Current Events in May 2015

Amazon.com built its business selling all kinds of things online, making it one of the nation's largest retailers. To win even more business, it's trying to get those purchases to consumers faster – for a price.

When ordering from Amazon, standard delivery is 3 to 5 business days. If you select that option, chances are you won't see you purchase any sooner than that.

In 2005 Amazon launched Amazon Prime. For an annual fee of less than $100 members received free 2-day shipping on all orders. To get their money's worth consumers often felt the need to order lots of stuff, so it worked out.

Amazon has since added other benefits to Prime, including access to streaming video content, added in 2011. But pretty soon, 2-day delivery didn't seem all that fast, so Amazon has consistently focused more attention on ways to get items to consumers even faster.

Same day delivery

Because it has massive distribution centers scattered around the country Amazon is able to offer same-day delivery in several cities, for an extra shipping fee of $5.99.

Amazon has just announced it is extending that service to Prime members in certain cities without the extra shipping charge. They will be able to get some items delivered in just one day, included in the $99 annual fee.

There are several strings attached. Not all items will qualify and purchases must total $35 or more to be eligible.

Purchases must also be made before noon to arrive the same day and the delivery must be to one of 14 metro areas.

Selling delivery

It might be said that delivery has, itself, become a commodity in the marketplace. Other competitors like Walmart and eBay are working on their own delivery deals, perhaps prompting Amazon to push the envelope a bit.

In 2013 Amazon founder Jeff Bezos announced plans to use drone aircraft to make deliveries – a plan that still must navigate some challenging regulatory turbulence from the Federal Aviation Administration before it can begin to be implemented.

Last week Amazon disclosed its Prime Now service will provide 1-hour delivery service from other local stores, along with many Amazon items, to members in select Manhattan neighborhoods.

“Our Prime Now hub in Manhattan is home to tens of thousands of products that are being delivered to customers in an hour or less. Now, we are expanding the service to include delivery from local stores,” said Dave Clark, Amazon’s senior vice president of worldwide operations. “So whether you’re ordering diapers and a big-screen television from Amazon, fresh produce from D’Agostino, a chef-made prepared meal from Gourmet Garage or cupcakes from Billy’s Bakery, we will get all of the items right to your door in lightning-fast speeds as well.”

Amazon says that service and will eventually spread to include other Manhattan neighborhoods and other major U.S. cities.

If the Federal Aviation Administration (FAA), gets its way, FedEx will pay a $58,600 civil penalty for allegedly violating hazardous materials regulations.

According to the agency, FedEx accepted a box containing 1.7 liters of flammable liquid for air transportation in June 2014 that lacked the proper shipping name of the hazardous materials. The FAA further contends that 2 months later, the company accepted a hazardous materials shipment consisting of 2 pounds of consumer commodity that had shipping papers incorrectly indicating the amount of hazardous materials inside.

The shipments were not properly classed, described, packaged, marked, labeled and in the condition for shipment required by the hazardous materials regulations, the FAA claims.

Additionally, the FAA accuses FedEx of failing to provide the pilots in command with accurate and legible written information about the amount of hazardous materials on board 3 other flights in June, July and August 2014.

The shipments according to the feds, contained radioactive material, flammable printing ink and flammable and combustible paint.

The FAA says it discovered the alleged violations during a dangerous goods inspection at the FedEx facility at Bradley International Airport in Windsor Locks, Conn.

FedEx has asked to meet with the FAA to discuss the case.

Office Depot will pay a $3.4 million civil penalty to settle Consumer Product Safety Commission (CPSC) staff’s charges that the company knowingly failed to report -- as required by federal law -- defects and an unreasonable risk of serious injury concerning the Quantum and the Gibson models of office chairs.

The seatbacks of both models failed, resulting in multiple back and other injuries.

Failure to report

Federal law requires parties like Office Depot to report to CPSC immediately (within 24 hours) about a consumer product containing a defect that could create a substantial product hazard or presenting a risk of serious injury.

Office Depot received dozens of reports of seatback failures and related injuries involving both the Quantum chairs and the Gibson chairs. It never reported the Quantum chair hazard to CPSC, and reported the Gibson chair hazard only after receiving a request from staff.

By the time the Quantum and Gibson chairs were recalled, Office Depot had received 33 and 153 reports – respectively -- of seatback detachment from the chairs, and 14 and 25 reports – respectively -- of injuries, some of which required medical attention.

Office Depot sold about 150,000 Quantum chairs nationwide between May 2006, and August 2009, for about $350 each, and about 1.4 million Gibson chairs nationwide between 2003, and 2012, for about $40 each.

Settlement terms

In addition to paying the $3.4 million civil penalty, Office Depot has agreed that the company has, and shall maintain, a compliance program designed to ensure compliance with the Consumer Product Safety Act and a related system of internal controls and procedures. The program must include written standards and policies designed to convey information obtained from sources such as complaints, parts requests, and incident reports to personnel responsible for CPSC compliance.

The compliance program also must address:

• confidential employee reporting of compliance concerns to a senior manager;
• effective communication of compliance policies and procedures, including training;
• senior management responsibility for, and general board oversight of, compliance; and
• requirements for record retention.

Office Depot neither admits nor denies CPSC staff’s charges.

General Motors is recalling 126 model year 2014 Chevrolet Impalas manufactured March 22, 2013, to May 22, 2014.

The electronic parking brake piston actuation arm in the recalled vehicles may not fully retract, causing the brake pads to stay partially engaged. Brake pads that remain partially engaged with the rotors may cause excessive brake heat that could result in a fire.

GM has notified owners, and dealers will reprogram the electronic parking brake control module with new software, free of charge. The recall began on May 6, 2015.

Owners may contact Chevrolet customer service at 1-800-222-1020. GM's number for this recall is 15259.  

In the first of 2 actions, Ford is recalling 423,000 Ford Taurus and Flex vehicles, Lincoln MKS and MKT vehicles, 2011-2012 Ford Fusion and Lincoln MKZ vehicles, and 2011 Mercury Milan vehicles.

A potential intermittent electrical connection in the steering gear might result in the loss of electric power steering assist while driving. If this happens, the steering system defaults to manual steering mode, making the vehicle more difficult to steer, especially at lower speeds. This could result in the increased risk of a crash.

Ford says it's aware of 4 minor accidents that might be related to this condition, but no injuries.

Dealers will perform one of 2 service fixes, depending upon whether certain diagnostic trouble codes are present in the vehicle. They will either update software for the power steering control module or replace the steering gear.

Mustang recall

Ford is also recalling 19,500 2015 Ford Mustang vehicles with a 2.3 liter engine.

Prolonged exposure to elevated underbody temperatures might cause degradation of the fuel tank and fuel vapor lines, which could eventually result in a fuel leak. In addition, prolonged exposure to elevated underbody temperatures might cause the parking brake cable seals to degrade, potentially affecting parking brake functions.

A fuel leak in the presence of an ignition source increases the risk of a fire. Impaired parking brake function could result in unexpected vehicle movement, which might increase the risk of injury.

Ford says it's not aware of any accidents, injuries or fires resulting from this condition.

Dealers will replace the current fuel tank shield with a shield with better insulating capability, install thermal patches on the fuel tank and parking brake cable, and install thermal wraps on the fuel vapor lines.

With identity theft-related tax fraud such a lucrative enterprise for scammers, it should be no surprise that the Internal Revenue Service (IRS) has been the target of a hack attack.

The agency has disclosed that hackers penetrated security systems and obtained access to the tax records of as many as 100,000 taxpayers. For an identity thief, it's like hitting the jackpot.

With your tax return a criminal not only has access to your Social Security number, he or she knows a lot about you. The hacker can see where your sources of income came from and next year, file a bogus return in January that is a dead ringer for the one you filed this year. If the attack went undetected the IRS wouldn't bat an eye before sending out a refund – not to you but to the scammer filing your return.

In an email to ConsumerAffairs Wednesday, Leah, a taxpayer in Georgia, reports she has been an apparent victim of identity theft-related tax fraud. When she filed her return earlier this year, expecting a $3000 refund, she learned that the IRS had already processed her return.

“The original refund was addressed to someone in Texas,” she wrote. “I live in Georgia.”

Chances are, there could be many other cases like Leah's next year.

Get Transcript

The part of the IRS that was compromised is a section called Get Transcript. Taxpayers who have created an account at IRS.gov may log in and obtain transcripts of their tax records for previous years. People applying for a mortgage often need to do this.

If you have not set up a Get Transcript account, you should not be at risk in this breach. Taxpayers attempting to log into the Get Transcript website Wednesday are greeted with this message:

Alert: The online Get Transcript service is currently unavailable. Transcripts may still be ordered using the Get Transcript by Mail service. We apologize for any inconvenience.

To log in normally, a taxpayer enters a user name and password. The people who hacked the system had that information.

Second tier of security

A second tier of security then asks a security question that the account holder selected and answered when setting up the account. In about half the cases, the IRS says the hackers knew the answer. Of the 200,000 accounts targeted, about 100,000 were breached.

That suggests this breach was highly sophisticated and targeted, not random. Officials speculate, for example, that by combing social media sites hackers were able to learn information about their potential victims that would help them answer those security questions – what was your high school's mascot, for example.

IRS response

In addition, to disabling the Get Transcript portion of its website, the IRS said it has taken steps to protect taxpayers. They include:

• Sending a letter to all of the approximately 200,000 taxpayers whose accounts had attempted unauthorized accesses, notifying them that third parties appear to have had access to taxpayer Social Security numbers and additional personal financial information from a non-IRS source before attempting to access the IRS transcript application.
• Offering free credit monitoring for the approximately 100,000 taxpayers whose Get Transcript accounts were accessed to ensure this information isn’t being used through other financial avenues.

In addition, the IRS said it is flagging the underlying taxpayer accounts on its core processing system to alert for potential identity theft to protect taxpayers going forward — both right now and in 2016.

The Federal Trade Commission announced yesterday that for-profit Ashworth College “agreed to settle” charges that Ashworth misled potential students about the value of an Ashworth education.

Jessica Rich, Director of the FTC’s Bureau of Consumer Protection, said that “When schools promise students they can transfer course credits or get a better job after completing their programs, they’d better be able to back up those claims. Ashworth College didn’t tell the truth when it made those promises to prospective students.”

Ashworth's settlement with the FTC includes an $11 million judgment — which is currently “suspended” due to Ashworth's “inability to pay.” In addition to not-paying this fine, Ashworth is also expected to not-make certain misleading claims to students. Or, as the FTC said:

The proposed stipulated court order prohibits Ashworth College from misrepresenting that:

• completing Ashworth’s program will qualify students to obtain vocational licenses without any additional training or experience;

• Ashworth’s programs provide all the training and credentials required to switch careers or obtain a job in a new field;

• there will be job security or steady employment for consumers completing its programs; and that

• course credits are generally recognized by, and accepted, by other postsecondary institutions.

For-profit schools

Ashworth is the latest in a series of for-profit schools to come under legal scrutiny for similar reasons. Corinthian Colleges, which operated schools under the Heald, Everest and WyoTech brands, had to cease operations and close its remaining schools late last month (and declared bankruptcy a week later), after years of legal troubles including multimillion-dollar fines, suspensions of federal student aid, federal lawsuits charging “predatory lending,” and more.

In mid-April, shortly before Corinthian closed its remaining schools and filed for bankruptcy, it was fined $30 million for misrepresenting its job placement rates to students.

ITT Educational Services also started coming under increased scrutiny this month. A couple weeks ago, Congresswoman Jackie Speier urged the Department of Education to investigate ITT for “deceptive and predatory lending practices, pushing students into high-interest loans they know cannot be repaid.”

A few days later, California suspended GI Bill benefits for ITT Technical Institute locations in the state.

Students at ITT and Corinthian schools both paid high tuition rates (or, more likely, went deep into bankruptcy-proof student loan debt) in order to get what turned out to be useless degrees: traditional four-year colleges or universities generally wouldn't accept course credits from these schools, and neither will state professional licensing boards.

No student loans

The FTC settlement with Ashworth suggests that Ashworth students have the same problem, but they do have one slight advantage (or one less disadvantage) than students of ITT, Everest and similar for-profit schools. The FTC says:

Tuition at Ashworth College ranges from hundreds to several thousand dollars. Ashworth College does not accept student loans, and students are required to pay tuition in full or make monthly payments. However, it does accept military benefits including GI Bill payments, and has directed some of its advertising to military servicemembers and their families.      

So Ashworth students may waste large amounts of money or squander their military tuition benefits on what turns out to be relatively worthless college-course credits — but at least they don't have bankruptcy-proof student-debt millstones weighing them down, too. By the sad standards of contemporary American for-profit higher-educational victims, that actually leaves Ashworth students ahead of the game.

Five in a row. That's how many weeks applications for mortgages have been on the decline.

According to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey, applications were down 1.6% during the week ending May 22.

The Refinance Index tumbled 4%, pushing the refinance share of mortgage activity down 1 percent -- to 51% of total applications. The adjustable-rate mortgage (ARM) share of activity was unchanged at 6.4% of total applications.

Contract interest rates

• The average contract interest rate for 30-year fixed-rate mortgages (FRMs) with conforming loan balances ($417,000 or less) rose 3 basis points -- from 4.04% to 4.07%, with points increasing to 0.35 from 0.32 (including the origination fee) for 80% loan-to-value ratio (LTV) loans. The effective rate increased from last week.
• The average contract interest rate for 30-year FRMs with jumbo loan balances (greater than $417,000) increased to 4.06% from 4.04%, with points increasing to 0.29 from 0.25 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.
• The average contract interest rate for 30-year FRMs backed by the FHA edged up 3 basis points to 3.83%, with points increasing to 0.16 from 0.06 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.
• The average contract interest rate for 15-year FRMs went from 3.26% to 3.29%, with points dipping to 0.24 from 0.30 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.
• The average contract interest rate for 5/1 ARMs jumped 5 basis points to 3.04%, with points increasing to 0.48 from 0.45 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.

The survey covers over 75% of all U.S. retail residential mortgage applications.

After posting a decline in April, The Conference Board' Consumer Confidence Index increased moderately this month.

It now stands at 95.4 -- up 1.1 from the previous month's reading. The Present Situation Index rose 3 points -- to 108.1, while the Expectations Index edged down to 86.9 from 87.1.

“After a three-month slide, the Present Situation Index increased, propelled by a more positive assessment of the labor market,” said Lynn Franco, director of economic indicators at The Conference Board. “Expectations, however, were relatively flat following a steep decline in April. While current conditions in the second quarter appear to be improving, consumers still remain cautious about the short-term outlook.”

Gauging the consumer view

Consumers’ assessment of current-day conditions improved in May. Those saying business conditions are “good” edged down from 25.5% to 25.2 percent. However, those who think they're “bad” also decreased -- from 19.2 % to 17.4%.

The assessment of the job market was mixed. Those who see jobs as “plentiful” rose from 19.0% to 20.7%, while those saying they are “hard to get” rose from 25.9% to 27.3%.

Optimism about the short-term outlook edged lower in May. The percentage of consumers expecting business conditions to improve over the next 6 months inched up from 15.4% to 15.6%, while those who predict business conditions will worsen also increased -- from 9.1% to 10.8%.

Consumers’ outlook for the labor market, however, improved. Those anticipating more jobs in the months ahead increased from 13.8% to 14.6%, while those who look for fewer jobs declined from 16.4% to 15.5%.

The proportion of consumers expecting growth in their incomes was unchanged at 17.4%, while the proportion expecting a decline rose slightly from 10.8% to 11.1%.

The monthly Consumer Confidence Survey, based on a probability-design random sample, is conducted for The Conference Board by Nielsen. The cutoff date for the preliminary results was May 15.

Toyota Motor Sales is recalling approximately 3,000 model year 2015 Lexus NX 200t vehicles.

The recalled vehicles are equipped with an Anti-Lock Braking system (ABS), Traction Control System (TRAC) and Vehicle Stability Control System (VSC) which are controlled by the ABS actuator. There is a possibility that a component inside the actuator could be damaged during assembly and later not operate properly. Under some driving conditions, if the ABS is activated, this could cause a loss of vehicle stability, which can increase the risk of a crash.

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

All known owners of the recalled vehicles will be notified by first class mail. Lexus dealers will inspect the ABS actuator and if necessary replace it with a new one.

Owners may contact Toyota customer service at 1-800-331-4331, or Lexus customer service at 1-800-255-3987.

Bombardier Recreational Products (BRP) of Canada is recalling about 12,500 all-terrain vehicles (ATVs).

The youth ATVs fail to meet performance requirements of the federal standard for maximum unrestricted speed and parking brakes, posing a crash hazard.

No incidents or injuries have been reported.

This recall is for model year 2008 through 2015 Can-Am Mini DS ATVs. The recalled vehicles are youth model ATVs and have engines sizes of 70 cubic centimeters and 90 cubic centimeters. They were sold in the colors black and yellow. "Can-Am DS" and the engine size is on both sides of the vehicle's fairing. "Can-Am" appears in white letters on both sides of the seat.

Model year 2008 through 2014 DS 70 ATVs fail to meet requirements pertaining to the unrestricted maximum speed of the vehicle. Model year 2008 through 2015 DS 70 and DS 90 ATVs fail to meet requirements pertaining to parking brakes.

The ATVs, manufactured in Vietnam, were sold at Can-Am dealers nationwide from July 2007, through January 2015, for between $1,800 and $2,800.

Consumers should immediately stop using the recalled ATVs and contact a BRP dealer to schedule a free repair. BRP is notifying registered consumers directly.

Consumers may contact BRP toll-free at (888) 272-9222 from 9 a.m. to 9 p.m. ET Monday through Friday.

Gerber Legendary Blades of Portland, Ore., is recalling about 161,000 Cohort folding knives.

The locking mechanism can fail to hold the blade, posing a laceration hazard.

The company has received 6 reports of laceration injuries, 2 of which required stitches.

The Cohort is an open frame folding clip knife with either a black or dark gray anodized aluminum handle. The tail end of the handle includes a lanyard hole. When the knife blade is fully extended, it is held in the open position with a liner lock function. When fully extended, the overall length of the knife is about 7 inches. When closed, the knife measures about 4 inches.

The knife blade is 3 inches long, weighs less than 3 ounces and has the Gerber “sword and shield” trademark in silver on the non-clip side of the blade. The Gerber name appears on the knife clip.

The following models are being recalled:

Model numbers can be found underneath the UPC barcode on the lower right corner on the rear of the hanging blister packaging. For box packaging, the model number is found on the bottom of the box.

A product date code appears on the blade, beneath the thumb stud, on the clip side of the knife. The last figure in the code is a letter, and the recall applies to all Cohort knives with the letters “E” and “F.”

The knives, manufactured in China, were sold at Bass Pro Shops, Cabela’s, Home Depot, other retailers nationwide and online at www.gerbergear.com and other online sporting goods stores from January 2013, through March 2015, for about $30.

Consumers should stop using the knife and contact Gerber for a replacement.

Consumers may contact Gerber Legendary Blades toll free at (877) 314-9130 between 9 a.m. and 5 p.m. PT Monday through Friday.

We are well into the spring home shopping season and in many markets, would-be buyers are having to compete for properties. Inventories of available homes remain tight in many metros.

So when you come across the cute “mid-century” rancher in a good neighborhood at an attractive price you may be ready to pounce. But before you do, there are four parts of the home you should closely examine. They can be the difference between a good deal and a money pit.

They are, in order of importance, the roof, the basement or crawlspace, the heating and cooling system (HVAC) and the electrical service.

Roof

The roof protects the integrity of the structure. If it leaks, moisture is getting inside and causing all sorts of damage.

If shingles are missing or are cracked and peeling, the roof may already be leaking. If the shingles are intact but are curling or torn, they are on their way to failing.

Discolored shingles can be a sign of mold or algae growth on the roof. That holds moisture and can cause rapid deterioration.

Inside, water spots on the ceiling can be a telltale sign of a leaky roof. That may be reason enough to walk away. The cost of replacing a roof will be several thousand dollars and that doesn’t cover the repairs to any damage that may have already occured.

If the house is going to need a roof replacement soon after you move in, that cost should be reflected in your offer. On the other hand, if the roof has recently been replaced, that’s a big checkmark in the house’s favor.

Crawlspace or basement

Just as moisture invading your home from above, an invasion from below is just as damaging. Water can get under the structure any number of ways. Sometimes the contour of the lot allows rain water to collect next to the foundation, but more often than not the water comes from the roof, by virtue of overflowing gutters or downspouts.

Subterranean water is easier to spot in a basement because of easier access. In addition to the musty odor you can detect water marks on walls where water has entered. If basement walls have recently been painted it may be reason enough to suspect a water problem.

Water is harder to hide in a crawlspace, but may require crawling into a dark, cramped space with a flashlight. Moisture can usually be detected by the musty smell. If water is present, there is a chance of mold and insect damage as well.

Whether it’s a basement or a crawlspace, addressing water issues is usually a costly home repair and to be avoided, if possible.

HVAC

HVAC systems keep you cool in the summer and warm in the winter. Furnaces tend to last a lot longer than air conditioners but you still want to pay attention to the furnace’s age. The same is especially true for air conditioners.

Window units that cool specific parts of the home, are relatively inexpensive and easily replaced. Not so with central air units. According to the experts at This Old House, central air conditioning units last 10 to 15 years, heat pumps about 16.

A home with a newer cooling system is a big plus. One with an older system will likely need replacing soon, at a cost of several thousand dollars.

Electric service

All homes have electricity but some have more of it than others. Many older homes are still powered by 100 amp service, which was the standard when they were built. Modern homes have 200 amp service and are able to handle today’s greater electricity demands.

For example, a home may need a 200 amp service to handle a large load HVAC system or other large appliances. If a home doesn’t have it, it can cost several thousand dollars to add and should be considered before making any offer.

Home shoppers often get fixated on granite countertops and stainless steel appliances. Before considering the cosmetics, better focus on structural basics like roof, foundation, HVAC and electric service.

It was just a few weeks ago that Comcast bowed to opposition from consumer activists and skepticism from regulators and withdrew its offer for Time Warner Cable.

Now Charter is buying Time Warner for about $55 billion and predicts the deal will be approved because a combined Charter/Time Warner would be a stronger competitor for Comcast.

Comcast, with 22 million subscribers, is the biggest cable and Internet provider in the country and has a knack for making enemies. Charter, by comparison, is a mere pup with about 6 million subscribers. Bright House, owned by the Newhouse interests, which would also be acquired by Charter, has about 2.5 million. The three companies combined would have about 20 million subscribers.

Charter is seen by the people who make their livings generating spin about deals like this as more consumer-friendly, perhaps because it's smaller. It's not that small, though. Its largest shareholder is billionaire John Malone who has enjoyed a lengthy career building gigantic media enterprises.

Back to the future

There is a certain method to this apparent madness. If you look back a few years to 2013, you'll find that Charter was then trying to acquire -- yes -- Time Warner. Time Warner said no and Charter's bid escalated into an attempted hostile takeover.

Time Warner rebuffed Charter by leaping into the waiting arms of Comcast and the invisible hand of public opinion manipulation went to work stoking up opposition to the Comcast deal.

The argument went something like this: Comcast will be oh so big that it will squash such small competitors as Netflix in the fast-congealing gob of cable and streaming video.

Activist groups like Public Knowledge and Consumers Union took to the barricades, warning that the sky would fall if Comcast's evil empire grew any larger. Charter's slightly smaller evil empire? No problem.

“It appears much less of an antitrust concern than the Comcast deal,” said Public Knowledge president Gene Kimmelman in a Washington Post report.

Squash newcomers

It seems to escape everyone's attention that Malone, 74, has spent the past several years preaching the gospel of cable consolidation as a weapon against the emerging threat that streaming video represents to cable interests. Cable operators must join forces to stamp out the newcomers, in other words. 

A combined Charter/Time Warner may have only a size 11 boot but that will likely be just about as effective as the size 12 boot Comcast/Time Warner would have brought to the party. 

Meanwhile, the largest cable provider is about to be none of the above. The AT&T/DirecTV merger appears to be smoothly moving towards completion. Anyone who thinks AT&T will deal gently with intruders on its turf should do a little research into the history of the telecommunications business.