Current Events in June 2013

It might not seem like a case that would make it all the way to the U.S. Supreme Court, but it did and the court has ruled unanimously that the Port of Los Angeles cannot force trucks to bear those ubiquitous "How am I driving?" stickers.

The port, the largest in the nation, has been trying to expand with limited environmental impact after a study found that people living near the port had a 60 percent greater risk of developing cancer than other Southern Californians.

As part of its "Cleaner Port" program, the port came up with a Clean Truck Program that limits emissions, prohibits excessive idling and regulates where trucks may park when not loading or unloading.

The program has not been without controversy, with complaints from residents who said the port wasn't doing enough and truckers who said it was going too far. 

The American Trucking Association, in particular, had challenged the "How's my driving" sticker requirement and the parking restrictions.

In a partial reversal of the 9th Circuit's ruling last year, the court agreed with the truckers that the provisions are pre-empted by the Federal Aviation Admin­istration Authorization Act.

"The port here has not acted as a private party, contracting in a way that the owner of an ordinary commercial enterprise could mimic," Justice Elena Kagan wrote for the unanimous court, Courthouse News Service reported. "Rather, it has forced terminal operators -- and through them, truck­ing companies -- to alter their conduct by implementing a criminal prohibition punishable by time in prison."

That ripping sound you hear? It's truck drivers ripping those "How's my driving?" stickers off their trucks.

Things are looking better for homeowners who are underwater, keeping in mind that “better” is a relative term.

According to property information, analytics and services provider CoreLogic, approximately 850,000 more residential properties returned to a state of positive equity during the first quarter of 2013. That brings the total number of mortgaged residential properties with equity to 39 million.

The firm's analysis also shows that 9.7 million -- or 19.8% of all residential properties with a mortgage -- were still in negative equity at the end of the first quarter, with a total value of $580 billion. That's down 21.7%, or 10.5 million, of all residential properties with a mortgage, at the end of the fourth quarter of 2012.

Negative equity, often referred to as “underwater” or “upside down,” means borrowers owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in value, an increase in mortgage debt or a combination of both.

Rising home prices credited

The national aggregate value of negative equity decreased more than $50 billion -- to $580 billion at the end of the first quarter from $631 billion at the end of the fourth quarter of 2012. The drop was driven in large part by an improvement in home prices.

Of the 39 million residential properties with positive equity, 11.2 million have less than 20% equity. Borrowers with less than 20% equity, referred to as “under-equitied,” may have a harder time getting new financing for their homes due to underwriting constraints. At the end of the first quarter of 2013, 2.1 million residential properties had less than 5% equity, referred to as near-negative equity. Properties that are near negative equity are at risk should home prices fall.

Under-equitied mortgages accounted for 23% of all residential properties with a mortgage nationwide in the first quarter of 2013. The average amount of equity for all properties with a mortgage is 32.8%.

“The impressive home price gains of 2012 and the beginning of 2013 have had a big impact on the distribution of residential home equity,” said Dr. Mark Fleming, chief economist for CoreLogic. “During the past year, 1.7 million borrowers have regained positive equity. We expect the pent-up supply that falling negative equity releases will moderate price gains in many of the fast-appreciating markets this spring.”

“We are still far below peak home price levels,” notes Anand Nallathambi, president and CEO of CoreLogic, “but tight supplies in many areas coupled with continued demand for single family homes should help us close the gap.”

Other findings

• Nevada had the highest percentage of underwater mortgages at 45.4%, followed by Florida (38.1%), Michigan (32%), Arizona (31.3%) and Georgia (30.5%). These five states combined account for 32.8% of negative equity in the U.S.
• Of the largest 25 metropolitan areas, Tampa-St. Petersburg-Clearwater, Fla., had the highest percentage of mortgaged properties in negative equity at 41.1%, followed by Miami-Miami Beach-Kendall, Fla., (40.7%), Atlanta-Sandy Springs-Marietta, Ga. (34.5%), Chicago-Joliet-Naperville, Ill. (34.2%), and Warren-Troy-Farmington Hills, Mich (33.6%).
• Of the total $580 billion in upside down mortgages, first liens without home equity loans accounted for one-half, or $290 billion aggregate negative equity, while first liens with home equity loans accounted for the remaining half at $290 billion.
• 6.0 million upside-down borrowers hold first liens without home equity loans. The average mortgage balance for this group of borrowers is $211,000. The average underwater amount is $48,000.
• 3.7 million upside-down borrowers hold both first and second liens. The average mortgage balance for this group of borrowers is $294,000.The average underwater amount is $79,000.
• The bulk of home equity for mortgaged properties is concentrated at the high end of the housing market. For example, 88% of homes valued at over $200,000 have equity compared with 73% of homes valued under $200,000.

Retail sales posted their best advance in three months during May, rising 0.6% from the previous month, and are 4.3% above the same period a year ago. Sales were up just 0.1% in April and fell 0.5% in March. The consensus of economists surveyed by Briefing.com was for a rise of 0.3%.

Figures released by the government show the May increase was fueled by a 1.8% surge in auto sales. Excluding that volatile category, sales were up just 0.3%. Gasoline slipped 0.2%, the result of lower prices, while restaurants and bars posted a decline of 0.4%.

The full report is available at the U.S. Census Bureau website.

Jobless claims

The nation's labor market was showing a little starch last week as first-time claims for state unemployment benefits dropped by 12,000 from the previous week -- to 334,000. The number was considerably lower than the 350,000 projected by economists surveyed by Briefing.

The 4-week moving average, considered a better gauge of the labor picture because of its lack of volatility, was 345,250 -- down 7,250 from the week before.

You can find more information on the Labor Department website.

Whether it's rodents or insects, controlling pests can be one of the more unpleasant tasks of home ownership. Not only do pests raise health issues, but they also can affect the structural integrity of your home.

What are some important considerations in choosing a pest control company?

First, you should pick a company with qualified technicians. Here are some questions to ask:

• Do the technicians who work for the company have current licenses?
• Is the license the correct classification for the job?

You can verify licensing by calling your state pesticide regulatory office. Most states have a department that regulates pest control companies and they can be the source of helpful information, including any unresolved complaints about a particular company.

When vetting a pest control company, it is completely appropriate to ask how it keeps its staff informed of changes in regulations, products, techniques and safety.

Look for a long track record

You should also ask how many years has the company been in business. The longer its track record the easier it should be to judge its performance.

How are employees trained? That's important because they need to be skilled at what they do, as well as interacting with the customer – you.

Make sure you understand the terms of the contract. What exactly are you buying?

“I paid Orkin $500 to remove a mole infestation and Andy came out a few times, but when moles came back, he refused to come back unless I signed a new contract,” writes David, of Powell, Ohio.

Rats!

Marsha, from California, writes that she had a bad experience with Terminix. She says she had a serious rat problem but the inspector who came to her home was rude and didn't seem to know what he was doing.

“Twenty-eight days later and I have multiple nests and rat droppings,” Marsha writes. “Guess who I am hiring to do the job of a pest control company? A handy man.”

Scotty, from Maine, claims to work for Terminix and isn't pleased with the changes he says he has observed.

“This is not the same company it once was,” Scotty writes in a ConsumerAffairs post. “Customers are now a number. Technicians are now a number. I personally feel bad for these customers knowing what goes on from the inside. Not being supplied with the proper chemicals because the branch is too cheap (hurts their bonus). Being over scheduled and not being provided enough time to do a thorough job. Now big business and big corporations run the show.”

Do your homework

But consumers who need professional pest control services can improve their chances of finding a reliable company by doing proper research. Don't just choose the first company in the phone book or the company that advertises on TV.

As with any business, a pest control company lives and dies by its reputation. Ask family members, friends, coworkers, or neighbors for a recommendation. The experience of other consumers will be your best way to find a company that will provide the services you are paying for. If you don't know anyone who has used a pest control company recently, ask the company to provide references.

Make sure you understand what services you are buying and what it costs. Can the company offer an estimate for services in writing? Many offer free estimates. It's a good idea to get estimates from more than one company.

Will the company require you to sign up for a long-term contract? If so, what is that going to cost?

Finally, make sure the company offers a guarantee of its work and that you understand the terms.

It's been awhile since the U.S. Agriculture Department lifted its ban on slaughtering horses for their human consumption but you still won't find horse meat at your neighborhood supermarket.

Animal rights groups are pressuring Congress to reimpose the ban and various problems are cropping up at the state level. In Maine, the House voted Tuesday to ban commercial horse slaughter to produce meat for human consumption. And in New Mexico, the state attorney general has delivered an opinion that horse meat is adulterated under state law.

The ban, imposed in 2007, was lifted in 2011 after the USDA's Inspector General found it was contributing to inhumane treatment of horses. Owners hard hit by the recession and the high cost of grain were abandoning their horses, letting them starve to death, the IG's report said.

But now that the ban has been lifted, animal welfare groups are protesting and there's concern that the antibiotics and other drugs pumped into horses could leave dangerous residues in the meat.

"Adulterated food"

There are strict limits on the drugs that can be used in cattle, pigs, chickens and other animals that are routinely raised as food, although critics say the limits are not strict enough and are not adequately enforced.

Cantering into the dispute is New Mexico Attorney General Gary K. King, who issued an opinion saying that horse meat "fits the legal definition of an adulterated food product." 

“Our legal analysis concludes that state law does not allow for production of meat that is chemically tainted under federal regulations,” said King.  “New Mexico law is very clear that it would be prohibited and illegal.”

That dashed the hopes of Valley Meat Co. in Roswell, N.M., which had been hoping to be the first USDA-inspected horse slaughter facility since 2007. 

A Valley Meat employee didn't do much to help his employer's cause when he shot a horse to death in March and posted it on YouTube, expressing his disdain for animal welfare advocates.

"To all you animal activists, f*** you," Tim Sappington says in the video, NBC News reported. He then shoots the horse in the head. The video was later removed by YouTube because it violated the video site's terms of service, a notice posted on the site said.

A television news report quoted Ricardo De Los Santos, owner of Valley Meat, as saying he didn't mind Sappington shooting the horse but didn't think he should have put it on YouTube.

Maine invokes Paul Revere

In Maine, lawmakers voted 94-49 in favor of a bill that would ban slaughtering horses for human consumption and would also make it illegal to transport horses through the state for that purpose. Animal welfare groups have charged that American horses are sometimes shipped to Canada for slaughter, possibly passing through Maine. 

“If not for a horse, would Alexander have been the Great? Would Paul Revere had spread the word? Can you imagine the Lone Ranger on the back of a cow?” said Rep. Lisa Villa, D-Harrison, the Bangor Daily News reported. “I would dare say they are very different from your average livestock.”

California, Texas, Illinois and several other states also ban slaughtering horses for food.

Would-be butchers say slaughter is more humane than letting horses starve to death or be subject to mistreatment, which animal groups note is illegal under animal cruelty statutes. They also contend that the USDA's National Residue Program, which tests newly slaughtered meat for illegal drug residues, pesiticides, hormones and contaminants would protect horse meat just as it now protects beef, pork and other food products.

The Animal Welfare Institute disputes the claim that slaughtering horses is sometimes a humane option and quotes federal statistics which found that 92.3 percent of horses slaughtered before the ban took effect were in good condition and were being slaughtered for profit, not for humane reasons. 

The organization also quotes surveys showing that nearly 70 percent of Americans support a federal ban on slaughtering horses. 

Britain has decided to regulate electronic cigarettes, treating them as non-prescription medicine. That means the popular e-cigs will still be widely sold in convenience stores and elsewhere but the government will enforce quality and purity regulations, just as it does with aspirin, sinus remedies and other widely sold products.

In the United States, the Food and Drug Administration (FDA) has been studying the matter and is expected to issue regulations one of these days, but more than 300 years after the Revolution, things move a bit more slowly on this side of the pond.

The decision was announced today by the UK's Medicines and Healthcare products Regulatory Agency (MHRA), which said it wanted to ensure that e-cigs "are safe, are of the right quality and work."  

Consistent quality

"Reducing the harms of smoking to smokers and those around them is a key government health priority. Our research has shown that existing electronic cigarettes and other nicotine containing products on the market are not good enough to meet this public health priority," Jeremy Mean, the MHRA’s Group Manager of Vigilance and Risk Management of Medicines, said.

“The decision announced today provides a framework that will enable good quality products to be widely available. It’s not about banning products that some people find useful, it’s about making sure that smokers have an effective alternative that they can rely on to meet their needs," Mean said.

The FDA's efforts to regulate e-cigarettes have bean hampered by a court decision that grew out of a 2010 effort by the agency to ban the devices, which deliver nicotine vapor without using tobacco.

In December 2010 the U.S. Court of Appeals for the District of Columbia ruled the FDA's attempt to classify e-cigarettes as drug delivery systems was incorrect. Instead, the court found that e-cigarettes were tobacco products, even though they contain no tobacco.

The FDA declined to appeal the ruling but has served notice that it might propose rules that would, in fact, regulate e-cigarettes as tobacco products. 

Howls of protest

Any talk of banning or regulating the use of the devices brings howls of protest from their users and manufacturers, who say the products are safe and do not emit fumes harmful to bystanders, unlike cigarettes.

Just a few days ago, R.J. Reynolds Co. jumped into the fray and announced it would launch a TV advertising campaign for its new e-cig brand, Vuse. TV ads for cigarettes have not been seen since 1971, when they were banned by Congress. Other large tobacco companies are also getting into the business in other countries and are expected to do so here, if the FDA permits it.

They're not cigarettes and they don't contain tobacco, so the ban shouldn't be a problem, is essentially the message R.J. Reynolds seems to be sending. Its initial marketing effort is restricted to Colorado.

It's not just the U.S. and Britain that have been trying to figure out what to do about the devices.  Brazil, Norway and Singapore have banned them outright while others have limited advertising and curbed the practice of "vaping" -- as adherents call it -- in public places.

Much safer

While some health authorities are dubious about the safety of e-cigs, the  MHRA's chief medical officer, Dame Sally Davies, made it clear she regards them as much safer than cigarettes.

“Smokers are harmed by the deadly tar and toxins in tobacco smoke, not the nicotine," she said. “While it’s best to quit completely, I realize that not every smoker can and it is much better to get nicotine from safer sources such as nicotine replacement therapy.

“More and more people are using e-cigarettes, so it’s only right these products are properly regulated to be safe and work effectively,” Dame Sallay said.

Unlike the U.S., where health and consumer advocates generally oppose wider use of e-cigs, the MHRA's decision is being greeted positively in the U.K. 

The non-profit public health group ASH said it "strong supports" the decision. 

"We think this is both proportionate and necessary," said Deborah Arnott, the group's chief executive. "Regulation will ensure that e-cigarettes meet the same standards for quality, safety and efficacy as medicines while remaining as readily available to smokers as they are today."

A physician's group, the General Council at the Royal College of General Practitioners, also said it was on board with the plan.

"The RCGP supports MHRA regulation of novel nicotine products such as e-cigarettes as this will ensure that they are of good quality and reliability and are effective in helping smokers who want to use them to cut down and quit,” Dr. Clare Gerada, the group's chair, said.

The MHRA's new rules don't go fully into effect until 2016.

Every summer there's usually at least one movie for every type of film fan.

This summer, "Man of Steel" will probably satisfy those who like action and adventure. And the film "Before Midnight" -- with Ethan Hawke and Julie Delpy -- will most likely draw in a good number of indie film fans.

But what can you do to find out what else is playing? While there are millions of ways to do a search, the most convenient is probably to search with an app. There are a few good ones out there that can assist the hardcore film buff and tell the occasional moviegoer what's playing around town.

Get Glue

Take Get Glue. It started as a social networking site for TV shows, but now includes music, books, sports and yes, movies, and it tells you what's playing in theaters and what's being streamed.

Although Get Glue has added other features since it launched, the creators still kept the social networking parts of the app, so you can communicate with other fans once a film ends or while it's still playing.

Plus the app gives you movie recommendations, lets you watch clips and gives you behind the scenes info. And you can win prizes and special perks for using the app, too.

Movie vault

Movie Vault is another great app mainly for its wide variety of content and for having a collection of obscure movies that would be hard to locate on other apps.

The creators claim Movie Vault has well over a thousand movies from the last hundred years and that new content is being added all the time.

You can use the site's search bar to look for movies by title, actor, director or in other ways. You can search by genre, too. In addition, Movie Vault gives you all of the film's background information as well as the cover art.

All the background info comes from the Internet Movie Database (IMDb). And like Netflix's site and phone app, you can either stream movies on the spot or save them to your queue for another time.

Movie Vault's boosters say it's extremely easy to use and that you'll be able to navigate through it very easily. It'll cost you $1.99 to download the app, but there are no charges afterwards.

RunPee

Then there's RunPee, a good app with a bad name. You'd think the creators could have come up with a name that's a little less descriptive, but the app is still pretty useful.

Simply put, RunPee tells you when it's okay to take a bathroom break without missing a crucial part of the movie. 

They choose these times based on parts of the movie where nothing much is going on. And when you return to your seat, the app tells you what you've missed.

The app lets you know other things too. It gives you a brief synopsis of the first few minutes of a film, in case you're running late, and it lets you know if there's something coming after or during the final credits -- because sometimes it's hard to decide whether to stay or leave.

Location Scout

Location Scout is another movie app for film lovers, but it works much differently than the rest of the apps mentioned here. It doesn't show movies or tell you where the nearest one is playing; it directs you to  famous film locations instead.

So if you're in Miami and you want to get a peak of Tony Montana's house in the movie "Scarface," the app will help you find it.

Location Scout pulls the information from IMDb and brings it up on a map to direct you to the exact spot. And whether you use the app to discover filming locations in your area or while you're on vacation, it could be a fun thing to have -- especially if you like visiting places where the rich and famous have roamed.

With the month of June now here, high school seniors from all around the country are slipping on their caps and gowns, walking across stages to receive diplomas and starting whole new lives. 

Once September rolls around, some will be in a new job, while others will go to a four-year school or a community college. 

But what are the benefits of going to a community college and getting an associate's degree? Is going to a four-year school better?

Some might say a two-year degree won't get you much these days.

The value of a degree

But that's wrong, says Shandon Guthrie, a Nevada philosophy professor. He received his associate's degree and said community college put him on a great path.

"It's my only degree I possess outside of my primary field of philosophy," said Guthrie in a published interview. "It helped me tremendously in advancing my knowledge of science and has served as a backdrop for my avocation in science as I steered into using physics and engineering as factors in my study."

Anthony Carnevale, director of Georgetown's Center on Education and the Workforce, believes a person with an associate's degree can compete quite well in today's job market, but it's all about choosing the right course of study.

"It's a system in which you can't just have an ambition to go to college and get a degree," said Carnevale in an interview with TheHuffington Post. "You have to pay attention to the courses and the content of your degree.

"The degree level matters, but a lot less than it used to. What matters is what you take. Thinking about it as a hierarchy of degrees isn't the way to think about it anymore," he said.

Choosing your field

According to NerdScholar, a site that helps parents and students with the college process, getting an associate's degree in the right field can lead to some pretty decent pay. 

In 2010, the average pay for a radiation therapist was $74,980. Nuclear medicine technologists earned $68,560 and dental hygienists earned $68,250 on average.

There are good paying jobs in other fields too. 

Air traffic controllers earned $108,040 in 2010, construction managers $83,860 and electrical and electronic engineering technicians earned $56,040 -- and all of these jobs only required a two year degree.

Avoiding debt

But it's not only what community college graduates can earn that may be surprising, it's how much of that pay they can actually keep.

According to the site CampusExplorer.com, the average debt for a person receiving a bachelor's degree is $20,000, compared to just a few thousand dollars at a community college.

And based on figures from CollegeBoard.org, the average cost for a two-year college was $2,713 in 2010, compared to $7,605 at a public four-year institution.

Ashley Johnson, recruiter for Schneider Electric, said her company looks for people with associate's degrees, because they seem to have a tremendous amount of hands on experience.

"An associate's degree is great for us," she said while speaking at a job fair. "We have a lot of hands on positions for building automation, HVAC (heating, ventilation and air conditioning), network specialists and now on the security and IT side.

"There are great positions that allow you to get in the field, start working, [while] working with people that are more senior in their career," noted Johnson.

Is more better?

Of course there have been several studies that show more education means higher pay, so going to a four-year school certainly isn't bad. But experts say more people should consider going to a community college, especially those families who may need to take out a big loan for a four year institution.

Guthrie says getting his associate's degree before going to a four year school worked in his favor when it came to finding a job, because it looked like he had extra schooling.

"Getting a dual major can accomplish the same thing," he said. "But I do believe that on paper when people examine your resume, they will see the associate's degree as a separate emphasis, having been studied in its own right. It proves stability and independent accomplishment -- something the dual major might not necessarily accomplish."

If you watch cable TV you have undoubtedly seen commercials for reverse mortgages. They're pitched as a convenient way to take money out of your home while you are still living in it.

It sounds complicated and in some respects it is. And while it sounds appealing, it can have some drawbacks, depending on your circumstances. Before moving forward you need to make sure you understand how the program works. It might be just what you need. Then again, it might not.

A reverse mortgage is actually called a Home Equity Conversion Mortgage (HECM). It's a government program that allows seniors to remain in their homes while taking out some of their equity. If you are still making payments on a mortgage, the payments stop. It sounds a little like having your cake and eating it too.

Let's assume a couple in their early 70s have a home that appraises for $200,000 and they still owe $65,000 on their current mortgage, making principal and interest payments of $1,000 a month. They have a number of options.

Options

First, they could sell their home and retrieve the equity. But there are costs associated with selling, not least of which is an average six percent real estate sales commission. Then, there's the matter of moving and paying rent or making a mortgage payment on your new home.

Some seniors find a reverse mortgage attractive because they don't have to move. And if they are currently making mortgage payments, those payments stop. Many find that, alone, is enough reason to go for a reverse mortgage. They might even receive a lump sum of cash, or regular payments to them, depending on how much equity they have.

It all sounds pretty good, but what are they giving up? First and foremost, they are spending that equity in the present, which is fine if needs require it. But if seniors aren't really pressed financially and hope to leave something for their children and grandchildren, equity in a home normally makes up the bulk of an estate.

When you sign a reverse mortgage, an individual or couple may remain in the house as long as it is their permanent residence. Once they die, or move into a nursing home, the house reverts to the lender, who sells it to retrieve the money it paid out.

Not always a good deal

Because there is an element of uncertainty about how long the homeowner will remain in the home, the lender must be conservative in its estimates. In all likelihood, the amount of money the homeowner receives will be significantly less than the equity they believe they hold in the home.

Why not just take out a home equity line of credit? That's another way to tap into your home's credit. However, you must have adequate income to qualify for an equity line and that loan does nothing to stop your payments if you are still paying on your mortgage.

To qualify for a reverse mortgage you must be 62 or older and either own your home outright or have a significant amount of equity. According to the U.S. Department of Housing and Urban Development (HUD) you can get money from a reverse mortgage five ways:

• Tenure: equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
• Term: equal monthly payments for a fixed period of months selected.
• Line of Credit: unscheduled payments or in installments, at times and in an amount of your choosing until the line of credit is exhausted.
• Modified Tenure: combination of line of credit and scheduled monthly payments for as long as you remain in the home.
• Modified Term: combination of line of credit plus monthly payments for a fixed period of months selected by the borrower.

Pushing reverse mortgages

Because of the high fees associated with reverse mortgages, they are lucrative for lenders. Seniors who are considering such a loan should guard against heavy-handed sales tactics and avoid being swayed by celebrity endorsements.

Remember, the only reason celebrities do endorsements is that they get paid for them. Simple as that.

Late last year a report by the Consumer Financial Protection Bureau (CFPB) warned that consumers have a poor understanding of reverse mortgages and are in danger of making costly mistakes.

“Reverse mortgages are complex and have the potential to become a much more pervasive product in the coming years as the baby boomer generation enters retirement,” CFPB Director Richard Cordray said at the time. “With one in ten reverse mortgages already in default, it is important that consumers understand what they are signing up for and that it is the right product for them.”

Foreclosures are a possibility

That's right. A reverse mortgage can go into default. While the homeowner no longer has to pay a mortgage, they still must pay the taxes and insurance on the property. A distressingly large number apparently haven't taken that into consideration. The report found nearly 10 percent of reverse mortgage borrowers are at risk of foreclosure because of this.

Many homeowners don't realize how much they're paying in property taxes because the amount is built into their monthly mortgage payment. In a high-tax state like New York or Illinois, taxes on a modest home can easily be $6,000 or  more a year -- nothing to sneeze at.

Before taking any action on a reverse mortgage, speak with family members and a trusted financial advisor or lawyer and -- as always -- don't sign anything you don't fully understand.

Automakers are stuffing cars with "infotainment" systems that include everything from GPS to Facebook. But a new study from the AAA Foundation for Traffic Safety suggests this may be a dangerous detour along the road to safer cars.

Even hands-free devices are dangerous, AAA said. The research found that as mental workload and distractions increase reaction time slows, brain function is compromised, drivers scan the road less and miss visual cues, potentially resulting in drivers not seeing items right in front of them including stop signs and pedestrians.

AAA said the study is the most comprehensive of its kind and arms it with evidence to appeal to the public to not use these voice-to-text features while their vehicle is in motion.

“There is a looming public safety crisis ahead with the future proliferation of these in-vehicle technologies,” said AAA President and CEO Robert L. Darbelnet. “It’s time to consider limiting new and potentially dangerous mental  distractions built into cars, particularly with the common public misperception that hands-free means risk-free.”

Mental workload

Cognitive distraction expert Dr. David Strayer and his research team at the University of Utah measured brainwaves, eye movement and other metrics to assess what happens to drivers’ mental workload when they attempt to do multiple things at once, building upon decades of research in the aerospace and automotive industries. 

Using established research protocols borrowed from aviation psychology and a variety of performance metrics, drivers engaged in common tasks, from listening to an audio book or talking on the phone to listening and responding to voice-activated emails while behind the wheel.

Researchers used the results to rate the levels of mental distraction drivers experienced while performing each of the tasks. Similar to the Saffir-Simpson scale used for hurricanes, the levels of mental distraction are represented on a scale:

• Tasks such as listening to the radio ranked as a category “1” level of distraction or a minimal risk.
• Talking on a cell-phone, both handheld and hands-free, resulted in a “2” or a moderate risk.
• Listening and responding to in-vehicle, voice-activated email features increased mental workload and distraction levels of the drivers to a “3” rating or one of extensive risk.

“These findings reinforce previous research that hands-free is not risk-free,” said AAA Foundation President and CEO Peter Kissinger. “Increased mental workload and cognitive distractions can lead to a type of tunnel vision or inattention blindness where motorists don’t see potential hazards right in front of them.” 

AAA said it will be using the findings to promote dialogue with policy makers, safety advocates and industry to ensure that these emerging in-vehicle technologies won’t lead to unintentional compromises in public safety.  As part of this effort, AAA has already met with safety advocates and provided copies of the report to CEOs of all major U.S. automakers.

There's an old saying that the way to a man's heart is through his stomach. It appears there's a better route.

New research published in the American Heart Association journal Circulation shows more doctors in the U.S. are unclogging heart arteries -- in both men and women -- by entering through the radial artery in the wrist.

That means, in turn, means fewer bleeding complications than the traditional route through the groin. The blocked arteries are reopened by threading a catheter through the femoral artery in the groin or the radial artery in the wrist in a procedure called percutaneous coronary intervention (PCI).

Course of the study

For the study, researchers examined data of almost 3 million artery-opening procedures in 1,381 centers in 2007-12. They found:

In 2004-07, doctors used the radial artery to reach the heart in fewer than one out of every 50 PCI procedures.

By the study's end in 2012, nearly one out of every six PCIs was performed through a radial artery in the wrist -- a 13-fold increase.

"Traditionally, femoral access has been taught and used in the United States for PCI, whereas the radial approach is frequently used in Europe," said Dmitriy N. Feldman, M.D., the study's lead author and assistant professor of medicine at Weill Cornell Medical College, New York Presbyterian Hospital Department of Medicine, Greenberg Division of Cardiology.

Wider use of the wrist-route procedure, particularly in high-risk patients, could improve PCI safety, researchers said.

Stopping the bleeding

Bleeding complications are an important concern in PCI because patients are often treated with blood-thinning medications that make it harder to stop bleeding after the procedure. The radial artery is smaller and located closer to the skin's surface compared with the femoral artery, which is why it is easier to compress manually, Feldman said. This makes it easier to prevent or stop internal and external bleeding.

Researchers found:

• Bleeding complications occurred in 2.67% of the radial artery procedures, versus 6.08% of the femoral artery.
• Fewer vascular complications occurred in the radial artery group: 0.16% compared with 0.45%.

High-risk patients -- those over age 75, women and people with acute coronary syndromes -- benefited most from radial PCI. However, its use and growth of use is lowest in those patients, researchers noted.

A "learning curve" is important in developing proficiency in radial PCI procedures, particularly in high-risk patients, Feldman said.

Doctors in academic institutions and centers in the New England area are using radial PCI at a much higher rate than other centers in the United States, researchers found.

Salsa Cycles of Bloomington, Minn., is recalling about 1,700 Salsa bicycle forks.

The bicycle fork can bend above the disc brake mount, posing a fall hazard to the rider. The company has received eight reports of forks bending above the disc brake mount. No injuries have been reported.

This recall involves all Salsa Vaya bicycle forks stamped with the batch codes 2011 02 21, 2011 04 11, 2011 06 14 and 2011 09 09 and all Salsa La Cruz bicycle forks stamped with the batch codes 2011 03 01, 2011 04 08, 2011 05 30 and 2011 09 09. The batch code is stamped on the steerer tube.

The forks are made of tubular chromoly steel and can be installed on any bicycle that takes a threadless 1 1/8 inch steerer tube. They were sold individually and as original equipment on Salsa Vaya bicycles and framesets. Salsa Vaya bicycle forks are orange or dark gray. La Cruz bicycle forks are black. The manufacturer’s insignia “CWI” is stamped on the steerer tube. “Salsa” is printed on the bicycle’s frame.

The forks, manufactured in Taiwan, were sold at bicycle stores nationwide and on various websites from February 2011, through June 2012 for about $100 individually for La Cruz forks and on Salsa Vaya bicycles for between $1,300 and $1,600.

Consumers should immediately stop using bicycles equipped with the recalled Salsa Vaya and La Cruz bicycle forks and contact a Salsa dealer for a free inspection, replacement fork or a full refund.

Consumers may contact Salsa Cycles toll-free at (877) 774-6208 from 8 a.m. to 6 p.m. CT Monday through Friday.

Chrysler is recalling 12,907 model year 2013 Dodge Dart vehicles manufactured March 1, 2012, through February 28, 2013 and equipped with a 1.4L MultiAir turbo engine and dual dry clutch transmission.

The vehicles may experience an engine stall when the temperature is 20 degrees Fahrenheit or colder. An engine stall when the vehicle is being driven could increase the risk of a crash.

Chrysler will notify owners, and dealers will reprogram the powertrain control module, free of charge. The recall is expected to begin in June 2013.

Owners may contact Chrysler at 1-800-247-9753. Chrysler's recall campaign number is N32.

Technology makes strange bedfellows. Just a few years ago, consumers who were fervent about eating locally-grown and organic foods had to get out their Birkenstocks, pile into the Prius and head for the nearest Whole Foods or farmers market.

Now all it takes is a few swipes of the mouse at an online grocer like Door to Door Organics, Relay Foods or AmazonFresh, which last week confirmed it was beginning to roll out its online shopping product beyond its home base of Seattle, opening operations in Los Angeles.

"Quick, easy and affordable doesn't have to mean highly processed," said Cambria Vaccaro, vice president of marketing for Colorado-based Door to Door Organics. "Every family can start making good food choices -- easily. In fact, 90% of the people who shop with us, say they eat more fruits and veggies, 88% say they’re doing a better job of supporting local, 88% say they feel healthier and 83% say it’s more convenient that other shopping options."

Like a subway train rumbling along deep underground, the boom in online grocery shopping has gone largely unnoticed by most consumers and the press. That changes quickly, however, as entrepreneurial vendors spring up in new markets and word-of-mouth promotion attracts new shoppers.

In interviews with ConsumerAffairs, Vaccaro said her company has grown more than 800% in the last four years and expects to exceed that growth rate as it opens new markets and more fully develops existing ones while  RelayFoods president and co-founder Arnie Katz is equally bullish about his firm's prospects.

"Our view is that in a decade over 25 to 50% of grocery purchases will be done online," Katz said. "The future doesn’t happen, doesn't happen, doesn't happen ... then it happens all at once. We are approaching that day. We think it will happen within the next two years."

Both agree that online grocers aren't expecting to completely eliminate traditional brick-and-mortar stores, although even shoppers who continue to travel to physical stores are increasingly using technology to improve the process. A new study from KSC Kreate finds that more than half (52%) of grocery shoppers visit a store's web or mobile site prior to shopping; in addition one-third are using mobile devices while in-store. It's not a stretch to say those shoppers are one click away from moving the entire experience online.

Business models vary

"What we continue to see are varying business models -- everything from natural and organic to conventional, door to door delivery, centralized pick-up,  bulk shopping and prepared meals," she said. "Door to Door isn’t trying to completely replace or eliminate traditional grocery shopping.   We focus on helping people feed their families good food and becoming the place where a family begins their routine, weekly shop -- much more like your virtual neighborhood grocery or an online Trader Joe's."

There is as yet no standard model. Some online grocers, like Door to Door Organics, deal primarily with organic and locally-grown foods while others, like Relay, also offer canned goods, cereal and other packaged products. Door to Door, as its name implies, delivers directly to homes. Relay uses mostly pick-up locations, parking a truck in a heavily-traveled area where consumers can pick up their order on the way home. Home delivery is available for a $20 monthly fee.

Peapod, supermarket giant Ahold's service, eschews the emphasis on local and organic products and gears itself more to convenience, offering everything a shopper would find at the local Giant or Stop & Shop. AmazonFresh offers a full range of products but emphasizes organic and locally-grown foods. 

This kind of experimentation is good, Vaccaro and Katz agree.

"With only around 2% of a $600 billion food-at-home market happening online, competition is a good thing for expanding market awareness and driving innovation in quality, service, price and service expectations.  Awareness and demand is great for us all," Vaccaro said.

For now, customers are primarily younger time-pressured families struggling to deal with work, commuting, childcare and serving fresh, healthful food.

A recent study by FGI Research found that more than half of digital shoppers were either young urban professionals and early tech adopters or what market researchers call "passionate planners," shoppers who put a lot of effort into planning their grocery purchases. Vaccaro says 95% of Door to Door's customers are women 25-45.

"They're the people who are the CEO of the home," she said. "It's a source of guilt for some -- that they're so busy they barely have time to get anything done and still have time to prepare and serve good food."

Jostling for position

For the moment, competition in the online grocery business is actually rather slight, as companies stay within their chosen market boundaries. But that situation is bound to change as the more successful start-ups seek new markets to counquer and as Amazon and other large players get serious about protecting and expanding their turf.

At the moment, Door to Door has operations in Colorado, Kansas City, Chicago, Michigan and the Greater New York area, including New Jersey, Pennsylvania and Delaware, Vaccaro said.

Relay operates in Charlottesville and Richmond, Va. and in the Northern Virginia/Washington D.C. area, with plans to expand to Charlotte, N.C., Florida and the Midwest, according to Katz.

AmazonFresh so far serves only Seattle and Los Angeles but if things go well in Southern California, it is expected to quickly expand into other West Coast markets.

Peapod operates in the Northeast and Mid-Atlantic regions as well as Chicago and is thought to be by far the largest online grocer at the moment. It reports filling 23 million orders last year. Door to Door and Relay, both privately-held venture-backed firms, don't reveal their sales or revenue figures.

Last to budge

Ironically, the slowest to adapt to online grocery shopping may turn out to be the men who are generally early adopters of technology. Most of us have perfected a shopping methodology that consists of roaming the supermarket aisles and grabbing whatever looks edible, then hauling it home like the triumphal hunter-gatherers we see ourselves as.

Shopping online takes more planning than we're accustomed to devoting to something as seemingly simple as food, as I discovered when I tried to conduct a couple of sample online shopping trips. I quickly gave up and said, "Oh hell, I'll just go to the store and find something."

But, like most things, it probably gets better with practice.

How did you meet your spouse or significant other? It's increasingly likely it wasn't in a bar, at your church's ice cream social or on a safari to Outer Burundi. 

These days, folks are increasingly hooking up online, and a sizeable percentage of them are staying hooked. In fact, a new study claims that marriages between people who met online are at least as stable and satisfying as those who met in more physical venues -- and perhaps more so. Critics were quick to question the findings, however.

Imagine a study that said couples who first met at the theater had better marriages than couples who met at a rodeo, UCLA social psychologist Benjamin Karney told the Los Angeles Times.

"Would you then conclude that meeting at the theater leads to better marriages? I think not," Karney said. "You might conclude that couples who go to the theater are different from couples who go to the rodeo in ways that also happen to be associated with marital success."

The study of 20,000 people was organized by John Cacioppo, a psychologist at the University of Chicago and scientific adviser to eHarmony.com, which paid for the study and was quick to begin cranking out publicity touting its results.

Participants had all gotten married between 2005 and 2012. A third had met their spouse online, about half through online dating, the rest through chat rooms, gaming and so forth.

Researchers who analyzed the results said the online marriages were not only "durable" but were slightly more so than marriages that happened through more traditional means. In other words, those who met online were less likely to be divorced.

Those who were still married were asked to rate the happiness of their union and, again, those who had met online were slightly happier than the others.

The results were analyzed by statisticians Elizabeth Ogburn and Tyler VanderWeele of the Harvard School of Public Health, who had no monetary interest in the outcome. The researchers' findings were reported in the Proceedings of the National Academy of Sciences (PNAS).

"Not left to chance"

eHarmony was quick to trumpet the findings, saying they showed  eHarmony ranks first in creating more online marriages than any other online site, ranked eHarmony first in its measures of marital satisfaction and showed eHarmony has the lowest rates of divorce and separation than couples who met through other online and offline meeting places.

“The overarching goal of eHarmony has always been to reduce the divorce rate by helping build quality relationships that are based on compatibility and not left to chance," said Dr. Neil Clark Warren, founder and CEO of eHarmony. "To have consistently the happiest marriages with the lowest divorce rate, we now have the foundation in place that will enable the addition of new services as we transform into a more general relationship site.”

Warren claimed that eHarmony was on the road to "change a whole generation and countless other generations to follow.”

Critics pounce

That might be going a little far, some skeptics cautioned.

UCLA's Karney said the study appears to have been well designed and conducted. But the suggestion that match-making websites produce more successful marriages is misleading, he said.

"The authors allude to the possibility that the Internet is changing relationships and making them better," said Karney, who has studied the dynamics of long-term relationships extensively. "These data cannot support those conclusions."

Harry Reis, a psychologist at the University of Rochester, said the study took demographic factors into account but did not control for "personality, mental health status, drug and alcohol use, history of domestic violence, and motivation to form a relationship,” according to the Washington Post. Yet all of these factors are known to affect marital outcomes, he said.

“It is entirely possible that when these factors are taken into account, online meeting may have worse outcomes than offline meeting,” Reis told the Post.

Writing at Forbes.com, columnist Steven Salzberg said eHarmony got the results it paid for. "I think they got their money’s worth," he sniffed.

There's a lot of hand-wringing over rising levels of student debt but Congress, so far, has been unable to figure out a way to keep new loans from becoming more expensive.

A law subsidizing the Stafford Loan rate at 3.4% expires at the end of June. Starting July 1, 2013 the rate jumps to 6.8% on new loans – much higher than the interest rate on a home or car purchase. There's a measure in Congress to extend the subsidized rate for two years. Democrats generally support it but Republicans generally oppose it as too costly. Its backers concede the stalemate.

“The federal government provides subsidized student loans to increase the number of Americans who can attain a college degree -- not to generate revenue,” said Sen. Jack Reed (D-RI), a co-sponsor of legislation to extend the lower rate. “We do this because a college education is a means of empowerment. It helps individuals build a better life and helps our nation build a stronger economy -- generating more jobs and opportunity and strengthening the middle class.”

Stafford Loans

Stafford Loans are federal student loans to college students pursuing an undergraduate or graduate degree. They are intended to supplement personal and family resources, as well as aid from scholarships, grants and work-study. With the expiration of the law, the Stafford Loan will go from one of the cheaper college loans to one of the more expensive ones.

The Consumer Financial Protection Bureau (CFPB) has recently focused attention on the issue of student loans, warning they are burdening a generation with oppresive debt. The agency provides an online tool to help prospective students compare loans and find the best deal.

According to CFPB, most students will find federal loans to be the best option. When it comes time to pay back federal loans, the interest rate will be fixed, which will help you predict your payments after graduation. In some cases, the federal government will pay the interest on your loans while you are in school, with subsidized loans.

Private student loans

Other student loans are generally offered by private companies or entities. The most common private student loans are offered by banks. Their interest rates are often variable, which means it's hard to know what your interest rates and payments will be.

Private loans can also be more expensive. According to a report by CFPB, private loan rates have been as high as 16% over the past couple of years. When it is time to repay, private loans often don’t offer as many options to reduce or postpone payments.

Natasha, of Austin, Tex., completed work on her undergraduate degree in four years with the help of a $25,000 student loan from Wells Fargo. She says she was shocked by the interest charges.

“Today I call for my payoff amount and it is $29,300,” she wrote in a ConsumerAffairs post. “I'm paying 17.2% more money than I borrowed. If I paid it off over the next 20 years I would only have paid interest and still owe the entire loan when I'm 42 years old.”

Adds up fast

Chrystal, of Florence, S.C., says she got an associates degree from Strayer University that turned out to be much more costly than she thought.

“The only thing I’m not happy about is the amount of student loans I have racked up,” Chrystal writes. “In the five years since graduating I hadn’t put much of a dent in my student loans and the monthly payment is not small. Now, due to the economy I am being laid off from my job and as of June 4th will be unemployed. This is in no way Strayer University’s fault but just be careful when taking out student loans because they add up fast!”

They do, indeed, add up fast. The total student debt total in the U.S. is now well in excess of $1 trillion.  

So, as predicted, Apple CEO Tim Cook unveiled Apple iRadio and iOS 7 Monday and, believe it or not, the earth just kept on spinning. Crowds did not run into the street in shock and awe.

Of course, iRadio is not exactly an earth-stopping idea. I mean, we already have Pandora, Spotify, MOG, Google Play whatever and so forth and so on. Come on guys, what took you so long?

And iOS is a reworking of the Apple's mobile software that looks an awful lot like that weird Microsoft Phone thing -- you know, with the buttons and all. 

It was  just a couple of years ago that Apple was seen to be on a higher plane than the rest of us mortals and its iPhone satisfied both hard-core techies and people who just wanted a cool phone.

But now, iPhones are slowly becoming uncool, and teens and preteens are flocking to Google's Android system on Samsung, HTC and Motorola smartphones. 

iPhones taking a hit in the cool department may have something to do with the short lifespan of electronic gadgets in general, especially among younger folks.

Because in most cases, once kids start using a mobile device for the first time, they want something different from what their parents are using.

Kind of old ...

Plus, there have been a few commercials by Samsung that have made fun of Apple and made the iPhone seem stodgy and old-fashioned -- kind of like, well, Microsoft. And once you besmirch a company's cool futuristic image, younger consumers will usually head someplace else.

For example, look at iTunes. The music service used to be the go-to destination for downloading, but since streaming has become today's new craze, folks are heading to sites like Pandora and Spotify instead.

Additionally, there seems to be a new streaming site popping up everyday, which is probably why Apple was eager to secure its deal with Sony/ATV and get iRadio out to consumers as soon as possible.

But will iRadio really give Apple the shot of coolness it needs? Will iOS 7 satisfy the many critics who have complained about the company's previous operating systems?

If not, it'll be back to the drawing board for Cook and his team, in order to come up with something that sets Apple apart from its competitors.

Gone for good

Bob O'Donnell, vice president of the market research firm IDC, said it's almost impossible for Apple to reclaim the stronghold it once had. 

"I'm not sure if [Apple] can be as dominant as they once were," he said in an interview with CNN. "I don't think anybody can be quite as dominate as Apple once was. I think we see the pie of influence spreading."

"So the things that they innovated on are now standard and commonplace. The trick is can they come up with new things or continue to evolve their existing products in ways that continue to completely set them apart," O'Donnell asked.  

Whatever Apple can do to improve its image better be done fast, because Samsung is fast on its tail with its increasingly popular smartphones and  its new streaming service. According to several reports, Samsung has teamed with rapper and business mogul Jay-Z for its streaming site, which has many in the tech world buzzing.

The company hasn't made an official announcement of the streaming service yet, but experts say partnering with Jay-Z can only be a good thing. 

"Jay-Z has demonstrated a particularly good ability to identify what audiences want or to create a demand for something that they didn't even know they wanted," said attorney Lori Landew in an interview with Forbes. "And it seems likely that he will be able to use these instincts in designing a streaming service that will appeal to a variety of audiences."

Reports indicate the Brooklyn rapper will be paid a cool $20 million for partnering with Samsung.

David Barnard, who founded App Cubby, said iPhones are still the most popular, but the company has taken a big hit in the area of hipness. "Painting the iPhone as a passé thing is such a perfect marketing message to counteract its coolness," he said.

So Apple has its work cut out for it, as it tries to wow consumers with iRadio and iOS 7. Whether folks will be truly wowed remains to be seen.

Some might say 2013 will be a crucial year for the company, because if it slips out of the coolness zone any farther, it may not recover. 

Isn't that what happened to the BlackBerry?

According to the American Diabetes Association there are 25.8 million people in the United States with diabetes -- about 215,000 of them children.

One child living with diabetes is 11-year old Isaac Hedrick, who like other patients, has to make sure he receives the right amount of insulin according to the amount of carbohydrates he eats.

Fortunately, he has a calculator to tally everything, but what happens if the calculator gets lost or damaged? What if he's at a friend's house or away at camp and the person watching him doesn't know anything about insulin?

Dr. David Repaske, chief of Endocrinology, Metabolism and Diabetes at Nationwide Children's Hospital, apparently thought the same thing, so he developed the first online diabetes calculator specifically for kids.

The calculator

Here's how it works: The user just has to go to the site, plug in some information about the patient's diabetic condition and the site provides a customized chart that lets him know how much insulin is needed before meals.

The chart can be printed so children can carry it around and give it to whomever is taking care of them. Repaske says having a chart like this makes things easier for everyone involved.

"The goal is to provide an additional tool to empower families to successfully manage their child's diabetes at home in order to provide as normal a life as possible for that child," he said. "The chart can also be printed out and taken to school or given to a sitter to ensure accurate insulin dosing without the need to learn the formula and do the math for each dose."

In addition, Repaske says always maintaining the right balance of carbohydrates and insulin can be challenging for anybody, but especially for a child. And others seem to agree.

Diabetes app

Panarea Digital has come up with an app that teaches kids how to manage their Type 1 diabetes. The app is a great tool for parents to learn more about their child's condition too.

It's called Managing Type 1 diabetes: A guide for kids and their families and uses animation to teach kids about their condition and follows a character by the name of Max -- an 8-year-old boy living with Type 1 diabetes.

In a series of interactive guides, users can watch Max manage his own condition while experiencing different adventures, so kids will be able to learn about their condition and be entertained at the same time.

There are other characters too. Like Dr. Phil Good, Max's healthcare specialist and Parrot, Max's sidekick. All the characters in the app are supposed to make learning about diabetes fun and easy.

There are eight different sections the app goes through: The real symptoms, facts and myths about diabetes, the food trip, what is Type 1 diabetes? Food and insulin, keeping the balance, getting control and a glossary.

What to do

According to the Centers for Disease Control and Prevention (CDC) each parent of a diabetic child should do the following at the beginning of every school year:

• Make sure you create a diabetic management plan with the school and make sure the school has all of the necessary supplies like testing strips, lancets and ketone testing supplies. And that's just some of the supplies schools should have.
• Plus, schools should have glucose tablets on hand or snacks that can raise blood glucose levels quickly if necessary.
• The CDC says each school should have three to five pieces of hard candy on hand for each diabetic student, four to six ounces of regular non-diet soda, four to six ounces of orange juice, two tablespoons of raisins and eight ounces of nonfat or low-fat milk.
• Each school should have a glucagon emergency kit as well.

Repaske says diabetic patients need all the help they can get when it comes to managing their condition, because it's easy for a person to get tired and not do everything they should.

"There's no weekend off, there's no summer vacation from diabetes. It's something you've got to deal with every single day," he says. And that makes it really tough, because you just get tired of it."

"Having something printed out that is not just for one time, but it's useful for a month or six months or a year, no matter what the conditions are [helps]," said Repaske.

It's no secret that trying to predict overdraft charges is about as simple as charting the orbits of the various comets and meteors that occasionally go rocketing past the earth.

The Consumer Financial Protection Bureau (CFPB) has been looking into the situation and is today releasing a report that raises concerns about the ability of consumers to anticipate and avoid overdraft costs on their checking accounts.

The report finds wide variations across financial institutions when it comes to the costs and risks of opting in to overdraft coverage on debit card transactions and ATM withdrawals. The report also finds that consumers who opt in for overdraft coverage end up with higher account fees and more involuntary account closures than consumers who decline to opt in.

“Consumers need to be able to anticipate and avoid unnecessary fees on their checking accounts. But we are concerned that some overdraft practices may increase consumer costs beyond reasonable expectations,” said CFPB Director Richard Cordray. “What is marketed as overdraft protection can, in some instances, create greater risk of consumer harm.”

When consumers try to withdraw more money from their checking accounts than is available, the financial institution can reject the transaction. For certain types of transactions, like checks, the institution generally charges a non-sufficient funds fee. The financial institution can also choose to cover the payment by advancing funds on the consumer’s behalf, and generally charges a fixed overdraft fee for doing so.

Automated systems 

In recent years, most banks have adopted automated systems for making these decisions. These systems have contributed to the evolution of overdraft from an occasional courtesy to a significant source of industry revenues. The CFPB estimates that overdraft and non-sufficient funds fees represent 60 percent or more of the fee income on consumer checking accounts.

The CFPB conducted this overdraft study, which reflects a significant portion of U.S. consumer checking accounts, after initial market research raised concerns about overdraft practices.

Many of these concerns are not new. Over the past decade, federal regulators have taken a number of different steps in an effort to address them. The CFPB report is intended to provide the factual basis to develop more uniform treatment of these issues across financial institutions.

Opting-in is risky

In 2010, a new federal government regulation took effect requiring that banks obtain a consumer’s consent (opt-in) before charging fees for allowing overdrafts on ATM withdrawals and most debit card transactions.

Today’s CFPB report found that new customer opt-in rates varied substantially across institutions. At some banks in 2011, more than 40 percent of all new customers opted in while other banks saw opt-in rates of less than 10 percent. The report also found that a consumer’s decision to opt in may have significant ramifications:

• Consumers who opt in end up paying higher fees: The CFPB report looked at previous heavy overdrafters who declined to opt in when the new federal requirements were implemented in 2010. It found that by not opting in these accountholders reduced their overdraft and non-sufficient fund fees, on average, by more than $450 during the second half of 2010.
• Consumers who opt in to overdraft coverage are more likely to end up with involuntary account closures: Negative account balances are a significant contributor to involuntary account closures, which can leave a black mark on a consumer’s record and make it difficult to open an account elsewhere. The CFPB report found that involuntary closure rates at some banks in the study were more than 2.5 times higher for accountholders who had opted in to debit and ATM overdraft coverage.

Highly complex

The CFPB report raises questions about the ability of consumers to anticipate and avoid overdraft costs. Each institution’s overdraft policies, procedures, and practices are highly complex and can be difficult for a consumer to navigate, yet greatly affect whether and how often they will incur overdraft fees. These complexities include:

• Complicated fee structures: Banks have different fee structures when it comes to the number of overdrafts that can be incurred in a single day. Some, for example, limit the number of overdraft charges in a day to two; others have no cap on fees or caps that allow as many as 12 overdrafts and non-sufficient fund fees in a day. 
• Overdraft coverage limits often depend on many factors: Some institutions have fixed limits on how much they will advance an accountholder; others vary the limits based on the accountholder’s individual circumstances, such as his or her balance, overdraft history, or deposit patterns.
• Complex transaction postings: The order in which check, debit card, and other transactions are posted to an account can influence the number of overdraft fees. The report found wide variation in posting practices, from institutions debiting transactions at periodic intervals throughout the day to debiting them in nightly batches.