Current Events in May 2011

For decades people have been saying cigarettes are addictive. Now, even the heads of tobacco companies admit that it is true.

Michael E. Szymanczyk, Chairman and CEO of Altria, parent company of Philip Morris USA, addressed shareholders this week and said smoking is addictive and can be very hard to quit. His comments were reported by the Richmond Times-Dispatch.

According to the newspaper, his remarks came during a presentation to shareholders about the company's 2010 results. They came in a context of an explanation of the company's efforts to curb youth smoking.

“Because tobacco use is addictive and it can be very difficult to quit, our tobacco companies help connect adult tobacco consumers who have decided to quit with cessation information from public health authorities,” Szymanczyk reportedly told the group.

Szymanczyk's comments follow those of Philip Morris International CEO Louis Camilleri, who said smoking is addictive but “not that hard to quit.” Szymanczyk said he was doing nothing more than stating Altria's official position, as outlined on its website.

Altria owns three tobacco companies - Philip Morris USA, U.S. Smokeless Tobacco Company and John Middleton.com. Altria says these companies design their marketing programs only to enhance brand awareness, recognition and loyalty among their adult tobacco consumers to grow their market share.

“Each tobacco company has practices in place to focus their marketing activities towards adult tobacco consumers while limiting reach to unintended audiences,” Altria said on its website. “Each of our tobacco companies have programs in place designed to connect with their intended audience while helping to prevent underage access to tobacco products.”

The U.S. Food and Drug Administration (FDA) is putting new restrictions on the sale of the diabetes drug Avandia (rosiglitazone), used to treat Type 2 diabetes in millions of Americans, after years of consumer complaints, petitions and public appeals that it take action against the drug which many consumers say made their conditions worse rather than better.

"During its use there was chest pain, shortness in breathing, itching, muscular weakness, fatigue and yellow color of skin and bone pain," said Sharma of Foley, Ala., who said the drug amounted to "[waste] of money to buy an early death."  David of Ft. Myers, Fla., said he had a stress test after he stopped taking the drug and "the doctor pointed out had I still been on the drug I would have died! Wonderful eh?"

Beginning in November, the controversial drug will no longer be sold at retail pharmacies. It will only be available to patients who have been using it without complications, patients who have had no luck with drugs and those who choose to continue taking the drug after being informed of the risks.

"Under the Avandia-Rosiglitazone Medicines Access Program, rosiglitazone medicines will only be available to enrolled patients by mail order from certified pharmacies participating in the program," the FDA said. "The drug manufacturer, GlaxoSmithKline, will withdraw rosiglitazone medicines from the current supply chain and will provide pharmacies with instructions on returning the medicines."

Rosiglitazone is also sold under the names Avandamet and Avandaryl when it is combined with other drugs. The new rules apply to those combination drugs as well.

The consumer group Public Citizen petitioned the FDA in 2008 to ban the drug, saying it is dangerous and can cause death from liver failure and many other life-threatening risks.  

Avandia prescriptions fell sharply following a May 2007 study published in The New England Journal of Medicine connecting the drug with increased heart attack risk. In 2006, the number of people taking the drug peaked at 13.2 million. Since then, that number has dropped to 4.6 million for the last full year. This means that about 10,000 prescriptions a day are still being filled for this dangerous drug.

"The scientific consensus against Avandia is overwhelming," said Dr. Sidney Wolfe, director of Public Citizen's Health Research Group, in a statement issued in October 2008. "The timing of these findings should give the FDA the momentum it needs to act swiftly to prevent further needless deaths and health damage by banning this drug."

Cover-up?

In an article published in April 2010, The New York Times said it had obtained documents that show SmithKlineBeecham -- the firm's name in 1999 -- buried a disastrous study that suggested Avandia posed greater heart risks than a competing drug.

As evidence of a smoking gun, the Times points to this 2001 email from Dr. Martin I. Freed, a GSK executive: "This was done for the U.S. business, way under the radar. Per Sr. Mgmt request, these data should not see the light of day to anyone outside of GSK," the email states. 

The Times report said the documents it uncovered demonstrated the company was sitting on incriminating data that surfaced soon after Avandia's introduction. In one document cited by the newspaper, GSK tried to add up the lost sales that would result if Avandia's heart safety risk became established. The document put the cost at $600 million over a two-year period.

A federal judge has certified a class-action lawsuit against Chase Bank that alleges the company promised consumers permanent low interest rates on "check loans" and later forced them to make increased minimum payments or accept higher interest rates.  

U.S. District Court Judge Maxine M. Chesney certified the class and denied a motion by Chase to strike the complaint.

The plaintiffs in the case, which was filed in 2009, allege that they each had a Chase credit card that carried a minimum monthly payment of 2% of the outstanding balance, and that the card included a “credit card check” option which provided a loan with a fixed annual percentage rate (APR) until the balance is paid in full.

In November 2008, Chase advised some of the plaintiffs that it was raising the minimum monthly payment from 2% to 5% of the balance on their account. Others were not notified until June 2009.

The plaintiffs charge that Chase's intent was to forced the class members to accept higher APR loans or make a late payment a trigger a “penalty APR” as high as 29.99%.

The suit charges that Chase breached the “implied covenant of good faith and fair dealing implicit in the Cardmember Agreement.”

Chase had argued that the case should not be granted class action status because of differences in the form letters various plaintiffs received. But Judge Chesney disagreed and said the plaintiffs' situations were “materially similar.”

The court's finding defines the class as all persons who entered into a loan agreement with Chase, whereby Chase promised a fixed APR until the loan balance was paid in full and (I) whose minimum monthly payment was increased by Chase to 5% of the outstanding balance or (ii) who were notified by Chase of a minimum payment increase and subsequently closed their account or agreed to an alternative change in terms.

A Minnesota judge has thrown out a lawsuit filed by a neurologist who objected to online criticisms posted by a patient's son. Dr. David McKee of Duluth sued Dennis Laurion for defamation after Laurion posted critical comments about McKee's bedside manner.

But St. Louis County District Court Judge Eric L. Hylden said the statements were “nothing more or less than one man's description of shock at the way he and in particular his father were treated by his physician” and said there was no reason to treat online comments any differently than more traditional means of expression.

Laurion said in his postings that McKee had been brusque and insensitive while examining Kenneth Laurion, 83, who had been hospitalized with a stroke. McKee reportedly said in front of the patient that 44 percent of hemorrhagic stroke victims die within the first 30 days.

“I guess this is the better option,” McKee said, according to Laurion. McKee also told the elder Laurion that when he could not find Laurion in intensive care, it took him a while to track him down to the regular room to which he had been moved.

McKee said he had “spent time finding out if you were transferred or died,” Laurion's postings said.

McKee denied making the statements and sued Laurion for $50,000. After Judge Hylden said he found “no defamatory meaning” in Laurion's posts, McKee was quoted as calling Laurion “a liar, a bully and a coward,” Courthouse News Service reported.

Doctors are famously thin-skinned and frequently react without outrage, threats and lawsuits when patients dare to complain about the treatment they receive. So far, courts in various states are reacting differently to such cases.

A drug used to treat moderate to severe cases of Alzheimer’s disease should be removed from the market immediately because of its risk of serious adverse effects and its lack of effectiveness, Public Citizen said today in a petition to the Food and Drug Administration (FDA).

Donepezil, also known as Aricept, has been approved by the FDA in a dose of 5 to 10 milligrams (mg) for patients with mild to moderate cases of Alzheimer’s disease and in a dose of 10 or 23 mg for patients with moderate to severe Alzheimer’s. Public Citizen is calling for the 23-mg dose to be immediately pulled from the market.

“Data show that the 23-mg dose of donepezil is significantly more toxic than the 10-mg dose,” said Dr. Sidney Wolfe, director of Public Citizen’s Health Research Group. “Combined with its lack of improved clinical benefits, this leads to only one conclusion: that the 23-mg dose should be immediately withdrawn from the market.”

Public Citizen is also asking the FDA to warn doctors and patients against taking 20 mg of the drug (two 10-mg pills) a day, even if Aricept 23 is removed from pharmacy shelves.

Desperation

Dr. Thomas Finucane, professor of medicine in the Division of Gerontology and Geriatric Medicine at The Johns Hopkins University School of Medicine and staff physician at the Johns Hopkins Bayview Medical Center, stated that “Cholinesterase inhibitors such as Aricept have gained multibillion-dollar success due primarily to two factors: the understandable desperation of those who care for patients with Alzheimer’s disease, and a relentless promotional campaign by drug companies.” Finucane is a co-petitioner with Public Citizen to ban Aricept 23.

“When clinicians consider whether to initiate a therapeutic trial of a largely ineffective drug, the risk of harm should be a prominent consideration,” Finucane said. “The clearly increased risk of harm from Aricept 23-mg compared to Aricept 10-mg is so great, coupled with the lack of any evidence of improved benefit, that I believe it should not have been approved for sale to the families and caregivers of Alzheimer patients.”

The only clinical trial of donepezil submitted to the FDA for approval of the 23-mg dose compared it to the 10-mg dose and failed to prove that the higher dose was more effective.

In three of four tests, on either a cognitive or functional level, there was no significant difference between the 10- and 23-mg doses. In the fourth test, the improvement over the 10-mg dose was only two points on a 100-point scale, which is not clinically important, Wolfe said.

Adverse effects

Increased adverse effects of the 23-mg dose of donepezil compared to the 10-mg dose include a slowed pulse rate, nausea, vomiting, diarrhea, urinary incontinence, fatigue, dizziness, agitation, confusion and anorexia.

Vomiting – which occurred more than 3.5 times as often in patients taking the 23-mg dose than those taking the 10-mg dose – is a particularly dangerous side effect for patients with Alzheimer’s disease because it can lead to pneumonia, massive gastrointestinal bleeding, esophageal rupture and even death, Wolfe said.

Overall, patients taking the 23-mg dose stopped taking the drug because of adverse effects more than twice as often as those taking the 10-mg dose. Additionally, because of the drug’s very long half-life, it can stay in patients’ systems for about two weeks after they stop taking the drug. So, those who suffered adverse effects may not have immediate relief after they stop treatment, Wolfe said.

“With no evidence of an added advantage in benefit to patients, the clear increase in risk should have been more than adequate grounds for denying approval, a conclusion reached by both the FDA medical officer and statistician,” Wolfe said. “It is inexcusable that the FDA approved this higher dose. Its prompt removal would belatedly fulfill the agency’s mission to allow only drugs whose benefits outweigh their risks to be marketed.”

Home prices are down and sales are sluggish to non-existent but there's been one bright spot for homeowners: insurance rates have been relatively stable for the last few years.

But that's about to end. Some of the country's biggest insurers are getting ready to raise rates. Some already have. Smart Money reports that State Farm plans to raise its rates by an average of 7.3%. Firemen's Fund is also increasing premiums with increases reaching 33% in Pennsylvania.

So what's up with that? You might think that with homes actually declining in value that insurance rates would go down.

But insurers look not at the market value of a home but at the replacement cost, and with fuel and materials prices up sharply, replacement costs are rising rapidly.

The spate of natural disasters is also making insurance companies nervous. Tornadoes, hurricanes, floods, earthquakes and severe storms have been occurring with what seems like increasing regularity. While it may be that a growing population and accompanying suburban sprawl simply put more homes in harm's way, the fact remains that insurers get nervous as they see their risk exposure growing.

Oh and by the way, homeowners who live in flood-prone areas are likely to see the price of federal flood insurance going up as well. Congress is looking at raising the limit on annual premium increases from 10% to 20%, partly to recoup the $45 billion in losses from Hurricane Katrina.

What to do?

What's a homeowner to do? There's not a lot individual consumers can do, other than shop around for the best rate in their area.

When buying or building a home, consumers would be wise to consult with a knowledgeable independent insurance agent about the best location, building material and built-in fire protection.

A sprinkler system is relatively cheap to install when building a home and is not only the best protection against fire damage but should also produce major savings in annual premiums.

Live in an area prone to flash fires? A concrete home with a stucco or adobe covering is not only attractive but relatively fire-proof, especially if it also includes a sprinkler system.

And then there's the little matter of earthquakes. Many homeowners don't realize that their homeowners policy probably doesn't cover earthquake damage. If you're taking the trouble to shop around for new coverage, it's worthwhile pricing an add-on policy or rider that covers earthquake damage.

The latest report on foreclosures shows that foreclosure filings have dropped in recent months. But it's not because things have suddenly gotten better.

Many homeowners, like Paul, of Jersey City, N.J., are still struggling to hang on, but aren't finding much help. His story is a revealing glimpse at what some people are going through in a heart-rending effort to avoid foreclosure.

“Due to a loss of my business and income I am trying to sell my home in a short sale rather than face foreclosure,” Paul told ConsumerAffairs.com. “I have an arms length buyer at a fair market price. The holder of the first lien, Hudson City Savings Bank has been compassionate and has worked well with us and our short sale negotiator and has signed off.”

A second lien complicates things

The problem he's encountered, Paul says, is with PNC, who holds the second mortgage. He says the bank insists on 10 percent of the balance at closing, which he was able to scape together with the Realtors and the short sale negotiator kicking in and the signing of a deficiency agreement to repay the full amount, or a flat settlement.

“I was able to look at closing out my retirement account, which is my last remaining asset, and borrowing from my 92-year-old widowed mother to offer $60,000 in return for full forgiveness,” Paul said. “They refuse.”

There was another problem, Paul says. As soon as you agree to the deficiency judgment, he says the bank puts you on a recorded line, where you must agree to the deficiency judgment and make a payment on the spot.

“I explained that I have no money and can't make a payment today and am not sure when I can make a payment,” Paul said.

The answer is no

Paul said the PNC rep berated him, asking him how he could sign a deficiency judgment when he didn't know when he could repay it. She told him the bank would not release the lien for short sale.

“She talked to me with such disgust, like I was a wad of gum she scraped off the bottom of her shoe,” Paul said. “There have been no Christmas or birthday gifts in our house for three years. When I visit family and friends they send me home with bags of groceries.

Paul says he paid his mortgage faithfully for many years, before the economy crashed and took his livelihood. Why can't the bank understand, he wonders, that if he made his payments before, there must be a reason he can't do it today, and that no amount of berating, belittlement and verbal harassment is going to make him able to do so.

“I offered them the absolute best settlement that I could,” Paul said. “I am 57 years old and am absolutely broke. I have worked for 40 years, paid my taxes and have never taken a penny of assistance or entitlement. The government has instituted the short sale process to help people. Why do I feel like I have no right to live?”

It should be pointed out that Paul is trying to do the right thing by arranging a short sale. It might actually be in his best interest to let the house go to foreclosure. Either way, Paul loses his home.

But in a foreclosure, he at least keeps his retirement money. And the second lien-holder would likely get nothing.

A few year ago ConsumerAffairs.com routinely heard from Ford truck owners about their vehicles spitting spark plugs out the exhaust pipe. We don't get as many complaints now, but we still get them

“My 2002 Ford Expedition has had three blown spark plugs in five months,” Jeff, of Mobile, Ala., told ConsumerAffairs.com. “The cost to repair exceeded $2,000, not to mention lost time and inconvenience. The last two times I reported it to Ford and heard nothing in return.”

In 2007 ConsumerAffairs.com heard from a reader who said he was a Ford dealer technician.

“I would like to address the Ford spark plug blowout issue," the technician wrote as he was working on a Ford vehicle that had blown a spark plug out of its aluminum head. "I would like the customers to know that it is Ford's defective engine design and not the fault of the technicians or dealerships," said the technician, who asked that his name and hometown not be used for fear that he would be fired if his identity was made public.

The technician said the 5.4-liter engines are particularly susceptible to the problem.

Unintentional world traveler

There can be many pitfalls to using online travel sites to book hotels. For example, you have to pay close attention to what country the hotel is in. Debra, an attorney in Richmond, Va., said she was booking hotel rooms for herself and her investigator in Massena, N.Y., where she had a case.

“I saw a hotel at Hotels.com, but did not know it was in Canada,” Debra told ConsumerAffairs.com. “I only found that out after I booked the hotel. My investigator did not have a passport, thus we could not use that hotel. I canceled the reservation within minutes and they sent me a confirmation number. Imagine my surprise when Hotels.com charged my credit card $896.40, and got very ugly when I asked them to remove it from my credit card charge. To date, they refuse to issue me a credit.”

Debra may have a valid point. While the hotel probably had an address with the listing, it might not be too much to ask for a Web site to alert a consumer they are about to book a room in another country.

Fed up

“I purchased a Maytag Neptune front load washer and have had to replace the drain pump numerous times and now have to replace it again,” Trish, of Chester, N.H., told ConsumerAffairs.com. “This pump retails for $200.00 + at retail stores. I am sick of paying for new pumps and will never purchase another Maytag product again.”

We hear from a lot of consumers frustrated by constant problems with their washing machines. Our advise is to save all the service records and submit a claim under a state or federal lemon law. If companies have to start replacing out of warranty products, maybe that will be incentive to step up the quality a bit.

Your baby can read, but you can't cancel

Kimlan, of Brooklyn, N.Y., reports a frustrating experience trying to cancel her order of Your Baby Can Read. After receiving the product on March 23, she said she called to cancel.

“They informed me that they will give me a 30 day extension for free,” Kimlan said. “Then I called on April 7, 2011 to cancel again but they told me that they will give me another 30 day extension. I called on May 15, 2011 to cancel but the representative told me there was no information under my name.”

Canceling became a moot point the next day, Kimlan said, when the company called and said her credit card had been declined, and could she please supply another one. For future reference, whenever you are trying to cancel a subscription and the company offers you another 30 days free, always decline. By accepting the free extension, you are wiping out your cancellation.

A group of convenience stores throughout the United States have agreed to step up efforts to stop underage tobacco sales. The Assurance of Voluntary Compliance agreement (AVC) includes 40 state attorneys general and the stores operating under the names of Circle K, Dairymart, and On The Run.

Under the agreement the convenience stores will adopt specific procedures to reduce the sale of tobacco products to minors.

“This agreement will make it harder for teens to get tobacco and will keep them from a product that creates a lifelong addiction,” said Utah Attorney General Mark Shurtleff. “Circle K should be commended for their efforts to protect our children.”

The Circle K agreement covers 4,000 stores in 32 states. The terms include checking the ID of anyone who appears under 30 years old, restrictions on in-store advertising, and employee training that emphasizes eliminating underage tobacco sales and the health risks of tobacco use.

The agreement also acknowledges that the majority of adult smokers began smoking before 18 and that young people are less likely to be able to quit smoking. Signs of addiction begin to show after only smoking a few cigarettes. 

“Fortunately the number of retailers agreeing to take a strong stand against underage tobacco sales is growing,” said Assistant Attorney General Kathy Kinsman, who worked on the agreement. The agreement is part of an ongoing, multi-state enforcement effort to implement practices that were developed by public health experts and tobacco control officials. 

The Federal Trade Commission has brought a law enforcement action against an online operation that allegedly raked in more than $450 million from consumers in the United States, Canada, the United Kingdom, Australia, and New Zealand by luring them into “free” or “risk-free” offers, and then charging them for products and services they did not want or agree to purchase.

The FTC seeks to stop the operation’s illegal practices and make the defendants repay injured consumers.

“The defendants used the lure of a ‘free’ offer to open an illegal pipeline to consumers’ credit card and bank accounts,” said David C. Vladeck, Director of the FTC’s Bureau of Consumer Protection. “‘Free’ must really mean ‘free’ no matter where the offer is made.”

The FTC worked closely with Canadian law enforcement to track down the defendants, most of whom are located in Alberta.

According to the FTC’s complaint, Jesse Willms and 10 companies he controls used deceptive tactics in offering “free trials” for various products online, including acai berry weight-loss pills, teeth whiteners, and health supplements containing resveratrol (the supposedly healthful ingredient in red wine), as well as for a work-at-home scheme, access to government grants, free credit reports, and penny auctions. (Penny auctions are online auctions in which consumers must purchase bids, usually for $0.50 to $1 each.

Regardless of whether a consumer actually wins a penny auction, the consumer has paid for each bid he or she placed during the auction. However, each bid that is placed raises the price of the auctioned item by a penny.)

Bogus offers

According to the FTC, Willms and his companies obtained consumers’ credit or debit card account numbers, by enticing them with bogus “free” or “risk-free” trial offers that supposedly required only small shipping and handling fees, and also promised phony “bonus” offers just for signing up.

Consumers had no reason to believe they would be charged for the trial product or the extra bonus products, but they were often charged for the “free” trial plus a monthly recurring fee, typically $79.95. Consumers were also charged monthly recurring fees for the so-called bonus offers.

Although the defendants offered a money-back guarantee, consumers were often unsuccessful in canceling the charges or obtaining refunds, and the process involved time-consuming phone calls and other steps that made the deals far from risk-free, the FTC complaint alleged.

The defendants allegedly contracted with affiliate marketers whose banner ads, pop-ups, sponsored search terms, and unsolicited e-mail led consumers to the defendants’ websites, and the defendants paid the affiliates for each consumer whose credit or debit card was charged. The defendants allegedly made false claims about the total cost of products, recurring charges, and the availability of refunds. They also buried important terms and conditions in fine print, the FTC alleged.

The complaint charges that the defendants’ penny auction offers falsely indicated consumers would receive free “bonus” bids, but those who provided credit or debit card numbers to facilitate future auction buying were hit with charges they did not know about, including $150 for introductory “bonus” bids and $11.95 per month for ongoing “bonus” bids.

The FTC also charged that Willms and his companies made false weight loss and cancer cure claims for their products, and touted bogus endorsements by Oprah Winfrey and Rachael Ray.

The FTC further alleged that the defendants provided merchant banks with false or misleading information, in order to acquire and maintain credit and debit card processing services from the banks in the face of mounting chargeback rates and consumer complaints. Willms and his companies also allegedly violated the Electronic Fund Transfer Act and Regulation E (issued by the Federal Reserve System’s Board of Governors) by debiting consumers’ bank accounts without their signed written consent and without providing consumers with a copy of the written authorization.

Businesses named in the FTC complaint include Just Think Media, Credit Report America, eDirect Software, eDirect Software; 1524948 Alberta Ltd., Terra Marketing Group, SwipeBids.com, and SwipeAuctions.com; Circle Media Bids Limited, Selloffauctions.com; Coastwest Holdings Ltd.; Farend Services Ltd.; JDW Media LLC; Net Soft Media LLC, Sphere Media LLC, and True Net LLC.

Next time you 're preparing shrimp from India or tilapia from Indonesia, consider this: the Food and Drug Administration tested  about 0.1 percent – yes, that's one-tenth of one percent – of all imported seafood products for drug residues during 2009, the last year for which statistics are available.

The Government Accountability Office (GAO), in a report released this week, generously describes the FDA's fish safety program as “limited.” Most inspections consist of reviewing paperwork rather than actually visiting the fish farms or sampling the actual fish.

While many consumers are concerned with chemical residues in wild-caught fish, food safety experts are generally more concern about potential bacterial infections and antibiotics in farm-raised fish. The residues of some antibiotics can cause cancer and antibiotic resistance.

About half of the seafood imported into the U.S. comes from farmed fish (aquaculture), and the percentage is likely to grow as seafood consumption increases and ocean stores are depleted.

As is often true of food safety, an alphabet soup of agencies are involved.

The FDA is charged with ensuring the safety of seafood against residues from unapproved drugs, and the Department of Commerce's National Marine Fisheries Service (NMFS) provides inspection services on request. In 2009, these agencies signed a memorandum of understanding (MOU) to enhance seafood oversight and leverage inspection resources. In preparing its report, GAO reviewed data and documents from each agency and interviewed agency officials.

GAO was asked to assess the extent to which (1) FDA's program is able to ensure the safety of seafood imports against residues from unapproved drugs and (2) FDA and NMFS have implemented the 2009 MOU.

"Limited"

The GAO found the FDA's program “limited, especially as compared with the European Union (EU).”

It said that FDA's program generally consists of “reviewing records to ensure the processors and importers considered significant hazards, including those resulting from drug residues if the seafood they receive are from fish farms.”

It noted that “inspectors generally do not visit the farms to evaluate drug use or the capabilities, competence, and quality control of laboratories that analyze the seafood. “

The FDA's sampling program does not generally test for drugs that some countries and the EU have approved for use in aquaculture. Consequently, the report said, seafood containing residues of drugs not approved for use in the United States may be entering the U.S.

“Further, FDA's sampling program is ineffectively implemented,” the report said. “For example, for fiscal years 2006 through 2009, FDA missed its assignment plan goal for collecting import samples by about 30 percent.”

“Better leveraging available resources is critical, especially in places like China, where FDA has inspected 1.5 percent of Chinese seafood processing facilities in the last 6 years,” the GAO said.

The GAO recommended that foreign countries that want to export seafood to the United States should be required to develop a national residues monitoring plan to control the use of aquaculture drugs. It said the FDA should also develop a “more comprehensive” screening program.

Over the last year few years, the worse the economic news got the more commercials you saw on cable TV for companies selling gold and silver. Now, the Federal Trade Commission (FTC) says at least one of those companies hawking gold tricked senior citizens into investing in gold on credit.

The FTC says it has obtained a court order forcing American Precious Metals LLC to shut down its telemarketing sales operation. According to court documents, the sales campaign has raked in $37 million from consumers, many of whom the FTC says didn't understand the transaction.

Get rich quick

The FTC says the company's sales personnel promised consumers they could earn large profits quickly by investing in precious metals such as silver, gold, platinum, and palladium. Using high-pressure sales tactics, telemarketers allegedly led consumers to believe that they were offering low-risk investments that would double or triple in value in a short time.

The company told consumers that precious metals are low-risk investments because they are tangible, physical assets – bars, bullion and coins. While that might be stretching the truth, it's a fact that many people have seen their money grow over the last two or three years be investing in precious metals.

However, the FTC maintains American Precious Metals did not use consumers’ money to buy precious metals. Instead, after taking fees and commissions that were not clearly disclosed to consumers, they deposited consumers’ money in the account of a clearinghouse that recorded the investments but did not buy or handle metals.

Buying on margin

The make matters worse, the FTC says the consumers were often not told their investments were leveraged, that is, that they were agreeing to take out a loan and pay interest for up to 80 percent of the purchase price of the metal investment. They didn't know that, if the price of gold fell, they would be forced to put up even more money to prevent their positions from being liquidated.

Because consumers’ leveraged investments were opened with low equity levels and incurred hefty interest charges, the investments were vulnerable to equity calls even if prices remained constant.

The Commodity Futures Trading Commission (CFTC) also charged American Precious Metal with violating federal law by using the mails and other means of interstate commerce as part of a scheme to defraud consumers in the sale of precious metals contracts.

The FTC and CFTC are part of the South Florida Securities and Investment Fraud Initiative, a multi-agency task force spearheaded by the U.S. Attorney’s Office for the Southern District of Florida to combat white collar fraud.

The court has ordered a stop to the defendants’ allegedly deceptive practices pending a trial, and has frozen their assets and appointed a receiver to oversee the business.

You need a loan but the bank has turned you down. It happens a lot these days. Banks have raised lending standards and any little blemish on your credit history can blow you out of the water.

But this is the Internet age, and where there is a need, there is usually someone online, willing to meet it. So it is with peer-to-peer lending.

In peer-to-peer lending, a group of investors acts as the bank. They loan their money to borrowers and receive interest payments in return. But how do you find a peer-to-peer lender and, more importantly, how do you persuade them to make a loan if the bank won't do it?

Tell your story

While the bank looks strictly at your credit score, and wants it to be very high, researchers at Rice University and the University of Delaware say a peer-to-peer lender is more interested in your story. If you have a credit blemish or two, but can explain the reason, they'll listen.

In two new studies, researchers analyzed data from Prosper.com, America's first peer-to-peer lending marketplace with more than a million members; borrowers and lenders can connect there without going through a bank or institution.

Borrowers choose a loan amount, purpose and post a loan listing. Then investors review loan listings and invest in those that meet their criteria. Once the process is complete, borrowers make fixed monthly payments and investors receive a portion of those payments directly to their Prosper account.

In the first study, the researchers – Scott Sonenshein and Utpal Dholakia from Rice University's Jones Graduate School of Business and Michal Herzenstein from the University of Delaware -- found that micro-lenders were more likely to offer loans to borrowers who explained, and then admitted or denied, the details of their credit history.

Be honest

For instance, a borrower increased her/his perceived trustworthiness and chance of securing a loan by telling a lender, "I missed several payments on my car loan, which led to an increased interest rate, but I'm paying on time now and have learned from my mistakes" even though there was no evidence to support the claim that the borrower learned from past mistakes. Indeed, 65.3 percent of all loan requests that included such similar statements were funded, compared with only 45.8 percent of the loans that did not include such statements.

"Despite a poor credit grade, the social accounts that borrowers give and identities they create can increase their chances of securing a loan," said Sonenshein, lead author of one of the studies and assistant professor of management.

In the second study, Sonenshein and his co-authors analyzed the six different identities – trustworthy, successful, economic hardship, hardworking, moral and religious – that borrowers constructed for themselves in the loan application's optional essay. They found that borrowers in their sample could lower their costs by almost 30 percent and saved about $375 in interest charges by using a "trustworthy" identity.

'Trustworthy' is best

By presenting themselves as "trustworthy" or "successful," applicants had a much better chance of getting the loan. Those who described themselves as "religious" were less likely to get a loan.

When selecting an identity, researchers say it's better to choose just one. Presenting yourself as a mix of identities – “hardworking” and “economic hardship,” for example, tends to be confusing. Statistics also show that applicants who had multiple identities tend to be more likely to default, making investors more wary.

Still, for a growing number of consumers, peer-to-peer lending makes it possible to get a loan, in large part by adopting many of the ways banks did business in the past.

"By analyzing the reasons borrowers give and the identities they construct, we can predict payback status over and beyond more objective factors such as credit scores," Sonenshein said. "In a sense, it offers a way of assessing borrowers in ways that hark back to the earlier days of community banking when lenders knew their customers."

As more and more consumers – especially young consumers – avoid land line telephones and use only cell phones, it poses a dilemma for telemarketers. How can they sell things to these consumers?

In Indiana, at least, they may not be able to call them on their cell phones. The state has passed a new law allowing residents to register cell phone numbers on the state's Do Not Call List. The national Do Not Call list already allows you to register mobile numbers.

The measure, signed into law late last week, clarifies current state law by extending the protections of Indiana's telephone privacy laws to include cell phone numbers, prepaid wireless calling and Internet-enabled VOIP services.

"I want to thank the General Assembly for taking action to update the state's telephone privacy laws and the Governor for signing the bill," Indiana Attorney General Greg Zoeller said. "Extending the protections of the Do Not Call list for cell phones and VOIP phones will shield more Hoosiers from intrusive solicitors and potential scams."

Deadline today

In Indiana the Do Not Call list is updated four times a year and today happens to be the latest deadline. Phone numbers placed on the list by 11:59 PM (ET) May 17 will begin receiving benefits of the law starting July 1, 2011. Out of state area codes can also now be registered as long as the billing address is located in Indiana, which Zoeller emphasized is particularly relevant for out-of-state college students studying in Indiana.

"Thousands of students come to Indiana to attend college every year and only have a cell phone,” he said. “As long as their bills come to an Indiana mailing address, they can add their number to the list. This will reduce the number of unwanted marketing calls as well as text-based solicitations."

Currently more than 1.8 million phone numbers are registered on Indiana's Do Not Call list, however, it is estimated that one third of eligible phone numbers are not registered. Registering on the list not only reduces the number of telemarketing calls, it also helps to the attorney general's office investigate and prosecute those telemarketers who violate the law and scammers looking to defraud consumers over the phone.

No robo-calls

Indiana law also forbids the use of auto-dialers to deliver pre-recorded messages without a live operator obtaining consent to deliver the message. These calls are often referred to as “robo-calls."

Meanwhile, the Federal Trade Commission (FTC), which administers the national Do Not Call list, is asking the Federal Communications Commission (FCC) to hold companies responsible when telemarketers violate the Do Not Call law on their behalf.

In comments filed with the FCC, the FTC said the agency should not allow such sellers to escape liability from federal telemarketing laws designed to protect consumers and their privacy when others place telemarketing calls on their behalf.

“The Do Not Call Registry is important to the FTC, but is absolutely critical to consumers who want a stop to the telemarketing and robocalls that interrupt their dinner hour,” said FTC Chairman Jon Leibowitz. “We hope that the FCC acts quickly to resolve this issue.”

Roger, of Athens, Ga., reports a recent frustrating experience when he was setting up his Dish Network service. He says nearly everything the customer service rep told him was wrong.

“I was told my monthly bill would be $27.04, but it went up to 30.04 on the first bill and was told package just went up,” Roger told ConsumerAffairs.com. “I was told I would receive HDTV for life and then received an email telling me my package did not qualify for HDTV. They said installation was free but first the electric company had to check for wires. They said they would finish the installation after the electric company notified them. The electric company came out and Dish never showed up, and when I called, they sent out a tech and charged me 150 dollars, saying the I only had two months after signing up to have this completed.”

The lesson here is to basically disregard any promise a customer service, or sales associate makes verbally. Instead, read the contract or the customer agreement. If what the sales person tells you conflicts with the contract, the contract is what will prevail.

Still not fixed

ConsumerAffairs.com gets lots of complaints about washers and driers, like the one from Pamela, of East Hampton, Conn.

“I purchased a Whirlpool duet washer in 2010 and the drum and bearings went before the year was over, making it sound like a freight train,” Pamela said. “It was under warranty, it was fixed but the problem returned two months later and now it's out of warranty and the repair is costly. Whirlpool doesn't warranty the replaced parts.”

Pamela, like other customers is frustrated that her appliance seemingly can't be repaired. She can either junk it now, or have it repaired a few more times. At that point, she might be able to have it declared a “lemon” under the lemon law, which applies to appliances as well as automobiles.

Doesn't cover everything

It sometimes pays to have renter's insurance, to protect against the loss of the contents of a rented home. But not all policies cover everything.

The apartment above me had a leak in their bathroom and it came down the wall and caused mold on the back of all my pictures so bad that it ate through the pictures,” Patti, of Ashburn, Va., told ConsumerAffairs.com. “The apartment company repaired the walls immediately but AllState has refused to reimburse for my damages. Mold is not covered they tell me.”

Not infallible

In this day an age, no one seems to use a map anymore. Instead, they rely on GPS. But keep in mind these machines can sometimes make mistakes.

“We have used a Garmin Nuvi 360 GPS for many years with no significant problems,” James, of Portland, Ore., said. “But today, as we drove down Arizona Highway 67 to the north rim of Grand Canyon National Park, we encountered problems with the GPS routing that make us wonder how much to trust Garmin.”

For about 46 miles, James said he got at least 20 route misdirections--some to the left, some to the right-- that tried to put onto unpaved National Forest roads, such as NF 610, leading from the highway.

“Had we followed the directions and the weather was bad or it was dark, we could have been in serious danger,” James said. “In the news, we have heard of other drivers who have been injured or even perished from following GPS directions. Garmin needs to check its data relative to Arizona Highway 67 and issue a correction immediately.”

This is a good reminder to use a GPS with some caution. While they are great inventions, you shouldn't invest them with blind trust. A little common sense is also helpful.

Massachusetts Attorney General Martha Coakley is investigating the recruiting and financial aid tactics used by the University of Phoenix and has asked the school to produce documents dating back to 2002, a Phoenix newspaper reports.

The Arizona Republic said the probe was disclosed in a Securities and Exchange Commission (SEC) filing by the school's parent corporation, Apollo Group.

The report said the Massachusetts probe was thought to be part of a “coalition” of state agencies that are looking into the activities of for-profit universities and trade schools.

Apollo Group, among the largest education institutions in the world, has more than 405,000 students.

Florida's attorney general last year said the state was investigating several for-profit schools. Oregon officials sued Apollo Group last year for allegedly misleading investors in its financial statements.

Congress has also been investigating and holding hearings after the Obama Administration floated a proposal to regulate federal aid to for-profit schools and their students.

The General Accountability Office (GAO) was sharply critical of recruiting practices at some for-profit colleges, saying recruiters lie and urge aid applicants to committee fraud.

A federal class action claims The Hain Celestial Group misrepresents its Jason and Avalon Organics brand "personal care products" as organic when they actually contain less than 70% organic ingredients.

In the suit, filed in Alameda County, Calif., Superior Court, Rosminah Brown alleges that in September 2009, she purchased a Jason Ester-C Super-C Cleanser Facial Wash at a Whole Foods Market.

She said the front label of the product prominently stated that it was “Pure, Natural & Organic.” But, she said, of the 19 ingredients listed, only one was actually organic, as revealed when one closely studies the ingredients listed on the back of the “pure, natural, organic” product.

By the company's own admission, only Aloe Barbadensis (Aloe Vera) leaf gel is organic and it is not among the most prominent of the 19 ingredients, ranking ninth on the ingredient list, excluding water.

The products at issue are all intended to be rubbed, poured, sprinkled or sprayed onto or otherwise applied to the human body and are, therefore, “cosmetics” under California law, the suit argues, and thus are governed by state laws regarding labeling of cosmetics.

State law requires that cosmetic products sold as organic must contain at least 70% organically produced ingredients.

The suit cites other Hain Celestial products as having similar shortcomings:

• Jason Aloe Vera Soothing Body Scrub is labeled as organic yet lists only two of its 23 ingredients as organic.

• Baby Avalon Organics Silky Cornstarch Baby Powder is labeled as organic, yet only two of the seven ingredients are organic, according to the label.

• Jason Thin to Thick Extra Volume Conditioner is labeled as organic, as only four of the 32 ingredients are organic.

The suit seeks an injunction to prohibit future violations, a corrective advertising campaign, consumer redress, damages and legal fees.

Joining Brown in the suit is the Center for Environmental Health (CEH), an Oakland-based non-profit advocacy group. 

There's been a lot of bad press lately about new bank charges and fees that are supposedly the result of new rules that limit how much banks can charge to process debit card transactions. But while the debit card rules may have some unintended consequences, the Credit CARD Act of 2009 is doing what it was supposed to do, a new study finds.

Credit card holders are seeing stabilized interest rates, the elimination of overlimit penalty charges, a reduction in late fees charged by banks and minimal changes in annual fees since the Credit CARD Act of 2009 took effect, according to new research by the Pew Health Group’s Safe Credit Cards Project.

Pew data show that the median advertised interest rates for purchases on bank credit cards remained unchanged from 2010. Meanwhile, bank cash advance and penalty rates held firm. Additionally, the percentage of cards with annual fees held steady for credit unions, at 14 percent, and increased for banks, from 14 percent in 2010 to 21 percent in 2011. The amount charged for annual fees remained unchanged.

“Pew’s research shows that predictions that the legislation would spark new charges and long-term interest rate growth have not materialized,” said Nick Bourke, director of Pew’s Safe Credit Cards Project. “Whatever increases in advertised interest rates we saw going into 2010 have not continued into 2011. The Act created a new equilibrium where interest rates have flattened, penalty charges have declined and a number of practices deemed ‘unfair or deceptive’ have disappeared. Consumers are enjoying safer, more transparently priced credit cards – and banks and credit unions are able to compete on a more level playing field.”

The study, “A New Equilibrium: After Passage of Landmark Credit Card Reform, Interest Rates and Fees Have Stabilized,” is the latest in a series of reports from the Pew Safe Credit Cards Project that has examined all consumer credit cards offered online by the nation’s 12 largest bank and 12 largest credit union issuers. Together, these institutions control more than 90 percent of the nation’s outstanding credit card debt. For this latest report, which measures how the industry has changed since the passage of the Credit CARD Act, Pew collected data in March 2010 and January 2011. 

A Brooklyn eye glasses merchant who yelled at, cursed and threatened customers has pleaded guilty to one count of mail fraud and one count of wire fraud. But it's his behavior with consumers that brought him to the attention of law enforcement.

Back in November the New York Times published a story about Vitaly Borker, who owns and operates DecorMyEyes.com out of his home. He admitted to a Times reporter he threatened customers who complained about his products or service.

In the article, he also bragged that he didn't mind it when consumers complained about his company on sites like ConsumerAffairs.com, since even negative comments helped him show up higher in Google searches.

Google reacts

Immediately after the story appeared, Google announced it was changing its algorithm so that sites would not benefit from bad behavior.

Lacey, of San Jose, Calif., told ConsumerAffairs.com last November that Borker was abusive to her when she called to complain that he had lost an expensive pair of glasses she had sent him to have repaired.

“He said 'you know what, you are stupid,” Stacey told ConsumerAffairs.com.

Other consumers reported that Borker threatened to kill them when they complained. He allegedly told one consumer, “I know where you live,” and emailed her a picture of her house he got from Google Streetview.

Gaming the system

In Borker's ill-advised interview with the Times last year, he said he intentionally abused customers, so they would go online and write about their experience. When they did so, he said, it elevated his site's traffic from search engines.

In the end, the government didn't charge Borker with making threats, but with selling counterfeit eyeglasses. The judge ordered him confined and barred him from using the Internet, pending sentencing.

Sentencing is scheduled for September 16. Prosecutors say Borker could face maximum of six years in prison.