Current Events in January 2012

The U.S. Department of Agriculture (USDA) says it can inspect chickens and turkeys quickly and more cheaply with a new system it has devised, but some consumer advocates think the agency is playing chicken with public health.

"The modernization plan will protect public health, improve the efficiency of poultry inspections in the U.S., and reduce spending," Agriculture Secretary Tom Vilsack said. "The new inspection system will reduce the risk of foodborne illness by focusing Food Safety Inspection Service (FSIS) inspection activities on those tasks that advance our core mission of food safety."

Currently, some FSIS employees in poultry establishments perform several activities which are unrelated to food safety, such as identifying visual defects like bruising, while others conduct the critical inspection activities. Under the proposed plan, all FSIS inspection activities will focus on critical food safety tasks to ensure that agency resources are tied directly to protecting public health and reducing foodborne illnesses, Vilsack said.

But the Consumer Federation of America said it has several concerns with this announcement.  It said Vilsack's announcement precluded any independent review of the new standards, something that had been requested recently by Sen. Kirsten Gillibrand.

Michael F. Jacobson, executive director of the Center for Science in the Public Interest, said USDA should "modify its inspection program carefully to ensure that the program reduces the unacceptably high levels of Salmonella and Campylobacter in chicken and turkey."

"One can’t escape the fact that the government is shrinking, and that historic programs like this one need to demonstrate their value. The proof will be in reduced contamination rates, leading to fewer deaths and illnesses," Jacobson said.

Meat industry groups expressed support for the program.

“As new research expands our ability to respond to food safety issues, it is essential that we embrace new inspection approaches that keep pace with that knowledge,” said AMI Executive Vice President James H. Hodges.  “While our knowledge has grown exponentially in the last two decades, there have been no major changes to our federal poultry inspection system during this period.  We commend USDA for embracing science and we look forward to working with them as they finalize the rule and implement this new approach.”

If you would like to use the Internal Revenue Service (IRS) Free File service, it's now open for business for the 2011 tax filing year, the IRS said.

As the name implies, Free File is a free tax-preparation service that taxpayers can use online. According to the tax agency, more 33 million returns have been filed through Free File since its debut.

Everyone can use Free File, but there is an income limit for using the free tax preparation software the IRS offers through a number of commercial partners. To use the software, you must have an adjusted gross income of $57,000 or less.

Free File Fillable Forms, the electronic version of IRS paper forms, has no income restrictions. The only difference is, you have to prepare your taxes yourself.

“Free File can save you time and money,” said Diane Fox, director, Free File program. “You can prepare and e-file your tax return at no charge. And, the software helps you find the tax breaks you are due. Free File helps make taxes less taxing.”

Most taxpayers eligible for free software

The IRS estimates that 70 percent of taxpayers fall into the category that allows them to use the free tax preparation software. To get started, click here. 

All Free File members must meet certain security requirements and use the latest in encryption technology to protect taxpayers’ information.

People with an adjusted gross income of $57,000 or less are eligible for at least one software product if not more. Each of the Free File software providers sets their own eligibility requirements, usually based on qualifiers such as income, state residency, age or military status.

The easiest way to locate a software provider is to use the online “get help” tool at the IRS website, with a little of a taxpayer’s information such as income, age and state residency, can identify matching free-file products. Or, taxpayers can review all providers and their offers. Some software providers also offer state income tax preparation for free or for a fee.

Volunteer help

Also, the IRS is working with select volunteer tax sites such as Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly. There are 200 locations nationwide that have set up Free File kiosks where taxpayers can use computers to prepare their own returns with Free File.

For taxpayers whose incomes are more than $57,000, there’s Free File Fillable Forms, also available at the IRS website. This program is best for taxpayers experienced in preparing their own federal tax returns. For people who prefer doing their taxes the old fashioned way – by paper – this is an electronic alternative.

Free File Fillable Forms performs some math calculations and provides links to some IRS publications. It does not use the familiar question-and-answer format used by software. Taxpayers can e-file the forms for free. It also does not support state income tax returns.

Taxpayers must access the free-file products through IRS.gov or authorized kiosks.

When is a “gift” not really a gift? Ask Teresa, of Chenago Forks, N.Y. who says she received a $5 gift card from Kmart when she purchased $94 worth of merchandise before Christmas.

“When I had to return a pair of slippers that were the wrong size, I received a refund of $7.85 for the $7.99 purchase price,” Teresa told ConsumerAffairs.com. “I then had to return a pair of pajamas that cost me $14.99, my refund was $14.74. Both returns were done with the original receipt and during the correct time frame.
This time I caught the discrepancy while I was standing at the register and asked why there was a difference in price. The clerk told me that it was due to the fact that I had received a gift card. and that it came off the price of the purchase. Mind you, I had received the gift card, not used one.”

So the gift wasn't really a gift. And as it turned out, Teresa said there was a one-week window of time when the card could be used, and she missed it.

When a free trial isn't

Netflix markets its video service by offering a one month “free trial.” While most free trial offers are just a way for a marketer to get access to your credit card, a free month of Netflix would certainly give you ample opportunity to decide if you want to keep the service. Weerasak, of Teaneck, N.J., says she didn't get that opportunity after she signed up for the free trial last week.

“The next day I got a charge on my credit card $7.99,” Weerasak said. “I has called customer service and she said that I not eligible for a free trial because I leave in the same house of a previous customer.”

If this is indeed the policy, this could impact millions of people who live in apartments or other high-turnover residences.

Shedding some light on the light bulb issue

Dalton, of Mayfield, Ky., is not happy with new GE Helical light bulbs.

“I have been told, that they will be a requirement to use in the United States rather than regular light bulbs,” Dalton said. “They do not last five years as they say. You're lucky to get five months out of them. One of my main concerns is that they will not work in my dimmers. When you turn the button to dim the light it starts to flicker and gets even worse the more you turn it down. What I really would like to know is who in our democratic system of government has decided that we will be forced to use these bulbs and why.

Let's address Dalton's second question. The new federal regulations that took effect this month do not “ban” incandescent light bulbs. They just set higher efficiency standards. Some incandescent bulbs meet these standards. The new rules do not mandate the use of any particular type of bulb, so Dalton doesn't have to use helical bulbs.

And as for dimming, compact fluorescent lights are not "dimmable."  If he is using them with a dimmer, that explains the short service life he has experienced.  

Is Volkswagen the Rick Santorum of the auto world?  Just a day after the former Pennsylvania senator was named the winner of the Iowa primary following a recount, bumping Mitt Romney, VW says a fair count would make it the world's No. 1 auto maker, bumping GM, which claimed the title yesterday.

GM, which lost the No. 1 title to Toyota in 2008, yesterday said it had regained it with sales of 9.03 million vehicles worldwide, putting it about 1 million ahead of VW.

Ach but wait, exclaimed VW, which said its sales figures don't include sales from truckmakers MAN and Scania, which it owns.  Volkswagen argued that GM inflates its numbers by including sales from its China affilites SAIC and Wuling.  

On one point there's no controversy.  VW's sales are growing faster than GM's. VW sales last year were up 11% while GM's rose 7.6%.

Toyota, meanwhile, is expected to be down 6% when it releases its full-year results, estimated to be around 7.9 million. Toyota sales were battered by the natural disasters in Japan and Thailand and, possibly, by public concerns over a rash of recalls in recent years.

Both GM and VW have been cranking out new models in hopes of gaining new market share.  

VW has built a new plant in Chattanooga, Tenn., enabling it to build cars and crossovers for the U.S. market more cheaply than in Germany. VW has established a goal of selling 10 million vehicles a year by 2018 and expects to become the world's largest carmaker by 2018 or sooner.

GM's growth was aided last year by the Chevy Cruze compact, which helped boost the Chevy brand to sales of 4.76 million. GM expects to show earnings last year of $8.1 billion.

Hearts & minds

Numbers are one thing.  Consumer sentiment is something else and on that score, Volkswagen appears to have a leg up on General Motors.  We conducted a computerized sentiment analysis of more than 1 million consumer comments on Facebook, Twitter and other social media. 

Volkswagen enjoyed a consistently positive net sentiment while GM's more closely resembled a seesaw, as these charts illustrate

Small businesses around the country have reported receiving an unwanted fax, telling them how to end "unwanted faxes." The best advice? Throw it away.

The fax comes from an organization called the "Envirofax Commission." In bold type, the fax declares "Fax Us Your Unwanted Faxes." In smaller type the fax notes that a change in regulations, in 2006, gives fax recipients the the right to opt-out from receiving future faxes.

"Please fax your unwanted faxes to the Envirofax Commission," the fax declares. "We will contact the sender and have your fax number permanently removed from their fax list."

What's the angle?

The fax states this service is free, so what's the angle? According to the Better Business Bureau (BBB), the motive may not be all that altruistic.

"It sounds too good to be true and like a scam to gain active fax numbers," the BBB says.

The group said, based on its inquiries made more than a year ago, it believes that there is no such thing as this commission, and that this group’s primary goal is to confirm valid fax numbers to that it can turn around and sell them to companies that send out junk faxes.

No contact info

The BBB notes the flyer contains no phone number or address for the organization, just a fax number.

Under the government's regulations, a business can only send you a fax if they have an existing business relationship, or "there is an existing relationship formed by a voluntary two-way communication between a person or entity and a business or residential subscriber with or without an exchange of consideration [payment], on the basis of an inquiry, application, purchase or transaction by the business or residential subscriber regarding products or services offered by such person or entity, which relationship has not been previously terminated by either party.”

How to opt out

When you receive an unwanted fax and want to opt-out of receiving additional faxes in the future, your request must identify the fax number or numbers to which it relates and be sent to the telephone number, fax number, Web site address, or e-mail address identified on the fax advertisement.

If you are one of Zappos.com's estimated 24 million customers, you will be getting an official notification that some of your personal data has been compromised in last weekend's massive cyber attack.

A security expert at Indiana University (IU) says you should take it very seriously. But the threat is not that credit card information will be stolen.

"Credit cards are covered by a federal law that limits consumer liability in the case of fraud up to $50, and card issuers universally waive even that small amount," said Fred H. Cate, a professor at the IU law school. "Compromised credit card data is not the major area for concern."

Sensitive information

Instead, according to Cate, who also serves as director of the IU Center for Applied Cybersecurity Research, the data that were reportedly accessed in the Zappos breach -- customer names, addresses, phone numbers, email addresses and encrypted passwords, in addition to the last four digits of customer credit card numbers -- pose the greatest risk to affected individuals. That risk falls into three categories.

First, he says, it sets up Zappos.com customers for phishing scams.

"Think about it," Cate said. "If you get an email from a company that includes your correct name and contact information and refers to the last four digits of your credit card number, wouldn't you think it is real?

Cate says it's not clear how customers will be able to distinguish real messages from fraudulent emails claiming to come from Zappos itself.

Second, this is exactly the information necessary to locate other data about individuals in public and commercial records.

"If I have your name, address and phone number, in many states I can get your property tax records, marriage license and other publicly available information," Cate said. "With that additional information a criminal is in an even better position to commit frauds in your name or to access password-protected sites by using the extra information to answer password-reset questions."

Third, since the information included emails and encrypted passwords, this poses a serious risk to other online accounts held by affected customers of Zappos.

"Almost all consumers reuse passwords, and email addresses often serve as default account names for online sites, so depending upon the quality of encryption being used by Zappos, it is entirely possible that the perpetrators will have access to a wide range of online accounts," Cate said.

What to do

Fortunately, most major breaches do not result in extensive fraud. In addition, there are practical steps consumers can take to protect themselves. If you are a Zappos.com customer, here's what Cate says you should do:

• Change passwords on all accounts that use the same password as you Zappos.com account.
• Use unique passwords on all accounts
• Monitor account, credit card and bank statements carefully
• Be very careful about responding to any email that appears to be from a company that requires your action. When in doubt, look up the company's number and call it directly.

While most people are aware they must include wages, salaries, interest, dividends, tips and commissions as income on their tax returns, many don’t realize that they must also report "outside," or miscellaneous income.

With a tough economy and raises few and far between, more people are doing work on the side to earn extra money, so the reporting requirements affect a lot more taxpayers than before. In addition to income from side jobs, the Internal Revenue Service (IRS) also requires you to report:

• barter exchanges of goods or services,
• awards, prizes, contest winnings and
• gambling proceeds

Taxpayers must report all income from any source and any country unless it is specifically exempt under the U.S. tax code. There may be taxable income from certain transactions even if no money changes hands.

You report this income using Form 1099-MISC, which you should receive from the person paying you. It is a common misconception that if a taxpayer does not receive a Form 1099-MISC or if the income is under $600 per payer, the income is not taxable. However, the IRS says there is no minimum amount that a taxpayer may exclude from gross income. If you earn it, you must report it.

All income earned through the taxpayer’s business, as an independent contractor or from informal side jobs is self-employment income, which is fully taxable and must be reported on Form 1040.

Use Form 1040, Schedule C, Profit or Loss from Business, or Form 1040, Schedule C-EZ, Net Profit from Business (Sole Proprietorship) to report income and expenses. Taxpayers will also need to prepare Form 1040 Schedule SE for self-employment taxes if the net profit exceeds $400 for a year. Do not report this income on Form 1040 Line 21 as Other Income.

Independent contractors must report all income as taxable, even if it is less than $600. Even if the client does not issue a Form 1099-MISC, the income, whatever the amount, is still reportable by the taxpayer.

Fees received for babysitting, housecleaning and lawn cutting are all examples of taxable income, even if each client paid less than $600 for the year. Someone who repairs computers in his or her spare time needs to report all monies earned as self-employment income even if no one person paid more than $600 for repairs.

Bartering

Bartering is an exchange of property or services and oftentimes this slips through the tax-reporting cracks. But the IRS says even bartering is subject to taxation.

The fair market value of goods and services exchanged is fully taxable and must be included on Form 1040 in the income of both parties. An example of bartering is a plumber doing repair work for a dentist in exchange for dental services. Income from bartering is taxable in the year in which the taxpayer received the goods or services.

Gambling winnings

In most places, gambling is against the law. Even so, gambling winnings are fully taxable and must be reported on Form 1040.

Gambling income includes, among other things, winnings from lotteries, raffles, horse races, poker tournaments and casinos. It includes cash winnings as well as the fair market value of prizes such as cars and trips.

Even if a W-2G is not issued, all gambling winnings must be reported as taxable income regardless of whether any portion is subject to withholding. In addition, taxpayers may be required to pay an estimated tax on the gambling winnings.

Losses may be deducted only if the taxpayer itemizes deductions and only if he or she also has gambling winnings. The losses deducted may not be more than the gambling income reported on the return.

Prizes and awards

In most cases the cash value of prizes or awards won in a drawing, quiz show program, beauty contest, or other event, must be included on the tax return as taxable income. Taxpayers must also report the fair market value of merchandise or products won as a prize or award, as taxable income. For example, both a $500 cash prize and the fair market value of a new range won in a baking contest must be reported as other income on Form 1040, Line 21.

For more information about miscellaneous income reporting requirements, check out IRS Publication 525 - Taxable and Non-Taxable Income.

The Supreme Court has unanimously ruled that consumers injured by violations of the Telephone Consumer Protection Act (TCPA), which outlaws abusive telemarketing practices, may bring lawsuits in federal courts as well as state courts.

Lawyers for the consumer group Public Citizen represented Marcus Mims in the case, Mims v. Arrow Financial Services, a debt collection agency.

Mims, a Florida resident, alleged that Arrow, seeking to collect a debt, repeatedly used an automatic telephone dialing system or prerecorded or artificial voice to call Mims's cellular phone without his consent. He charged that Arrow "willfully or knowingly violated the TCPA" and sought declaratory relief, a permanent injunction, and damages.

"The court’s opinion, written by Justice Ruth Bader Ginsburg, accepts without reservation all of the arguments we made in support of [Mims'] right to choose a federal court to assert his claims," said Scott Nelson, a Public Citizen attorney.

"We find no convincing reason to read into the TCPA's permissive grant of jurisdiction to state courts any barrier to the U. S. district courts' exercise of the general federal-question jurisdiction they have possessed since 1875," Ginsburg wrote. "We hold, therefore, that federal and state courts have concurrent jurisdiction over private suits arising under the TCPA."

The TCPA forbids such practices as calls to cell phones that use automatic dialers, calls to residences that use prerecorded messages, and unsolicited junk faxes, and it says that consumers who are victims of such practices can sue for up to $1,500 per violation.

The act specifies that those lawsuits may be brought in state courts. But, as the court ruled, the act does not prevent consumers from going to federal court instead, by invoking the federal courts’ general jurisdiction over all cases that are based on federal law.

The decision will make it possible for plaintiffs with large claims that are suited to litigation in federal court to choose a federal forum for those claims. It also may facilitate class actions that could not be brought if TCPA claims were limited to state courts.

AT&T is jacking up data plan rates by as much as 33% for smartphones and tablet computers.

“Customers are using more data than ever before,” said David Christopher, chief marketing officer, AT&T Mobility and Consumer Markets. “Our new plans are driven by this increasing demand in a highly competitive environment, and continue to deliver a great value to customers, especially as we continue our 4G LTE deployment.”

Normally, when one produces and sells more of a commodity, it becomes cheaper. But in the case of bandwidth, demand is outpacing supply and carriers are raising prices or imposing usage ceilings, or both. AT&T prefers to say the plans "give customers more data and value."

“Customers are using more data than ever before,” said David Christopher, chief marketing officer, AT&T Mobility and Consumer Markets. “Our new plans are driven by this increasing demand in a highly competitive environment, and continue to deliver a great value to customers, especially as we continue our 4G LTE deployment.”

The new plans will launch this Sunday, January 22. 

The new smartphone plans include:

• AT&T Data Plus 300MB: $20 for 300MB
• AT&T Data Pro 3GB: $30 for 3GB
• AT&T Data Pro 5GB: $50 for 5GB, with mobile hotspot / tethering

Smartphone customers needing additional data can pay $10 per additional gigabyte on the AT&T Data Pro 3GB and Data Pro 5GB plans; AT&T Data Plus users will receive an extra 300MB for $20.

The new tablet plans include:

• AT&T DataConnect 3GB: $30 for 3GB
• AT&T DataConnect 5GB: $50 for 5GB

Existing smartphone and tablet customers will have the choice of keeping their current plans or choosing one of these new plans, and the current $14.99 for 250MB plan for tablet customers will remain available. 

The tablet plans are for 30 days and automatically renew every 30 days, unless you cancel service prior to the start of the 30 day renewal, while smartphone plans are covered by contracts, normally three years. 

The company said customers should keep their device’s Wi-Fi turned on because data usage over Wi-Fi does not count against a customer’s monthly data plan. AT&T smartphone and tablet customers have access at no additional charge to AT&T’s 29,000 Wi-Fi hotspots nationwide.

Now that AT&T has officially given up on its plan to acquire T-Mobile, it's going to have to keep a tighter rein on its available spectrum, which would have been greatly increased had the T-Mobile deal gone through. Not that AT&T is any stranger to rate caps. It was the first carrier to limit consumption when it introduced tiered pricing plans way back in 2010.

Eastman Kodak Co. has filed for Chapter 11 bankruptcy protection after running short of cash to finance a turnaround that's still in the darkroom.

“Kodak is taking a significant step toward enabling our enterprise to complete its transformation,” said Antonio M. Perez, Chairman and Chief Executive Officer. “At the same time as we have created our 
digital business, we have also already effectively exited certain traditional operations, closing 13 manufacturing plants and 130 processing labs, and reducing our workforce by 47,000 since 2003."

Kodak said it had secured $950 million in financing from Citigroup Inc. to help keep it afloat during bankruptcy proceedings.

"The Board of Directors and the entire senior management team unanimously believe that this is a necessary step and the right thing to do for the future of Kodak,” Perez said. “Our goal is to maximize value for stakeholders, including our employees, retirees, creditors, and pension trustees. We are also committed to working with our valued customers."

The company named Dominic Di Napoli, a vice chairman at FTI Consulting Inc., as its chief restructuring officer to manage the trip through bankruptcy court.

Tough times in the digital age

Founded as Eastman Kodak Company in 1892, the company has struggled to find its footing in the digital age. It recently stopped making its iconic Kodachrome film, a product that captured images for generations and inspired a number one hit song by singer-songwriter Paul Simon in the early 1970s.

The company last reported a profit in 2007 as it moved into producing digital cameras and office equipment. Mary, of Bradenton, Fla., is not a happy Kodak customer.

“I purchased an All-in-One Printer Esp 3200 about a year and a half ago,” Mary told ConsumerAffairs.com. “I was going to take it back immediately because it clunks and makes noise long after it has printed, and operates slow. I kept it and now wish I had returned it because mine has a problem with the print-head. I rarely use the printer and like everyone else says, it runs out of ink very quickly. This is not a savings in ink, and false advertising. From now on, I'm going with my gut instincts on brands. I just thought I'd give Kodak a shot and they're not ready.”

Meanwhile, the news that Kodak might be contemplating bankruptcy took few by surprise on Wall Street. Kodak has virtually becoming a penny stock, selling for less than $1. A bankruptcy filing would also allow Kodak to sidestep some expensive pension obligations to retirees.  

You might say it's an invisible hunger issue. Pediatricians in some low-income communities have found a dangerous practice they call formula “stretching.” Families that can't afford enough infant formula have begun watering down the formula to make it last longer.

“We were surprised to find one in three families worried about putting food on the table,” said Andrew Beck, MD, a general pediatrician at Cincinnati Children’s Hospital and one of the study’s authors. “Food insecurity tends to be an invisible problem, forcing families to make difficult choices between nutrition and other essential needs.”

After encountering instances of “stretching” at urban pediatric clinics, the research team launched a separate quality improvement project to help doctors better identify families with hunger issues. The new study was just published online in the journal Pediatrics.

Public assistance recipients at high risk

The researchers found that families receiving public assistance remain at high risk of food insecurity – defined as the inability to afford enough food to meet basic nutritional needs. Approximately 30 percent of families in the clinics reported food insecurity, a rate that is roughly twice the national average.

Two-thirds of the families in the federal Special Supplemental Nutrition Program for Women, Infants and Children (WIC) program – which provides nutrition basics for low-income women with children – reported running out of WIC-supplied formula toward the end of most months.

Watering down infant formula is especially harmful to babies, since they have not started eating solid food, and thus rely on formula for all their daily nutrition needs.

Watering down formula

Among food-insecure families, 27 percent reported watering down formula or reducing feedings, a practice the pediatric researchers said can have serious health consequences for babies’ developing brains, leading to cognitive, behavioral and psychological issues.

Why do families seem to be running low on formula? There could be many reasons, but researchers point out that, in 2009, WIC decreased the amount of formula provided to infants over the age of six months.

“We’re seeing the effects of those changes in our urban clinics, highlighting that WIC is truly a supplemental program,” said Mary Carol Burkhardt, MD, lead author of the study. “I would venture to say that cities with similar demographics and poverty levels are seeing some of the same behaviors found in our study.”

Companies change their products from time to time. The packaging may change color, the box may get smaller, or they may adopt a new logo. Most of the time consumers notice these changes.

Other changes may escape our notice, but they don't get by at least one consumer – Susan, of Kenton, Ohio, who says she has been buying General Mills' Multi Grain Cheerios cereal for years.

“For years the product has boasted not only whole grains but, like the company’s Total cereal line, a wide range of vitamins and minerals,” Susan told ConsumerAffairs.com.

But now, says Susan, the company has “reformulated” Multi Grain Cheerios. The box is still the same size and is still the same color. What's different is the list of vitamins and nutrients on the side, along with the percentage of the recommended daily allowance. Most consumers might not notice, but Susan did.

Reductions and eliminations

“Out of the sixteen vitamins and minerals of the previous formula, the new version of the cereal has reduced the percentage of eleven vitamins and minerals and completely eliminated two others.”

For example, Susan says the amount of vitamin C has been reduced to 10% and iron reduced to 45%.

Susan says when she contacted General Mills by email, she got this response:

“Multi Grain Cheerios’ vitamin levels have been reformulated,” the message read. “The vitamin and mineral profile of Multi Grain Cheerios is now similar to that of Yellow Box Cheerios. Multi Grain Cheerios now delivers an excellent source of 8 vitamins and minerals for our all-family consumer base.”

Reducing the product but not the cost

Maybe so, but Susan's point is the product is not what it once was but still costs the same. Susan says she would have preferred the company either raise the price of the product without making any changes or reduce the size of the box, which she said would be easier to detect than reduced vitamin content.

“Had I been given the choice to either pay more to cover the increased manufacturing costs, or have the vitamin/mineral percentages of the food altered, my wallet would have been wide open,” Susan said. “But consumers were not consulted; the company simply took it for granted that money is more important to the general public than physical well-being.”

Caught in a squeeze

All kinds of businesses caught in the squeeze between higher manufacturing costs and the retail price consumers will accept face a dilemma. If they raise their prices to reflect the real cost of the product, Susan may keep buying it but a lot of other consumers will look for a cheaper alternative. Sales will go down.

For competitive reasons, businesses selling mass market products want to keep their prices as low as possible. Unfortunately, that can mean products that aren't what they used to be.

If Susan truly wants a cereal that has more vitamins and minerals than the reformulated Multi Grain Cheerios offers, she should check the cereal aisle at Trader Joe's, Whole Foods, Wegmans or other chains that offer a wider range of nutritious foods.

As consumers, we've had it drummed into us in recent years about the dangers of identity theft; how it can ruin your credit and cause you to spend countless hours straightening out the mess.

Less has been said about how identity theft can impact your relationship with the Internal Revenue Service (IRS), but the tax agency is now addressing the issue.

If thieves steal your identity, they can apply for credit cards and loans in your name. But you may not have thought about another threat. According to the IRS, they can – and do – file fake tax returns in your name, claiming a big refund.

Here's how it works. An identity thief uses a legitimate taxpayer’s identity to fraudulently file a tax return and claim a refund. Generally, the identity thief will use a stolen Social Security Number (SSN) to file a forged tax return and attempt to get a fraudulent refund early in the filing season, before the victim has had a chance to file their real return.

How you'll know

You may be unaware that this has happened until you file your return later in the filing season and discover that two returns have been filed using the same SSN.

Be alert to possible identity theft if you receive an IRS notice or letter that states that:

• More than one tax return for you was filed,
• You have a balance due, refund offset or have had collection actions taken against you for a year you did not file a tax return, or
• IRS records indicate you received wages from an employer unknown to you.

What to do

If you receive a notice from IRS, respond immediately. If you believe someone may have used your SSN fraudulently, you should notify IRS immediately by responding to the name and number printed on the notice or letter. You will need to fill out the IRS Identity Theft Affidavit, Form 14039.

For victims of identity theft who have previously been in contact with the IRS and have not achieved a resolution, please contact the IRS Identity Protection Specialized Unit, toll-free, at

How can you protect your tax records?

The IRS has established the IRS Identity Protection Specialized Unit to assist taxpayers who think they could be vulnerable to identity theft. You could be included in this group if you've lost a wallet or purse, found questionable activity on credit accounts or otherwise suspect you've been a victim of identity theft. You can reach this special unit by calling 1-800-908-4490.

Meanwhile, there are ways you can minimize the chance of becoming a victim. Don’t carry your Social Security card or any document with your SSN on it. Don’t give a business your SSN just because they ask. Give it only when required.

Also, check your credit report every 12 months using www.annualcreditreport.com.

Secure personal information in your home. Protect your personal computers by using firewalls, anti-spam/virus software, update security patches, and change passwords for Internet accounts.

Finally, don’t give personal information over the phone, through the mail or on the Internet unless you have initiated the contact or you are sure you know who you are dealing with.

With tax season in full swing, some taxpayers are not only dealing with their 2011 returns, but trying to resolve tax issues from past years. The Internal Revenue Service (IRS) has recently made it easier to deal directly with the tax agency when you have a tax problem. Des, of Charlotte, N.C., says she wishes she had known that before contacting JK Harris.

“I joined with them in Jan 2011 thinking I was going to get help with my IRS debt, but when in fact, like everyone else, all JK Harris did was make my situation worse,” Des said. “Now I have the IRS about to garnish my wages and I'm a single mother of two and JK Harris stole about $4,000 from me and my children. Thanks JK Harris for nothing.”

Earlier this month JK Harris & Co. suspended operations, sent its employees home and is reported to be preparing to liquidate its assets. The firm, the subject of hundreds of complaints to ConsumerAffairs.com over the years, has been in Chapter 11 bankruptcy proceedings since October but has reportedly been unable to raise enough funding to continue operations.

Not really a gift, was it?

Kirby Vacuum Cleaner salesmen are known for being pushy and persistent when they come knocking on your door. But Sandra, of Dayton, Va., says one Kirby representative came to her door bearing a gift.

“He gave me a candle for letting him come inside,” Sandra told ConsumerAffairs.com. “I told him that I already owned a Kirby but he insisted that he show me this model. I told him I was not interested, so he showed me anyway. When he was done he called his boss to pick him up. Before leaving the boss told him to come back to the door and ask for the candle back. What kind of leadership is this?”

Yes, but at least Sandra wasn't pressured into making a purchase. That's worth losing a candle any day.

See you in court

Laura, of Bakersfield, Calif., said she was rear-ended while stopped at a traffic signal. The driver, she says, is insured by State Farm.

“I am still under treatment for my neck injuries but have already been told by the State Farm adjuster that they will not be considering the injuries to my hip when they do try to settle with me because I had a bone spur on my hip that I was not even aware of,” Laura said. “They are trying to get out of paying me for all my out of pocket expenses and my lost wages The person that hit me was 100% responsible no question on that but they still are trying to get out of paying me and I am a State Farm customer too - have been since 1994."

If Laura is not satisfied with the company's settlement offer, she can decline to sign any papers and retain legal counsel. There are a lot of personal injury attorneys advertising these days. They aren't hard to find.

Giant Bicycle is recalling about 900 2012 Model Year Giant Defy Advanced and Avail Advanced Bicycles. The fork can crack, posing a fall hazard to riders.

This recall involves all 2012 model year men’s Giant Defy Advanced 0, 1 and 2 model bicycles and the women’s Giant Avail Advanced 0, 1, and 2 model bicycles. “Giant” and the model name are printed on the bicycle. The bicycles are various colors and sizes.

Authorized Giant Bicycle dealers sold the bikes nationwide from August 2011 through November 2011 for between $3,000 and $4,550. They were made in Taiwan.

Consumers should immediately stop riding the recalled bicycles and contact any authorized Giant Bicycle dealer for a free inspection and replacement of the fork.

For additional information, contact Giant Bicycle toll-free at (866) 458-2555 between 9 a.m. and 4 p.m. PT Monday through Friday or visit the firm’s website at www.giant-bicycles.com

Online shoe retailer Zappos.com reported this week that one of its customer database servers was compromised by hackers over the weekend. The initial reports, however, were not that alarming.

After all, the company said hackers were not able to get access to customers' credit card information. The company is requiring all 24 million customers to reset their account passwords.

While all of this may be slightly reassuring – as reassuring as data breaches can be – one security expert says it's still a very serious breach.

“Zappos said that credit card information was not stolen, but acknowledged that email addresses, billing and shipping addresses, phone numbers, and the last four digits from credit cards may have been compromised,” said Stephen B. Wicker, Cornell professor of Electrical and Computer Engineering. “This is a lopsided outcome for the customer.”

Wicker conducts research in wireless information networks. He focuses on networking technology, law, and sociology, and how regulation can affect the privacy and speech rights. He is the author of the book “Cellular Convergence and the Death of Privacy,” to be published by Oxford University Press at the end of 2012.

The bigger problem

“The bigger problem Zappos faces is that large databases of consumer information can be used for identity theft,” Wicker said. “As Zappos acknowledged, users who use the same or similar passwords are at risk of theft through access to other sites such as Amazon or Ebay.”

Wicker says information about a customer can be used to “de-anonymize” other databases on other Web sites, further invading customer privacy. In other words, hackers can begin building databases on individuals, piecing together bits of data from a variety of sources.

Correlation attacks

“Correlation attacks enabled by such data have been shown to strip anonymity from NetFlix, AOL and other databases that were assumed safe,” Wicker warned. “Thus, the information used can include customer preferences, beliefs and practices that are far harder to change than a credit card number.”

Wicker says he thinks Zappos responded quickly and correctly, calling the response admirable for its forthrightness and immediacy. But he says it's also a reminder of the risk run when online service providers maintain databases of user data. This is a practice that many, many web site and service providers engage in for convenience and, in some cases, for profit.

“This is a practice that a networked society cannot afford for the long term if individual privacy is to be preserved,” Wicker said.

Someone unfortunate enough to become President once said that if you want a friend in Washington, you should get a dog.  It was good advice then and may be even better today, when the D.C. definition of friendship seems to have spread virally across the cybersphere.

Not too long ago, a friend was someone who offered not just occasional facetime and frequent tweets but was also someone you could count on to stand by you in good times and bad -- you know, somebody who would offer sympathy, support and honest advice.

But increasingly, a friend is just a "friend," meaning someone who has managed to hook up with you on Facebook Twitter, Google+ and so forth.

In fact, there are now people who spend quite a bit of time amassing huge lists of "friends" for reasons that aren't quite clear, although it seems that we're coming to regard "friends" as something akin to airline miles or bonus points on a credit card.  

In other words, they're not worth much now but maybe we'll find a use for them one of these days.

A friend indeed

Sensing which way the wind is blowing, two young lads, Ryan and Andrew Landau, have left their presumably cushy posts at Google and IBM to launch something called PowerVoice, their P.R. person told us recently.

Believe it or not, PowerVoice promises to "automate the ability to measure the influence of a particular individual."  This should at the very least come in handy when deciding who gets an organ transplant or who gets to board the airplane first.

Better yet, if you believe in selling out your friends, PowerVoice promises to enable you to do just that. Here's how the company describes its noble mission:

"PowerVoice negotiates a marketing agreement with companies and their brands. PowerVoice then provides a paying customer (or sale) to the brand for a fee. Lastly, PowerVoice takes part of that fee and passes it along to the original consumer that acted as a conduit for the transaction to occur."

In other words, you'll be able to tell your friends how great that new super-whitening toothpaste is, how much you loved the taste, how white it made your teeth, etc., etc., and get paid for it, even if you keep your teeth in a drawer at night.

Everyman's payola

The possibilities are pretty much endless, as the Messrs. Landau presumably see it.  Why stop with "friends," after all? Maybe they'll sign up members of the clergy, who can use their time in the pulpit to make some real money instead of just storing up pennies in heaven. Will parishoners be told to "go forth and buy a Ford?"

Or maybe psychiatrists will recommend specific vacation spots, airlines and car rental companies to their depressed patients.  Car pool partners will have a daily opportunity to importune their carmates about the latest and greatest Starbucks flavor, now on sale in the office building lobby.

It is, in other words, payola for the masses.  Now everyone can be a lobbyist. Why should Jack Abramoff make all the money?  Oh well, sure, he's in prison now, but he did pretty well back in the day, all by talking to his "friends."

And speaking of prison, there is one little problem with being paid to endorse products without disclosing that fact: It's illegal.

The Federal Trade Commission (FTC) has for years enforced prohibitions against deceptive and undisclosed endorsements.  Simply put, says FTC attorney Lesley Fair, "Any material connection between the seller and endorser that prospective buyers wouldn’t normally expect must be disclosed."

In other words, if your friends think of you as, well, a friend and not just a "friend," they're not likely to think you're being paid to tell them what a great time you had on your last visit to Match.com.

The FTC has managed to stay outfront in most areas of Internet advertising and already has rules and guidelines in place that would seem to anticipate what the Landau lads have in mind.

As the agency says in one of its publications: "If there’s a connection between the endorser and the marketer of the product that would affect how people evaluate the endorsement, it should be disclosed."  Failure to do so can fall under the rules prohibiting deceptive advertising, which can result in pretty unpleasant fines and other penalties.

Now, of course, it's quite possible the Landaus themselves might not be directly liable, since they are probably not going to be endorsing products, other than their own.  But individual consumers hoping to make a buck off their friends?

Well, you might want to think again.  Or at least be sure that after you tell your "friends" how much you really loved that NutriSystem diet and how you shed pounds like dandruff, you add a simple little phrase along the lines of: "These and other comments of a similar nature made by me during the course of what appears to be a non-commercial conversation between us may constitute a paid endorsement."

They'll love you for that.

Lastly, today's consumer tip:  If you find yourself growing suspicious of your "friends" constantly babbling on about what a great time they had during their Sheraton weekend, you might want to take an occasional peek at the PowerVoice Advertisers page, just to see who's doing the pay for play game this week.  

Since Hollywood Video went out of business, former customers have received notices from debt collection agencies saying they owe either late fees or must pay for unreturned movies. In nearly every case, these consumers have disputed the charges. Alison, of Roseville, Minn., tells us how she dealt with a collection effort

“Thanks to my husband's research efforts and helpful postings from ConsumerAffairs.com, I was able to successfully dispute a bogus debt collection attempt by West Bay Acquisitions, LLC, located in Cranston, Rhode Island,” Alison said. “I received a collection letter from West Bay dated January 9, stating that I owed $43.66 in rental fees from bankrupt Hollywood Video. I did not owe Hollywood Video any fees and filed complaints with the FTC, BBB, and the Minnesota Attorney General's Office. The Boston BBB contacted West Bay on my behalf on January 16; on January 17 I received a response from West Bay via the Boston BBB stating that they 'have decided to cease all collection activity and close the account.'”

Alison's proactive approach paid off. She also says the response from the debt collector said "at no time have any of these accounts been reported to any consumer reporting agency by West Bay Acquisitions, LLC."

Complication

Debra, of League City, Tex., certainly has a complicated issue with Southwest Airlines. She says she had a $57 credit from a previous ticket that was set to expire January 24, 2012.

“I used that credit to purchase a ticket to travel January 20, 2012 and the total cost of the ticket was $300.00,” Debra told ConsumerAffairs.com.

Debra paid used her credit and paid an extra $243 for her ticket. But here's where it starts to get complicated.

"For business reasons I need to move the flight forward one week to January 27, three days after the $57 credit expires,” she said. “I am now told that I have lost the entire $300 even though I only purchased the additional $243 one week ago. I was told I could call in after the ticket expires on January 24 and they would give me a six month extension. Does it make sense to lose the entire $300 because of three days difference?”

Of course, the answer is that it depends on what kind of fare Debra bought.  If it was a special, discounted fare, it no doubt came with restrictions on changes, cancellations, etc. 

Slow pay

Patrick, of North Smithfield, R.I., thinks Ally Bank is just a little too slow to send him his money when he asks for it.

“So far, six phone calls to very nice customer service representatives of Ally Bank have identical results; promises but no cash,” Patrick said. “In short, two CD’s matured December 31 and direction to close those accounts and surrender my principal with interest has not been completed as of January 17. Sure, I received the interest but the principal just hasn’t shown up like promised.”

Different banks have different policies about the length of time they will take to disburse funds. Unless you actually walk in to a branch, you're unlikely to get a check the same day. Even though there have been a couple of holidays in there, Patrick's wait does sound a bit excessive.

There's at least one bright note for consumers as this tax season gets into gear: This is the final year in which refund anticipation loans (RALs) will be available from banks on a large scale, nationwide basis. After this season, there will be an end to the hundreds of millions drained from taxpayer refunds by these high-cost, high-risk loans.

“We will be glad to see the last of RALs, which were both high-cost and high-risk,” says Chi Chi Wu, staff attorney at the National Consumer Law Center (NCLC). “It’s not a moment too soon to stop multi-million dollar corporations from skimming off the tax refunds of hard-working families.”

Consumer advocates suggest that taxpayers looking for quick refund cash should consider these lower-cost or free alternatives:

• Taxpayers with a bank account can get their tax refunds in 8 to 15 days with e-filing and direct deposit.

• Taxpayers without a bank account can get a fast refund by e-filing and having their refund deposited to a prepaid card, including any existing payroll or prepaid card that the taxpayer already has.

• H&R Block is even offering free refund anticipation checks (RACs) until early February if the customer uses its prepaid Block Emerald Card to receive the refund.

• Walmart will cash your refund check up to $1,000 for $3, or $6 for up to $7,500.

With refund anticipation checks (RACs), the bank opens a temporary bank account into which the IRS direct deposits the refund check. After the refund is deposited, the bank issues the consumer a check or prepaid card and closes the temporary account. A RAC allows the consumer to pay for tax preparation fees out of the refund and provides the speed of direct deposit of tax refunds for unbanked taxpayers, but generally at an additional cost.

Life after Refund Anticipation Loans (RALs)

Even after the end of RALs, tax preparers and banks will continue to offer RACs, for which the banks generally charge about $30-$32. Tax preparers may also charge their own “add-on” fees, which can range from $25 to several hundred dollars.  

Since their main purposes is to defer payment of the tax preparation until the refund arrives, RACs may represent a high-cost loan of that fee. With the exception of free RACs, consumer advocates recommend taxpayers consider alternatives.

Prepaid cards are one alternative to allow taxpayers without a bank account to receive a fast refund. Taxpayers, however, should be cautious when selecting a prepaid card. “As with any financial product, taxpayers should compare costs and consumer protections,” recommends Wu.

Taxpayers without a bank account should also consider opening a bank account to receive their refund. “Getting a big refund is the perfect time to open a savings account and start a nest egg,” advises Jean Ann Fox, director of financial services for Consumer Federation of America.

Free tax preparation

Low-income taxpayers have a number of options for free tax preparation, including Volunteer Income Tax Assistance (VITA) (1-800-906-9887 or www.irs.gov) and AARP Tax-Aide sites. Choosing a VITA or AARP Tax-Aide site saves taxpayers the cost of a tax preparation fee. Many VITA sites also offer services to help open a bank account or get a low-cost prepaid card, which enables taxpayers to get fast refunds without pay a fee.

Free tax preparation may be available on military bases, and since servicemembers are required to have bank accounts, they are able to benefit from the speed of electronic delivery of their tax refunds

There are also a number of websites that allow taxpayers to prepare and file their taxes online for free, such as the IRS Free File program (www.irs.gov) and the I-CAN! E-file site (www.icanefile.org).

Enter the payday lenders

With the end of RALs made by banks, a few high-cost fringe lenders have stepped into the fray. Liberty Tax Service, which is planning an initial public offering, revealed in its prospectus that the tax preparation chain plans to partner with an unnamed non-bank lender to make RALs.

Liberty’s website shows that it has partnered with SGS Credit Services, Inc., which appears to be linked with Texas payday lenders.

A prominent payday lender, Advance America, is offering “fast” refunds though its storefronts, although it is unclear whether the product is a RAL, a regular payday loan, or a RAC in actuality.

The website for TaxWorks, a division of RedGear, which is owned by H&R Block, is promoting a “Tax Season Cash Advance” provided by Schear Lending Group and Atlas Financial Services. Schear Lending Group appears to be somehow affiliated with Ohio-based payday lenders.

“Consumers have even more reason to avoid RALs made by payday lenders,” advises Jean Ann Fox, “These RALs are likely to be more expensive and riskier.”

RALs made by nonbank lenders will most likely not be as widespread as bank RALs. Nonbank lenders do not have the legal ability, unlike banks, to flout state laws that cap interest rates, i.e., usury laws. Tax-time loans from payday lenders and other storefront outlets that offer to prepare taxes and make loans may be subject to state loan laws, usury caps, or loan broker requirements in states that have them. Seventeen states (and District of Columbia) do not permit payday lending at all.