• What people are saying
• Tip of the month: Debit cards
• Class action prohibitions challenged
• Give student debtors a second chance
• Building a national financial literacy strategy
• The outreach team on the housing trail
• CARD Act Training in Maryland
• Hotline Chronicles: Burned by 'love'

What people are saying

I have worked with the Alabama Cooperative Extension System in the area of Family Financial Management for almost nineteen years and I really enjoyed your MoneyWise presentation. I learned a great deal about the changes in the financial area recently and the information about Rebuilding Credit and Id Theft was invaluable to me and ultimately to my clientele in eight counties here in Northwest Alabama. The people in our area of this region will really benefit from the MoneyWise presentation.

— Lelia Wissert, Regional Extension Agent, Consumer Science and Personal Financial Management

Tip of the month

When it comes to debit cards, electronic transactions are governed by a different federal law than credit card charges. Regulation E, the Electronic Funds Transfer Act, protects debit card users from fraudulent charges (except for the first $50) if the cardholder reports a lost or stolen card within two business days after learning of the loss. Debit cards (like credit cards) can be used fraudulently by copying your authorized signature or stealing your PIN.

Despite federal law, you may have a higher level of protection on your card because many of the banks that issue debit cards voluntarily offer "zero liability" to cardholders. Both MasterCard and Visa have policies that go beyond federal guidelines so that you will not be held financially liable for fraudulent purchases on your card. Ask your bank if your debit card has zero liability and, if so, what types of transactions are covered.

To fully protect yourself under federal Regulation E, you must report a lost or stolen debit card to your bank within 2 days of the time you become aware that it's missing. You then will be liable only for $50 of your losses.

For more information, visit our page on Understanding Debit Cards.

Class action prohibitions challenged

Consumers often unknowingly sign away their right to sue companies in a court of law through arbitration clauses. Buried in the fine print of everything from employment contracts to cell phone and nursing home agreements, forced arbitration occurs when a company demands that, in exchange for goods and services like jobs and healthcare, consumers agree to give away their rights to legal protections and access to the court system. Consumer Action has long fought this type of conduct by companies and in fact was a pioneer in litigating on behalf of consumers in Ting v. AT&T. "We believe that citizens who have been harmed by discrimination, negligence, defective products or scams should not be forced into arbitration," says Michelle De Mooy, national priorities senior associate at Consumer Action’s Washington office.

Consumer Action's advocacy team has been fighting to end this practice via legislative means. For the last several years, the organization has lobbied to pass two key bills in Congress: the Arbitration Fairness Act, which would make mandatory binding arbitration unenforceable in civil rights, employment, consumer, and franchise disputes, but would not eliminate voluntary arbitration agreed to after a dispute arises; and the Fairness in Nursing Home Arbitration Act, which would invalidate pre-dispute mandatory arbitration provisions in nursing home, assisted living, and other long-term care facility contracts. Unfortunately, both bills died in Congress this year despite Consumer Action’s efforts. The advocacy team plans to communicate to legislators the importance of recognizing the basic unfairness of forced arbitration by passing both bills in the 112th Congress.

A key Supreme Court case will also greatly impact the future of forced arbitration. In AT&T v. Concepcion, the U.S. Supreme Court will decide whether corporations can ban class actions against t against it in the fine print of their contracts with consumers and employees. The question presented in AT&T v. Concepcion is whether the Federal Arbitration Act of 1925 precludes courts from declining to enforce class-action bans when they are embedded in arbitration agreements.The Court will hear arguments in the case in November of this year, which will be argued in part by Consumer Action coalition partner, Public Citizen.

Consumer Action signed on to an amicus brief in support of the respondents in the case. Among other highlights, the brief points out that the majority of aggrieved consumers have no idea they have legally enforceable rights. The median loss is $220, an amount so small as to discourage the use of attorneys and the incursion of legal fees to settle the dispute even if consumers were aware of their options.

For two-thirds of middle class consumers, civil legal needs pertaining to consumer services are not met. For indigent consumers, this figure jumps to four-fifths. Individual arbitration is no substitute for class actions for the same reason that arbitration is no substitute for individual litigation in court.

“While many praise arbitration as relatively inexpensive, and geared to help persons with small claims to achieve justice,” says Jean R. Sternlight of the William S. Boyd School of Law at the University of Nevada, “no one has seriously suggested that arbitration ensures an economically viable forum for persons with claims of five dollars, ten dollars, or even two hundred dollars.”

Give student debtors a second chance

For the first time, Americans owe more in student loans than they do in credit card debt. Americans owe about $826.5 billion in revolving credit, mostly credit card debt, and $829.8 billion in government and private student loans.

In September, the student loan bankruptcy bill passed its first hurdle, passing 6 to 3 in a vote by a panel of the House of Representatives Judiciary Committee. The legislation would amend the federal bankruptcy code to remove qualified educational loans as an exception to discharge from bankruptcy. Struggling borrowers have virtually no way to make private loan debt more manageable, as lenders generally refuse to negotiate affordable terms.

This is not a matter of giving people a way to avoid legitimate debts. Private student loans carry guarantees for lenders but few rights for borrowers who cannot afford to repay the loans. On the other hand, federal student loan borrowers are eligible for income based repayment and loan forgiveness programs.

According to the non-profit Institute for College Access & Success, private student loans are one of the riskiest ways to pay for an education. Like credit cards, private loans typically have uncapped; variable interest rates that are highest for those who can least afford them. Click here to urge your representatives in Congress to support HR 5043 and S. 3219 to provide fair treatment of borrowers with private student loans.

Building a National Financial Literacy Strategy

In mid September, Consumer Action submitted comments to the Treasury Department’s Office of Financial Education and Financial Access on initiatives aimed at increasing consumer knowledge of personal finance. In particular, our comments focused on the OFE’s proposed Core Competencies Concepts and National Financial Literacy Strategy.

Core competencies would map the most important things people need to know to successfully manage their personal finances. The National Literacy Strategy (click here to download) is a framework for improving the financial literacy and education of Americans.

These documents are part of the mission of the Financial Literacy and Education Commission (FLEC), chaired by the Treasury secretary with membership comprised of 20 federal agencies. The commission was established under the Fair and Accurate Credit Transactions Act of 2003 (FACTA). Under this mandate, a national financial education website, MyMoney.gov, and a toll-free hotline, 888-MyMoney, were established for consumers. These resources are intended to expand financial education and serve as a resource for Americans seeking information to inform their personal financial decisions.

In addition to other things, the FLEC proposal outlined a kind of nutritional label (or chart similar to the nutritional pyramid) for financial products. Consumer Action suggested that a “life cycle chart” would be more effective than a finance pyramid because it would show the interactivity between the financial choices we make. For example, one’s understanding of credit and loans can have a drastic effect on your earning, spending, and savings.

Click here to read Consumer Action’s comments.

For close to 40 years, Consumer Action has been a pioneer in the consumer movement, working to improve consumer literacy and protect consumer rights in areas consumers care about most: credit cards, home ownership, insurance, healthcare, online and medical privacy, and basic necessities such as phone service.

“We have worked tirelessly to educate consumers who are unsophisticated about financial services, have limited English skills and who don’t have access to the information they need to cope with increasingly complex financial product offerings,” says Executive Director Ken McEldowney. “In this regard, we have many insights into teaching people to manage their money effectively and to build assets and wealth.”

The Commission has met quarterly since it was established in January 2004, and has invited representatives from many financial education sources to present information on their programs. Consumer Action’s Ruth Susswein has attended the meetings and has spoken about Consumer Action’s multilingual financial literacy outreach model. The next meeting of the Financial Literacy and Education Commission will take place on Jan. 26, 2011 at 10:30 a.m. at the Department of the Treasury. For more information, visit the FLEC website.

The outreach team on the housing trail

In light of recent news concerning foreclosure issues, the outreach team’s training on homeownership could not have come at a better moment. Consumer Action staff traveled to California’s Central Valley (Visalia) and Central Coast (Monterey) to conduct housing roundtables for approximately 80 staff members and leaders of community-based organizations. The Central Valley roundtable was co-hosted by Self-Help Enterprises, based in Visalia, and the Central Coast roundtable was co-hosted by Monterey County Community Action Partnership, based in Salinas. At both sessions, the outreach team recruited local experts to speak from their experience with the local market.

The “Keys to Homeownership” and “Successful Homeownership” modules are a part of the Capital One MoneyWi$e training module and are a part of Consumer Action’s Housing Information Project. The materials teach consumers about the home buying process and how to be successful at homeownership. The modules include: brochures for consumers, leader’s guides for financial educators to anticipate questions, lesson plans with interactive activities and power point slide presentations.

At both trainings, Community Outreach Manager Linda Williams led the group in a Community Toolbox networking exercise, where the participants were divided into teams. Each team was assigned the task of identifying two community issues, discussing possible solutions and selecting two team ambassadors to go from team to team to find more solutions for their particular issues. Participants were observed taking copious notes on local resources and identified programs they plan to implement when they returned to their respective agencies.

Williams concluded the morning session at each roundtable with a presentation on How Adults Learn, a component that is as important as the content being delivered. Williams used a combination of visual, audio and kinesthetic (learning by doing) teaching styles to demonstrate that adult educators need to incorporate a variety of learning styles to reach adult learners. This particular piece has evolved into one of Consumer Action’s most talked about training tools.

At both trainings, there was a lunchtime presentation on advocacy. Consumer Services Manager Joseph Ridout led the discussion on advocacy in Visalia. Ridout discussed key pieces of California legislation and how the various groups can get involved in Consumer Action’s online Take@ction Center.

At the Monterey training, Staff Attorney Melissa Mikesell from the Alliance for Justice gave a presentation on Worry-Free Advocacy.

Community Outreach Manager Nelson Santiago delivered a preview of both housing modules, Keys to Homeownership and Successful Homeownership. Santiago had the group analyze the budget of a fictional homebuyer, Eva, and make recommendations on steps to take to trim her budget in preparation for homeownership. He broke the audiences into teams so that they could work on selecting a property for their fictional homebuyers and make offers on a property. Both activities are in the You Can Buy A Home Lesson Plan (click on title to download). Santiago also had the group working in teams to solve the crossword puzzle in the Successful Homeownership Lesson Plan.

Sarah Shena, Esq. of the Kings/Tulare Area Agency on Aging, a participant, said, "I was lucky to attend part of the Consumer Action Housing Round Table in Visalia this fall. In particular, I wanted to see the presentation on How Adults Learn, as I often make presentations to the public. I found the session so useful that I have recommended my employer begin offering a similar training."

CARD Act Training in Maryland

Consumer Action joined counselors from the Mission of Peace this October for part of its week-long national conference at the grand Gaylord Hotel and Convention Center at the National Harbor in Maryland.

After participating in Consumer Action’s American Express-sponsored “Credit Cards What you Need to Know” training in Detroit at the end of September, the Mission’s CEO Reverend Elmira Smith -Vincent invited Consumer Action to take part in its recent national conference.

National Priorities Deputy Director Ruth Susswein trained counselors on the benefits of the CARD Act, the credit card law that prevents card issuers from increasing interest rates on balances (with very few exceptions), makes card fees and terms more understandable, and saves consumers money by requiring penalty fees to be “reasonable” and payments to be applied to balances with the highest interest rate.

Mission of Peace is a HUD-approved housing counseling agency with affiliates across the nation. The faith based non-profit based in Flint, Michigan, has provided homeownership and credit counseling to 17,000 families and individuals since 1997. Mission of Peace devotes itself to educating and counseling underserved communities to achieve and maintain homeownership.

Rev. Elmira Smith-Vincent, president and CEO of Mission for Peace, commended Ms. Susswein on an excellent delivery on a timely issue that provided a wealth of knowledge for the counselors in attendance. Consumer Action looks forward to future partnership opportunities with the organization. This is just one example of the long-term, steadfast relationships Consumer Action has built with the more than 8,000 community-based organizations in its national network.

Hotline Chronicles: Burned by 'love'

A San Francisco man contacted Consumer Action’s hotline to share how he had fallen for a “sweetheart scam” with someone posing as an available prospect on the free dating site Badoo.com.

He met a woman on the site and they corresponded. The woman said that she was in financial difficulties and could not afford her medicine. The kind-hearted but gullible gentleman from San Francisco sent her $2,300 in $50-$100 increments via wire service. Then, one day, “that was all she wrote.”

“Asking you for money on a dating site is a red flag for fraud,” says Consumer Action’s Joe Ridout, who manages our complaint hotline.

It turns out that Badoo.com customers have met a lot of bad apples on the site. One online post said, “Join the Badoo site and you will be bombed with Ghana scammers. I get about three a day. They all have false photos. Two scammers turned up with the same photo. It’s the place for baiting [gullible and lonely individuals]. Most of the scammers on Badoo give no profile and always are drop dead gorgeous.”

According to RomanceScam.com, a site where users post information about scam artists, scammers tend to be from Nigeria and Russia.

Badoo.com is not the only place you can fall for a sweetheart scam. Anyone on any dating site, in the personals, or on a social network could be a scammer. Some of the deception can be remarkably inventive, as demonstrated in the new documentary, “Catfish,” a tale of twisted cyber-romance. So no matter how perfect this one sounds, never, ever:

• Share personal information such as your full name, address or home or cell number
• Arrange to meet a stranger at (or even near) your home
• Wire money or give your bank account information to a stranger—even if you feel you know the person or have fallen in love
• Agree to sponsor the individual for a green card to live and work in the U.S.

Some signs you have met a sweetheart scammer:

• S/he asks how to send you gifts
• You are asked to cash a check, keep some cash and send the rest to your sweetheart
• You are asked for money to help with a “financial difficulty"
• You are asked for your bank account information via e-mail
• You are threatened when you won’t send money
• The scammer attempts to blackmail you

The Federal Bureau of Investigation has warned people about a related scam. Those who have fallen for a romance scam are then contacted by so-called detectives offering their services, for a fee, to track down the scammer. This new scam artist then attempts to dip back into the pot by asking for more money to get the fraudster arrested and brought to justice.

If you are scammed:

• File a complaint with the Internet Crime Complaint Center.
• If you feel you've been victimized in a fraud scheme that involves the U.S. Mail, file a complaint with the U.S. Postal Inspection Service.
• Do not attempt to get back at the scammer or seek revenge by continuing to communicate.
• If you still want to look for a date online, set up a “throw away” email account so you don’t inadvertently give the scam artist personal information.
• Monitor your free credit reports at AnnualCreditReport.com to make sure you are not a victim of identity theft.

In researching this story, Consumer Action discovered Romance Scams ([url=http://www.romancescams.org]http://www.romancescams.org[/url]), a website that offers a wealth of information about this threat, including victim stories, advice and links to news articles about the terrible impact that falling for a sweetheart scam can have on your life.