Current Events in January 2011

It's the worst-kept secret in Las Vegas. Verizon Wireless has the media covering the Consumer Electronics Show buzzing about an event in New York on Tuesday for a special announcement.

What could it be?

Quoting "a person familiar with the matter," the Wall Street Journal reports Verizon will make the long-awaited announcement that it will begin selling an iPhone that will operate on its network. Since the inception of the iconic device, it has operated exclusively on the AT&T network.

For the first time, consumers who want an iPhone will be able to choose which carrier it operates on.

Since late October, industry blogs have been abuzz with speculation that Apple was going to produce an iPhone that would operate on Verizon's CDMA network, which is a different technology than the one used by AT&T.

AT&T iPhones won't work on Verizon Wireless

Current iPhone owners who drop AT&T and move to Verizon will have to purchase a new iPhone. The ones that operate on the AT&T network won't operate on Verizon's.

In October there were widespread reports that Verizon had suddenly begun rehiring hundreds of workers for its call centers. What could be behind it, many wondered, if not to have people in place to accept the anticipated flood of orders for a Verizon iPhone?

Even back in October, blogger Ben Parr was calling the Verizon iPhone "Apple's worst-kept secret," and is already  went so far as to conduct a among Verizon customers, asking if they will switch to an iPhone.

Sarah Ellison, writing in Fortune in October, called the Verizon iPhone "the most talked about cell phone that doesn't actually exist." In fact, neither Apple nor Verizon have said a word about a long-anticipated Verizon iPhone. At the time, Apple was playing coy, sahying it was quite happy with its present relationship with AT&T.

Gaining steam

The story gained steam when Verizon announced it would begin selling an Apple iPad that would run on its 3G network. Many technology writers saw that as the opening move toward Verizon, that would ultimately end with an iPhone.

Moving to Verizon makes sense for Apple, which narrowly leads in the universe of smartphone operating systems. Tapping into Verizon's customer base, many of whom may change to the iPhone, could help it increase its marketshare.

While the technology world sees the Verizon iPhone as a foregone conclusion, one piece of information remains unknown. No one seems to know when the Verizon iPhone will be available in stores. That, perhaps, will have to wait untul Tuesday.

By now, you’ve probably seen it on TV: the “Power Balance bracelet” that claims to improve balance and agility.  According to its manufacturer and celebrity endorsers, the bracelet “is “designed to work with your body’s natural energy field,” to allow you to reach “the next level.”

Even if you’ve seen the commercial, though, you’re likely still at a loss as to how the bracelet actually works. According to the Power Balance website, the product is “based on the idea of optimizing the body’s natural energy flow, similar to concepts behind many Eastern philosophies.” The site describes the “hologram” inserted in the bracelet as “designed to resonate with and respond to the natural energy field of the body.”

Josh Rodarmel, the 28-year-old Californian who co-invented the bracelet, put it this way in an interview last year: “Everything in nature has a set frequency. The body has a frequency and things which cause negativity to the human body -- like mobile phones and radio waves -- break down its natural healing frequency.”

Sounds hip and new age-y. And the bracelet’s credibility has been strengthened by the number of professional athletes who claim to wear one, including New Orleans Saints quarterback Drew Brees; Los Angeles Lakers guard Kobe Bryant; Boston Celtics center Shaquille O’Neal; and soccer legend David Beckham. Even veteran actor Robert DeNiro and Kate Middleton, Price William’s fiancée, have been sold on the powers of the bracelet.

“No credible scientific evidence”

Only one problem: In an official statement, the company recently admitted that “there is no credible scientific evidence that supports our claims and therefore we engaged in misleading conduct in breach of” an Australian consumer protection law.

The company’s admission came in response to a finding by the Australian Competition and Consumer Commission (ACCC) that the bracelet “may be no more beneficial than a rubber band.”

“Suppliers of these types of products must ensure that they are not claiming supposed benefits when there is no supportive scientific evidence,” ACCC chairman Gene Samuel said. The ACCC ordered Power Balance to take the product off the market and to issue a refund to any consumer who so requested.

Power Balance is complying with that order.

In response to the ACCC snafu, a class action lawsuit was filed in Los Angeles this week claiming that Power Balance misled the public by implying that there was a tangible benefit to be gained by wearing the bracelets.

Power Balance “stands by” product

Despite its admission that there is no “scientific evidence” behind the bracelet’s supposed powers, Power Balance is continuing to defend its product’s more mystical capabilities.

“[D]on’t believe what u hear. We stand by our products. (our trainers did test on us and we saw a difference in wearing them),” the company wrote in a recent tweet.

And in a statement issued Tuesday, the company insists that “Power Balance products work. The existing reports out there are fundamentally incorrect. Power Balance did not make any claims that our product does not perform.”

Since the bracelet’s introduction in 2007, over 2.5 million have been sold worldwide, at $29.95 a pop.

First Wells Fargo, then Citibank, followed by the Bank of America and now J. P. Morgan Chase have announced that they either have or will start charging new fees for checking accounts. In the case of Chase, it will begin imposing a $12 monthly maintenance fee for new customers of its new Total Checking account next month. 

All this appears to be in response to the government’s CARD Act, which ironically banned other fees such as certain overdraft fees and excessive late charges as well as high interest rate hikes. Most recently, the Federal Reserve proposed a cap on debit interchange fees -- what the bank charges retailers when customers swipe their cards.

Despite what looks like the end of free checking, there are ways to get around it. According to Greg McBride, a senior financial analyst at Bankrate.com, 65% of all financial institutions still offer free checking and 23% that offer an account where fees can be waived with actions such as direct deposits.

Wells Fargo ended its "free checking" account in July 2010 and now it charges customers $5 a month unless they maintain a minimum balance of $1,500 or make monthly deposits of $250. Its other accounts charge fees up to $30, but they can be waived if you meet certain requirements, like maintaining higher minimum balances or making automatic transfers to your savings account. That means every account at Wells Fargo offers a way to waive a fee.

Starting back in September 2010, Citibank became the second of the large banks to begin charging monthly maintenance fees of up to $30 for checking accounts.

Then this week, Bank of America announced it would be implementing new monthly fees, ranging from $8.95 to $25. That means you could end up paying anywhere between $100 and $300 extra a year in fees alone. Bank of America currently charges an $8.95 monthly maintenance fees on most checking accounts, but you can get those charges waived if you make at least one direct payment each month or maintain a balance of $1,500. That will all change soon. So if you want a basic checking account where you don't have to worry about keeping up balances or making minimum deposits, you're going to have to pay a $9 monthly fee.

In order to avoid the fee you will have to enroll in what’s called an "enhanced" checking account and keep a balance of $5,000 in your total linked deposit accounts, which could include checking, saving and investment accounts. You can also deposit at least $2,000 monthly, or use a linked credit card at least once a month and the fee would be waived. But if your balance drops below $5,000 or you don't meet the other requirements, you're charged a $15 fee.

Now, you can avoid paying a fee entirely with an online account, but you have to receive statements online and only use ATMs. If you need to speak with a teller or get a paper statement it will cost you   $8.95 a month.

As for the new J.P. Morgan Chase fee, the new Total Checking account will cost you $12 a month unless you maintain a checking account balance of $1,500, make monthly direct deposits of at least $500, or keep a $5,000 balance across all deposit accounts -- including checking, savings and investments.

If you keep your old account, you'll get charged a $6 monthly fee unless you make a direct deposit at least $500 per month or make five debit card purchases. Currently, customers can qualify by making any direct deposit. The basic checking account charges a monthly maintenance fee of $8 on unless you complete five or more monthly transactions, including direct deposit, debit card purchases, bill payments, check payments and ATM cash withdrawals.

Wachovia customers still get to hold on to their free checking accounts, but they will be fully integrated with the bank's other fees -- including $2 charges to receive images of cancelled checks and $10 fees for using your savings as overdraft protection.

While you can find ways around monthly fees at most of the nation's biggest banks, many smaller community banks, credit unions and online banks offer free checking without the strings attached. McBride also recommended checking out online banks such as Charles Schwabb, ING Direct, Flagstar Direct and EverBank for free checking accounts and said that the 39 of the 50 largest credit unions offer free checking.

Every tax season it becomes abundantly clear to many that the nation's tax code is overly complicated.

In December, as part of its package of recommendations, the President's bi-partisan committee on the deficit urged a simplification of the tax code, reducing rates and closing loopholes. The Taxpayer Advocate within the Internal Revenue Service (IRS) agrees.

In her annual report to Congress National Taxpayer Advocate Nina E. Olson said taxpayers, most of whom must pay someone to prepare their tax return, would benefit from a simplification of tax laws.

"There has been near universal agreement for years that the tax code is broken and needs to be fixed," Olson said in releasing the report. "Yet no broad-based attempt to reform the tax code has been made.  This report documents the burdens the tax code imposes on taxpayers and explores why many taxpayers may nevertheless feel wedded to key aspects of the current system, undermining efforts at reform."

Hard-core enforcement

The report describes the Advocate's continuing concern that IRS collection practices inflict unnecessary harm on financially struggling taxpayers and fail to achieve the IRS's overriding objective of increasing long-term voluntary compliance with the tax laws.

"Tax collection requires a delicate balancing of the government's interest in collecting revenue and ensuring that all taxpayers pay their fair share of tax, on the one hand, and protecting financially struggling taxpayers from unnecessary harm, on the other," Olson said.  "Current IRS policies do very little balancing.  For example, IRS lien filing policies are all about 'protecting the government's interest' and don't consider the impact on the taxpayer."

In FY 2010, the IRS filed liens against 1.1 million taxpayers.  When the IRS files a notice of federal tax lien, the taxpayer's creditworthiness can be badly damaged for the long term. 

Lien filings are picked up by the three credit rating agencies and remain on the taxpayer's credit report for seven years from the date a tax liability is resolved, or longer if it is not resolved. 

"Increasingly, employers, mortgage lenders, landlords, car dealerships, auto insurance companies, and credit card issuers utilize credit reports, so a tax lien has the potential to render someone unemployable, unable to obtain housing, and unable to obtain car insurance or a credit card, at least at reasonable rates, for many years into the future," Olson said. 

A tax lien can be particularly devastating to small businesses, as it often cuts off their access to credit. Over the past seven years, the IRS has filed more than five million tax liens. 

The report says that despite the high unemployment rate and the unusually large number of Americans who are experiencing financial difficulties, the IRS is continuing to ramp up the number of tax liens it files each year.  The 1.1 million liens filed in FY 2010 compare with 168,000 in FY 1999, an increase of 550 percent.

What's the benefit?

The IRS does not have data that show whether, or to what extent, liens further revenue collection.  A study conducted in 2009 suggests there is a possibility that lien filings may reduce long-term tax collection.  Notably, over the same period that lien filings have increased by 550 percent, annual revenue collected by the IRS's Collection function on an inflation-adjusted basis has remained flat.

"By filing a lien against a taxpayer with no money and no assets, the IRS often collects nothing, yet it inflicts long-term harm on the taxpayer by making it harder for him to get back on his feet when he does get a job," Olson said.  "Absent data that show liens make a meaningful contribution to revenue collection and especially in this economy, I find it unacceptable that the IRS continues to torment financially struggling taxpayers in this way."

 Consumers who thought they were getting a free trial of dietary supplements or teeth whitening products, only to find their credit cards charged for additional products, are getting $3 million in refunds. The company has agreed to settle deceptive marketing charges.

Just over a year ago, the Florida Attorney General’s Economic Crimes Division began investigating Florida-based XM Brands, a marketer of non-prescription dietary aids, nutritional supplements, teeth-whitening, and other products.

The investigation was triggered by complaints from consumers, who said they received and were billed for products they did not order. The investigation revealed that acceptance of XM’s trial product offer triggered a negative option agreement which imposed automatic monthly shipments and reoccurring costs associated with receiving the trial products.

Sold on the internet

The products were advertised on the Internet, offering consumers a free trial. However, to receive the free product, consumers had to provide credit card information to pay a $2 to $4 shipping fee. Once the company had he credit card information, consumers complained they were subjected to automatic subscription renewals, and automatic shipments.

Florida's newly sworn-in Attorney General Pam Bondi said XM Brands and its directors have fully cooperated with the Attorney General’s Office and have already reimbursed or assisted in the reimbursement of approximately $3 million to consumers nationwide. Consumers who have not yet been reimbursed, have until April 29, 2011 to file a claim with the Attorney General’s Office.

Refunds

As part of the settlement, refunds will be offered to Florida consumers who were enrolled in a trial offer, automatic renewal or automatic shipment plan online. In addition to consumer refunds, the companies will pay approximately $51,000 to the Attorney General’s Office for attorneys' fees and costs and for future investigation and enforcement.

XM agrees to advertise in a way that clearly and conspicuously tells consumers about the terms and conditions of its plans and ensures that consumers have agreed to automatic renewals and automatic shipments before enrolling them in such programs.

If you've ever wondered why mass-produced clothing, shoes, and accessories tend to stick to small, similar color schemes, a new study suggests it’s because that’s what most consumers tend to like.

The study involved 142 participants who agreed to go to the publicly available NIKEiD website and create a Nike "shox" shoe for themselves.  

At the site, they choose colors for seven elements of the shoe: the base, secondary, swoosh, accent, lace, lining and shox.  For each element, they could choose between six to 12 colors.

The researchers analyzed the color choices made by the participants and measured the similarity of chosen colors based on a widely accepted “color space” model.

Results showed there was a strong tendency to use identical colors in more than one of the seven different elements of the shoe, said Xiaoyan Deng, lead author of the study and assistant professor of marketing at Ohio State University’s Fisher College of Business.

When the participants did use different colors, they were almost always very closely related.  For instance, “ice blue” might be combined with “twilight blue.”

They usually avoided contrasting or even moderately different color combinations.

The results support the theory that people like their color combinations to be relatively simple and coherent, rather than complex and distinct.

“Most people like to match colors very closely,” Deng said.  “The further the distance between two colors, the less likely people are to choose them together.”

Easier to work with

What could be the reason behind this tendency to play it safe with colors? Deng thinks one of the reasons could be that it‘s easier to work with fewer color choices.

“Using a small number of colors simplifies the final design and reduces the effort it takes to design the shoe,” Deng said.

There was, however, one exception to the play-it-safe tendency most consumers had.

A large minority of the study participants chose to highlight one element of the shoe by making it a color that was unrelated to the others used, offering a strong contrast.  Often, people chose this contrasting color for the “shox” element -- columns in the heel and mid-section of the shoe that provide cushioning while running.

These shox are a unique component of athletic shoes and a signature component of this Nike product line.

“It seems that some consumers wanted this signature part of the shoe to really stand out from the rest,” Deng said.  “It may be that they saw the rest of the shoe as a background for this one contrasting color.  But we need to study that more.”

Deng said it was significant that consumers used only about four different colors in the shoe.  The researchers calculated that they would expect consumers to use 5.48 colors per shoe, based on the conditions in this study.

“We found that consumers preferred to use just a small palette of colors in their shoe and closely matched colors within this palette,” she said.

But does this study really capture the participants’ general feelings about color combinations, or are the results only applicable to these self-designed shoes?

To test this, the researchers asked participants to rate how much they liked four Nike-designed shoes available on the website.

The researchers then created a “color coordination index” for each Nike-designed shoe that allowed them to relate the level of similarity between colors of a specific Nike-designed shoe to participants’ shoe preferences.

The results showed that there was a strong association between the color coordination index and the liking for Nike-designed shoes.  This suggests the study really did reveal how participants liked to combine colors, Deng said.

Too many choices?

Deng said the findings suggest that Nike may be offering more color combinations for each element of the shoe than consumers really need.

“If a consumer chooses a reddish color for one element of the shoe, he or she will probably only use colors closely related to red for the rest of the shoe,” she said.

“However, it is not the case that you can offer the same small palette of colors for all consumers.  Each consumer may have a different idea of what color they want to emphasize.  But once they make that choice, their palette tends to be restricted.”

The study is important, Deng said, because it is one of the first to show, from a marketing perspective, people’s preferences for color combinations and how they would choose to combine colors in a realistic shopping situation.  

Most other research on color preferences has taken a psychological perspective and simply asked people whether they thought two color chips would go well together.

“We had a very realistic situation in the study where consumers could clearly show how they would combine colors in real life,” Deng said.

Deng conducted the study with Sam Hui of the Stern School of Business at New York University and J. Wesley Hutchison of the Wharton School at the University of Pennsylvania.  It was published in a recent issue of the Journal of Consumer Psychology.

Although Facebook Founder and CEO Mark Zuckerberg has said he has no interest in taking his company public, it appears that could happen anyway.

There are now indications that the most powerful social networking site in terms of members could be pressured into or is already preparing to take itself public, possibly as early as next year.

Under pressure

These indications come as the Palo Alto, California-based company revealed new details in a 100-page private placement document Goldman Sachs sent to a small group of potential investors that Facebook would be increasing its number of shareholders above 500 this year.

Under Securities and Exchange Commission (SEC) rules, that would force Facebook to begin disclosing public financial information it had previously kept private or go public by April 2012.

In recent interviews, Zuckerberg has said he is in no rush to go public, but that was before the company launched a private equity offering of as much as $1.5 billion through Goldman Sachs Group. There was so much investor demand to get in on the deal that Goldman had to close it down.

Question of value

Before the Goldman deal was announced, investors in the secondary private equity market had reportedly driven Facebook’s estimated valuation to $50 billion. Although that figure has never been validated by Facebook, some analysts have voiced concern that it seems a bit inflated since Facebook’s earnings for the first nine months of 2010 were around $355 million on $1.2 billion in revenue. That would make that valuation approximately 140 times earnings.

Jordan Rohan, an analyst with Stifel Nicolaus, said that while Facebook’s financial performance was strong, it was difficult to value the company based simply on its revenue and net income.  

He said to value it accurately, you need to understand whether they are generating cash after all their capital expenditures and that Facebook was most likely spending hundreds of millions of dollars building two giant data centers, and that the cost of those facilities was probably being amortized over several years. Rohan said Facebook’s margins are high and the company appears to be more than doubling in sales every year.

Another analyst, Lou Kerner of Wedbush Securities, said he believed the revenue was in line with what he thought it would be, but the profitability is higher. Kerner predicted that Facebook could be worth as much as $200 billion by 2015.

The SEC had been stepping up its inquiry into the trading of shares in hot private Internet companies such as Facebook, Linkedin and Twitter, specifically the so-called 499 shareholder limit rule. 

Facebook says it would cross the 499 shareholder limit by the end of 2011 in the offering memorandum sent to Goldman clients who are being given an opportunity to buy Facebook shares. The document also said Facebook was cooperating with the SEC inquiry.

Schadenfreude, or “the pleasure derived from the misfortune of others” is not necessarily a thing we should strive for as a society, but a new study shows -- in a weird way -- when we assume others' lives are always happy and stress-free, it makes us more likely to feel depressed and lonely.

Previously, “no one had shown that people systematically underestimate how often others feel sad or upset,” says Benoît Monin, associate professor of organizational behavior and of psychology at Stanford University.

This misconception is linked to loneliness and unhappiness.

The grass is greener

“When you think everyone else is having fun, you think your life is not that great,” Monin says. “Perceptions -- even erroneous ones -- matter a great deal.”

Monin says the tendency to think we’re alone in our problems stems from the fact that most people keep their worries, fears, or anger hidden in social situations. Even if all our friends around us are suffering from personal, financial or workplace woes, they may not bring it up at parties or happy hour.

The result is that “people look at their friends’ smiles in social situations and think they’re always happy,” says Alex Jordan, the study’s first author and a recent psychology doctoral graduate who is now a postdoctoral fellow at Dartmouth College.

Down in the dumps

To confirm the difficulty of knowing when friends are feeling down, researchers surveyed college students about their emotional experiences and how often they put feelings like laughing or crying on public display. They also asked how often emotional feelings were shared with friends.

Negative emotions were nearly twice as likely to occur in private compared to positive emotions and were three times more likely to be intentionally hidden from others.

In another study, participants were asked how often they had negative and positive emotional experiences, like arguing with a friend or having fun at a party. They were also asked to estimate how often their peers experienced the same types of emotions.

Most participants underestimated the prevalence of their peers’ negative emotional experiences and overestimated the prevalence of the positive ones. Misperceptions occurred even among close friends.

Participants in their first semester of college recorded their emotional experiences in private online diaries for 10 weeks. The participants also had three friends judge and describe how happy or sad they seemed.

Repeatedly, friends thought the participants were happier than they truly were.

All alone

In another study, the researchers looked for a correlation between participants’ perceptions of how often their peers experienced certain emotions and the participants’ own emotional well-being.

Participants who sensed less sadness in their peers said they were lonelier and spent more time brooding over their own problems. And those who thought their peers had lots of positive experiences reported being less satisfied with their own lives.

“Thinking you’re alone in your emotional challenges is, understandably, not much fun,” Jordan says.

He first considered the idea that people might view others’ lives as happier than they really are after noticing some of his friends were upset after reading others’ posts on Facebook.

“They felt disappointed with their lives when they logged onto Facebook and browsed the apparently ‘perfect’ lives presented by their peers,” Jordan explains. “I wondered whether people might harbor a more general illusion that others’ lives are cheerier than they actually are.”

“Paradoxically,” Monin says, “if we told others how unhappy we are, we would probably all be happier in the long run.”

Researchers from the University of California, Berkeley and Elmira College contributed to the study, which is published in the journal Personality and Social Psychology Bulletin.

Have you noticed that some products don't seem to last as long as they used to?

From toothpaste to tuna fish, hot dogs to hand soap, companies have been shaving ounces and inches from packages for years. Consumer Reports’ (CR) latest investigation, featured in the February issue, found that more and more products are getting downsized.

Shrinking packages

Household names like Tropicana orange juice, Ivory soap and Kraft singles American cheese are all playing the shrinking package game, and manufacturers are attributing it to rising costs for ingredients and energy.

“They’ve got a point. Higher commodity and fuel costs are expected to spike in food prices by as much as three percent is 2011,” said Tod Marks, senior editor and resident shopping expert at CR. “But if manufacturers are skimping when costs go up, why aren’t they more generous when costs hold steady or fall?”

Companies often hide their handiwork when they shrink their packages. Indenting the bottom of containers, making plastic wraps thinner or whipping air into ice cream are a few subtle ways companies downsize their products.

Reasons for reduction

Manufactures make subtle changes to the packages but generally keep the price the same because when prices rise, buyers often seek cheaper alternatives. And the bottom line is consumers are more attuned to changes in price than packaging.

Consumer Reports found packages reduced in size by as much as 20 percent in its study. For example, Ivory dish detergent shrank from its 30 oz. bottle to a new 24 oz. bottle due to increased costs for raw materials, according to a customer service representative.

And Häagen Dazs ice cream’s 16 oz. container shrank to a 14 oz. container due to the cost of ingredients and facility costs. It was either change the size of the container or raise the price, according to customer service.

What shoppers can do

Despite awareness of downsizing, it’s not easy to figure out which products have shrunk because relatively few package goods come in standard, recognizable sizes anymore. Other products come in such a range of sizes it’s hard to tell when one of them shrinks. For example, Oreos come in more than a dozen packages weighing from two ounces to more than 50 ounces. 

Consumer Reports offers these tips to help consumers shop the aisles with ease:

• Look at different brands. Not all manufacturers downsize. Minute Maid still sells its orange juice in half-gallons, and Ben & Jerry’s packs its ice cream in pints.
• Compare unit price. Look at cost per ounce, per quart, per pound, per sheet. Promotions change, making one size or another cheaper from week to week.
• Try store brands. House brands are usually 25 to 30 percent cheaper than name brands and are often at least as good.
• Stock up and save. Supermarkets sell staples such as paper goods, cereal, and soups at or below cost and rotate them regularly. Many items go on sale at predictable intervals, so stock up until the next sale.
• Buy in bulk. Warehouse clubs offer everyday low prices on large sizes or multipacks.
• Contact the company. When Consumer Reports asked customer-service representatives why a product had been downsized, they often offered coupons as an apology.

If enough people complain about downsizing, companies may actually listen. When customers complained to Pepperidge Farm about a new smaller-sized, more-expensive wheat bread package, the company bought back the larger loaf briefly. It has since been discontinued.

Structured products sound so benign, so safe, so -- well -- structured. They’re not.

In fact in terms of where they fall on the risk scale, they’re in the same category as options, which are considered high risk and are actually linked to many structured products.

So when an unsuspecting investor hears about a structured product, which is really a derivative and usually takes a Ph.D. in mathematics to understand, and that it’s sort of a bond linked to the performance of stocks that could return as much 64 percent at a time when interest rates are historically low, then he just might take notice.

That’s what happened, according to Bloomberg, with a structured product known as a reverse convertible, and we’re not talking about a ragtop that goes backwards.

Investment devices

These reverse convertibles are tricky little devices and this time they ended up doing a double reverse on the investors who bought them by losing value even when the stocks they were linked to went up. And that’s not so easy to do.

Bloomberg news says banks sold more than $6 billion worth of reverse convertibles with the promise of extraordinary gains and even though Standard & Poors’ 500 index of stocks gained 8 percent and corporate bonds gained 11.1 percent, the reverse convertibles managed to lose an average of 1 percent.

Banks market reverse convertibles as short-term bonds that convert into stock if a company’s share price drops. They’re part of the recent boom in structured notes, or bonds packaged with derivatives whose values are derived from other assets that could include stocks, bonds, currencies and commodities, or even from events such as changes in interest rates.

Booming sales

According to Bloomberg, structured note sales rose 46 percent percent last year to a record $49.4 billion in the U.S.  They seemed to fill a demand from individual investors who were frustrated with record low rates on everything from CDs to money market funds.

Barnkrate.com says the Royal Bank of Scotland, RBS, sold $1.15 million in three-month notes tied to Eastman Kodak on June 10 that paid 24 percent annualized interest or 24 times the average rate on one-year CD.

Buyers couldn’t lose money unless shares of the camera maker fell to below $3.54 from $5.06. Guess what? Kodak dropped below $3.54 to  $3.50 on August 31 in New York trading and RBS converted the bonds into stock costing investors an 18 percent loss even with the high interest rate.

According to Bloomberg, reverse convertibles aren’t traded on exchanges and their performance isn’t reported publicly but investors lost $27 million on the $2.19 billion worth of the securities.

A closer look

The SEC is reportedly looking into whether the banks are charging excessive fees. Banks typically charged 1.6 percent on a three- month reverse convertible, or about six percent. In comparison, the average annual fee on stock mutual funds is one percent. The three-month reverse convertibles sold by RBS and linked to Kodak paid brokers a 2.75 percent commission. One investment expert said it may have been the fees that caused the losses.

Professional money managers generally don’t buy reverse convertibles because they can pay less in fees by trading derivatives directly.

Horror story

Perhaps the worst story tied to reverse convertibles happened to a retired Sun City Center, Florida, couple. According to Bloomberg, Leroy and Carol Conklin were pitched an investment in reverse convertibles by a broker at H&R Block Financial Advisors.  Conklin, who is 80 years old, said they bought the reverse convertibles as if they were corporate bonds and because they paid nine percent which he thought was a good investment.

However, when the notes converted into stock, the Conklins lost more than $130,000. Carol Conklin said she still has no idea what derivatives are. They’ve filed an arbitration claim and a hearing is scheduled for May.

Joseph Borg, director of the Alabama Securities Commission, told Bloomberg that state regulators are seeing an influx of concerns and complaints from individual investors about structured products, including reverse convertibles. He added that brokers who sell the investments sometimes don’t even understand them.

Young people may crave boosts to their self-esteem a little too much, new research suggests.

Researchers found college students valued pumping up their egos more than any other pleasant activity they were asked about -- including sex, favorite foods, drinking alcohol, seeing a best friend or receiving a paycheck.

“It is somewhat surprising how this desire to feel worthy and valuable trumps almost any other pleasant activity you can imagine,” said Brad Bushman, lead author of the research and professor of communication and psychology at The Ohio State University.

Bushman conducted the research with Scott Moeller of Brookhaven National Laboratory and Jennifer Crocker, professor of psychology at Ohio State.

Sense of self

In two separate studies, the researchers asked college students how much they wanted and liked various pleasant activities, such as their favorite food or seeing a best friend.  

They were asked to rate how much they wanted and liked each activity on a scale of 1 (not at all) to 5 (extremely).

One of the items they were asked about was self-esteem building experiences, such as receiving a good grade or receiving a compliment.

“We found that self-esteem trumped all other rewards in the minds of these college students,” Bushman said.

In one of the studies, the participants took a test which purportedly measured their intellectual ability.  Afterwards, they were told if they waited another ten minutes, they could have their test re-scored using a new scoring algorithm that usually yields higher test results.

Students who highly valued self-esteem were more likely to stay to get the new scores.

“They were willing to spend their own precious time just to get a small boost in their self-esteem,” said Bushman.

Too much focus

While Bushman admits there’s nothing wrong with a healthy sense of self-esteem, the results of this study suggest many young people may be a little too focused on pumping up their sense of self.

Here’s why: for all the pleasant activities examined in this study, participants were asked to rate both how much they liked the activity and how much they wanted it.  

Both questions were asked because addiction research suggests that addicts tend to report they “want” the object of their addiction (drugs, alcohol, gambling) more than they actually “like” it, Bushman said.

“The liking-wanting distinction has occupied an important place in addiction research for nearly two decades,” said Moeller.  “But we believe it has great potential to inform other areas of psychology as well.”

According to Bushman, the study participants all reported liking the pleasant activities more than wanting them -- even in regards to self-esteem. But the difference between liking and wanting was smallest when it came to self-esteem.

“It wouldn’t be correct to say that the study participants were addicted to self-esteem,” Bushman said.  “But they were closer to being addicted to self-esteem than they were to being addicted to any other activity we studied.”

Findings showed the participants with a strong sense of entitlement were the ones who were most likely to “want” the good things in life -- including boosts to their self-esteem -- even more than they actually “like” them.

Entitlement

Entitlement was measured as part of a narcissism scale which participants completed.  

In the scale, participants had to choose which of two statements they most agreed with.  For example, people who scored high on entitlement were more likely to agree with “If I ruled the world, it would be a much better place” rather than “The thought of ruling the world frightens the hell out of me.”

“Entitled people want all the good things in life, even if they don’t particularly like them,” Bushman said.  “Of course, there’s no problem with enjoying good things, but it is not healthy to want them more than you like them.”

Dangerous obsession

Bushman said he sees danger in this obsession with self-esteem.  Research has shown that levels of self-esteem have been increasing, at least among college students in the United States, since the mid-1960s.

“American society seems to believe that self-esteem is the cure-all for every social ill, from bad grades to teen pregnancies to violence,” he said.  “But there has been no evidence that boosting self-esteem actually helps with these problems.  We may be too focused on increasing self-esteem.”

Study co-author Crocker added the problem isn‘t having high self-esteem, but rather how much people are driven to boost it.

“When people highly value self-esteem, they may avoid doing things such as acknowledging a wrong they did. Admitting you were wrong may be uncomfortable for self-esteem at the moment, but ultimately it could lead to better learning, relationships, growth, and even future self-esteem,” said Crocker.

The study appears online in the Journal of Personality and will be published in a future print edition.

We’ve all got to get a lot smarter these days just to keep up with the everyday gadgets in our lives. It already takes a certain amount of skill to handle a smart phone, drive a smart car, or even watch streaming video over the Internet on a smart TV.

Can you just imagine the brain power it’s going to take to live in smart home?

Living smart

Well, start taking classes now folks because GE is hoping to transform the way we live with its new smart house that includes a wind turbine, an electrical vehicle charging station, and a variety of technologies designed to help you reduce your health and energy-related costs.

David McCalpin is general manager for Home Energy Management in GE’s Appliances & Lighting department. He says consumers are expecting near real-time information to inform household decisions. He says GE will provide this with its Nucleus energy manager with something called Brillion technology, to the digital-energy technology that will enable an energy transformation to make peoples’ lives easier.

Energy management

This includes GE’s smart meter technology which enables two-way communication between the electric utility and the customer via smart devices in the home, letting consumers manage their energy use and utilities to manage demand.

With smart meters in place, utilities will have the option to charge different rates for electricity throughout the day, with lower prices when energy demand is lowest during off-peak.

The smart home will be filled with appliances enabled with Brillion technology, which allows the appliances to automatically react to utility price signals from the smart meter and delay or reduce the wattage consumed by the appliance until lower-cost, off-peak periods.

GE Profile appliances outfitted with Brillion technology will include ENERGY STAR-qualified refrigerators, dishwashers, clothes washers, and the new GeoSpring™ hybrid water heater, as well as ranges, microwaves and clothes dryers.

The lights in the smart house are LEDs and have a life expectancy of 22 years -- just a bit longer than what most of are used to.

Then there’s the advanced Small Wind Turbine that could provide up to 80 percent of the homes energy requirements.  This turbine will be available in March.

As for innovations in healthcare, the smart home will give consumers tools to manage their health remotely and increase their independence. How it will do that was not spelled out, but  more information on the smart home is available here. 

Microbloggers may think they're interacting in one big Twitterverse, but researchers at Carnegie Mellon University's School of Computer Science find that regional slang and dialects are as evident in tweets as they are in everyday conversations.

Postings on Twitter -- “tweets” -- reflect some well-known regionalisms, such as "y'all" (the South) and "yinz" (Pittsburgh), plus the usual regional divides in references to soda, pop and Coke.

Analyzing tweets

But Jacob Eisenstein, a post-doctoral fellow in CMU's Machine Learning Department, said the automated method he and his colleagues have developed for analyzing Twitter word use shows regional dialects appear to be evolving within social media.

In northern California, something that's cool is "koo" in tweets, while in southern California, it's "coo."

In many cities, something is "sumthin," but tweets in New York City favor "suttin."

While many of us might complain in tweets of being "very" tired, people in northern California tend to be "hella" tired, New Yorkers "deadass" tired and Angelenos are simply tired "af."

The "af" is an acronym that, like many others on Twitter, stands for a vulgarity. (Think the “f-word.“)

“LOL” is a commonly used acronym for "laughing out loud," but Twitterers in Washington, D.C., seem to have an affinity for the cruder LLS. (Think the “sh-word.”)

Eisenstein said some of this usage clearly is shaped by the 140-character limit of Twitter messages, but geography's influence also is apparent.

Tracking tweeters

The statistical model the CMU team used to recognize regional variation in word use and topics could predict the location of a microblogger in the continental United States with a median error of about 300 miles.

Studies of regional dialects traditionally have been based primarily on oral interviews, Eisenstein said, noting that written communication often is less reflective of regional influences because writing -- even in blogs -- tends to be formal and thus homogenized.

But Twitter offers a new way of studying regional lexicon, he explained, because tweets are informal and conversational. Furthermore, people who tweet using mobile phones have the option of geotagging their messages with GPS coordinates.

For this study, Eisenstein and his co-authors -- Eric P. Xing, associate professor of machine learning, Noah A. Smith, assistant professor in the Language Technologies Institute (LTI), and Brendan O'Connor, machine learning graduate student -- collected a week's worth of Twitter messages in March 2010, and selected geotagged messages from Twitter users who wrote at least 20 messages. That yielded a data base of 9,500 users and 380,000 messages.

Tracking vs. profiling

Though the researchers could pinpoint the users' locations using the geotags, they can only guess as to their profiles.

Eisenstein said it's reasonable to assume that people sending lots of tweets from mobile phones are younger than the average Twitter user and the topics discussed by these users seem to reflect that.

Automated analysis of Twitter message streams offers linguists an opportunity to watch regional dialects evolve in real time.

"It will be interesting to see what happens. Will 'suttin' remain a word we see primarily in New York City, or will it spread?" Eisenstein asked.

Eisenstein said it might be a mistake to assume the greater interconnectivity afforded by the Internet will necessarily result in more homogeneity in language since social circles maintained by sites like Twitter are often geographically focused.

Also, many people use the Internet to seek out like-minded people with similar interests, rather than expose themselves to a broader range of ideas and experiences.

Eisenstein will present the study on Jan. 8 at the Linguistic Society of America annual meeting in Pittsburgh. The paper is currently available online.

If you live in Arizona, Georgia or Massachusetts, Bank of America has its eye on you. The giant bank, which has some kind of banking relationship with half of all U.S. households, has chosen those states as test markets for a new batch of fees aimed at squeezing more money out of consumers.

Forget free checking, no-fee ATMs and statements in the mail. Nearly every activity will cost you something under the new fee structure, which has not been formally announced but became publicly known after a series of employee meetings this week.

The most basic checking account will cost about $6 a month while those with more features could cost as much as $25, press reports said.

As always, some fees might be waived for “better” customers, meaning those who maintain certain balances, keep a healthy balance on their credit cards, have a mortgage with the bank or do all of their banking online.

Ironically, the stiffer fees are at least partly in response to new regulations designed to protect consumers from predatory banking practices., including overdraft fees, high interest rates on credit cards and debit card “swipe” fees.

The changes are costing big banks billions and banks are moving swiftly to recover at least some of that revenue through new and higher fees.

A study by Bankrate.com recently found that the percentage of banks offering free checking has dropped from 76 percent in 2009 to 65 percent in 2010.

Wells Fargo and Chase are also trying out new fees.

The new Bank of America fee structure sets up four “tiers” – Premium, Enhanced, eBanking and Essentials, The Wall Street Journal reported.

The paper said the Premium and Enhanced tiers will be for customers who have multiple accounts with the bank. Ebanking is for customers who do all their banking online and Essentials is the most basic account, for those who have one checking account and a debit card.

The social-networking company LinkedIn reportedly intends to file for an initial public offering (IPO) within a few months, another sign that the market for high-tech companies is heating up. In a story first reported by Reuters, it appears the Mountain View, California company, whose members include more than 85 million business professionals, could file what’s called an S-1 registration statement before April.

Reuters quoted a person close to deal as saying there are three underwriters, Bank of America Merrill Lynch, J.P. Morgan Chase and Morgan Stanley. According to Reuters, the decision to take Linkedin public was actually made in the fourth quarter of 2010, before all the news about Goldman Sachs investment in Facebook or the Securities and Exchange inquiry into the private equity secondary markets for social networking firms such as Facebook, Linkedin and Twitter. Meanwhile, Linkedin refused to confirm the report other than to say an IPO is one of the many tactics it would consider.

As for those other tactics, Goldman Sachs and a Russian company announced earlier this week they plans to invest $500 million in Facebook, the privately held social networking giant. Goldman reportedly will use a special purchase vehicle to raise and invest $1.5 billion in the company on behalf of its wealthier clients and in a way that doesn’t violate the SEC’s rule prohibiting more than 500 shareholders of a private company before that company has to reveal certain financial statements it previously kept secret.

The SEC is said to be looking into whether Facebook may be using the special purpose vehicle to skirt the law that limits the number of shareholders in a private company.  Goldman reportedly was so inundated with client demand that it had to stop taking orders for shares of Facebook. Source say it even had to some would-be investors to expect just a small fraction of the shares they requested.

Investor interest in companies like Facebook and Linkedin is enormous despite a dearth of available information about their operations and financial condition. Some additional details about Facebook's performance emerged late Wednesday as part of an offering document. According to people familiar with the document, Facebook had net income of $200 million in 2009 on revenue of $777 million. Figures for 2010 weren't disclosed, but analysts have said the company's revenue last year could be as much as $2 billion, fueled by advertising growth.

There was a story in The New York Times this week that said a former Goldman partner turned down the chance to buy Facebook shares because he believes the $50 billion valuation implied by the deal is too high. He was quoted as saying Google's trading is at seven times sales so, “I'm not going to buy Facebook at 25 or 50 times sales.”

It isn't clear how many Facebook shares will be sold as part of the deal. Employees at Facebook aren't currently allowed to sell shares. Last year, though, Facebook arranged a deal in which employees could sell a total of at least $100 million in shares to the Russian company Digital Sky (DST). 

Some are already calling Facebook a public company. Salesforce.com CEO Marc Benioff, who took the San Francisco-based Internet software company public in 2004, wrote: "There are now thousands of investors in Facebook and more coming with these new investment vehicles. It's already a public company. It's just unregulated."

Then come the analysts who worry about another bubble similar to the tech boom of the late 1990s followed by the burst in the beginning of the new millennium when overvalued tech companies folded under the weight of their misplaced hype.

Goldman says Facebook is valued at $50 billion. What are they basing this on? Google was valued at $50 billion in 2005 but then Google had net income of $1.5 billion. However, most sources say Facebook has revenue of about $1.5 billion but not nearly that much income. Who really knows how much income Facebook is generating? So they’re valuing Facebook at a price-to-sales ratio instead of price-to-earnings ratio of a young Google. So if you do the math, shares of Facebook today are trading for about 50 times sales and at least 1,000 times earnings. But even that’s a guestimate.

What we do know about Facebook is that it’s about seven years old, its founder is a college dropout, but then so was Bill Gates, and its home page contains 20 words, six of which are, "It's free, and always will be."

Anyone who saw the movie The Social Network will remember how the movie’s Mark Zuckerberg never seemed to care about money. All he wanted was a great company and not necessarily a profitable one. Now chances are anyone investing in Facebook is doing it to get a spectacular Google-like return on their investment. How can a website being used by more than half a billion people every day not make money, right?  

 The long-discredited study linking autism with childhood vaccinations was not only inaccurate but was “an elaborate fraud” was based largely on falsified data, the British Medical Journal reports.

Writing in the Journal, journalist Brian Deer said that many of the cases cited in the study either misrepresented or falsified important details

 The original study was published in the respected medical journal The Lancet in 1998 by Andrew Wakefield and his collaborators. It concluded that the measles, mumps and rubella vaccine (MMR) was linked to autism and gastrointestinal disorders.

Wakefield was stripped of his medical license last May by British regulators who cited “serious professional misconduct” in the way he conducted and promoted the research.

The falsified findings played into the “natural is good” mantra popular in many quarters today. Ironically, it was higher-income, better-educated parents who took the bogus advice to heart.

A study released last November found that childhood vaccination rates in the United States had declined by almost four percentage points, with the biggest declines coming among higher-income families. Vaccination rates for Medicaid -- which serves low income families -- continued to steadily improve.

The Wakefield study was given added prominence when celebrities like Jenny McCarthy, Jim Carrey and Holly Robinson Peete took up the cause. McCarthy has been particularly anti-vaccination. The actress appeared on the Oprah Winfrey Show in 2007 to discuss her son's autism, which she feels was caused by common vaccines he received as a baby.

Measles outbreaks were reported in Western countries as the falsified study gained more adherents despite the efforts of public health agencies to counter the misleading but presumably well-meaning propaganda of the anti-vaccination activists.

The Lancet withdrew the article in January 2010 after concluding that “several elements” of the study were incorrect, but didn't go as far as calling them fraudulent.

No evidence

Last October, an article in theJournal for Specialists in Pediatric Nursingfound that there was s no convincing scientific evidence supporting a relationship between vaccines and autism.

Researchers explored vaccination history, vaccine safety monitoring systems in the U.S., and the two most publicized theoretical vaccine-related exposures associated with autism - the vaccine preservative thimerosal and the MMR vaccine.

By definition, the onset of autism occurs prior to age three. No clear cause of autism has been identified, although various possible associations have been examined. There has been growing interest in environmental exposures, including vaccinations.

Childhood vaccinations are administered as early as possible to assure that infants are protected against diseases that occur in early childhood. This time period often coincides with the time period that autism may be suspected or diagnosed.

In response to the Wakefield paper, the U.S. Centers for Disease Control (CDC) and National Institutes of Health (NIH) examined vaccine safety issues and after performing an in-depth review of the relevant literature, rejected a causal relationship between the MMR vaccine and autism. Eventually most of the authors of the original British paper also asked to retract the interpretation of their findings.

Thimerosal

Concerns have also been raised about thimerosal, a preservative in multidose vaccines that was removed from routine vaccines in 2001 in the US and in 1992 in Denmark and Sweden. Despite the removal in Denmark and Sweden, autism rates have continued to increase there.

Other studies have failed to find a link as well. Finally, in February 2009, the U.S. Court of Federal claims found that the MMR vaccine and thimerosal containing vaccines were not causal factors in the development of autism.

"Nurses are often in the unique position of providing advice regarding vaccines in their formal practice areas as well as in their daily lives," the authors note. "It is thus imperative that they have knowledge of the research and its results when discussing vaccines with parents, peers, and medical health professionals."

That tired old saying of “don’t do what we do, do what we say” may finally be paying off, at least as far as taking a more prudent approach to money and finances.

A new survey commissioned by Chase Card Services and U.S. News and World Report found that adults age 18 to 34 are more likely to want to save more, spend less and pay down their debt than their spendthrift parents.

Setting goals

The study, titled the Chase Slate-U.S. News Consumer Monitor, found that while overall, one in four consumers set a personal financial goal as their main New Year’s resolution, four out of five -- including 98 percent of people aged 18-34 -- indicated they will try to save more money in 2011. Three in five will even try to develop a budget.

Tom O’Donnell, general manager, Chase Card Services says most young adults are clearly more committed to actively managing their financial situation than their parents are. He added that 65 percent wanted more tools and resources to manage their personal finances better versus just 45 percent for the general population.

The survey was conducted for Chase and U.S. News by Ipsos Public Affairs, which surveyed 1,000 adults nationwide about their personal finance goals and general economic outlook entering 2011.

Growing optimism

The survey found that 61 percent of consumers were more optimistic about the year ahead than they were last year and slightly more than half have little to no anxiety about 2011. Among 18-34 year olds, 70 percent were more optimistic than last year – significantly more than any other age group surveyed.

When asked to make a personal financial resolution for 2011, young adults were twice as likely to want to save money as their parents and grandparents and significantly more likely to want to better manage their finances than older segments of the population.

In addition, the survey found that planning translates into confidence -- 18-34 year olds are also more likely to believe both the economy and their personal finances are getting better than other age groups.

In addition, young adults are at the forefront of setting financial goals. They are more than three times more likely to use an online program to budget their money than those ages 65 and older.

With persistent rumors of a Verizon iPhone sometime this year, AT&T is beefing up its Apple offerings with a new price on the iPhone 3GS. Starting Friday, January 7, 2011, AT&T will begin selling the device for $49.

The offer will be available online, across more than 2,200 AT&T retail locations nationwide and through AT&T business channels, as well as Apple channels.

Exclusivity

The phone can be used, of course, only on AT&T's network -- at least for now. There have been numerous media reports over the last few months that Apple plans to offer an iPhone that will operate on the Verizon, and perhaps other networks. Since its introduction, the iPhone has been exclusive to AT&T.

"We want to deliver the best, most complete package for our customers -- from price, to speed, to worldwide access and more," said David Christopher, chief marketing officer of AT&T Mobility and Consumer Markets. "Combined with our new, lower monthly data plans beginning at just $15 a month, this new price brings even more value to one of the most popular devices in our leading lineup of smartphones. We're very excited for more people to experience iPhone on the nation's fastest mobile broadband network."

The iPhone 3GS was introduced in June 2009. It was updated a year later by the iPhone 4, which remains the most current model. But AT&T says the older model gives users access to the latest iPhone iOS 4 software as well as access to the App Store.

Two-year contract

To get the iPhone 3GS for $49, consumers must sign up for a new two-year AT&T wireless agreement of $39.99 or higher with min $15/mo plan.

The current price of the 8 GB version of the iPhone 3GS is $99, so the new promotional offer represents a 50 percent price reduction.

AT&T has begun positioning itself for a new environment where the iPhone is available on multiple carriers. At the Consumer Electronics Show (CES) this week in Las Vegas, it announced plans to begin offering 20 new smartphone models this year, moving from its reliance on Apple to multiple manufacturers.

With the deepening housing crises, plenty of companies claiming to be "rescuers" have pitched their services to desperate homeowners. They'll help forestall foreclosure or obtain a loan modification, they say, for a fee.

Arkansas Attorney General Dustin McDaniel has issued a consumer alert to warn homeowners of the pitfalls of these offers and to make homeowners aware of new protections from the Federal Trade Commission (FTC).

Mortgage "rescue" services or loan modification services often promise to deliver lower monthly payments and lower interest rates, aid in short sales, and offer other relief from foreclosure. However, these services also typically require an upfront fee from a homeowner prior to performing any services. And that's the catch.

Empty Promises

In most cases, the offers of assistance are empty promises given only to extract the advance fee. Some services offer "guaranteed" results and full refunds to disappointed customers, but those promises are not often honored.

Some services claim strong relationships with the servicing and lending community and tout past successes in rescuing consumers from foreclosure. Others suggest an affiliation with federal government programs. Most of these claims are false.

These scams are promoted through direct contact with distressed homeowners, either by phone, a personal visit, or a card or flyer at the door. Homeowners are told to stop contact with their lenders, credit counselors, and lawyers, and let the "rescuer" handle the details. This cuts off the homeowner from legitimate opportunities to achieve a financial solution.

Good news

"The good news for homeowners facing foreclosure is that legitimate avenues for relief exist," McDaniel said. "If a homeowner is having difficulty keeping up with mortgage payments, that homeowner should contact his or her lender to negotiate a modified payment plan. All lenders and servicers have a legal obligation to offer remediation services."

The FTC has issued a new rule that bans the acceptance of an advance fee by mortgage relief/loan modification services until the homeowner has a written offer from their lender or servicer that they decide is acceptable. The Mortgage Assistance Relief Services (MARS) Rule is designed to protect homeowner from mortgage relief scams that have persisted during the current mortgage crisis.

Most parts of the rule went into effect on Dec. 29, 2010. The full rule will be implemented on Jan. 31, 2011.

Prohibitions

According to the MARS Rule, mortgage relief companies must disclose that they are not associated with the government and that their services have not been approved by the government or a consumer's lender; that the lender may not agree to change loan terms; and that consumers could lose their homes or damage their credit ratings if told to stop paying their mortgage.

The MARS Rule will also prohibit several common advertising tactics used by mortgage relief services and requires companies to have reliable evidence to support any claims about the benefits or effectiveness of the services they provide.