Current Events in August 2011

The American Civil Liberties Union is challenging “pay or stay” sentences imposed on five persons across the state who were illegally jailed for being too poor to pay court fines.

In each instance, the judge failed to hold a hearing that would prove the individual was too poor to pay, or give the defendant the option of a payment plan or community service.

“Long thought to be a relic of the 19th century, debtors’ prisons are still alive and well in Michigan,” said Kary Moss, the ACLU of Michigan’s executive director. “Jailing our clients because they are poor is not only unconstitutional, it’s unconscionable and a shameful waste of resources.

"Our justice system should be a place where freedom has no price and equality prevails regardless of a defendant’s economic status.”

The announcement is the result of a nearly two-year investigation into modern-day debtors' prisons in Michigan. Over the last two weeks, ACLU attorneys witnessed district and circuit court judges dole out “pay or stay” sentences in seven counties - Wayne, Oakland, Macomb, Montcalm, Muskegon, Kent and Ionia. The ACLU’s clients represent dozens of poor defendants who are being jailed at increasingly alarming rates for failing to pay legal debts they cannot afford.

The U.S. and Michigan constitutions forbid debtors’ prisons and the jailing of individuals who cannot pay court fines and fees because they are poor.

“In the face of mounting budget deficits, states are aggressively targeting poor people, and minorities often bear the burden,” said Elora Mukherjee, staff attorney with the ACLU’s Racial Justice Program. “These modern-day debtors' prisons impose devastating human costs, waste taxpayer money and create a two-tiered justice system.”

Too poor to pay

The ACLU is challenging the sentences of five individuals who were jailed for being too poor to pay fines, fees and costs related to criminal offenses. Although each defendant is willing to pay fees over time on a payment plan or perform community service, the judges never gave this option. As of today, two individuals have been released as a result of the ACLU’s intervention.

• Kyle Dewitt, 19, was sentenced to three days in jail by Judge Raymond Voet of the 64A District Court in Ionia because he is unemployed and unable to pay $215 in fees related to a ticket for catching a fish out of season. After ACLU intervention, Dewitt was released from Ionia County Jail on Wednesday pending a trial.

• Kristen Preston, 19, was sentenced to 30 days in jail by Judge Voet because she could not afford to pay a $125 alcohol assessment fee stemming from a minor in possession (MIP) charge. On Wednesday, Preston was released after ACLU intervention. She awaits sentencing for the MIP charge.

• Dorian Bellinger, 22, was sentenced to 13 days in jail by Judge Robert Brzezinski of the 16th District Court in Livonia because he could not afford to pay $425 in fines and costs related to a misdemeanor marijuana possession charge.

• Dontae Smith, 19, was sentenced to 41 days in jail by Judge Joseph Longo of the 43rd District Court in Ferndale because he could not afford to pay $415 in connection to several driving offenses, including driving with a suspended license and impeding traffic.

• David Clark, 30, was sentenced to 90 days in jail by Judge Randy Kalmbach of the 27th District Court in Wyandotte because he could not afford to pay $1,250 in fees and costs related to charges for spanking his girlfriend’s son on the buttock. Clark’s girlfriend was charged with the same misdemeanor offense; however, her parents paid her costs, and she was therefore not jailed.

In 2010, Michigan was among the states featured in an ACLU report, “In for a Penny: The Rise of America’s New Debtors’ Prisons.” The report detailed the way courts, in the face of budget cuts, target poor people who have already served their criminal sentences to pay fines or face jail time.

While many judges view the collection of legal debt as a critical revenue stream, there is no evidence such sentences increase revenue, as the costs of incarcerating indigent defendants for failing to pay generally exceed the amount owed.

A class action suit filed in San Francisco federal court on behalf of reverse mortgage borrowers and their survivors is designed to head off illegal foreclosures and evictions.

The suit seeks a declaration of the rights of class members, as well as an injunction prohibiting illegal foreclosures and evictions, and damages for breach of contract.

The case involves the alleged failure of Wells Fargo Bank and the Federal National Mortgage Association (Fannie Mae) to accord the surviving spouses and heirs of reverse mortgage borrowers the right to purchase the property for its appraised value after the loan becomes due and payable, either because of the death of the borrower or for some other reason.

The representative plaintiff is Robert Chandler of Elk Grove, CA, whose mother, Rosemary, died in 2010, five years after obtaining a reverse mortgage. Like many other heirs, Chandler was never given notice of his right to purchase the property for its current value.

When Chandler expressed an interest in purchasing the property at that price, Wells Fargo told him that he would have to pay off the full mortgage balance. This is contrary to the explicit terms of the contract his mother signed with Wells Fargo and federal reverse mortgage law.

Wells Fargo, acting on behalf of the owner of the mortgage, Fannie Mae, then proceeded to foreclose on the Chandler home. Finding no one willing to buy it for the same market price that Chandler was willing to pay, Fannie Mae then began efforts to evict Chandler from the property, which his family has owned since the 1940s.

Congress designed the Home Equity Conversion Mortgage program with the explicit goals of helping seniors to access the equity in their homes, without facing a threat of losing their homes. A key part of the program is an insurance fund that every reverse mortgage borrower pays into, which ensures that their survivors can purchase the property at the current market value, should real estate prices fall.

The class action seeks to ensure that any heir of a reverse mortgage borrower who wants to purchase their family home, as Chandler does, will be able to do so.

Not an isolated case

“Mr. Chandler’s case is not an isolated one," said Jean Constantine-Davis, a senior attorney with AARP Foundation Litigation. "In the wake of HUD’s reversal of its rule on the rights of surviving spouses and heirs earlier this year, we have been contacted by many, many others facing the same problem. It is difficult to understand why reverse mortgage lenders continue to deny them their contractual and legal rights.”

In March, AARP Foundation Litigation and the law firm of Mehri & Skalet filed suit in federal court alleging that the Department of Housing and Urban Development (HUD) had abandoned long-established federal rules that guaranteed that an heir or surviving spouse would never owe more than the home was worth at the time of repayment.

One month after the AARP suit was filed, HUD reversed itself, and reinstituted the HUD policy to the fairer practice of not requiring payment that exceeded the updated value of the home.

“We are committed to the cause of survivors of reverse mortgage borrowers who want to keep their family homes," said Steven A. Skalet of Mehri & Skalet.  "No one should lose a home because lenders fail to observe the explicit purchase provisions of the reverse mortgage program.  If defendants insist on breaking those rules, we intend to hold them to account.”

Michael Ng of Kerr & Wagstaffe LLP, another law firm involved in th4e case, said Wells Fargo’s actions are "not just wrong, they are economically irrational.

"Even though elderly borrowers paid for insurance that protects the bank against the downturn in the housing market, Wells Fargo insists on evicting family members from homes that will go unsold and unoccupied,” Ng said.

The new suit alleges that, despite HUD’s correction of its rules, the defendants are still failing to give notice to surviving spouses and heirs of their rights to purchase the property for the lower value, and are foreclosing and seeking to evict an heir who is attempting to pay off the current fair market price on an underwater home.

A reverse mortgage is a loan that allows older homeowners to convert the equity in their homes into cash. It is the “reverse” of a traditional mortgage, in which the borrower repays the borrowed sum on a monthly basis. Reverse mortgage borrowers receive money in the form of a loan that must be paid back out of their home equity.

Reverse mortgage borrowers are not required to make monthly or other periodic payments to repay the loan, other than payment of property taxes and home insurance premiums. Instead, the loan balance increases over time and the loan does not become due and payable until one of several specific events occur, for example, the last homeowner dies, moves permanently, or sells the home.

The loans are insured under the Home Equity Conversion Mortgage (HECM) program, and because of the complexity of the program and because it is specifically tailored to meet the needs of those 62 and older, Congress included special protections for HECM borrowers.

In the technology world, no company has been hotter than Apple. That trend continues as the research firm IDC reports Apple has supplanted Nokia as the world's top smartphone manufacturer in the second quarter of 2011.

According to IDC, Apple shipped 20.3 million iPhones during the second quarter, giving it a 19.1 percent market share. That achievement is impressive when you consider that in the second quarter of 2010, Apple shipped 8.4 million iPhones, and had a 13 percent share of the smartphone market.

In the last year the iPhone has increased its stature as the must-have mobile device. It didn't hurt that in the first quarter of this year, Verizon Wireless – with its much larger subscriber base – started selling the iPhone in the U.S. Prior to that U.S. consumers could only use an iPhone on AT&T's network.

iPhone 5

The iPhone 4, Apple's latest model, is growing a bit long in the tooth by technology standards, since it was introduced 13 months ago. Apple has not confirmed when or if it will issue an update, but rumors suggest the iPhone 5 will be out by October.

While Apple has a good second quarter, so did Samsung. The equipment maker was second in sales with shipments of 17.3 million units, for a 16.2 percent share of the market. It's improvement over the second quarter of 2010 was even more dramatic, with shipments rising 380 percent.

Of course, Apple achieved its numbers on one model – the iPhone. Samsung produces and sells a variety of different model smartphones. IDC said Samsung achieved most of its success, however, on its high-end devices, such as the Galaxy S.

There's nothing more embarrassing that being in an important business meeting and have your cell phone go off. But what if that happens when you've set the device to silent?

“This all started when I heard a faint ringing noise that wouldn’t stop,” Karthik, of Cincinnati, Ohio, told ConsumerAffairs.com. “At first, I didn’t even suspect my mobile device, a Sanyo Zio SCP 8600. After several days of searching, I almost gave up. One fine morning, I was at an official meeting and the noise started. To my embarrassment, the noise was indeed coming from my cellphone, that was silenced! After attempts at silencing the phone again, I ended up shutting down the device, and that is how I keep it at work now!”

Karthik says she has spent countless hours with Sprint trying to pinpoint the problem, to no avail. Anyone else have that problem?

When it rains, it pours

Louis, of Asssonet, Mass., bought a 2010 Toyota last year and really likes it, except for one thing.

“When it rains the sunroof leaks and Toyota has not been able to explain to me what the issue is,” Louis said. “I have reproduced the failure/leak many times at home and took pictures of the issue. But the dealership seems to do nothing about the problem. Any support and help on this issue please feel free to comment. All I want is an explanation why some cars leak and some don't.”

Toyota owners should feel free to chime in, but a sunroof leak could be caused by any number of flaws, included a mismounted window and a damaged gasket. Water can find the tiniest hole. The bigger issue is the repair. Louis says the car is still under warranty, so he should insist that the dealer repair it.

Sour note

Mark, of Jacksonville, Fla., went to Pearle Vision for glasses, informing the optometrist the main reason he needed them was for reading music.

“It's usually a little more than arms length,” Mark told ConsumerAffairs.com. “I showed her by stretching my arm out. The glasses were ready in a little over a week. The fitting did not go well as the glasses were way off. Focal range was about six inches from my nose. The prescription was changed without a new exam. The second pair was worse as the first because it moved the focus to four inches. But, I was told by the professional Pearle Vision associate the distance was ideal for reading a book. Was offered the opportunity to return on another day for a re-exam by the other optometrist. I declined.”

Mark said he returned to an optometrist he had used in the past and was happy. Generally, that's the way it is with healthcare providers. Some you like more than others. Some listen to you, others don't.

Unauthorized charge

Consumers get very upset when they think they are using a “free” service, or are on a “free trials,” only to have charges show up on their credit cards.

"I did a search on MyLife.com for a lady that crossed the pacific with me in1963,” said Paul, or Huger, S.C.. “I did not join the site or give them any credit card information but they were able to hack my account and stole without my consent $14.95 for a Mylife people search. I have no idea how they got my debit card info because I did not provide it to them. This is wrong and very misleading.”

Paul may feel like a hacking victim, but he probably isn't. Chance are he got to the MyLife site by doing an online purchase with another company. It's common practice for one company to share credit card information with “marketing partners.” The consumer has no idea the second company can charge them for something. Paul should be able to ask MyLife to provide a proof of purchase.

For months economists and industry analysts have said market fundamentals did not support $100 a barrel oil, yet oil prices stubbornly hovered around that level. Now, that seems to have changed, big time.

As Wall Street went into a free fall this week, so did oil prices. Light sweet crude for September delivery fell below $89 a barrel at midday. Even Brent crude, which has remained much more expensive that U.S. oil, dropped nearly three percent today.

Stocks and oil are down for much the same reason. Recent economic data suggests the U.S. economic recovery has stalled. Data from other countries has also been disappointing, convincing the markets that another global recession is possible.

Less demand for oil

With economies in recession, the reasoning goes, there is less need for oil, so that present supplies, which have remained plentiful, can be stretched even farther.

If oil continues to fall, consumers can expect to see lower gasoline prices. In the futures market, where wholesalers buy their fuel to sell to gas stations, reformulated gasoline for September delivery was down about four percent in today's trading.

Gasoline at the retail level, of course, is slower to react. The national average retail price of self-serve regular today is about $3.70 a gallon, according to AAA, and has been in that range over the last few days. Chances are, that average price should begin dropping over the next few days.

A repeat of 2008?

How low will it go? It all depends on whether fears about a recession actually come true. One only has to rewind the clock to about this time in 2008 to see a parallel. After gasoline prices peaked at over $4 a gallon in July, the economy went into a freefall in September. By the end of the year, gas prices were well under $2 a gallon.

This year gas prices peaked right under $4 a gallon in early May, with the economy showing signs of weakness at the end of July. Is there a link between $4 a gallon gas and a recession? That's something for economists to argue about.

What can't be argued is that $4 a gallon gas places a heavy burden on consumers, many of whom are operating on the same, or less income over the last few years. No one wants to see a recession, but for consumers, relief at the gas pump may be a silver lining.

One year after the Federal Reserve required banks to get customers’ permission to charge overdraft fees on debit card transactions, fees charged by banks have not dropped for what amounts to short-term loans, the Consumer Federation of America (CFA) reports.

While some banks have modified the order in which they process payments from accounts, most banks continue to pay the largest transactions first, which can drive up overdraft revenue at the expense of struggling families.

CFA surveyed overdraft fees at the 14 largest banks and found only Citibank and HSBC not charging overdraft fees for debit-card and ATM transactions.

“Bank overdraft fees at the largest banks remain steep, ranging from $33 to $37, and far exceed the typical $20 debit card overdraft,” said Jean Ann Fox, director of financial services for CFA.

“Some banks have hiked the number of overdraft fees consumers can rack up in a single day to as many as ten, costing consumers as much as $370 in just one day.”

BB&T doubles fees

In the last year, BB&T doubled the number of overdraft fees it charges per day, capping fees at 8 per day, and Regions Bank raised its daily limit from 4 to 6 per day. Only TD Bank reduced the number of fees per day from 6 to 5.

The CFA survey found two-thirds of the largest banks pile on second and multiple fees if consumers do not repay overdrafts in just a few days. SunTrust charges a second $36 fee after seven days while JP Morgan Chase adds $15 after each five-day period an overdraft remains unpaid.

Overdrafts and fees must be repaid immediately to avoid extra fees or as soon as the next paycheck or benefit check hits the customer’s account. Banks repay themselves directly out of the consumer’s funds, making overdrafts balloon payment loans and the top priority for scarce family funds.

Most large banks solicit their customers to opt in to paying g overdraft fees for debit card purchases and ATM withdrawals that could be denied for no fee. Notable exceptions are Citibank, which never charged overdraft fees for debit card and ATM transactions, and HSBC which no longer permits overdrafts by debit card at the cash register or ATM.

Bank of America does not permit debit card overdrafts for single purchases, but in the last year resumed permitting consumers to overdraw at the ATM at a cost of $35 per transaction.

Manipulating payments

Manipulating the order of processing payments from accounts results in more fees for consumers who struggle to make ends meet. In 2010 almost all major banks processed payments largest to smallest or reserved the right to do so.

In the last year, three banks improved the order in which they process payments from accounts. Citibank now processes checks smallest to largest and will begin processing ACH payments smallest first in October. Fifth Third and Wells Fargo made changes in the order in which some transactions are paid which should lessen the number of overdraft fees triggered. But most banks haven’t improved their posting process.

“Banks extend credit when they pay overdrafts with the bank’s money,” Fox noted. “If the cost is computed as for a payday loan, banks are charging triple and quadruple-digit rates to borrow money when all the fees are added up.”

The highest cost of a $100 overdraft loan repaid in two weeks, if computed as a closed-end payday loan, is 3,259% APR at Fifth Third Bank, 2,799% APR at RBS Citizens, and 2,574% APR at PNC Bank. There is no legal limit to the size of overdraft fees, the number of fees banks can charge, or the length of time consumers have to repay these loans.

“Consumers need stronger protection from abusive overdraft fees and practices,” Fox said. “Regulators should prohibit banks from manipulating payment processing order to drive up overdraft fees and should require banks to offer consumers the lowest cost overdraft coverage for which they qualify. Banks should be prohibited from charging for overdrafts triggered by debit cards that can be denied at no cost to consumers,” she urged.

The Comptroller of the Currency is accepting comments through August 8 on proposed guidelines for bank overdraft practices and other loans based on bank accounts. Consumers can use an easy comment form provided by the Center for Responsible Lending to tell the OCC about needed overdraft reforms.

The U.S. Food and Drug Administration has approved Anascorp, the first specific treatment for a scorpion sting by Centruroides scorpions in the United States.

Venomous scorpions in the U.S. are mostly found in Arizona. Severe stings occur most frequently in infants and children, and can cause shortness of breath, fluid in the lungs, breathing problems, excess saliva, blurred vision, slurred speech, trouble swallowing, abnormal eye movements, muscle twitching, trouble walking, and other uncoordinated muscle movements. Untreated cases can be fatal.

“This product provides a new treatment for children and adults and is designed specifically for scorpion stings,” said Karen Midthun, M.D., director of the FDA’s Center for Biologics Evaluation and Research. “Scorpion stings can be life-threatening, especially in infants and children.”

Horse plasma

Anascorp is made from the plasma of  horses immunized with scorpion venom. Anascorp may cause early or delayed allergic reactions in people sensitive to horse proteins. The manufacturing process for Anascorp includes steps to decrease the chance of allergic reactions and to reduce the risk of transmission of viruses that may be present in the plasma.

The effectiveness of Anascorp was based on results from a randomized, double-blind, placebo-controlled trial of 15 children with neurological signs of scorpion stings. These signs resolved within four hours of treatment in the eight subjects who received Anascorp, but in only one of the seven participants who received the placebo.

The most common side effects were vomiting, fever, rash, nausea, itchiness, headache, runny nose, and muscle pain. In total, safety and efficacy data was collected from 1,534 patients in both open-label and blinded studies.

Anascorp was designated as an Orphan drug by FDA and received priority review.

Cargill Meat Solutions Corporation, of Springdale, Ark., is recalling 36 million pounds of ground turkey products that may be contaminated with a multi-drug resistant strain of Salmonella Heidelberg, the U.S. Department of Agriculture's Food Safety and Inspection Service (FSIS) said.

A total of 79 persons in 26 states are known to have been infected with the outbreak strain of Salmonella Heidelberg. At least one has died.

The products subject to recall today bear the establishment number "P-963" inside the USDA mark of inspection, and include the following:

Ground Turkey Chubs - Use or Freeze by Dates of 2/20/11 through 8/23/11

• 10 lb. chubs of Honeysuckle White Fresh Natural Lean Ground Turkey with Natural Flavorings

• 10 lb. chubs of Unbranded Ground Turkey w/ Natural Flavoring 2 Pack

• 80 oz. (5 lbs.) chubs of Riverside Ground Turkey with Natural Flavoring

• 10 lb. chubs of Natural Lean Ground Turkey with Natural Flavorings

• 16 oz. (1 lb.) chubs of Fresh Lean HEB Ground Turkey 93/7

• 16 oz. (1 lb.) chubs of Fresh HEB Ground Turkey 85/15

• 16 oz. (1 lb.) chubs of Honeysuckle White 93/7 Fresh Ground Turkey with Natural Flavoring

• 4-1 Pound Packages of Honeysuckle White Ground Turkey with Natural Flavoring Value Pack

• 16 oz. (1 lb.) chubs of Honeysuckle White 85/15 Fresh Ground Turkey

• 48 oz. (3 lb.) chubs of Honeysuckle White 85/15 Fresh Ground Turkey

85% Ground Turkey - Use or Freeze by Dates of 2/20/11 through 8/23/11

• 19.2 oz. (1.2 lb.) trays of Honeysuckle White 85/15 Ground Turkey

• 19.2 oz. (1.2 lb.) trays of Honeysuckle White Taco Seasoned Ground Turkey Colored with Paprika

• 19.2 oz. (1 lb. 3.2 oz.) trays of Kroger Ground Turkey Fresh 85/15

• 48.0 oz. (3 lb.) trays of Kroger Ground Turkey Fresh 85/15

• 20 oz. (1.25 lb.) trays of Honeysuckle White 85/15 Ground Turkey

• 48.0 oz. (3 lbs.) trays of Honeysuckle White 85/15 Ground Turkey Family Pack

• 16 oz. (1 lb.) trays of Honeysuckle White 85/15 Ground Turkey

• 19.2 oz. (1.2 lbs.) trays of Honeysuckle White Seasoned Italian Style Ground Turkey with Natural Flavorings

• 20 oz. (1 lb. 4 oz.) trays of Safeway Fresh Ground Turkey with Natural Flavorings * 15% Fat
  (NOTE: Sold in Texas only at Randall's and Tom Thumb, Use or Freeze by 03/12/11 through 05/05/11)

93% Ground Turkey - Use or Freeze by Dates of 2/20/11 through 8/23/11

• 19.2 oz. (1.20 lb.) trays of Honeysuckle White 93/7 Lean Ground Turkey

• 48 oz. (3.0 lbs.) trays of Honeysuckle White 93/7 Lean Ground Turkey Family Pack

• 19.2 oz. (1.2 lb.) trays of Fit & Active Lean Ground Turkey 93/07

• 19.2 oz. (1.2 lbs.) trays of Giant Eagle Ground Turkey Fresh & Premium Lean

• 19.2 oz. (1 lb 3.2 oz.) trays of Kroger Ground Turkey Fresh Lean 93/7

• 20 oz. (1.25 lb.) trays of Honeysuckle White 93/7 Lean Ground Turkey

Ground Patties

• 16.0 oz. (1 lb.) trays of Honeysuckle White Ground Turkey Patties with "Use by" or "Freeze by" dates of 2/20/11 through 8/23/11

• 16 oz. (1 lb.) trays of Kroger Ground Seasoned Turkey Patties Fresh 85/15, with "Use by" or "Freeze by" dates of 2/20/11 through 8/23/11

• 16.0 oz. (1 lb.) trays of Shady Brook Farms Ground Turkey Burgers with Natural Flavoring with the following "Use by" or "Freeze by" dates: 07/09/11, 07/10/11, 07/11/11, 07/15/11, 07/16/11, 07/21/11, 07/22/11, 07/24/11, 08/01/11, or 08/04/11

Frozen Ground Turkey - Production Dates of 2/20/11 through 8/2/11

• 16 oz. (1 lb.) chubs of Honeysuckle White Ground Turkey with Natural Flavoring

• 16 oz. (1 lb.) chubs of Spartan Ground Turkey

• 48 oz. (3 lb.) chubs of Honeysuckle White 85/15 Ground Turkey

• 40 lb. Bulk Packed Ground Turkey with Natural Flavoring for Food Service Use Only

The products were distributed nationwide. Cargill Meat Solutions Corporation requests that consumers who may have purchased these products return them to the point-of-purchase. When available, the retail distribution list(s) will be posted on FSIS' website at www.fsis.usda.gov/FSIS_Recalls/Open_Federal_Cases/index.asp.

To prevent salmonellosis and other foodborne illnesses, wash hands with warm, soapy water for at least 20 seconds before and after handling raw meat and poultry, and cook poultry—including ground turkey—to 165° F, as determined with a food thermometer.

This recall follows a July 29, 2011 FSIS Public Health Alert that was initiated due to concerns about illnesses caused by Salmonella Heidelberg that may be associated with use and consumption of ground turkey. A total of 79 persons infected with the outbreak strain of Salmonella Heidelberg have been reported from 26 states between March 1 and August 3, 2011. The outbreak strain of Salmonella Heidelberg is resistant to several commonly prescribed antibiotics.

Among the ill persons with available information, 22 (38%) have been hospitalized and 1 death has been reported. As a result of the epidemiologic and traceback investigations, as well as in-plant findings, FSIS determined that there is a link between the Cargill ground turkey products and this illness outbreak. FSIS is continuing to work with CDC, affected state public health partners, and the company on the investigation.


Consumers with questions about this recall should contact Cargill's consumer relations toll free telephone number at 1-888-812-1646. 

More states appear to be taking aim at businesses that lure desperate homeowners into mortgage modification plans, only to leave the homeowners in worse shape financially.

New Jersey reports administrative actions against seven businesses for illegally offering mortgage modification services to homeowners in dire financial straits. State law requires that anyone providing these services in New Jersey be licensed as a Debt Adjuster by the Department of Banking and Insurance, or be otherwise authorized.

The seven companies served with a Notice of Violation are:

• Dunwell Financial Services, LLC - Jersey City
• Home Mitigation Group - Matawan
• Loss Mitigation Consultant Services - Paulsboro
• Rose MM, LLC - Newark
• Save Americas Mortgages Corp. - Fort Lee
• TWI Corp. - Winter Garden, Fla.
• Continental Associates, Ltd. - Commack, N.Y.

Not licensed

The Division of Consumer Affairs filed Notices of Violation against what it called “illegitimate businesses,” which offered mortgage loan modification services even though they were not licensed to do so in New Jersey. The State is seeking $35,000 in civil penalties and $49,434 in consumer restitution from the companies. The amounts sought in consumer restitution represent the fees paid by approximately 10 consumers for mortgage loan modification services.

The Notices of Violation also provide that the companies, cited for violating the state’s Consumer Fraud Act and Debt Adjustment and Credit Counseling Act, must cease and desist from offering debt adjustment services. The companies have the option of contesting the Notice of Violation and requesting a hearing.

Making a difficult situation worse

“We do not want homeowners who are already struggling to make mortgage payments victimized by unlicensed persons offering services that they cannot lawfully provide,” New Jersey Attorney General Paula Dow said. “Unlicensed companies most often make a difficult situation worse for homeowners, and we will continue to go after these firms.”

A mortgage loan modification involves changing the terms of an existing loan – for example, by lowering the monthly payments, adjusting the interest rate, extending the length of the loan, or in some cases decreasing the unpaid balance.

To weed out the bad actors preying on distressed homeowners, a number of states, including New Jersey, have written laws limiting the types of businesses and organizations that can offer mortgage modification services.

Microsoft double-bills subscribers to its Xbox Live Gold service, an online multiplayer game system with 23 million subscribers, an irate customer says in a federal class action.

In the suit filed in U.S. District Court in Seattle, Ryan Graves of Bloomington, Ind., says he bought his first Xbox 360 video game console in December 2005. He later signed up for Xbox LIVE Gold, a prepaid subscription service which allows its 23 million members to play against each.

Graves used his debit card in January 2010 to sign up for the $49.99 annual subscription and said he did not recall authorizing an automatic renewal of his subscription.

In June 2010, Graves canceled his debit card and in January 2011, his prepaid Xbox LIVE Gold subscription ended and Microsoft terminated his access.

Shortly thereafter, Graves signed up for a new one-month free Xbox LIVE Gold subscription and, when that ended on March 4, 2011, he purchased a new annual subscription for $64.19 and gave Microsoft his new debit card number.

Upon reviewing his checking account statement in April, Graves found that Microsoft had billed him for two separate $64.19 transactions on March 4.

But Graves had agreed to only one of those charges – the new subscription. Microsoft debited his card not only for the new subscription but also for the one that had ended in January 2011.

Graves called Microsoft customer support and was told that the company would investigate. After a number of conversations, a Microsoft representative informed him that the company considered the matter "resolved" and would give him two years of Xbox service.

Graves objected, saying he did not want and did not order a two-year subscription.

The suit charges that Microsoft routinely renews Xbox subscriptions without permission and charges it with breach of contract, unjust enrichment and violations of the Electronic Funds Transfer Act.

Would you use the Internet to make a blind date? To buy a car sight unseen? Send a money order for a few thousand dollars to collect millions of dollars in a sweepstakes you didn't enter?

OK fine, but would you use the Internet to rent your apartment to a perfect stranger?

Believe it or not, people do this every day using Airbnb.com, a site that takes the Web sharing concept to new heights. Basically, Airbnb lets you rent your house or apartment to someone you've never met and whose identity you are not given.

Of course, Airbnb has never met this person either but, taking a page from the dating site playbook, claims it thoroughly checks the references of would-be renters.

It didn't work out so well for a San Francisco blogger known as "EJ." She rented her apartment last month while she was out of town on a business trip. When she returned, the place had been trashed and EJ hastened to the keyboard to describe the damage in chilling detail.

EJ's renters not only trashed the apartment and stole numerous valuables. They also took the time to thoroughly investigate her personal documents, thus gaining access to account numbers and other data useful for future identity theft adventures.

Sincerest regrets

Airbnb dutifully expressed its regrets and vowed to tighten up its procedures going forward and police said they had a suspect in custody.

Now a second Bay Area Airbnb member, Troy Dayton, is telling a similar story, claiming his Oakland apartment was rented three months ago by a drug addict who trashed the place and left it littered with meth pipes, Techcrunch reports.

The latest account calls into question Airbnb's initial claims that EJ's experience was the first it knew of – "our first major incident in over 2 million nights" as the company put it.

Perhaps none of this would be worth the buzz it has generated except that Airbnb is one of the current hot items in the online business. The company raised $112 million recently on an estimated valuation of $1.3 billion – not bad for what amounts to a classified-ad site.

Hoping to rescue its reputation, and valuation, Airbnb now says it will provide $50,000 worth of protection to Airbnb hosts. The company also says it will beef up its user verification profile process and integrate profiles with social sites, allowing hosts to view potential guests prior to agreeing to rent to them.

Consumers who sold their gold jewelry last week may wish they had waited a few days. The price of the precious metal has surged this week amid signs of economic weakness in the U.S. and Europe.

The New York price of gold at midday was up $26 to $1,668 an ounce. It's up over $50 an ounce so for this week.

While gold prices have been surging, stock prices have been tanking. Wall Street has taken a beating this week, virtually ignoring the resolution of the much-worried-about debt ceiling debate and instead focusing on future growth prospects.

It hasn't happened overnight

Gold prices have been going up for years, but the sudden acceleration takes place against a backdrop in which the U.S. Congress waged an contentious debate before finally increasing the U.S. borrowing limit. As that vote was nearing its deadline, daily economic data suggested U.S. economic growth is slowing down, much faster than anyone expected. A growing number of economists concede the possibility the U.S. could slip into a double-dip recession.

Investors aren't the only ones loading up on gold. It was revealed this week that South Korea's central bank bought the precious metal. It's noteworthy because the bank had not bought gold in the last 13 years.

Flight to safety

"People want gold for safety," Frank Lesh, a trader at FuturePath Trading LLC in Chicago, told Bloomberg News.

Weakness in the dollar and the euro is also sending investors to gold, which even at its record level seems cheaper than some of the “safer” currencies, like the Swiss Franc.

Will gold go even higher or is it a bubble that one day will burst?

Many analysts think gold still has plenty of room to run. They note that in 1979, gold prices peaked at over $800 an ounce. Adjusting for inflation, an ounce of gold in 1979 should cost over $2,500 today.

Consumers lately seem paranoid about advertisers “tracking” their Web activities to deliver more relevant ads. This is child's play compared to a proposal that won approval in the House Judiciary Committee recently.

The committee voted to approve a bill that would require internet service providers (ISPs) to retain data on every customer to allow the government to identify and track their online activity for one year.

Amendments added to the bill expanded the data retention requirement to include not only internet protocol addresses, but also customer names, addresses, phone records, type and length of service, and credit card numbers.

The measure is being portrayed as a weapon against child pornography but  privacy groups and committee members said the bill goes overboard.

Rep. Jason Chaffetz (R-Utah) called it “a radical contradiction of the core American value that we are innocent until proven guilty” and Rep. James Sensenbrenner (R-Wis.) said he was "not convinced it will contribute in any meaningful way to prosecuting child pornography,"

"Power grab"

Rep. Zoe Lofgren (D-Calif.) called it an "unprecedented power grab by the federal government - it goes way beyond fighting child pornography."

Rep. Bobby Scott (D-Va.) pointed out that while the measure was portrayed as fighting child pornography, the data would be available for many other uses, including copyright prosecution and divorce cases.

“This data will be made available to law enforcement officers without a warrant or judicial oversight, and is a convenient way for law enforcement to get powers they couldn't get in the Patriot Act, said Rep. Darrell Issa (R-Calif.).

Privacy advocates testified that collecting and retaining additional data on Internet users greatly increases the risk that hackers will get access to that data and use it for data theft and electronic surveillance.

“Security experts have made clear that the best way to prevent loss or misuse of sensitive personal information is to avoid gathering or storing it in the first place,” said Marc Rotenberg, president of the Electronic Privacy Information Center.

Almost all subscription services that involve hardware have a one or two year minimum service requirement, or they impose an early termination fee. Most consumers try to avoid these at all costs.

“I called Dish Network July 28th 2011 about canceling service in the near future,” Shawn, of Hillsborough, N.C., told ConsumerAffairs.com. “I was informed that I was not bound to any contract at the time of the call.”

That's just what he wanted to hear. So after making arrangements, Shawn said he called on August 2nd to cancel the service.

“I was informed that there will be a fee for canceling service, even after being with the company for 2 1/2 years,” Shawn said.

Shawn doesn't understand how a week ago he had no contract but now he does. He spoke to two different customer service reps and obviously one is mistaken.

If Shawn hasn't made any changes to his plan in the last two years, he can probably cancel without paying the fee, but he will have to talk to at least one more customer service rep, and maybe a supervisor or two.

Timing is everything

If you got mad at Netflix for raising prices and want to cancel, keep in mind that the service bills in advance.

“When Netflix announced their 60 percent price increase to begin the fall of 2011, I immediately cancelled my service,” Laura, of Kalamazoo, Mich. “This happened to be one day after my account was charged for the coming month. I cancelled through their website and never saw any notice that there would be no refund for unused service, which they claim when I called today was printed on the cancellation screen. Every other company that I have ever done business with, automatically calculates and issues a refund for any unused portion of service that was paid in advance. Three weeks went by and I didn't see a credit posted to my debit card account, so I called their customer service number to inquire on the refund. This is when the extremely rude service rep told me that cancellations made online will not receive a refund; that customers must call to cancel in order to receive a refund.”

Getting money back from companies these days always seems to be a struggle. If you are going to cancel, it may be best to do it at the end of your billing cycle.

Parting is such sweet sorrow

AOL is a legend when it comes to difficulty in separating yourself from their services. Harry, of Savannah, Ga., is finding it difficult to establish a cut off date.

“I cancelled my service with AOL on May 4, 2011,” Harry told ConsumerAffairs.com. “They have continued to bill me every month $25.90 on my visa card. My last payment was suppose to be for April because the next billing cycle had not gone through for May. When I called them June 22, 2011 they said I had to pay one more month because that it was I owed them (some bogus back pay). They have taken $25.90 out of my credit card every month and every month I pay off my crdit card so there was no back charges they had not been paid.”

Harry isn't alone. Others have continued to have the same difficulty, but there are ways to effectively terminate the service, outlined here.

Tricky marketing?

Magazine marketers have a large bag of tricks to persuade you to subscribe. The first challenge is to get you to open the envelop containing the sales pitch. Robert, of East Brunswick, N.J., doesn't care for the way Readers Digest goes about it.

“Today I received a form to subscribe,” he said. “My problem is the envelope in which it came. A normal white envelope with a bright orange box with black letters saying "ACCOUNT NOTICE". I think that a person seeing this would obviously open it quickly, thinking they had a problem. What really annoys me is that, in my case, my neighbor was taking in my mail for a few days while I was away. This highlighted box certainly can draw attention and, unless you open the envelope and see that it's only an invitation to subscribe, there could be a negative connotation.”

Robert wants to know why these kinds of tactics are used. The simple answer is, it's harder and harder to sell magazines these days. Robert shouldn't worry too much. Most people, probably including his neighbor, recognize these kinds of envelopes for what they really are.

The Federal Communications Commission is out with its report on broadband speeds, finding that Internet Service Providers (ISP) in the U.S. largely deliver on their promises, a contention some consumers might argue.

But is speed the only way to judge an ISP's performance? Researchers at the Georgia Tech College of Computing argue that in addition to measuring speed, regulators should require a broadband “nutrition label”—easy-to-understand information about service-limiting factors—and users need better ways of measuring the performance their ISPs are delivering,

Out of some 2 billion Internet users worldwide, about 500 million are residential broadband users, and recent figures show that two-thirds of U.S. households are hooked up to high-speed Internet. Generally speaking, these customers’ throughput—the “width” of their Internet pipeline—lives up to speeds advertised by their ISPs, says the FCC report, “Measuring Broadband America.”

How does it handle multi-tasking?

But many home Internet users simultaneously run multiple applications that each use network resources, and the behavior of one application can affect the performance another application receives, according to Nick Feamster, associate professor in the School of Computer Science at Georgia Tech.

“People should care about more than just throughput,” Feamster said. “Optimal network performance depends on several other factors, but measuring these important metrics and explaining them to consumers is challenging. It goes back to transparency—we want to give users the information that will help them make the best decisions about which service plan to purchase, and to give them ways to verify that they’re getting the level of service that they’re paying for.”

Feamster and his Ph.D. student, Srikanth Sundaresan, consulted with the FCC on its study data, which was gathered from about 10,000 homes across the United States and involved many different ISPs. Their recommendations incorporated data from both the FCC study and from an independent study, Project BISMark, a new open-source router platform that allows users to continuously monitor the performance that they are getting from their ISP.

Doesn't tell the full story

“We found that performance of U.S. ISPs more consistently matches their advertised promises than the ISPs in other countries—they do a pretty good job,” Feamster said. “But at the same time, those advertisements are based on performance metrics that don’t tell the full story about how users’ applications will actually perform. Throughput might have been the dominant metric when the debate was dial-up versus broadband, but it no longer gives the complete picture about application performance.”

Feamster sees the issue of broadband performance this way: while your connection to a webpage might be lightning fast, and use only a fraction of your bandwidth, how does it perform when you are running several functions at once? And do some functions work better than others?

For example, a user might be streaming a high-definition movie while making a video call over Skype—or when many other users are simultaneously on the network, that’s when performance can suffer.

Sometimes the network gives preference to activities or users with the biggest bandwidth appetites and leaves the rest foraging for scraps.

Latency

One key factor, says Feamster, is “latency,” a general term that refers to several kinds of delays incurred in the processing of network data. For instance, in the “last mile” of connectivity to a household—the final leg of connectivity from the ISP to the home—data errors and packet loss often crop up at a disproportionate rate, and these can significantly impair activities like streaming video or voice over IP services. To minimize this problem, ISPs often perform error correction in the last mile, which comes at the cost of some additional delay.

“They’re basically introducing a time lapse that, if you scaled it out to the appropriate physical distance, would equate to half the width of the country,” Feamster said. “So, if you’re a gamer and you chose your service plan based solely on throughput speed, you might not receive the level of service you expected.”

That could explain why many consumers feel they are not getting the performance from their ISP that they expect. The connection may be fast, but isn't up to the demands of that particular consumer's use of it.

Feamster and Sundaresan also found that certain cable and DSL modems can introduce excessive latency, depending on the activities and applications that users are performing in their homes.

Bufferbloat

“Any user who has noticed that certain activities like uploading photos can render the network unusable has been a victim of excessive buffering, or ‘bufferbloat,’” Feamster said.

In addition to proposing an Internet “nutrition label” that would detail network performance in terms of throughput, latency and other measurements, Feamster and Sundaresan have included mechanisms in the BISMark router to give priority to latency-sensitive applications like Skype so that they might function normally while their hungrier counterparts eat up the remaining bandwidth.

If throughput can be thought of as the number of lanes on the Information superhighway, the new technique in the BISMark router provides an “HOV lane” for voice and video traffic, so that the real-time traffic doesn’t get stuck waiting for your photos to finish uploading.

“Consumers need better tools for understanding whether their home network is performing as well as it should. A major part of making this possible is giving users an easy way to monitor their home network activity and performance over time, which is our vision for the BISMark router,” Feamster said.  

Nursing homes are bracing for an unexpected 11 percent reduction in Medicare reimbursement. The Centers for Medicare and Medicaid Services (CMS) announced the rate reduction late Friday, taking the nursing-home industry by surprise.

CMS said the sharply lower rates will “correct for an unintended spike in payment levels and better align Medicare payments with costs.” Nursing home executives say the cuts will make it even more difficult to provide appropriate levels of care.

"From our perspective, this is totally unacceptable," Sun Healthcare Chief Executive William Mathies said, according to The Wall Street Journal.

The government defended the cutbacks.

“CMS is committed to providing high quality care to those in skilled nursing facilities and to pay those facilities properly for that care,” said CMS Administrator Donald M. Berwick, M.D.  “The adjustments to the payment rates for next year reflect that policy.”

Stocks feel faint

Whether the cuts – which CMS prefers to call “adjustments” – negatively affect patient care remains to be seen, but they certainly put nursing home stocks into intensive care.

Sun Healthcare's stock price was off 43% Monday. Skilled Healthcare Group, which had earlier put itself up for sale, withdrew its sales offering after concluding that the company was no longer worth enough to make a sale worthwhile.

Just the beginning

Although it occurred just as Congress was finally reaching agreement on a debt ceiling and deficit reduction plan, the CMS action was not directly tied to that controversy.

However, anyway you look at it, the health care industry is in for huge cutbacks under the deficit reduction plan approved by Congress over the weekend. Under that plan,  a bipartisan Congressional committee must find a further $1.5 trillion in savings, beyond an initial $900 billion. If the committee cannot agree on at least $1.2 trillion in savings, automatic cuts kick in starting in 2013. Medicare would face big cuts under this scenario.

The prospect of years of whittling away at Medicare and Medicaid is already causing severe heartburn among seniors and their advocates.

“Over the next few months, policymakers must avoid making hasty decisions that would lead to deep cuts and irreversible changes to Medicare, shifting greater costs to beneficiaries—half of whom earn less than $22,000 per year—and reducing access to care,” said Joe Baker, president of the Medicare Rights Center.

“Changes to Medicare and Medicaid must address the root cause of the programs’ increasing costs, which is rising costs in the health care sector overall. Only by promoting shared sacrifice can we avoid balancing the budget on the backs of older Americans, people with disabilities and their families,” Baker said.

Now that the drawn-out battle to raise the national debt ceiling is finally behind us, some people might be wondering how the U.S. will ever manage to pay off its $14 trillion and counting national debt.

The answer is, it probably won't, if history is any guide.

For those brave souls who want to see how the U.S. got so deep in the hole, the Treasury Department has an area of its website devoted to the nation's debt, showing the total on a year-by-year basis. While it's easy to be overwhelmed by the numbers, it makes instructive reading.

What becomes apparent, even to the most casual observer, is that in almost every year since World War II, the national debt has gone up. In good times and bad, the U.S. Government has borrowed more money.

Crisis spending

In June 1941, six months before America was thrust into World War II, the national debt stood at $48.9 billion. When war came, the government had to borrow massive amounts of money, mostly through the sale of “war bonds,” to raise funds to support the war effort.

By June 1946, with the war finally won, the federal debt stood at $269.4 billion, more than five times what it was five years earlier. During the post-war years that followed, as America returned to prosperity and rebuilt Europe, the debt remained at about that level. Despite the country's return to prosperity, the large war-time debt was not paid down.

In fact, except for a couple of years in the 1950s when it went down slightly, the debt steadily rose over the next half-century. It stood at $288.9 billion in June 1961, six months into the presidency of John F. Kennedy. In 1966, after President Johnson launched a “War on Poverty,” a ground war in Vietnam and Medicare, the national debt was still just $319.9 billion.

The national debt rose sharply during the inflation of the 1970s, hitting a half-trillion dollars on Gerald Ford's watch in 1975 and $907 billion during Jimmy Carter's last year in office, in 1980.

The $1 trillion mark

The debt passed the $1 trillion mark during Ronald Reagan's second year in office and surpassed $2 trillion four years later, after tax cuts and massive defense spending.

The debt had doubled again by the time Bill Clinton was elected in 1992. And while the 1990s were a time of robust economic growth and a booming stock market, the U.S. did nothing to reduce its debt, though its growth slowed noticeably over Clinton's eight years.

During George W. Bush's administration, the national debt nearly doubled again, from $5.8 trillion to $10 trillion.

Why didn't the U.S. pay down it's debt after World War II? The U.S. economy was much bigger than before, and many felt $250 billion or so wasn't such a big deal, since it was about the same percentage of the economy in 1950 as $49 billion was before the war.

As the economy grew in the 1950s and 60s, the size of the debt, as a percentage of the overall economy, continued to get smaller, even as the numbers got bigger. Now, however, the economy isn't growing very much, and the debt becomes bigger in terms of numbers and as a percentage of Gross Domestic Product (GDP).

Unpleasant

As every consumer knows, paying off debt isn't all that pleasant. It requires using present resources to pay for things consumed in the past. In political terms, it would probably require Congress to raise taxes and cut spending, with the resulting surplus going, not for new spending that would please constituents and stimulate the economy, but to retire debt. Not a formula for winning re-election.

With the debt ceiling now at $16.4 trillion, will Congress ever start paying down the debt, just as consumers are paying off their credit cards?

Stranger things have happened, but over the last 60 years, paying off the national debt hasn't been one of them.

A nationwide Salmonella outbreak has killed one consumer in California and sickened at least 76 others in 26 states, but federal food safety officials have not yet positively identified its source.

However, officials at the Food Safety and Inspection Service (FSIS) believe the source of the contamination could be ground turkey. The agency has issued a public health alert while its investigation continues.

The alert reminds consumers of the critical importance of following package cooking instructions for frozen or fresh ground turkey products and general food safety guidelines when handling and preparing any raw meat or poultry.

In particular, while cooking instructions may give a specific number of minutes of cooking for each side of the patty in order to attain 165  degrees internal temperature, consumers should be aware that actual time may vary depending on the cooking method (broiling, frying, or grilling) and the temperature of the product (chilled versus frozen) so it is important that the final temperature of 165 degrees must be reached for safety. Don't rely on the cooking time for each side of the patty, but to use a food thermometer.

Ground turkey and ground turkey dishes should always be cooked to 165 degrees F internal temperature as measured with a food thermometer; leftovers also should be reheated to 165 degrees F.

Focus on Cargill plant

Though the FSIS has not identified a possible source of the contamination, the New York Times reports Cargill has confirmed that it has been contacted by the Agriculture Department (USDA) and asked to provide information to the investigation. The Times quotes a Cargill spokesman as saying the company is cooperating with the probe.

Meanwhile, the Centers for Disease Control and Prevention (CDC) is partnering with state health departments to monitor the outbreak. The CDC has identified the strain as Salmonella Heidelberg, and confirmed that it is likely caused by eating ground turkey.

Public health investigators are using DNA “fingerprints” of Salmonella bacteria obtained through diagnostic testing with pulsed-field gel electrophoresis, or PFGE, to identify cases of illness that may be part of this outbreak, the agency said.

The “R” word has cropped up again this week. While attention was fixed on Washington's last-minute maneuvers over a debt-ceiling deal, a spate of economic data has raised questions about the U.S. economy's strength and the possibility of another recession.

Last Friday the government reported that the economy grew at a much lower than expected rate in the second quarter. On Monday data on June manufacturing was shockingly weak. Today the government reported consumers are spending less than expected.

Dumping stocks

As a result, traders on Wall Street sold stocks and bought bonds and gold, fearing the U.S. is sliding into a double-dip recession. The Dow Jones Industrial Average was off more than 100 points at mid-day and appeared headed for an eighth straight losing session.

Keep in mind that, for most of the year consumers have been spending a dollar a gallon more for gasoline than they did a year ago. That takes a big bite out of household budgets and keeps consumers from spending in other areas. In June, even spending for services was down sharply.

“This part of the economy normally grows solidly and consistently and the failure to do so is a clear sign that people are still extremely cautious,” said economist Joel Naroff, of Naroff Economic Advisors, in Holland, Pa. “Of course, to be able to spend a lot of money you need to make a lot of money and income growth is extremely weak. Wage and salary income was actually down in June.  As for inflation, the declining gasoline prices led to a drop in costs.”

Didn't end for some

A recession is defined as two straight quarters of negative economic growth. The last two quarters have seen growth, but barely. The Gross Domestic Product (GDP) grew a paltry 1.3 percent in the second quarter and a nearly non-existent 0.4 percent in the first quarter. If the GDP were a pulse rate, the patient would likely be on life support.

Officially, the Great Recession ended two years ago, but for millions of Americans, it hasn't ended. Unemployment stubbornly remains above nine percent. Consumers, unsure about their job security and their ability to get a new job, put off spending. All of this has led to speculation that the U.S. is about to take a double-dip.

Jon Lonski, the chief economist at the Moody's ratings agency, is among the economists who thinks we're about to experience another round of negative economic growth. He warns Washington's deficit cutters that cutting spending too much could actually make a recession more likely.

In an article titled “10 Signs of a Double Dip,” The Atlantic notes the biggest drag on the economy remains the still floundering real estate market. It notes that “weakness in the real estate market hurts the real estate industry, construction, finance and net wealth.”