lucrative reinsurance business to those co-conspirators for undisclosed commissions and other benefits. The reinsurers in the groups agreed not to compete against the prices or terms set by Guy Carpenter for the business. The practice essentially created a closed market that Guy Carpenter said was “insulated from competition” or any market forces. The state’s investigation showed the practice pushed up costs 10 to 40 percent in some cases.

The complaint alleged that the facilities were used to provide reinsurance to Guy Carpenter’s smallest clients, those who were relying on the broker’s expertise to obtain the best coverage at the lowest prices. Guy Carpenter never disclosed its relationship with the other companies in the

facilities or that it was often setting the price and terms for reinsurance contracts.

Consumer crusader Ralph Nader is calling on Fiat to recall 1993-2004 Jeep Grand Cherokees, saying they are "a modern day Pinto for soccer moms with a fuel tank located dangerously behind the rear axle in the crush zone of an impact. "

"Now that Fiat has purchased Chrysler, it has the moral obligation to remedy the deadly fuel tank design in the Jeep Grand Cherokee before more innocent victims are burned today, not only in the United States, but also in Europe,” Nader said in a speech in Milan, Italy, where he had received an award from an automotive magazine.

The National Highway Traffic Safety Administration (NHTSA) has been conducting an investigation of the problem and could order a recall of 3 million of the vehicles. Chrysler has defended the Jeeps and said they do not pose an unusual risk.

NHTSA opened its investigation in August 2010 after finding that the fuel tank may have been linked to 22 crashes and 14 deaths. But the Nader-founded Center for Auto Safety says it has found 44 accidents in which the fuel tank has burst into flames, causing 64 deaths.

"The victims include mothers like Susan Kline who had just dropped her two children off at school and was hit from behind by a 2004 Toyota Sienna when she slowed her 1996 Grand Cherokee for a car stopped in front of her," Nader said in a statement on the Center for Auto Safety Web site. 

"Her door jammed shut in the crash and Mrs Kline struggled unsuccessfully to get out the passenger side but was burned alive." 

Nader cited two other fatal accidents and said that in all three crashes, "the striking vehicles had low front ends that submarined under the Jeep and into the fuel system structure behind the rear axle."

While Fiat is not responsible for the design of the 1993-2004 Grand Cherokee, "It has the moral obligation to remedy the deadly fuel tank design in the Jeep Grand Cherokee before more innocent victims are burned today, not only in the United States, but also in Europe where Chrysler marketed the Grand Cherokee since 1994 in its Build Up for Export (BUX) plan."

Nader noted that when DaimlerChrysler owned the Jeep brand, Daimley ordered the fuel tank moved to a safer location, beginning with 2005 models.

The subcompact Ford Pinto was recalled by Ford in 1978 after Nader and other safety advocates claimed it was unusually prone to burst into flames in rear-end collisions.

As millions of Americans prepare to tune into the Super Bowl this weekend, remember that a little common sense can keep the excitement on your TV screen and out of your living room.

“I’ve seen a number of injuries, some fatal, occur on Super Bowl Sunday because people often pay more attention to the game than to their health and safety,” said Dr. Jeff Kalina, associate medical director of emergency medicine at The Methodist Hospital in Houston.

Kalina said the ER is usually busy every year after the big game and he and his colleagues expect it to be no different on Sunday.

While the activities that can lead to injury are obvious, like drunk driving, others, like eating too much junk food, may seem completely harmless until the damage is done.

Kalina said stomach ailments, some severe, can occur from combining too much alcohol with too many salty, calorie-dense snack foods.

Combining too much alcohol with the urge to watch Superbowl commercials can also lead to an embarrassing condition known as urinary retention, a condition where the bladder gets so full the muscles are not strong enough to generate a stream.

“During most sporting events people will get up and use the restroom during the commercials and not have any problem,” said Kalina.

But since the commercials can sometimes be the best part about Superbowl Sunday, many people forgo bathroom breaks. Kalina said the only remedy for a full, exhausted bladder is a catheter.

Adding to the list of alcohol-related injuries that can occur on Super Bowl Sunday is a potential for domestic violence.

“There is a lot of testosterone flying around during the Super Bowl. You mix that with alcohol and underlying relationship problems and you have a recipe for disaster,” said Kalina.

Kalina recommends women who have a potentially violent husband on their hands should consider staying away from the house or party that night. (Or, perhaps, the overzealous hubby can stay at a buddy’s house that night until he cools off?)

Kalina has seen all types of cases following the Super Bowl, many of which included too much alcohol: a man so drunk he broke his teeth trying to open a beer bottle, people who threw out their backs by abruptly standing to cheer, and one guy so unhappy with his losing team that he threw his television out the window of his third floor apartment.

Luckily no one was on the street below.

Kalina's advice for staying safe is something many football junkies might have a hard time doing: remember, the Superbowl just a game.

“Don’t drink too much, don’t eat too much, and get up and go to the bathroom. Doing all these things will make your gathering and viewing of the Big Game much more enjoyable.”

Last week the State of Oregon pulled out of a class action settlement with Countrywide Financial and filed its own action against the subprime lender, claiming its deception led to massive losses in state pension funds.

This week the State of Michigan has followed the lead. Attorney General Bill Schuette and Treasurer Andy Dillon say the state's action against Countrywide Financial Corporation, its underwriters, auditor and some of its former executives and directors, seeks to recover $65 million in taxpayer-funded state pension funds. 

Schuette filed the lawsuit in the U.S. District Court for the Central District of California, accusing the defendants of participating in a massive corporate fraud scheme that depleted State of Michigan pension funds by millions of dollars.

"Protecting the hard-earned dollars of Michigan taxpayers from fraud is one of my top priorities," said Schuette. 

The complaint

In the complaint, the Attorney General's office alleges Countrywide had effectively become a subprime lender while telling investors that it continued to maintain stringent mortgage loan underwriting standards that differentiated it from its competitors and subprime lenders. 

Throughout the March 12, 2004 through March 7, 2008 time period, Countrywide assured the market that it should not be affected by a downturn in the housing market.  However, during that period, Countrywide's stock price dropped about 90 percent, from over $35 per share to about $5 per share. 

The suit claims this came as a result of disclosures revealing Countrywide's lax mortgage underwriting guidelines, cascading mortgage defaults, and an increased use of "pay option" adjustable rate mortgages, no documentation mortgages and other risky loan types.  This represented a loss of market capitalization of approximately $17 billion.  The State of Michigan Retirement Systems lost over $65 million.

Inflated stock prices

Michigan further claims that Countrywide's stock was artificially inflated during the class period because defendants made these false and misleading statements, which concealed their fundamental shift in core mortgage-related business strategy.  In addition, Countrywide also misstated their financial statements because reserves for loan losses, representation and warranty liability were materially understated.

"Nearly 540,000 participants and beneficiaries are depending on State Pension Funds to secure their retirement," said State Treasurer Andy Dillon. "We take our obligation to protect those funds very seriously."     

The State of Michigan Retirement Systems (SMRS), which invests on behalf of Michigan Public School Employees, State Employees, State Police and Michigan Judges, hold combined assets of approximately $47.5 billion, making the SMRS one of the largest pension systems in the nation. 

Countrywide Financial is currently owned by Bank of America.

A chain of tanning salons that ran afoul of Colorado consumer authorities has agreed to change its ways, pay fines and restitution and settle a lawsuit brought by the state.

Colorado Attorney General John Suthers brought the suit against Oklahoma-based At The Beach after a number of consumers complained they were misled by sales personnel working for the company. The agreement requires At The Beach to pay an estimated $350,000 in consumer restitution, fines and attorney fees and requires that At The Beach halt its deceptive sales practices and record all of its future sales.

"This agreement is a victory for the hundred of Colorado consumers who felt that At The Beach was not engaging in fair sales practices," Suthers said. "We believe the company's agreement to record all sales transactions will deter future misconduct, and is evidence of the company's desire to change its sales practices."

Cost of cancellation withheld

In practices similar to those cited in complaints about some health clubs, At The Beach allowed its employees to misrepresent that consumers could "cancel their contract at any time," according to the state's complaint.

For the investigate, state officials interviewed both former employees and customers of At The Beach. They say they were told that the company failed to disclose that cancellation would require payment of half of the remaining cost of the contract. Consumers also said they first learned of the cancellation fee when they attempted to cancel.

Consumers will be eligible for restitution if they have already filed a written complaint with the Colorado Attorney General's office or the Better Business Bureau. The Office of the Attorney General estimates that more than $100,000 will be refunded to more than 300 past At The Beach customers.

The company also will be required to pay an additional $75,000 to the state to be used to reimburse consumers who file complaints going forward.

Requirements

The settlement also requires At The Beach to pay a $75,000 fine and $38,500 to cover the costs of the investigation. At The Beach has already reimbursed Colorado consumers approximately $45,000 as a result of the state's investigation into At The Beach's credit and collection practices.

The settlement also will require At The Beach to:

• Install recording equipment in all of its stores and maintain an audio copy of every sale;

• Update its contracts to require initialing from consumers throughout the document; and,

• Simplify the documentation required to cancel a contract when moving outside the company's service areas.

When the U.S. economy drove off a cliff in October 2008, one result was a higher savings rate for consumers. Instead of running up a bigger balance on credit cards, consumers were suddenly socking away cash for a rainy day.

While that's admirable thrift when analyzed on an individual basis, it didn't do much for economic growth, which economists held out as the best hope for pulling us out of the economic quicksand. Now, there are signs consumers are resuming some of their old habits.

The U.S. Commerce Department reports Americans earned more and spent more in December. Personal income was up 0.4 percent for the last month of the year, with real personal consumption spending rising an identical amount.

Year-end spending spree

 "Today's data show consumer spending clearly accelerated at the end of last year," said Acting Deputy Commerce Secretary Rebecca Blank. "Personal income also posted stronger gains in the fourth quarter compared to the third."

As he broke down the data, economist Joel Naroff, of Naroff Economic Advisors, of Holland, Pa., found consumers increased their spending on bigger ticket durable goods. But it wasn't confined to that.

"Critically, purchases of services -- which constitute about seventy percent of spending -- are starting to come back," Naroff said. "People are buying the little things that make them happy and that points to rising confidence a better future spending ahead.

A consumer with the means and confidence to spend bodes well for the future of the economy, Blank says. And more help may be on the way.

"Looking ahead, we expect disposable personal income to get a boost from the Middle Class Tax Relief Act of 2010, which increases the take-home pay of many working families," she said, 

Tax holiday

That measures reduces the payroll tax by two percent for wage-earners. While adding to the short-term budget deficit, the tax holiday will put more money in consumers' pockets -- money economists and administration officials hope consumers will spend.

Naroff notes consumers' income rose more from investments rather than wages. While money is money, he says dividends and interest aren't enough to drive economic growth.

"We really do need greater increases in wages and salaries if consumers will keep going back to the malls and showrooms," he said. 

While the savings rate fell again in December, it's still at five percent. That may be a healthy level, as far as stimulating economic growth is concerned.

"It is likely that the savings rate will fall some more but there is only so much of future consumption growth that can be funded out of savings given the cautious nature of households," Naroff said.

Naroff says it's still all about jobs, since more employees means more income and more spending.  

One of the major advantages of buying a product or service with a credit card is the “chargeback” – the process that allows the customer to dispute a charge if the transaction is not completed satisfactorily.

But now, a New York company plans to change all that. US Digital Transactions Corporation (USDT) is lauching a “chargeback recovery service” that it says is aimed at combating “friendly fraud” by intimidating customers into paying and threatening to damage their credit rating if they don't.

“'Friendly fraud" occurs when a consumer, without a valid reason, refuses acceptance of the charge for a transaction they performed and reports the false claim to their bank/card issuer requesting a refund or chargeback,'” the US Digital said in a press release today.

The company claimed that about 20 percent of the $138 billion in annual credit card fraud is attributed to friendly fraud and said honest merchants are often the victims.

"Chargebacks can be the most frustrating aspect of a business. The merchant must comply with regulations set forth by the card associations to refute the chargeback and most often the merchant ends up losing the revenue. A merchant can also lose their ability to accept credit/debit cards if the percentage of chargebacks is too high," said Greg Wooten, US Digital CEO.

USDT said it would offer businesses both “soft and aggressive options for revenue recovery.”

The “soft” option would consist of “an easy-to-use, fully automated and economical flat fee collection service whereby a merchant sends a series of time-tested debt collection letters to the debtor and receives 100% of all collected revenue. This option will additionally report the debt to all three major credit bureaus.”

The company's press release didn't spell out what the “aggressive” option would consist of.

The Departments of Agriculture (USDA) and Health and Human Services (HHS) have released of the 2010 Dietary Guidelines for Americans, the federal government's evidence-based nutritional guidance.

The goal of the guidelines is to promote health, reduce the risk of chronic diseases, and reduce the prevalence of overweight and obesity through improved nutrition and physical activity.

Fighting obesity

Because more than one-third of children and more than two-thirds of adults in the United States are overweight or obese, the 7th edition of the guidelines places stronger emphasis on reducing calorie consumption and increasing physical activity.

“The 2010 Dietary Guidelines are being released at a time when the majority of adults and one in three children is overweight or obese and this is a crisis that we can no longer ignore,” said Agriculture Secretary Tom Vilsack.  “These new and improved dietary recommendations give individuals the information to make thoughtful choices of healthier foods in the right portions and to complement those choices with physical activity.  The bottom line is that most Americans need to trim our waistlines to reduce the risk of developing diet-related chronic disease. Improving our eating habits is not only good for every individual and family, but also for our country.”

The new 2010 Dietary Guidelines for Americans focus on balancing calories with physical activity, and encourage Americans to consume more healthy foods like vegetables, fruits, whole grains, fat-free and low-fat dairy products, and seafood, and to consume less sodium, saturated and trans fats, added sugars, and refined grains.

“Helping Americans incorporate these guidelines into their everyday lives is important to improving the overall health of the American people,” said HHS Secretary Kathleen Sebelius. “The new Dietary Guidelines provide concrete action steps to help people live healthier, more physically active and longer lives.”

The 2010 Dietary Guidelines for Americans include 23 Key Recommendations for the general population and six additional Key Recommendations for specific population groups, such as women who are pregnant. Key Recommendations are the most important messages within the Guidelines in terms of their implications for improving public health.  The recommendations are intended as an integrated set of advice to achieve an overall healthy eating pattern.  To get the full benefit, all Americans should carry out the Dietary Guidelines recommendations in their entirety.

Tips for healthy eating

More consumer-friendly advice and tools, including a next generation Food Pyramid, will be released by USDA and HHS in the coming months. Below is a preview of some of the tips that will be provided to help consumers translate the Dietary Guidelines into their everyday lives:

• Enjoy your food, but eat less.
• Avoid oversized portions.
• Make half your plate fruits and vegetables.
• Switch to fat-free or low-fat (1%) milk.
• Compare sodium in foods like soup, bread, and frozen meals – and choose the foods with lower numbers.
• Drink water instead of sugary drinks.

Healthier lives

This edition of the Dietary Guidelines comes at a critical juncture for America’s health and prosperity.   By adopting the recommendations in the Dietary Guidelines, the government says, people can live healthier lives and contribute to a lowering of health-care costs, helping to strengthen America’s long-term economic competitiveness and overall productivity.

USDA and HHS conducted the review of the scientific literature and developed and issued the 7th edition of the Dietary Guidelines for Americans in a joint effort that is mandated by Congress. The guidelines form the basis of nutrition education programs, federal nutrition assistance programs such as school meals programs and Meals on Wheels programs for seniors, and dietary advice provided by health professionals.

The Dietary Guidelines, based on the most sound scientific information, provide authoritative advice for people two years and older about how proper dietary habits can promote health and reduce risk for major chronic diseases, officials say.

Merrick Pet Care, Inc. of Amarillo, Texas is recalling the Jr. Texas Taffy pet treat (ITEM # 27077, UPC # 02280827077, All Lots up to and including 10364) because they have the potential to be contaminated withSalmonella.  Merrick Pet Care has made the decision to recall all Jr. Texas Taffy pet treats in the abundance of caution. Salmonella can affect animals and there is risk to humans from handling contaminated pet products.

People handling the treats can become infected withSalmonella, especially if they have not thoroughly washed their hands after having contact with the chews or any surfaces exposed to these products.  Consumers should dispose of these products in a safe manner by securing them in a covered trash receptacle. 

Healthy people infected with Salmonella should monitor themselves for some or all of the following symptoms: nausea, vomiting, diarrhea or bloody diarrhea, abdominal cramping and fever. Rarely, Salmonella can result in more serious ailments, including arterial infections, endocarditis, arthritis, muscle pain, eye irritation, and urinary tract symptoms. Consumers exhibiting these signs after having contact with this product should contact their healthcare providers immediately.

Pets with Salmonella infections may be lethargic and have diarrhea or bloody diarrhea, fever, and vomiting. Some pets will have only decreased appetite, fever and abdominal pain. Infected but otherwise healthy pets can be carriers and infect other animals or humans. If your pet has consumed the recalled product and has these symptoms, please contact your veterinarian immediately.

TheJr. Texas Taffy was shipped to distributors and retailers throughout the US.  These individuals have been notified and have activated their recall procedures.

No illnesses have been reported to date.

Consumers who have purchased the Jr. Texas Taffy are urged to return the unused portion to the place of purchase for a full refund. Consumers with questions may contact the company at 1-800-664-7387 M-F 8:00am – 5:00pm CST.

AT&T and Verizon have made some changes in their wireless plans and Consumers Union (CU) isn't happy about it. 

The nonprofit publisher of Consumer Reports has written the chief executives of the two firms and the head of the Federal Communications Commission (FCC), calling on the firms to alert their customers.

AT&T has made extensive changes to its text messaging plans and upgrade discount program, while Verizon has ended its upgrade discount program.

Consumer notice

In separate letters to AT&T CEO Randall Stephenson, Verizon CEO Daniel Mead, and FCC Chairman Julius Genachowski, CU policy counsel Parul P. Desai said the companies need to step up their efforts to inform consumers about the changes and the implications for their pocketbooks -- including any overage charges that may occur.

She said the companies should notify each customer affected by the changes individually and make all consumers aware of the specifics of the plans at the point of sale.

“In light of the tough economic times many consumers are facing, these companies need to provide greater transparency in, and disclosure of, these new plans and terms of service,” Desai said.

Texting changes

AT&T Wireless has dropped its $5/200 text messages-per-month plan and its $15/1500 text messages-per-month plan. The only options for consumers are $10 a month for 1000 messages or $20 a month for unlimited messages.

AT&T has also changed part of its upgrade discount program, which let customers upgrade their phone after two years and receive a discount of $50 or $100 off of the subsidized phone price. New customers no longer have this option, and current customers now have until July 23 to exercise this upgrade discount.

Discount plan changes

Verizon Wireless has discontinued its upgrade discount plan New Every Two, which allowed customers that were renewing their contracts to receive an additional discount on top of the subsidized price of the phone they purchased. Now current customers can redeem the New Every Two benefit just one more time, and they will not be eligible for it after that.

In her letter to the FCC, Desai noted that the agency is currently looking at cell phone "bill shock" and the need for greater transparency and disclosure of business practices. She urged the FCC to swiftly resolve these proceedings “so that all carriers would be required to appropriately notify consumers of rates, terms of service, overage charges and other relevant information.”

One of the fun things about watching the Super Bowl on TV is seeing some of the ads companies come up with. They often are more entertaining that what's happening on the field. In fact, some newspapers devote entire columns to reviewing the commercials as though they were the main event.

But when all is said and done, do they get the job done? Probably not, says Richard Feinberg, a consumer psychologist in Purdue University's Department of Consumer Sciences and Retailing.

Huge audience, huge stakes

An estimated 110 million people are expected to watch the Feb. 6 Super Bowl. When they aren't watching the football matchup between the Green Bay Packers and Pittsburgh Steelers, they'll be bombarded by more than 100 commercials for everything from beer to clothing to cars. Thirty-second ads will cost between $2.8 million and $3 million.

The problem, Feinberg says, is that the $3 million gets just one play of the commercial, and that one airing may not compel consumers to get off the couch and buy the product.

"Since repetition is the foundation of consumer memory, companies just might be better off with 10 $300,000 commercials than one $3 million commercial," he says.

The disconnect

Research suggests many viewers like the ads as much as or more than the game itself, Feinberg says. While the extra attention further enhances the effect of a 30-second commercial, liking an ad doesn't necessarily lead to sales.

A study by Feinberg suggests that even if people watch the commercials, they have a limited impact on longer-term memory. And if consumers cannot remember the companies or the products, the commercials do not lead to sales.

He asked 100 consumers who watched the 2010 Super Bowl to recall details from as many of the commercials as they could. About 30 percent could accurately recall at least one company with a commercial, but respondents had low confidence in their memory, indicating that they "thought" that the company had a commercial. Few could accurately recall details of the commercials.

No guarantee

Feinberg says the most effective Super Bowl commercials are connected to a range of social media, other advertisements and promotions. The use of animals, humor, special effects and celebrities increase memorability, but that alone does not mean an increase in sales, he says.

"Super Bowl commercials are celebrated for their creativity and humor, but that doesn't guarantee that consumers will become more aware of a product or make a purchase more likely than if the money had been spent in a less expensive but still effective way," Feinberg says.

You can't listen to satellite radio or watch cable TV without being bombarded by commercials for companies claiming they can help you reduce your debt, whether it be to credit card companies or the Internal Revenue Service (IRS).

A common characteristic of these ads is the warning that "there are a lot of scammers" out there making similar claims, but that you can trust them. How do you know? You might not want to take their word on that score. (Read consumer complaints about debt settlement companies).

Another common trait of these commercials is the disclaimer "if you have $10,000 or more in credit card debt..." they can help you. Why $10,000?

Because many companies charge a percentage -- usually around 10 percent -- of your total debt as their fee. The more money you owe, the more you will have to pay them. If your debt is less than $10,000, they really aren't interested in helping you because their fee would be too low.

The Federal Trade Commission (FTC) amended the Telemarketing Sales Rule (TSR) last year to add specific provisions to curb deceptive and abusive practices associated with debt relief services. One key change is that many more businesses will now be subject to the TSR.

The new rule expands the scope to cover not only outbound calls from the companies but inbound calls from consumers, in response to advertisements and other solicitations. There are three main changes to the rule, but one in particular will have the most impact.

No more upfront fees

Businesses can't collect any fees from a customer before they have settled or otherwise resolved the consumer's debts. If a company renegotiates a customer's debts one after the other, it can collect a fee for each debt it has renegotiated, but it can't front-load payments.

That means they can't charge any money up front. They must do the work before they get paid. This makes the debt settlement business much more risky and less lucrative. If a company demands an upfront payment from you, it is violating the law. You should assume it's a scam.

In the past ten years, the FTC and state law enforcement partners have filed more than 250 actions to stop deceptive and abusive practices by members of the debt relief industry. Even so, you should not assume that the remaining companies will always play by the rule.

Review the changes in the law

Instead of believing what the companies say in their commercials, consumers should know and understand the changes in the FTC rules by which the agency hopes to prevent consumer fraud. In addition to not allowing advance fees for services, the rule also prevents debt settlement companies from charging consumers until:

• They successfully settle or otherwise change the terms of at least one of the customer's debts;

• There's a settlement agreement, debt management plan, or other agreement that has the OK of both the creditor and the customer; and

• The customer has made at least one payment to the creditor as a result of the agreement negotiated by the debt relief provider.

 If customers enroll multiple debts in a company's program, the rule makes it clear they can't front-load their fees.

Consumers should perhaps take all these debt settlement commercials with a grain of salt. After all, settling debt is not as easy as many people make it sound.

"Many people owe money on their credit cards and are struggling to keep up with their bills because of the bad economy," said Minnesota Attorney General Lori Swanson last year, after suing six debt settlement companies doing business in her state. "People who are swimming in debt are often desperate for a life preserver, but they should know that debt settlement companies usually just anchor them down with even more financial problems."

Ticketmaster has agreed to settle a class action lawsuit that charged its order processing fee was a “profit component” unrelated to actual expenses and alleged its UPS delivery option included an artificial mark-up.

The suit was originally filed in Los Angeles in October 2003. It was broadened to a class action late last year to include anyone who purchased tickets through Ticketmaster.com from October 1999 through May 2010.

The settlement was revealed in a routine SEC filing by Live Nation Entertainment, Ticketmaster's parent company.

Consumers who qualify as plaintiffs will be entitled to receive a cash payment from Ticketmaster or discounts off future ticket purchases.

The company said it had "not acknowledged any violations of law or liability in connection with the matter, but have agreed to the settlement in order to eliminate the uncertainties and expense of further protracted litigation."

Ticketmaster has long been the source of consumer complaints about high service fees and other allegedly abusive charges and activities. The merger of Live Nation and Ticketmaster was slowed last year by Congressional inquiries and an investigation by the U.S. Justice Department and 17 states.

As a result of the combined federal and state efforts, the newly combined company was required to make significant changes to the merger agreement.

"Our office became concerned that Live Nation and Ticketmaster would be the only option to get tickets to concerts when they announced their merger," said Massachusetts Attorney General Martha Coakley in January 2010. "We are pleased with [the] settlement, which should create a more competitive ticketing market.

At issue was competition and the price consumers have to pay for tickets. In 2008, Ticketmaster had 80 percent of the primary ticketing services market. Ticketmaster and Live Nation - Ticketmaster's primary source of competition - announced plans to merge in February 2009.

After reviewing the proposed merger, the Department of Justice and 17 state Attorneys General decided that divestitures and anti-retaliation provisions were necessary to protect competition. Ticketmaster must provide access to one of its major technology platforms and sell Paciolan, a Delaware corporation that provides ticketing services throughout the United States and is owned by Ticketmaster. The federal and state officials are hoping to eliminate consumer complaints, like this one about Ticketmaster:

“Every time I am forced to use this company I am infuriated," Melanie, of Calabasas, Calif., told ConsumerAffairs.com last year. "This time, after five phone calls lasting over three hours in length total, I received one ticket and $15.00 worth of extortionate charges, which are each hilariously termed from facilities charge, convenience charge, processing fee and my favorite TicketFast (printing fee). This is outrageous."

In 2009, the state of New Jersey has reached a settlement with Ticketmaster to resolve more than 2,000 complaints from consumers who said they were unfairly denied tickets to two concerns by Bruce Springsteen and the E Street Band.

Google has reached an agreement with Connecticut over the “payload data” the company accidentally collected from consumers and businesses in the state during 2008 and 2009.

The data was collected using Street View cars equipped with cameras an a Wi-Fi antenna. The antenna inadvertently collected data from unsecured Wi-Fi networks.

Connecticut Attorney General George Jepsen and Consumer Protection Commissioner Jerry Farrell said Friday they have reached an agreement with Google, Inc. over the company’s objection to a demand that it produce the data.

The stipulation will allow Google and the state of Connecticut, and the 40-state coalition it is leading, to begin negotiations to resolve the data collection issue without going to court to enforce a subpoena issued in December on behalf of the state.

Google has said it is "profoundly sorry" for having mistakenly collected payload data from unencrypted wireless networks.

"As soon as we realized what had happened, we stopped collecting all Wi-Fi data from our Street View cars and immediately informed the authorities," a company spokesman said. "We did not want and have never used the payload data in any of our products and services.”

The company has said that it wanted to delete the data but was barred from doing so by the subpoena issued by Jepson's predecessor, Richard Blumenthal. Google had been fighting the subpoena but the agreement reached Friday resolved the issue.

“This is a good result for the people of Connecticut. The stipulation means we can proceed to negotiate a settlement of the critical privacy issues implicated here without the need for a protracted and costly fight in the courts, although we are ready to do so if we are unable to come to a satisfactory agreement through negotiation,” Jepsen said.

The subpoena was issued after Google refused to provide access to information requested to confirm that Google had gathered private information and to determine the frequency of any violations of law. Google has now stipulated that while collecting network identification information for use in offering “location aware” services, it did in fact collect and store the payload data that contained private information.

In particular, Google stipulates, for purposes of settlement discussions, that the payload data collected contained URLs of requested Web pages, partial or complete e-mail communications or other information, including confidential and private information the network user was transmitting over the unsecured network while Google’s Street View car was within range.

Google also will not contest during settlement negotiations that such private information was collected every day that the Street View cars operated.

Negotiations with Google are continuing.

Illinois Attorney General Lisa Madigan has filed a lawsuit against a Chicago area air duct and vent cleaning company for soliciting work it failed to complete and for repeatedly misleading consumers, particularly senior citizens, to purchase services they didn’t need.

Madigan’s lawsuit was filed in Cook County Circuit Court against Moshe Kesem, of Schaumburg, and his two business entities, Warranty USA Inc. and Air Duct Cleaning Pros, both based in Schaumburg. The suit alleges that since November 2009 Kesem has fraudulently charged consumers for expensive mitigation of mold and mildew damage that did not actually exist in their homes.

“This company targeted vulnerable seniors and deceived homeowners into purchasing services they didn’t need,” Madigan said. “Consumers should know illegitimate contractors are always scamming people out of their hard-earned money. So homeowners need to investigate contractors before signing contracts and beginning projects. Never get pressured to rush into a contract.”

The Attorney General alleges Kesem showed consumers fake pictures of extensive mold or mildew damage to their homes in order to charge them for clean-up and other services. The suit alleges homeowners who contracted work through Kesem at advertised discounts later were charged for additional services they did not request or approve. Madigan also alleges Kesem regularly tacked on fraudulent services that were not necessary to address fictional problems—sometimes adding more than $1,000 to the bill.

The defendant was known to target seniors for services they did not need and charge extra costs for work his company did not do. Some consumers objected to the high costs, while others paid the defendant to avoid his threats demanding payment. One consumer reported spending $2,494 so that Kesem and his workers would leave her home.

Consumers in Cook, Lake, DuPage, Will and Kane counties reported to Madigan’s office charges totaling more than $17,350 due to fraudulent contracts with the defendant.

Madigan’s lawsuit alleges violations of the state’s Consumer Fraud and Deceptive Business Practices Act and the Home Repair and Remodeling Act and asks the court to prohibit the defendant from working in the home repair trade in Illinois. The suit seeks to cancel Kesem’s pending contracts and obtain restitution for affected consumers. The lawsuit also seeks to impose on Kesem a civil penalty of $50,000, penalties of $50,000 for each violation found to be committed with the intent to defraud, and additional penalties of $10,000 for each violation found to be committed against a person 65 years or older.

Consumers can find tips for finding a reputable contractor by visiting Madigan’s website, www.illinoisattorneygeneral.gov.

A class action lawsuit accuses Groupon of selling gift certificates with short expiration dates, knowing full well that many consumers won't use them in time.

The suit, filed in federal court in the Southern District of California, takes issue with Groupon's so-called “Daily Deals” -- offerings sent out by e-mail to its “massive subscription base (comprised of tens of millions of consumers nationwide).” The offers cover a wide variety of products and services -- “restaurants and bars, salons and spas, clothing and other retail items, and ... instructional lessons” -- and are sent, as the name suggests, on a daily basis. The deals are only activated if enough consumers decide to take advantage of the offer.

Groupon has recently caught fire with consumers looking for deals on a variety of products and services. As noted by the complaint, the company's “business model is based on offering discounts to consumers en masse by directly partnering with retail businesses that provide the products or services.” The revenue collected from Daily Deals is split between Groupon and the retailers.

“Onerous conditions”

The revenue-sharing arrangement is at the heart of the scheme alleged in the suit. The complaint, which also names department store Nordstrom as a defendant, says that Groupon and its participating retailers “create[] a sense of urgency among consumers to quickly purchase [Groupons] by offering 'Daily Deals' for a short amount of time, usually a 24-hour period.” Consumers buy the certificates for fear of running out of time, thereby subjecting themselves to the “onerous sales conditions imposed by Groupon, including illegal expiration terms, which are relatively short, often just a few months,” according to the complaint.

Once consumers have their hands on a Groupon, many are unable to redeem it before the expiration date, and are thereby “left with nothing, despite already having paid for the particular service or product,” according to the suit.

The suit notes that “the Credit Card Accountability Responsibility and Disclosure Act ('CARD Act') and the Electronic Funds Transfer Act ('EFTA') ... specifically prohibit the sale and issuance of gift certificates, such as 'groupons,' with expiration dates,” as does a California consumer protection statute.

The plaintiffs are seeking compensatory and punitive damages.

Groupon vs. Google

Groupon, launched in November 2008, has quickly developed a following among cost-conscious consumers. Last year, the site collected a whopping $500 million from its sale of gift certificates, according to the suit. Last year, the site turned down a $6 billion dollar offer from Google, citing the need to maintain employee morale and relationships with clients.

Thoroughly spurned, Google wasted no time in announcing that it was testing a Groupon competitor -- Google Offers. Google spokesman Neil Tyler said the web giant was “communicating with small businesses to enlist their support and participation in a test of a prepaid offers/vouchers program.”

Last week, tech site Mashable reported that Google Offers was getting ready to launch, citing a fact sheet describing the enterprise as “a new product to help potential customers and clientele find great deals in their area through a daily email.”

Even though controversy has died down over Four Loko and other highly-caffeinated alcoholic beverages, it appears health officials still have a wary eye trained on energy drinks.

Love Red Bull? You might want to stock up now.

According to researchers at the University of Maryland School of Public Health and Wake Forest University School of Medicine, highly-caffeinated energy drinks -- even those containing no alcohol -- may pose a significant threat to individuals and public health.

In a new online commentary in the Journal of the American Medical Association (JAMA), they recommend immediate consumer action, education by health providers, voluntary disclosures by manufacturers and new federal labeling requirements.

“Recent action to make pre-mixed alcoholic energy drinks unavailable was an important first step, but more continued action is needed,” says University of Maryland School of Public Health researcher Amelia Arria.

“Individuals can still mix these highly caffeinated energy drinks with alcohol on their own. It is also concerning that no regulation exists with regard to the level of caffeine that can be in an energy drink.”

Arria, who also directs the Center on Young Adult Health and Development, and co-author Mary Claire O’Brien, associate professor of emergency medicine at Wake Forest University School of Medicine, alerted various state attorneys general to the risks of alcoholic energy drinks starting in 2009.

These actions culminated last November in actions against Four Loko and similar products by the U.S. Food and Drug Administration and the Federal Trade Commission.

HEALTH RISKS

The JAMA paper cites three public health concerns surrounding all packaged energy drinks containing moderate to high levels of caffeine:

Consumers often mix alcohol and energy drinks: “Energy drinks have become enmeshed in the subculture of partying,” the paper says.

“The practice of mixing energy drinks with alcohol -- which is more widespread than generally recognized -- has been linked consistently to drinking high volumes of alcohol per drinking session and subsequent serious alcohol-related consequences such as sexual assault and driving while intoxicated… Research has demonstrated that individuals who combine energy drinks with alcohol underestimate their true level of impairment.”

Caffeine can have adverse health effects in susceptible individuals: “Therefore continued public health awareness regarding high levels of caffeine consumption, no matter what the beverage source, in sensitive individuals is certainly warranted,” the researchers write.

Energy drink use appears to be associated with alcohol dependence and other drug use: More research is needed to clarify the possible mechanisms underlying the associations that have been observed in research studies.

The researchers recommend several “proactive steps to protect public health:”

• Health care professions should inform their patients of the risks of consuming highly caffeinated energy drinks;
• Individuals should educate themselves about those risks;
• Manufacturers should warn consumers about the risks of mixing their products with alcohol;
• Regulatory agencies should require energy drink manufacturers to disclose caffeine content on product labels and display appropriate warnings.