Current Events in January 2011

Think of it as the country’s FICO score. Just like anyone who carries more debt than he can handle, the U.S. has received a warning from the nation’s top two credit rating agencies that its credit rating could go down if it doesn’t do something to correct a deteriorating financial situation.

If and when that happens it will cost the country more to borrow the same as it does with anyone who's FICO score goes down. 

Ratings warnings

In a report issued this week, Moody's Investors Service says the U.S. will need to reverse an upward trajectory in its debt ratios in order to keep its triple “A” rating (AAA).

At the same time, Standard and Poor’s, which also gives the U.S. a AAA rating, said it would not rule out changing the outlook for its U.S. sovereign debt rating because of the recent deterioration of the country's fiscal situation.

Sarah Carlson, senior analyst at Moody's, in an interview with Dow Jones Newswires, said “We have become increasingly clear about the fact that if there are not offsetting measures to reverse the deterioration in negative fundamentals in the U.S., the likelihood of a negative outlook over the next two years will increase."  

Carol Sirou, who heads S&P France, told a Paris conference, that the view of markets is that the U.S. will continue to “benefit from the exorbitant privilege linked to the U.S. dollar" to fund its deficits. She added that may change. According to Sirou, the jobless nature of the U.S. recovery was one of the biggest threats to the U.S. economy and that no AAA rating is forever.

Cost Containment

Moody's said the U.S., Germany, France and the U.K. still have debt metrics, including debt affordability -- the ratio of interest payments to revenue -- compatible with their AAA ratings at the agency. But all four countries must bring the future costs arising from pension and healthcare subsidies under control if they are to maintain long-term stability in their debt burden credit metrics.

In its regular AAA Sovereign Monitor report, Moody’s noted that measures were recommended by the U.S. National Commission on Fiscal Responsibility and Reform, appointed by President Obama, to achieve a balanced primary budget by 2015, but that there was insufficient support to trigger consideration of those recommendations by the full Congress.

Moody’s said those recommendations included a wide variety of measures, including Social Security reform, cutbacks in the growth of Medicare outlays, elimination or modification of the mortgage interest tax deduction, a gasoline tax and other measures. But in Moody's view, it is unlikely that the Commission's recommendations will be adopted.

The most recent official figures show the ratio of federal debt to revenue averaging 397 percent of gross domestic product in the period to 2020, while the ratio of interest to revenue will rise to 17.6 percent by 2020, from 8.6 percent in the last fiscal year. Moody’s said these figures are quite high for a AAA rated country.

The foreign exchange or Forex Market has been under the regulators’ microscope for some time now following reports last fall of alleged scams involving some brokers.

Now comes word that a new investigation is about to be launched into whether some foreign exchange firms are still using unfair trading practices to take advantage of retail investors.

New probe

The National Futures Association (NFA), a self-regulatory body that polices the futures industry, says it plans to begin analyzing trades executed by its 16 member Forex firms. It plans to search for signs these firms are designing computer systems to take advantage of what's known in the industry as "slippage."

These are small price movements that happen between the time when a customer orders a trade and when that trade is actually executed.

For individual investors, slippage is almost impossible to detect. For example, if a retail investor places an order for euros at $1.335; he may find that by the time the brokerage firm executes the order, the rate has changed to $1.332. Does the customer get that new, lower price, or does the firm reject the order? Is the firm only executing an order when the price moves up in its favor, to say $1.338, and it can pocket the spread?

Small movements, big profits

The individual price movements in question are tiny but they can quickly add up.  A trader using 50-to-1 leverage could buy $100,000 worth of euros with just $2,000 in his account. If he placed an order to buy at $1.335, but instead paid $1.337, those euros cost him an extra $20. Within months, such spreads can mean millions of extra dollars for forex firms.

The new probe comes just as currency trading is becoming more popular for small investors looking for bigger returns. Average daily volume in retail forex trading grew 25 percent from 2008 to 2009, to $125 billion -- up more than ten-fold from eight years ago according to consultancy Aite Group.

Expanded investigation

Both the NFA and the Commodity Futures Trading Commission (CFTC) are also keeping mum about any additional investigations that may be underway. But when another forex trading firm, FXCM it  went public in December, its SEC filings disclosed the firm had been contacted by both regulatory agencies  for information about trade execution practices involving Ikon Global Markets and GAIN Capital. An FXCM spokeswoman declined to comment by press time.

Regardless of whether regulators find cases of unfair trading, retail investors are still at a disadvantage when trading currency because forex is far from transparent.

Charles Rotblut, the vice president of the American Association of Individual Investors says if a forex firm is acting as a market-maker -- taking the other side of a client's trades -- it's doubtful the investor is getting the best possible price.

While some slippage is normal, the NFA will be looking to see if trades are being executed only when the currency price moves in the firm's favor. This would indicate a firm may be violating NFA rules mandating fair business practices.

NFA spokesman Larry Dykeman says the group can then assess fines, and in some cases may suspend or expel a firm from membership in the organization.

The new investigation follows last October’s probe into Ikon and GAIN. Both firms were accused of taking advantage of slippage at their clients' expense and both firms settled without admitting or denying the allegations.

According to the NFA, Ikon paid a $320,000 fine and has ceased offering retail FX trading to U.S. clients. Meanwhile, GAIN, paid a $459,000 penalty and went public in December. A spokeswoman for GAIN said the trades in question accounted for only .05 percent of its transactions, and that the company will continue to review its operations to ensure that "the interests of our clients and partners are fully protected."

There are certain expenses in life like property taxes, healthcare, medical costs and groceries that seem fixed, but they’re not. According to Elisabeth Leamy, author of the book Save Big, all of these so-called “fixed expenses“ are negotiable. In fact, she’s helped people save thousands by applying a few negotiating techniques.

Basically says Leamy, this is a tricky economy and you need to adjust your attitude. Practically everyone needs to save money these days so it’s time to re-think certain expenses you once considered fixed and unchangeable. Leamy says most supposedly "fixed" costs can be negotiated, refinanced or shopped around.

Rent

For example, if you rent, try negotiating for a better rate. It costs landlords a lot of money to leave properties empty, so if you're a good tenant, that’s has a certain value to them. Research the incentives your landlord and other nearby buildings are offering new tenants, and use that as leverage to negotiate a lower rent.  

Mortgage Refinancing

If you own a home, interest rates are at near record lows. Are you in a position to refinance? It's worth refinancing if you can get half a point off your rate, if you’ll add no more than five years to the length of your mortgage and can still pay your closing costs off in five years or less -- preferably much less. If you can’t get approved at a big bank, try a credit union. Credit unions pay attention to your situation, not just your credit score.  

Property Taxes

If you’re a homeowner you pay property taxes. Have you ever tried to appeal your assessment? Many local jurisdictions haven’t caught up with current home prices and are still using market values from early 2008 to assess homes. This is the time of year that assessments get mailed out. Appeals take about the same amount of work as fighting a traffic ticket -- with a much bigger payout. Leamy says she knows of a New Jersey man who stood to save $5,000 a year if he won his appeal.

Car Payments

How about car payments? Did you know you can refinance your car loan? If your vehicle isn’t too old and you’re not underwater on the value, you should consider it. Once again, credit unions are the place to turn. They do more of these auto loan refinances than anybody else.

Insurance

You probably already know how various insurance costs range considerably from one company to another. Leamy says one New York family saved more than $2,000 a year on car insurance just by shopping around. Approach an independent agent who represents many different companies. She adds that a Virginia family of seven saved nearly $7,000 on health insurance by shopping around through an independent agent. There are savings to be had on homeowner's insurance too.

Groceries

You probably budget the same amount every week for groceries. Now you know grocery prices aren’t fixed but did you also know that there are some people who manage to save as much as 80 percent on their food and household supplies?  Leamy says one simple way to start saving like that is to follow what the supersavers are doing to get huge discounts. They’ll post their best finds online on their blogs. Just buy what they buy. A good site to check is www.becentsable.net, which has compiled a list of these grocery supersavers by state and store. You can also try the site's inexpensive grocery workshops, which take you through the savings process step by step.

Medical Costs

Like grocery costs, medical costs aren't fixed either. The key is to behave like a consumer rather than a patient when you interact with a medical professional. A Harris Interactive Poll found that 70 percent of people who asked a hospital for a price break got one. Most doctors are also open to negotiating, especially if you're willing to pay upfront, because they spend thousands chasing after patients and insurance companies to pay their bills. Even the cost of medication is flexible. Look up the meds you take on a website such as www.rxaminer.com or www.destinationrx.com,  and you’ll find that some stores offer them for far less than others do. These sites also list less-expensive alternative and generic drugs that you might be able to take instead.

It sounds too good to be true: a sneaker that “uses hidden balance board technology that encourages muscle activation in the glutes, quads, hamstrings and calves, which in turn burns calories.”

That's New Balance's description of its so-called “toning shoe,” which sports a rounded shape that makes it harder to keep one's balance, which in turn supposedly makes the muscles work harder and thus burn more calories.

But a lawsuit filed last week says that New Balance's claims really are nothing more than hype.

The complaint, filed in U.S. District Court in Boston, where the shoe company is based, says that New Balance's claims about the shoe are “false, misleading, and reasonably likely to deceive the public.”

Study: Shoes provide little benefit

According to the suit, lead plaintiff Bistra Pashamova “was exposed to and saw New Balance's advertising claims, purchased New Balance toning shoes in reliance on these claims, and suffered injury in fact and lost money as a result.”

The complaint cites several studies concluding that the sneakers simply do not live up to their promises. One by the American Council on Exercise found that wearing the sneakers does not produce any “statistically significant increases in either exercise response or muscle activation.”

New Balance's sneakers are the latest “toning shoes” to hit the market, following Reebok's EasyTone shoes and Skechers's Shape-Up line, both of which are facing their own lawsuits.

Diet and exercise still reign supreme

Based on the glut of litigation concerning this latest fads, consumers might do well to heed advice dished out last July by the Boston Globe: “Fads in dieting, equipment, and footwear come and go, but the old standby of moderate exercise, a few times a week, seldom fails.”

“Get-fit-quick schemes are a lot like get-rich-quick schemes: They’re usually too good to be true, especially when they’re making money for someone else,” the Globe wrote in that editorial. “That seems a decent analysis of the current footwear trend known as the 'toning shoe,' which is helping to boost sneaker sales for New Balance and other companies. But scientists and podiatrists are already raising questions about whether toning shoes do all they promise, and whether they cause unnecessary pain.”

Mayo Clinic doctor dismisses shoes

Indeed, in response to a consumer's question, Dr. Edward R. Laskowski of the Mayo Clinic wrote that “there is no convincing evidence that wearing toning shoes will make your legs more toned or cause you to burn extra calories.”

“Manufacturers say the unstable design of the shoes forces wearers to use their leg muscles more -- which burns more calories and tones the muscles,” Laskowski wrote. “However, an independent study by a nonprofit fitness organization found no evidence that wearing toning shoes leads to improved muscle tone or greater energy expenditure. In addition, there are no studies that prove that they improve balance or stability to a great degree.”

It remains to be seen whether the increased skepticism will slow consumers' infatuation with toning shoes. The subset produced sales of $1.5 billion last year alone, and decades of experience have shown that Americans are always willing to take the easy route to a better body.

There is no need to cheat on your income taxes because the U.S. tax code offers very generous tax deductions and credits. By taking advantage of each one for which you qualify will save money.

Here is a list of tax breaks that you may have overlooked. If you aren’t sure you qualify, be sure to discuss it with a tax professional.

1. Job hunting

If you were one of the millions of people out of work last year, don’t forget that you can deduct the costs of looking for a new job. For example, you can write off food, lodging and transportation if your search took you out of town. Cab fares, employment agency fees, even the cost of printing and mailing resumes are deductible when looking for a new job. Just make sure you have receipts for everything.

2. Moving expenses

Did you move last year to start a new job? If so, moving expenses are deductible. To qualify, the job just be at least 50 miles from your previous place of residence. If you qualify, you can deduct the cost of getting your and your stuff to your new home, including 16.5 cents a mile for driving your own vehicle. You can also deduct parking expenses and tolls.

3. Other taxes

Don’t forget to deduct the other taxes you paid last year. The biggest chunk will probably be state income taxes and there, you have to remember that any state tax refund you received will count as income, somewhat diluting that deduction.

However, don’t forget real estate taxes or personal property taxes on cars, trucks, boats and other vehicles. If your state doesn’t have an income tax, you are allowed to deduct state sales tax you paid during the year, just as long as you can document it.

4. Child care expenses

A tax credit, which is better than a deduction, might be available if you paid for child care last year. The cost of the qualifying child care can be subtracted from the amount of tax owed, instead of subtracted from your gross income, like a deduction.

5. Points

If you purchased a home last year, you might be eligible for the homebuyers’ tax credit. Even if you aren’t, you can deduct any points paid to your mortgage company. However, if you refinanced an existing mortgage, the points deduction is taken over the life of the loan, providing a much smaller tax break.

6. Making work pay

For younger taxpayers especially, the Making Work Pay Tax Credit is often overlooked. By claiming the credit on your 2010 return, qualifying taxpayers can get a credit equal to 6.2 percent of their earned income, capped at $400 for individuals and $800 for couples. The credit starts to phase out for singles at $75,000 of adjusted gross income and disappears at $95,000. For couples, the range is $150,000 to $190,000.

Verizon's announcement Tuesday that it would soon be offering the new iPhone whipped many current iPhone owners into a froth of excitement and preparation.

Until this week, the only cell phone company that carried the iPhone was AT&T. Many customers grew weary of the constant dropped calls and slow data service that AT&T has become known for.

Now, many of those customers are eager to give their business to Verizon, who has long been known for their large coverage areas and reliable service.

Seems like a no-brainer, right?

Maybe not. Consumers who plan to jump ship to Verizon -- especially those who like to buy a brand new phone every two years at a discount -- should be warned exactly what they’re getting into.

Contract changes

Smartmoney.com reported Wednesday that Verizon has quietly made some changes to the terms of its upgrade policy. Most notably, as of January 16, 2011, new customers will not be enrolled in Verizon’s “New Every 2” incentive program at the end of their two-year contract.

The New Every 2 program offers Verizon subscribers a credit of $30 to $100 toward a new phone every two years if they agree to sign a new, two-year contract.

The NE2 program has been a perk many customers have enjoyed, considering cell phone technology evolves exponentially every year.

Higher price

But starting Sunday, that perk is gone -- unless new customers choose the pricier option of a one-year contract.

(And we do mean "pricier." For example, as a new customer, choosing the HTC Droid Incredible with a two-year contract saves $200 right off the bat.)

Existing Verizon customers are allowed to get one more “NE2” upgrade if they’re currently eligible for it this year. (Whether they’ll be able to use their last NE2 upgrade towards the new iPhone is yet to be seen, however Verizon’s Support Twitter account recently tweeted they could.)

That’s all well and good for existing customers, but what about customers who are only a few months into their new, two-year contracts? Or those who haven’t even signed up yet? They’re apparently out of luck.

Interestingly, Verizon appears to have been planning this since before Tuesday‘s big iPhone announcement.

The tech blog AndroidCentral.com posted a screen cap of training material sent out to Verizon employees, announcing the policy change back on January 4, 2011.

Consumer quandry

So, what does this mean for consumers signing up with Verizon for the new iPhone?

Once their two-year contract is up, and the newest iPhone undoubtedly hits the market, customers will most likely have to pay full retail price for it -- or any other phone, for that matter -- even if they agree to stay with Verizon for another two years.

For people who like to stay current with new phone technology, it could be a wallet-draining move.

For just about as long as anyone can remember, we've been gazing into the sky, wondering if there is life on other planets and, if so, when we might hear from our intergalatic brothers and sisters. In particular, we've wondered if extraterrestrials will be like us.

We'd better hope not, researchers warn in a new study.

Evolution on alien worlds most likely will have followed the Darwinian model, meaning that the species that rise to the top will be the ones that are best at violence, exploitation and generally thuggish behavior.

They'll be like us, in other words.

The cautionary note is sounded as part of an extraterrestrial-themed edition of the Philosophical Transactions of the Royal Society A published today. The scientists urge that a branch of the United Nations must be given responsibility for "supra-Earth affairs" and formulate a plan for how to deal with extraterrestrials.

The UN branch would be expected to establish structures similar to those proposed for dealing with threats from near-Earth objects, such as asteroids, that might be on a collision course with our planet.

In other words, said Simon Conway Morris, a professor of evolutionary palaeobiology at Cambridge University, those planning for alien contact should prepare for the worst.

“If intelligent aliens exist, they will look just like us, and given our far from glorious history, this should give us pause for thought," wrote Morris.

Effect on religion

Others writing in the special edition of the journal said the sudden appearance of extraterrestrial life would have major implications for the world's religions. Might they collapse?

“Are religious believers Earth-centric, so that contact with ET would de-centre and marginalise our sense of self-importance?” asked Ted Peters, a professor of systematic theology at the Pacific Lutheran Theological Seminary in California.

After working the problem for awhile, though, Peters concludes that theologians would probably not be out of a job, and in fact might be busier than ever.

"Traditional theologians must then become astrotheologians ... What I forecast is this: contact with extraterrestrial intelligence will expand the existing religious vision that all of creation … is the gift of a loving and gracious God," he speculated.

As if college students didn’t have enough debt from student loans, it appears credit card companies are still targeting them even though the CARD Act prohibits such offers to anyone under 21.

A recent survey of 300 undergraduates done by University of Houston Law Center finds that most of them have received credit card offers. Houston University Professor Jim Hawkins, in an interview with The Wall Street Journal said “there are some things that haven't changed."

Student Solicitation Ban

The CARD Act took effect in February, 2009 and was designed to stop solicitations that lured in students and then left them buried under heavy credit-card debt when they left school. Under the rules, banks and card issuers were banned from offering credit cards to anyone under the age of 21, unless they have a qualified co-signer or proof of sufficient income to repay the debt.

According to the survey, 76 percent of those surveyed under the age of 21 said they had received a credit-card offer since the beginning of 2010 and 73 percent of freshmen say they saw credit card issuers marketing to students off campus. As for the income requirement, 29 percent claimed their student loans as part of the income they reported to the credit card companies in order to get the cards.

Also, 47 percent of freshman reported seeing credit card companies offering tangible gifts on and around campus, another violation of the CARD Act.

Loopholes

Hawkins said the CARD Act should have made it much less likely for freshmen to have seen advertising because the law has been in effect the entire time the freshmen have been in college. However, with so many loopholes in CARD, credit card companies still have easy access to young consumers.

"It concerns me that the marketing hasn't abated," Hawkins said in an interview with the Washington Post.  "I think one answer would be to ban marketing to college students completely. If we really think it's important not to market to students, why not make it easier by imposing an absolute prohibition on marketing rather than imposing certain rules?"

Moreover, college students will be paying back more debt from their loans than ever before.  For the first time ever, total student loan debt has outpaced total credit card debt.  Student loan debt is said to be increasing at a rate of $2,800 per second and is now around $880 billion. 

Last month, Attorney General Lisa Madigan issued a warning to parents and caregivers of infants and small children about crib bumpers. The pillow-like lining used to keep baby’s head away from the sides of the crib can pose serious risks of injury and death due to suffocation or strangulation.

On Wednesday, Madigan called on the national industry trade group overseeing manufacturers of crib bumpers, the Juvenile Products Manufacturers Association (JPMA), to push for a halt to the production and sale of bumper pads across the country.

Danger posed

Madigan said babies could be hurt or killed by their crib bumpers in any number of ways: rolling against it, pressing their faces against it, wedging their heads between the pad and the mattress or crib side, or getting the tie that secures the bumper to the crib wrapped around their necks.

“The JPMA and its manufacturers cannot sit by and wait for regulators to decide how, and if, crib bumpers should be used,” Madigan said. “Their disregard for the danger posed by these products creates a very real danger.”

Back in December, the Attorney General alerted parents and caregivers to the hazards bumpers pose and urged them to remove these products from their homes to prevent tragedy.

She also sent a letter to the JPMA urging the group to take immediate action to address bumper hazards with its manufacturer members.

Madigan demanded then that the JPMA release results of a study it commissioned to investigate the dangers of crib bumpers.

The study has yet to be published as the JPMA internally reviews the report.

Production halt demanded

As a result of JPMA’s inaction, the AG is calling on the group to halt production and sale of bumpers while the Consumer Product Safety Commission analyzes the products’ appropriate use, if any at all.

According to Madigan, the JPMA has failed to appropriately respond in light of these deaths.

“One infant death due to bumper pad use is too many. We must act now to remove bumpers from store shelves, stop production and work to educate caregivers to this threat,” Madigan said.

Since 2008, the National Center for Child Death Review has received reports of 14 infants who have died from suffocation caused by crib bumpers.

Mobilizing

Last month, Madigan partnered with the Illinois Chapter of the American Academy of Pediatrics, Kids in Danger, the American SIDS Institute, SIDS of Illinois and the Canadian Health Department to alert caregivers to this danger.

Madigan urged parents and caregivers to take the time to review her Rest Assured Guide to determine whether they have other dangerous children’s items that have been recalled in their homes.

The  guide provides information to consumers about cribs or other sleep-related items for children from 2007 to date. To obtain a copy of the guide, call the Attorney General’s Product Recall Hotline at 1-888-414-7678 (TTY: 1-800-964-3013).

It may seem like a long time until 2016, but not if you're an auto manufacturer. In just five short years, new Environmental Protection Agency (EPA) regulations will require automakers to achieve a fleetwide 35.5 miles per gallon standard.

To the average consumer, getting better fuel mileage usually means getting a smaller, less powerful car or even spending big bucks to get a hybrid or all-electric vehicle.

But big leaps in fuel economy don't happen all at once. There are lots of baby steps that, taken together, can achieve big results.

One that's capturing a lot of attention in Detroit these days is what's called “start-stop” accelerating. Very simply, it means that when you come to a full stop and keep your foot on the brake, the engine shuts down. Take your foot off the brake and it starts again.

That's what hybrids do, you say? Yes it is but there's no reason stop-start has to be restricted to hybrids, assuming you have enough faith in your car to trust it to start each time it's asked to do so.

Ford said late last month that it will start adding stop-start to nonhybrid U.S. cars and SUVs in 2012. And General Motors is introducing stop-start for the 2012-modelBuick LaCrosse. GM is calling it “e-Assist” and it's expected to spread quickly to other GM models.

As is often the case with fuel-saving techniques, stop-start is already fairly common in Europe, where gasoline is much more expensive than it is here. Even such high-end models as the Porsche Cayenne SUV and Panamera sedan feature stop-start in their European models, as do the Volkswagen Passat and Golf.

Ford also uses stop-start in its hybrid-powered Escape and Fusion.

Jeff Jowett, manager of North American powertrain forecasting for IHS Automotive, a consulting firm in a Detroit suburb, told trade magazine Automotive News this week that he expects the stop-start installation rate to hit 13 percent in the U.S. By 2015 – and he predicts the European rate will leap from today's 18 percent to 65 percent in five years.

Like all fuel-saving technologies, stop-start is not cheap to build. It requires a heavy-duty battery and starter, an electric auxiliary water pump and various software and sensor upgrades. But it definitely produces results.

Ford estimates its stop-start system generates fuel savings of 4 to 10 percent, depending on driving conditions, all without affecting driving performance.

Oregon Attorney General John Kroger today announced a lawsuit alleging that Johnson & Johnson and two subsidiaries exposed consumers to defective supplies of Motrin by delaying public disclosure of the problem for more than a year before finally conducting a public recall in 2010.

Instead of an immediate public recall, Johnson & Johnson and its subsidiaries allegedly attempted to quietly remove Motrin containers from store shelves. The “phantom recall” failed to notify consumers who had already purchased the defective product and exposed additional consumers by delaying public disclosure for more than a year.

“Companies that break the rules and put consumers at risk will be held accountable,” said Kroger.

McNeil-PPC and McNeil Healthcare, subsidiaries of Johnson & Johnson, discovered in late 2008 that supplies of Motrin sold in 8- and 24-caplet containers were defective, according to the lawsuit filed Wednesday in Multnomah County Circuit Court.  The containers were sold at gas stations, truck stops and convenience stores. In Oregon, the stores were scattered from the Portlandarea to Medford.

Company tests indicated that certain Motrin supplies failed to dissolve properly. As a result, consumers might not receive the expected dose of ibuprofen, which could lead to “a worsening of pain, fever or inflammation,” according to company documents submitted to the U.S. Food and Drug Administration.

McNeil notified the FDA. But instead of disclosing the existence of the defective Motrin to the public and conducting a recall, McNeil allegedly hired contractors to go into stores in early 2009 to secretly buy the product without telling wholesalers, retailers or the public.

Buyers were instructed not to tell retailers the purpose of their purchases, according to company documents:

“You should simply ‘act’ like a regular customer while making these purchases. THERE MUST BE NO MENTION OF THIS BEING A RECALL OF THE PRODUCT! If asked, simply state that your employer is checking the distribution chain of this product and needs to have some of it purchased for the project.”

In July 2009, one of the buyers in Oregonbecame concerned about the secrecy of the recall and reported the phantom recall to the Oregon Board of Pharmacy.  The Oregon Board of Pharmacy notified the FDA.

Although the phantom recall came to light in mid-2009, McNeil did not announce an official recall until February 2010.

Despite the efforts of the phantom recall, a total of 787 eight-count containers of Motrin sold byOregonretailers remain unaccounted for. 

The lawsuit alleges multiple violations of Oregon’s Unlawful Trade Practices Act (UTPA). Among other things, the UTPA prohibits employing unconscionable tactics, making certain false or misleading representations, or failing to disclose certain information. Each violation of the UTPA carries a maximum penalty of $25,000.

Do banks have short-term memory problems or has greed once again taken control? The dust has barely settled on what’s left of a devastated housing market, its demise caused in no small part by a flood of sub-prime mortgages to people who simply couldn’t make their mortgage payments. And now, the same thing could happen again with credit cards.

For the past two years, ever since the sub-prime mortgage debacle, banks have been acting somewhat responsibly by making it impossible or at least difficult for people with poor credit scores, those considered to be sub-prime borrowers, to borrow money.

But now, according to CardHub.com, the sub-prime category is no longer taboo. In fact, it says the number of credit card solicitations being sent to people with FICO scores of between 620 and 660 is up 300% in the last six months.

The credit card comparison website says Capital One and HSBC are among the most prevalent lenders going after subprime borrowers because they can charge them higher fees and interest rates.

Wasn’t this the first phase of what got us into trouble three or four years ago? What’s that famous saying, “history repeats itself because people forget?” Is it possible the banks have forgotten the recent past? Or do they believe that this time it will be different?

Subprime has always been an important market segment for banks because it generates more revenue than from more credit-worthy customers. They get to charge late fees and annual fees along with higher interest rates. It’s estimated that on average, lenders received 70% of their revenue from subprime borrowers.

The financial crisis and credit freeze triggered by the implosion in the sub-prime mortgage market forced banks to write off billions in losses of bad debt. But now that they’ve been bailed out and delinquency rates are on the decline, credit card issuers aren’t as worried and once again see these risky borrowers as a way to make more money. At least until they start to default again. 

It wasn’t that long ago when banks would only offer 0% APRs on credit cards to people who had credit scores of 720 or higher. But now banks say credit conditions are improving. Why would that be? The job market hasn’t recovered. The housing market hasn’t recovered. The economy is still limping along and yet the banks say credit conditions have improved.

Are they deluding themselves, or do they know something we don’t? Perhaps, if they make credit available to more people, this will in itself improve the credit market. Could that possibly be the answer?

According to direct-marketing data tracker Mintel Comperemedia.com, one in four mail solicitations sent from issuers for new credit cards are sent to subprime and near-prime borrowers.  Andrew Davidson, a senior vice president at Mintel, was quoted by SmartMoney magazine as saying “the pitch often offers solace, assuring such borrowers that they're entitled to a new beginning or that their blemished credit history doesn't mean they can't get a credit card.”

Odysseas Papadimitriou, chief executive of CardHub.com, says banks are hedging their risk with card terms that aren't all that favorable. The average interest rate for subprime accountholders is about 20%, up from 17.6% a year ago and nearly all of these cards come with an annual fee of $39 on average. He says the exception is Capital One's Standard Platinum card that is free the first year and $19 per year after that. The one saving grace is that the average credit lines for subprime borrowers are often very low, sometimes just $300 to $500.

But then how many sub-prime mortgages had to be sold and then defaulted on before that market caved in? 

The labor market hit the pause button in the third quarter of 2010, temporarily halting the momentum that had consumer credit delinquency rates improving in previous quarters, according to the American Bankers Association's (ABA) Consumer Credit Delinquency Bulletin. 

The results were largely unchanged from the second quarter and the composite ratio -- which tracks delinquencies in eight closed-end installment loan categories -- was virtually flat, rising just one basis point from the second quarter to 3.01 percent of all accounts in the third quarter.

Bank card delinquencies were stable, after dropping significantly over the last year -- rising a mere two basis points to 3.64 percent of all accounts, which remains well below the 15-year average (3.92 percent).  The ABA report defines a delinquency as a late payment that is 30 days or more overdue.

No surprises

ABA Chief Economist James Chessen said he isn't surprised that delinquency rate improvements slowed as the job market stumbled in the third quarter, with public sector job cuts (463,000) overwhelming private sector job gains (372,000).   "The economy just skipped a beat in the third quarter," Chessen said.  "It doesn't move in a straight line and neither do consumer credit delinquencies."

Delinquency rates showed slight upward and downward movement depending on the loan category. RV, marine, property improvement, home equity lines of credit, and non-card revolving loan delinquency rates showed improvement.  Auto indirect, bank card and mobile home loans were virtually unchanged.  Only personal, auto direct, and home equity loans delinquency rates rose.

Better days ahead

"I think we'll see momentum return and delinquencies improve over the next six months," Chessen said.  "There's less uncertainty about the economy now, and consumers and businesses feel more confident.  Improvements hinge on a consistent increase in new jobs.  We are also encouraged by lower consumer debt levels and higher personal savings rates.  This will help rebuild a sense of financial stability."

The second quarter 2010 composite ratio is made up of the following eight closed-end loans.  All figures are seasonally adjusted based upon the number of accounts.

CLOSED-END LOANS

Decreased delinquencies:

• Marine loan delinquencies fell from 2.20 percent to 2.04 percent.
• Property improvement loan delinquencies fell from 1.35 percent to 1.23 percent.
• RV loan delinquencies fell from 1.63 to 1.53 percent.

Increased delinquencies:

• Direct auto loan delinquencies rose from 1.67 percent to 1.74 percent.
• Indirect auto loan delinquencies rose from 3.01 percent to 3.02 percent.
• Home equity loan delinquencies rose from 3.97 percent to 4.05 percent.
• Personal loan delinquencies rose from 3.55 percent to 3.68 percent.

Unchanged delinquencies:

• Mobile home loan delinquencies remained steady at 4.01 percent.

In addition, ABA tracks three open-end loan categories:

OPEN-END LOANS

Decreased delinquencies:

• Home equity lines of credit delinquencies fell from 1.81 percent to 1.74 percent.
• Non-card revolving loan delinquencies fell from 1.21 percent to 1.09 percent.

Increased delinquencies:

• Bank card delinquencies rose from 3.62 percent to 3.64 percent.

Consumer Tips

For borrowers having trouble paying down debts, ABA advises taking action -- sooner rather than later -- to solve debt problems with the following tips:

• Talk with creditors – the sooner you talk to them, the more options you have;
• Don't charge more purchases until your problems are solved;
• Avoid bankruptcy – it's a short-term solution with long-term consequences; and
• Contact Consumer Credit Counseling Services at 1-800-388-2227.

National City Bank customers who were wrongfully charged for overdrafts would be eligible for refunds under a class action settlement tentatively approved by a Washington, D.C., judge.

Judge John Bates gave preliminary approval to a $12 million settlement in a class action that allegedNational City improperly charged overdraft fees on debit card transactions and provided false information about account balances.

The plaintiffs charged that National City, now owned by PNC, reordered debit transactions in a manner that depleted available funds as quickly as possible to increase overdraft fees.

Settlement class members will receive $36 for each an eligible overdraft charge incurred on debit transactions between July 2004 and August 2010.

The allegations in the lawsuit mirror the experiences of Veronica of Sauget, IL, who complained to ConsumerAffairs.com last January.

“They get a little crazy with the overdraft fees meaning I can't pay my bills this month because I just paid enough in overdraft fees to pay someone's salary for the week,” she said.

Kim of Milwuakee, WI, said the bank“charged me overdraft charges on my savings and checking, 3 times, for a $59 debit they put through twice … Now I'm out $75 for something they didn't even pay with overdraft protection that does not exist.”

Under the terms of the agreement, class members can be compensated for an unlimited number of overdraft charges incurred in any two calendar months during the class period. The months do not have to be consecutive.

Judge Bates said he restricted compensation to two months to prevent “chronic overdrafters … from being unjustly rewarded for their behavior.”

The next hearing in the case, to determine the fairness of the settlement, is set for June 13.

The full text of Bates' ruling is available online.

Consumers increased their spending with online retailers in December by 12 percent over December 2009 levels, according to a new report from IBM. The findings expand on the company's earlier report that both Black Friday 2010 and Cyber Monday 2010 delivered strong double-digit growth over 2009.

The report also bolsters the belief, suggested in previous reports, that consumer spending continues to migrate to the Internet.

Online sales were up 12 percent, with consumers pushing the average order value up from $171.06 to $190.42 for an increase of 11.3 percent.

Department stores and health and beauty

Both department stores and health and beauty retailers continue to show growth in online sales that far outpace the online retail sector overall. Both sectors reported sales increases of approximately 23 percent, with department stores reporting an increase of 22.6 percent and healthy and beauty retailers reporting 23.3 percent.

Jewelry retailers also reported a significant jump of 18.5 percent in sales, further evidence that upper income consumers are back to their free-spending ways.

Consumers also continue to use mobile technology as a shopping tool. Throughout December, 5.6 percent of all site visits were initiated from a mobile device, a 19 percent increase over November 2010. Further, 5.5 percent of all online retail sales came from mobile devices, a seven percent increase over November 2010.

Enticing consumers

"Retailers did a tremendous job of enticing consumers to shop online with a variety of special promotions, guaranteed delivery dates, free or deeply discounted shipping, and up-to-date inventory information," said John Squire, chief strategy officer, IBM Coremetrics. "Consumers have come to value the ease and convenience of shopping whenever and wherever they please, and are increasingly turning to online sites to research and purchase a variety of products."

While consumers shopping in brick and mortar stores decreased their use of credit cards to pay for purchases, online shoppers, of course, used credit cards almost exclusively, perhaps saving credit card companies from a dismal December.

In a separate report, ComScore reported earlier this month that during the 49 days of the holiday shopping season, from Nov. 1 through Dec. 19, e-commerce spending on gift items increased to over $28 billion. That, it turns out, is also a 12 percent increase over 2009 levels.

As any computer-user is aware, Spam is not just meat in a can, but the name given to all those emails cluttering your in-box, with enticements to grow body parts or get rich quick in the stock market.

Most are merely annoying but some carry dangerous malware and computer viruses. Where do they come from?

If you answered "Nigeria," because of that country's well-known 419 email scams, you would be wildly off the mark, according to the security experts at Sophos Software, who have compiled a "dirty dozen" list of countries that contribute more than their fare share of Spam email to the world. Nigeria isn't even on the list.

"What many people haven't learnt is that the spammers don't use their own computers to send spam - instead they create botnets of compromised PCs around the world (also known as "zombies"), which they can remotely command to spew out unwanted marketing messages, malicious links and even launch distributed denial-of-service attacks," Graham Cluley, a Sophos Security experts, writes in his blog.

That means Spam originates where there are the most infected computers, and according to Sophos, that's the United States. Here is the complete ranking:

1. USA (18.83%)

2. India (6.88%)

3. Brazil (5.04%)

4. Russia (4.64%)

5. UK (4.54%)

6. France (3.34%)

7. Italy (3.17%)

8. S. Korea (3.01%)

9. Germany (2.99%)

10. Vietnam (2.79%)

11. Romania (2.25%)

12. Spain (2.24%)

Rest of the world (40.17%)

"In all, we counted Spam being sent from an astonishing 232 countries around the world during the last quarter of 2010," Cluley writes. "So everyone, no matter where they are on the planet, should be taking more care of their personal computer's protection."

Cluley also reports what appears to have been a drop in Spam levels since Christmas. He said some botnets that had been pumping out Spam have suddenly stopped. That's not necessarily good news, he says, since they may be using the botnets for other, more sinister, activities.

If you bought a home in the first part of 2010, you may be eligible for a hefty tax credit that should not be overlooked when you prepare your 2010 tax return.

The original homebuyers' tax credit, which expired in 2009, covered only first-time buyers. When the law was extended, it was expanded to include not just first-time buyers, but also long-time residents who buy a new principal residence.

If you fall into that category, you may be eligible for a credit of 10 percent of the purchase price up to a maximum credit of $6,500. A long-time resident is an individual who, with his or her spouse if married, has owned and used the same home as a principal residence for any period of five consecutive years during the 8-year period ending on the date of purchase of the new principal residence for which the credit is being claimed.

Income Limitation

The full credit will be available to taxpayers with a modified adjusted gross income (MAGI) up to $125,000, or $225,000 for joint filers. MAGI is your adjusted gross income plus the total of certain foreign earned income.

Those with MAGI between $125,000 and $145,000, or $225,000 and $245,000 for joint filers, are eligible for a reduced credit. Those with higher incomes do not qualify.

No credit is available if the purchase price of a home is more than $800,000; and a purchaser must be at least 18 years of age on the date of purchase. To claim the tax credit, the taxpayer must used Form 5405.

Taxpayers who bought homes in 2009 or 2010 and sold them within a 36 month period that begins on the purchase date, must repay the credit. They also must repay the credit if they convert the home to a business or rental property or the lender forecloses on the home.

The taxpayer repays the credit by including the amount of the credit as additional tax on the tax return for the year in which the repayment event occurs.

However, taxpayers do not have to repay all or a portion of the credit under the following circumstances:

• Taxpayers sell the home to someone who is not related to them, the repayment in the year of sale is limited to the amount of gain on the sale;

• If the home is destroyed, condemned, or disposed of under threat of condemnation and the taxpayer acquires a new principal residence within 2 years of the event, the taxpayer does not have to repay the credit; and

• If, as part of a divorce settlement, the home is transferred to a spouse or former spouse, the spouse who receives the home is responsible for repaying the credit if required.

Recent studies show that one in seven youngsters has experienced unwanted sexual solicitations online. One in three has been exposed to unwanted sexual material online. One in 11 has been harassed or bullied online.

And as we all know, these are only some of the dangers that our kids face while surfing the Internet. How can we simultaneously protect them from these threats and enable them to take advantage of the positive things the web has to offer?

Education program

In addition to investigating online crimes targeting children, the FBI works to educate kids and their parents about the Internet -- sometimes sending cyber agents to visit schools as well as posting useful resources on our public website. The bureau also offers its Safe Online Surfing (SOS) program to schools to help students understand how to recognize, report, and avoid online dangers.

The SOS program began in the bureau's Miami office six years ago, when Special Agent Jim Lewis -- who saw first-hand how easily kids could be victimized online -- approached Community Outreach Specialist Jeff Green, about his desire to share information about Internet safety with school students.

The Miami office turned to nearby Nova Southeastern University for assistance with creating an online Internet safety program that that also tested students on what they learned. About 400 South Florida students took part initially, and according to Green, feedback from students and teachers was positive. “Kids are surfing the Internet anyway," he said, "so we were just using a vehicle they were comfortable with.” 

Spreading the word

Over the years, other FBI field offices began offering the SOS program with the help of their community outreach specialists. By October 2010, the Cyber Division at FBI Headquarters -- which manages the Innocent Images National Initiative, focused on online child predators -- took the SOS program under its wing and made it a national one. Today, more than 90,000 children in 41 states have completed it.

Innocent Images is an FBI intelligence-driven, proactive, multiagency investigative operation focused on combating the proliferation of child pornography/child sexual exploitation facilitated by computers. It also includes an international task force representing more than 40 countries that helps address the problem globally.

The program has grown tremendously between fiscal years 1996 and 2009:

• 2,435 percent increase in cases opened (113 to 2,865)
• 1,171 percent increase in informations/indictments (99 to 1,159)
• 3,421 increase in arrests, locates, & summons (68 to 2,326)
• 1,832 percent increase in convictions/pretrial diversions (68 to 1,246)

From fiscal year 1996 to 2009, Innocent Images has recorded a total of:

• 25,727 opened cases
• 8,958 informations/indictments
• 14,537 arrests, locates, and summons
• 9,054 convictions/pretrial diversion

How it works

At each grade level -- third through eighth -- students begin by taking pre-quizzes to test their overall knowledge. Then, a scavenger hunt takes them to pre-screened websites where they get Internet safety and cyber citizenship information. And finally, they take timed post-quizzes to demonstrate what they’ve learned.

The program also promotes a fun competition between schools: every month – from September through May -- schools with the highest scoring students in the nation are awarded the FBI-SOS Trophy.

Topics covered in the program run the cyber gamut: depending on the age of the students, they might learn about password security, cyberbullying, virus protection, copyright issues, online predators, e-mail, chat rooms, social networking sites, when to talk to parents or teachers about a threat, and appropriate uses of cell phones and gaming devices.

Of the SOS program, Cyber Division Assistant Director Gordon Snow said, “The Internet is a powerful resource for our youth, but it also presents opportunities for those who would attempt to do them harm…the Safe Online Surfing program is designed to teach young people what they need to know to avoid falling victim to individuals who want to take advantage of their youth and innocence.”

Schools interested in signing up for the Safe Online Surfing program should contact the community outreach specialist in their local FBI office.