Current Events in February 2015

Mima International Limited of Hong Kong is recalling about 1,470 Mima Moon 3-in-1 high chairs.

The seat can loosen and dislodge, allowing the seat and child to fall. The chair can also fall onto a child crawling underneath the seat, posing an impact hazard to the child.

The firm has received 14 reports of the high chair seat loosening. No injuries have been reported.

This recall includes Moon model 3-in-1 high chairs which adjust to a newborn, high and junior chair with a design consisting of a base with two feet supporting a single post that holds up the seat in a clear shell. The shell has a white inner seat with a removable seat pad in white, camel or black. The high chair measures about 3 feet tall when in its highest position.

There is a “Mima” logo where the metal post attaches to the base to the seat. There is also a “Moon” logo on the inside of the feet that form the base of the high chair. The serial and model numbers are located on a sticker on the inside of one of the two feet that form the base of the high chair.

Most of the high-chairs, manufactured in China, were given away at the May 9, 2014, taping of the Ellen DeGeneres TV show. The remaining chairs were sold at children’s juvenile product stores in California, Colorado, Connecticut, Florida, Georgia, Illinois, New Jersey, New York, Puerto Rico, Texas and Virginia from February 2014, through September 2014, for about $500.

Consumers should stop using the high chair immediately and contact Mima to receive a free replacement upper chair section or instructions on receiving a refund.

Consumers may contact Mima at (800) 392-1206 from 9 a.m. to 5 p.m. PT Monday through Friday.

Krehbiels Specialty Meats of McPherson, Kan., is recalling approximately 29 pounds of pork bratwurst product.

The product label does not include an accurate list of ingredients, including pork, Oasis brand beer, salt, natural flavor, spices and dextrose, due to a printing error.

None of these ingredients contain allergens.

There are no reports of adverse reactions due to consumption of these products.

The following product, produced on April 9, 2014, is being recalled:

• 16-oz. Vacuum Sealed Roll Stock packages of “FRESH BEER BRATWURST MADE WITH TALLGRASS BREWERY OASIS BEER.”

The recalled product bears the establishment number “EST. 13149” inside the USDA mark of inspection and was shipped to directly to consumers through an Internet retailer.

Consumers with questions about the recall may contact Jeff Krehbiel at (620) 241-0103.  

Lifesmart of Plano, Texas, is recalling about 17,000 Lifepro portable space heaters.

The screws used to attach the back plate to the heater are too short and allow the back plate to detach when removing the heater from the outlet, posing an electrical shock hazard to the user.

No incidents or injuries have been reported.

This recall is for Lifepro brand portable infrared quartz space heater models LS-IQH-DMICRO and LS-IQH-MICRO. The recalled heaters are about 6 1/2 inches tall x 5 inches wide x 3 3/4 inches deep and made of black plastic. They have a three-prong plug built into the back to allow them to be plugged directly into an electrical outlet. The Lifepro logo is molded into the front bottom of the heaters.

Model LS-IQH-DMICRO is a 400-watt heater with digital display on the top. Model LS-IQH-MICRO is a 450-watt heater with no display. The model name and wattage are printed on a label on the back of each heater below the plug.

The heaters, manufactured in China, were sold at Meijer stores, Northern Tool stores, QCI Direct stores and Tuesday Morning stores nationwide and online at Amazon.com, BJs.com, HomeDepot.com, QCIDirect.com, Samsclub.com, Walmart.com and Wayfair.com from January 2014, through December 2014, for between $40 and $50.

Consumers should immediately unplug and stop using the recalled space heaters and contact Lifesmart to receive either a free repair kit consisting of 4 longer screws with instructions on how to install them; a free replacement heater with the modified screws; or a full refund.

Consumers may contact Lifesmart at (866) 484-2066 from 8 a.m. to 5 p.m. ET Monday through Friday.

Toyota Motor Sales, U.S.A., is recalling approximately 120 model year 2014 FJ Cruiser.

The steering system contains an intermediate shaft connecting the steering wheel to the steering gear box, which could have received an inadequate weld. Under some circumstances, the weld could separate, resulting in the loss of steering control and increasing the risk of a crash.

Toyota says it is not aware of any crashes, injuries, or fatalities caused by this condition.

Owners of the involved vehicles will receive a notification by first class mail. Toyota dealers will replace the intermediate shaft.

Consumers may call Toyota customer service at 1-800-331-4331.

Savvy consumers know you need to take advantage of every opportunity to stretch a dollar. It helps explain why online coupons and daily deal websites have become so popular.

A cash-back website takes that concept and runs with it, actually putting money in your pocket. BeFrugal.com, founded 6 years ago, rang up $250 million in retail sales last year, earning a percentage of that from its 4,000 participating retailers.

Jon Lal, founder and CEO of BeFrugal.com, says consumers who signed up and purchase all those products and services were rewarded in a very tangible way.

Cash-back rewards

“What we do is pass this dollar amount back to the consumer in the form of cash-back rewards,” Lal told ConsumerAffairs. “For the consumer it's a loyalty reward for doing your online shopping through us.”

Lal says there is no fee for registering. You just give an email address and that's it. When you order something through BeFrugal.com, you get a portion of that purchase back.

Consumers get paid when their cash-back account balance reaches $25. Since the average cash-back on a transaction is 7%, Lal says it doesn't take long to reach that amount. And there are 3 ways to get paid.

“We will send the consumer, either a check in the mail or send it to a PayPal account, or they can even get an Amazon gift card from us,” Lal said.

Different way to shop

For consumers, it's a different way of shopping. If they want to purchase something from Macy's, for example, they might normally go directly to the Macy's website. But if they purchase the item at Macy's through the BeFrugal website, they get money back. And Lal says there are ways to increase the savings even more.

“Find a Macy's coupon at our site – and our average coupon will save a consumer $27 – and because you're making the purchase through BeFrugal.com, you're also getting cash-back. So you save 2 ways, you're basically doubling up.”

To find what you're looking for, Lal says you can search 2 ways. You can search by retailer or by category. It's a way to find the best price and then get a discount in the form of cash-back.

Travel savings too

Among the 4,000 retailers are the big box stores you would expect, but also hotels and airlines. Lal says travel offers consumers some of the biggest advantages because it tends to be a big ticket item – a much bigger advantage, he says, than a cash-back credit card.

“With a cash-back credit card you're getting maybe 1% or 2% back,” he said. “With BeFrugal.com, you sign up, and membership is absolutely free, and the savings are way more than a rewards credit card.”

On Wednesday evening, the Anthem health insurance company confirmed that hackers breached a database holding the records of 80 million current and former customers.

The information in that breached database includes peoples' names, birthdays, Social Security numbers, home addresses, email addresses and employment information including income data. However, Anthem says that nobody's personal financial information was made available to hackers, and there is currently no evidence that the hackers were able to access medical records, either.

Anthem has already set up a website, Anthemfacts.com, dedicated to releasing information about the breach, which it calls “a very sophisticated external cyber attack.” The website's Frequently Asked Questions page says that “all product lines are impacted,” and later specifies that the impacted brands include Anthem Blue Cross, Anthem Blue Cross and Blue Shield, Blue Cross and Blue Shield of Georgia, Empire Blue Cross and Blue Shield, Amerigroup, Caremore, Unicare, Healthlink, and DeCare.

The FAQs page also promises that over the next few weeks, “All impacted members will receive notice via mail which will advise them of the protections being offered to them as well as any next steps.”

Watch out for fake emails

(On another note, here's a pre-emptive scam warning: when Anthem said that people “will receive notice via mail,” they're talking about notices printed on paper and sent through the old-fashioned U.S. Postal Service, not an email, text message or any other form of electronic communication. Over these next few weeks, if you receive any emails or text messages purporting to be about the Anthem breach – especially messages that urge you to click on links or download attachments – ignore and delete them. Those emails and texts didn't come from Anthem, but from scammers out to trick you. Even people who've never been an Anthem customer will get these messages.)

Anthem has also set up a toll-free number for current and former members seeking information: 877-263-7995. The company says it will provide free credit monitoring for everyone affected.

Based on the available information so far, the Anthem breach is shaping up to be the new record-holder for “largest consumer hacking in corporate history,” with the number of affected customers dwarfing those from previous breaches at retailers, such as Target and Home Depot.

We'll keep you posted as more information becomes available.

Buying a timeshare is no problem at all. You can get a free lunch and maybe a boat ride, a massage or some other perk just for listening to a hard-sell pitch for a resort getaway that you use for a few days each year but pay for all year.

But as consumers sometimes learn to their dismay, the timeshare payments add up and they're not often able to use the facility as frequently as they had hoped. Even worse, people lose their jobs, move away, get old or sick. Sometimes they die, leaving family members trying to figure out what to do with their timeshare.

Bingo, along comes a friendly voice on the phone, offering to sell the unit for a small fee. Sometimes, the person the phone even claims to have a buyer all lined up and ready to lay down some heavy cash.

The hitch? It might be taxes, or a processing fee or a filing charge -- you know, something that sounds reasonable. 

A sad tale

Unfortunately, what happens next is that the consumer wires the money and the friendly voice disappears. We're flooded lately with emails telling this sad tale. Here's a recent email exchange with a consumer named Christy:

Christy: Can you  please  give me some advice. We bought a time share with  Occidental. A third party  contacted us looking to buy it for $16,000. We want to get rid of it, they said the buyer is in Mexico and we need to pay an upfront tax of $2,700 before the $16,000 is released. What do you think.

ConsumerAffairs: NO, NO, NO. You will never see your money again if you send it to someone in Mexico. Don't do it. 

Christy:  Have you ever heard of this group Third Coast Group out of Texas? They are the ones working with us. Said the $2,700 is a tax to Mexico that we have to pay before we get the money.

ConsumerAffairs: We do not recommend ANY timeshare resale company that charges an upfront fee. 

Christy: They are saying it's Mexico taxes.

Here's an email from Noel: 

We have been contacted by these 2 groups out of nowhere, saying that they have offers to our timeshare. Sounds believable, but both of them are insisting we have to pay the closing cost, legal documentation costs and transfer costs, first before they can proceed with the sale. It is not a small amount, almost $1,500.

Still stuck

We also heard from John, who had thought he was free of his timeshare, only to find out that he was out thousands of dollars and still stuck with the timeshare.

In October 2013, an agent for Exit Pros, a company in Daytona Beach, came to my house and convinced to turn the deed over to them and they would pay the maintenance but would offer me no money. On the contrary, I ended up paying $3,200 to them for transfer fees and other indigestible costs. In April 2014, the timeshares association assessed me $1285 for refurbishing costs.

I explained that I no longer owned the property.but they informed me that I was still the owner.

Then there's Joe, who seems to have escaped unscathed, at least so far:

Joe: My wife and I got caught up in a timeshare resell scam while in Los Cabos, Mexico. I am seeking information about attorneys who have experience with these fraudulent companies.

ConsumerAffairs: If the transaction occurred in Mexico, you need a Mexican lawyer. Simple as that. No one in the U.S. can retrieve money that you paid to someone in another country.

Joe: The first part of the scam took place in Mexico and I understand that. The second part of the scam is solely with a reseller company in Wilmington, Delaware, with absolutely no reference to Mexico other than the contract was signed in Mexico. Also, I have not sent any money to this outfit but they are trying to compel me to wire money to "continue with the process". ... Quite sad indeed! I guess I will just tell these con men to go pound sand and fight them in court if they file suit.

A contract signed in Mexico would normally be subject to the laws of Mexico, not the United States, so it's likely that it's safe for Joe to ignore further entreaties.

"Very valuable"

And here's a slightly more involved email from Gina:

I was solicited by Le Reve to visit their property while in Mexico on June 4th. They offered me $25,000 for my existing timeshare in NC. The amount is much more than I paid, and they explained that Mexican nationals can obtain a VISA to enter the US much easier if they have property in the US, therefore this deeded timeshare that I own is very valuable to them.

To make a long story short, after much wining and dining and free massages, Gina was told she would have to buy into a new vacation membership plan called Le Club. After that, she would be paid $25,000 as well as $6,000 each year for renting out some of her Le Club weeks. 

She didn't tell us how much she had to pay in exchange for all this but admitted it sounded too good to be true. Guess what? It was. The money didn't come through, the Le Club website is "under construction" and Gina has a big fat hole in her bank account.

Common elements

So what do all these cases -- just a few of the hundreds of similar incidents we hear about -- have in common? 

Well, aside from the fact that they all involve timeshare resellers, they require money to be paid upfront and many of them either take place in Mexico or require the would-be seller to send money to Mexico.

Either of these should be a tip-off. No one should ever pay upfront fees to sell anything -- whether it's real estate, a timeshare or an antique cello. Fees should be deducted from the proceeds at the time of the sale.

In other words, if you sell a timeshare for $25,000 and there are various fees totaling $2,000, you should get a check for $23,000. And the proceedings should be signed in the presence of licensed attorneys, duly notarized, etc. 

Second, money sent out of the United States is gone. There is no way to retrieve it if you change your mind later. Period. Anyone who tells you otherwise -- especially if it's someone asking you to send them money -- is either misinformed or trying to scam you. (Yes there are exceptions to this but they are seldom available to the average consumer and any attempt to legally recover funds sent overseas will be very expensive -- much more than a few thousand dollars).

In summary, timeshares are very tricky. The time to avoid trouble is before you buy one. Read some of our earlier stories about timeshares and consult your attorney before signing any timeshare document. 

Falling oil prices may be good for a lot of consumers, but those who work in the oil patch aren't celebrating.

Outplacement consultancy Challenger, Gray & Christmas reports U.S.-based employers announced plans to cut 53,041 jobs from their payrolls to start 2015, with 40% of them directly related to oil prices.

Last month's total was up 63% from December, and 18% higher than the same month a year ago. In fact, January saw the highest monthly job-cut tally since February 2013 and the highest January total since 2012.

Oil industry takes a hit

Of the 53,041 job cuts announced in January, 21,322 were directly attributed to the recent and sharp decline in oil prices. Most occurred in the energy industry, where employers announced a total of 20,193 layoffs (19,722 of which were directly attributed to oil prices). The January total is 42% higher than the 14,262 job cuts announced by the energy industry in all of 2014.

Falling oil prices also contributed to job cuts in the industrial goods manufacturing sector, where companies supplying products and materials to oil drillers were forced to shut down operations. These firms announced 4,859 job cuts in January, of which 1,600 (or 33%) were due to oil prices.

“We may see oil-related job cuts extend well beyond those industries directly involved with exploration and extraction,” said John A. Challenger, chief executive officer of Challenger, Gray & Christmas. “The economies throughout the northern United States that have been thriving as a result of the oil boom could experience a steep decline in employment across all sectors, including retail, construction, food service and entertainment.”

Initial claims

From the government, word that the number of people filing first-time applications for state unemployment benefits rose last week.

Initial claims rose 11,000, in the week ending January 31 to a total of 278,000. At the same time, the previous week's level was revised up by 2,000 -- from 265,000 to 267,000.

The government says there were no special factors affecting this week's initial claims.

The 4-week moving average, which is considered a more accurate gauge of the labor market because it is less volatile than the weekly tally, came to 292,750 -- a decline of 6,500 from the previous week.

The full report is available on the Labor Department website.

Family Dollar Services of Matthews, N.C., is recalling about 254,000 Tough Treadz Auto Carrier toy sets.

The die-cast metal cars can have sharp edges that pose a laceration hazard.

No incidents or injuries have been reported.

This recall involves a plastic toy truck with a plastic case that holds 6 die-cast metal toy cars in assorted colors. The truck is 14 inches long x 3 inches wide x 5 inches high. The cab of the truck comes in black, blue or red.

The package is labeled as “Tough Treadz Auto Carrier” and has a white sticker in the upper right-hand corner with “$5” and “SKU 1004247” printed in red. The UPC code appears on a label on the back stating “Made in China.”

The following UPC codes are included in this recall: 678565114083, 678565114090, 678565114106.

The toy sets, manufactured in China, were sold exclusively at Family Dollar Stores nationwide from September 2014, through December 2014, for about $5.

Consumers should immediately stop using the recalled toy sets, take them away and return them to any Family Dollar Stores location for a full refund.

Consumers may contact Family Dollar Stores at (800) 547-0359 from 8:30 a.m. to 5 p.m. Monday through Friday.

Wyked Labs of Winter Park, Fla., is recalling of all lot codes of the following products:

• Wyked Labs Ml-Alpha
• Wyked Labs M14-Ment
• Wyked Labs Halo-70
• Wyked Labs 7-Ment Alpha
• Wyked Labs Estrastain
• Wyked Labs Swoll-250
• Formexx Black (an Anabolic Science Labs product)
• Slim X Lean (an Anabolic Science Labs product)

The Food and Drug Administration ("FDA") says the products contain ingredients that do not meet the requirements of the Dietary Supplement Health and Education Act of 1994. Specifically, the recalled products are prohormone products or are otherwise adulterated. FDA says prohormones are synthetic steroids that bear a similarity to anabolic steroids.

The company says it has not received any reports of adverse effects related to this recall.

The recalled products were distributed nationwide to various nutritional supplement retail outlets and via the Internet, and can be identified as follows:

• Wyked Labs Ml-Alpha is packaged in a white plastic bottle containing 60 capsules.
• The product can be identified by the brand name Wyked Labs and the product name Ml­ Alpha, Mega Mass Builder.
• Wyked Labs M14-Ment is packaged in a white plastic bottle containing 90 capsules.
• The product can be identified by the brand name Wyked Labs and the product name
• M14-Ment, Advanced Mass Builder.
• Wyked Labs Halo-70 is packaged in a white plastic bottle containing 60 capsules. The product can be identified by the brand name Wyked Labs and the product name Halo-70, Mega Mass Builder.
• Wyked Labs 7-Ment Alpha is packaged in a white plastic bottle containing 90 capsules.
• The product can be identified by the brand name Wyked Labs and the product name 7- Ment Alpha, Advanced Mass Builder.
• Wyked Labs Estrastain is packaged in a white plastic bottle containing 60 capsules.
• The product can be identified by the brand name Wyked Labs and the product name
• Estrastain, Pro-Anabolic Mass and Hardening Complex.
• Wyked Labs Swoll-250 is packaged in a black plastic bottle containing 90 capsules. The product can be identified by the brand name Wyked Labs and the product name Swoll- 250, Super Mass Builder.
• Formexx Black is packaged in a black plastic bottle containing 60 capsules. The product can be identified by the brand name Anabolic Science Labs (ASL) and the product name Formexx Black.
• Slim X Lean is packaged in a clear plastic bottle containing 56 capsules. The product can be identified by the brand name Anabolic Science Labs (ASL) and the product name.

Consumers with any of the recalled products should stop using them and return them to the place of purchase.

Consumers with questions regarding the recall may contact Eric Dubois at 1-407-679-7986 or by email at ericnutrizone@hotmail.com, Monday through Friday from 9 am to 5 pm EST.

BMW of North America is recalling 13,130 model year 2014-2015 MINI Cooper Hardtop two door vehicles manufactured December 1, 2013, to December 14, 2014.

The vehicles may have been manufactured with an incorrect maximum capacity weight stated on the Tire Information Placard. The maximum weight listed on the label is incorrect (too low) and therefore does not comply with Federal Regulations.

MINI will notify owners, and dealers will replace the incorrect labels with corrected labels, free of charge. Owners will notified by March 13, 2015.

Owners may contact MINI customer service at 1-866-825-1525.

Whole Foods Market is recalling packaged raw macadamia nuts.

The product may be contaminated with Salmonella.

No illnesses have been reported to date.

The product was labeled as “Whole Foods Market Raw Macadamia Nuts” and was packaged in 5.6-oz. plastic tubs with sell-by dates of 4/22/15, 5/4/15 and 5/6/15 and a UPC code of 7-23055-21415-3.

The recalled product was distributed to Whole Foods Market, Greenlife Grocery, and Harry’s Farmers Market stores in Alabama, Georgia, Mississippi, North Carolina, South Carolina and Tennessee.

Customers who have purchased this product at stores in the affected states should discard it and bring in their receipt for a full refund.

Consumers with questions may contact Whole Foods Market customer service, 512-477-5566 ext. 20060 Monday – Friday 9:00am – 5:00pm CDT.

The rise in U.S. obesity rates is undeniable. According to the Centers for Disease Control and Prevention (CDC), more than one third of U.S. adults – 78.6 million people – are obese.

Obesity rates have more than doubled in both adults and children since the 1970s, according to the National Center for Health Statistics.

The question is why. Food industry critics blame food additives and fast food restaurants. The food industry points to an increased sedentary lifestyle.

But researchers at Georgia State University economists quote political operative James Carville – “It's the economy, stupid.”

Abundance of calories

Theories about the economic causes of obesity have gained traction in recent years, but Georgia State health economist Charles Courtemanche says it's more fact that theory. He and his team conducted a study, published by the National Bureau of Economic Research, concluding that the abundance of cheap calories available to consumers is largely to blame for our expanding waistlines.

"People are doing a lot of eating," said Courtemanche, an assistant professor in the Andrew Young School of Policy Studies. "But as economists, we know people's preferences don't change overnight, so the steady rise since 1980 must involve their incentives to eat."

To arrive at their conclusions, the Georgia State team studied obesity rates in 27 states, looking at a number of economic variables. Things like unemployment and income, food prices, the density of food retail, and physical activity as it is influenced by gasoline prices and fitness centers.

Answering the question

They titled their study "Can Changing Economic Factors Explain the Rise in Obesity?" and answer it in one word: yes.

The bottom line? They conclude that big-box retailers Costco, Sam's Club, BJ's Wholesale and Walmart, along with full-service and fast-food restaurants, are key contributors to the nation's obesity epidemic.

"Changes in variables related to calorie intake collectively explain 37% of the rise in body mass index (BMI) rates and 43% of the rise in obesity," Courtemanche said. "And our data show that the pervasive presence of supercenters, warehouse clubs and restaurants are responsible for most of these gains."

Simply put, the researchers say what has changed over the last 3 or 4 decades is the abundance of cheap calories. We have gone from a time when calories were expensive – food wasn't that plentiful and cost a lot to prepare – to a time when someone with $5 in their pocket can easily ingest 1,000 or more calories.

Less physical occupations

Here's another economic factor the researchers say contributes to obesity – the loss of blue collar jobs and the rise of office workers and the unemployed. When people did physical labor, not only were they burning calories all day, they didn't have time to stop and snack.

"The best explanation for the difference between these workers, outside of physical movement, is time flexibility," Courtemanche said. "White-collar workers have the flexibility to graze all day at their desks, and they can take lunch out. It all points to caloric intake."

On the other side of the coin, economic factors like high gasoline prices and the presence of fitness centers worked to reduce obesity rates. But the research suggests these effects are not the same for everyone.

"The greatest rise in weight is concentrated among people already at risk for obesity," Courtemanche said.

Food technology

Courtemanche and his team are not the first to suggest that economic factors are a significant driver of obesity. In 2003 a Harvard study (pdf) pointed to technological advances in food preparation as a significant contributor to obesity. It held out the potato as an example.

“Before World War II, Americans ate massive amounts of potatoes, largely baked, boiled or mashed,” the economists wrote. “They were generally consumed at home. French fries were rare, both at home and in restaurants, because the preparation of French fries requires significant peeling, cutting and cooking.”

Then along came technology. French fries are now typically peeled, cut and cooked in a few central locations using sophisticated new technologies. They are then frozen and shipped to restaurants and supermarkets. Today, the French fry is the dominant form of potato and America’s favorite vegetable.

A medium-sized baked potato has 129 calories before you add butter or sour cream. A medium order of McDonald's French fries contains around 380 calories.

Midland National Life Insurance Company has agreed to pay a $1.3 million settlement after the California Department of Insurance charged that the insurer was taking advantage of seniors in the sale of inappropriate annuities by using deceptive and misleading tactics.

“Midland’s illegal tactics provided big commissions for their agents and handsome profits for Midland while seniors lost money,” said Insurance Commissioner Dave Jones, who said a new state law "requires document and product suitability reviews for annuity sales and documentation of the review to protect the consumer.”

In one example, a 75-year-old consumer paid approximately $91,000 to Midland National for one of its annuity products. The annuity had a 14-year surrender period, which meant the consumer could not fully liquidate the annuity without paying a penalty until she was 89 years old.

Two years after buying the annuity, the consumer had to surrender it because she needed money to pay her bills after her husband had a stroke and was placed in a board and care facility. As a result, she ended up paying a surrender penalty of approximately $27,500 to Midland National.

“Selling a long-term annuity with a 10- or 15-year surrender period to someone of advanced age can have dangerous financial consequence,” said Jones. “[The] law also gives me the authority to revoke an agent’s license, impose fines, and restore money lost to the consumer.”

Consumer grievances

The settlement was reached in an enforcement action based on findings from a market conduct examination done after the department received consumer grievances.

The investigation covered an 18-month period and revealed Midland National agents were selling certificates to group annuities that were issued out of state and Midland National did not make its own agents or consumers aware that the annuity products had not been filed with the California Department of Insurance and did not provide important consumer protections.

Midland National has agreed to business practice reforms that eliminate this practice, which other life insurance companies are encouraged to follow.

Investigators also found numerous instances in which Midland National agents earned commissions by selling unnecessary replacement annuities to senior citizens. Seniors are more vulnerable because they are trusting and often do not have someone looking out for their best interest.

Annuities usually include large surrender payments, if a consumer needs to liquidate the annuity, which is more likely to occur for a senior that might need cash for medical care or long-term care payments. 

Unnecessary replacements

Unnecessary replacement of an existing annuity was another practice uncovered by investigators.

In one case the state probe uncovered, an agent replaced an existing higher-interest annuity for an 85-year-old woman with one that left her locked into a lower-earning rate for eight years.

Her existing annuity had no surrender charges and guaranteed a 5.5 percent interest. She was sold a Midland National annuity that guaranteed a 4.35 percent interest rate for eight years and three percent in interest thereafter—substantially less than her existing investment.

Additionally, the Midland annuity had a surrender charge of 10 percent for five years, grading down to zero after eight years.