Consumer Action INSIDER - June 2013

 

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What people are saying

I was glad to discover your financial educational materials and I use them with the participants I work with each day. They are practical, fun and keep the groups engaged. — Julie Riley, Galveston Housing Authority

Did you know?

The average state and local taxes and fees charged to wireless phone owners increased 5.5 percent in just two years (2010-2012). See where your state stands, at MyWireless.org.

Student loan borrowers, share your stories

Over the past few weeks, Consumer Action has been collecting stories from student loan borrowers as part of a collaborative effort spearheaded by the National Consumer Law Center (NCLC). Recently, the student loan and for-profit education industries have been under increased scrutiny from policymakers, the media and the public.

Outstanding student loan debt in the U.S. is approaching $1 trillion, according to the Federal Reserve Bank of New York's Quarterly Report on Household Debt and Credit. Many fear that the enormous outstanding student debt could trigger the next big U.S. economic fiasco.

“Personal stories and victim testimony lend impact to important policymaking efforts,” said Nelson Santiago, a community outreach manager at Consumer Action. “Now is a good time to gather the consumer experiences that can help prove that improved student loan consumer protections are vital to a healthy economy.”

To share your story now, follow this link.

The problem

Student loans can easily become an excessive burden to consumers and a barrier to financial empowerment. Private student loans, in particular, can leave struggling borrowers with few options for relief. In its May 2012 report on student loan affordability, the Consumer Financial Protection Bureau (CFPB) noted that many private student loan borrowers, in periods of temporary hardship, have been unable to negotiate affordable repayment plans with their lenders and servicers.

Unlike federal student loans, private student loans generally do not allow for flexible, affordable repayment options, such as those where payments are contingent on borrower income. In an analysis of complaints received, the CFPB's report also noted that borrowers of both federal and private student loans reported difficulties finding refinance options and were thus prevented in many cases from taking advantage of historically low interest rates.

In addition, student loans generally are not dischargeable in bankruptcy. If unpaid, lenders can confiscate federal tax refunds and even garnish Social Security income.

Working toward a solution

Policymakers and advocates are currently discussing modification of student loans as a way to assist private student loan borrowers. In comments filed with the CFPB this April, NCLC identified five key features for proposed loan modification programs. NCLC summarized these features in an April 10 press release: 1) Modifications must be truly affordable for borrowers; 2) Borrowers must not lose any existing rights or protections; 3) Borrowers must be able to enforce their rights under the modification program; 4) The program must reach a high percentage of eligible borrowers; and 5) The program must be fair to borrowers, taxpayers and lenders.

NCLC emphasizes the need for additional policies to assist current borrowers and prevent future student loan defaults, including restoration of bankruptcy rights for all student loan borrowers and reduced impact of negative credit reporting on borrowers’ ability to access housing, employment opportunities and other basic needs. It recommends that future loans be based on sound underwriting practices and include provisions for flexible repayment and discharges when schools close before students can earn a degree and when borrowers become disabled or die.

Consumers speak

The stories that former students recently shared with Consumer Action illustrate the huge impact that student loan payments can have on household budgets and the challenges that result from inflexible private student loans. One woman who received federal loans totaling about $115,000 is trying to pay them back on an annual salary of only $43,000. She explained that she tries to make her student loan payments on time every month, which often makes her late with her car loan and credit card payments.

Another borrower told Consumer Action that she took out federal and private loans to attend a private university and became the first person in her family to graduate from college. Now, she says, her private (non-government) loans have caused financial troubles because a mandatory ten-year repayment period prevents her from securing a reasonable repayment plan. She has placed her federal loans in forbearance since she can't pay both the federal and private loans. “I wish someone would have explained to me the difference between private and federal loans and the repayment requirements for both,” she wrote. “I would like to see more repayment options for private student loan borrowers.”

Consumer Action calls on consumers who have experienced problems with student loans or with their schools to share their stories. Click here to share your story.

On the road with the CFPB

At a Consumer Financial Protection Bureau (CFPB) field hearing in Des Moines, Iowa, in March, Bureau Director Richard Cordray announced a major expansion of the Bureau’s public complaint database to include all financial products and services that the CFPB supervises, including mortgages, student loans, bank accounts and more. Until recently, consumers only had access to credit card complaint data.

Consumer Action’s Ruth Susswein, who was in Iowa to participate in the hearing, has led a coalition of consumer groups working to ensure that the complaint data the CFPB shares with the public is comprehensive and useful, spotting trends and providing crucial information to consumer protection efforts. She was invited to speak as part of the panel of consumer, corporate and academic experts on the value of the public database.

Cordray told the assembly, “In this age of data and transparency, we believe sharing this information is in everyone’s best interest…It will now be possible for third-party sources to rate the performance of different financial products and services by evaluating what the public, in the aggregate, has to say about them.”

Susswein called on the CFPB to include non-personal but specific details in the database so that consumers can judge a complaint’s validity and avoid troubling trends. “The complaint database has the potential to be an outstanding pre-purchase tool. But so far it’s too limited to be of any real value to the average consumer.”

CFPB officials explained to the packed Iowa audience how to file a complaint online and what information a consumer can retrieve from the database, such as the type of complaint filed, general company response and whether the consumer disputed the company’s response.

Speakers who represented financial services institutions said that corporate reputations could be at risk if “unverified” complaint details were made public.

During the public comments, Jess Mazour, a former Wells Fargo employee who has since become a community activist fighting for homeowners’ rights, listed some of what she called the mortgage servicer’s “immoral practices.” Mazour said that customers would hand in completed loan modification forms but her employer would not examine applications until the information had expired, “purposely forcing people to re-file” if they wanted to save their homes from foreclosure. Mazour urged the CFPB to investigate financial services employee training programs to root out systemic corporate abuses.

The Bureau also heard consumers state strong support for the CFPB and pleas to crack down on payday lenders and foreclosure rescue scams.

To file a complaint, click here. To lodge a complaint by phone, call 855-411-2372 (CFPB). Click here to review the database.

Hotline Chronicles: Hold your ‘penny auction’ bids

Caroline*, a Georgia woman, contacted Consumer Action’s hotline in May about a “penny auction” website where she had made a purchase in late February. She returned the camera she purchased but had not received a refund despite continued efforts to contact the company.

Because Caroline already had attempted to work with website owners, to no avail, we advised her to file a complaint with the Federal Trade Commission (FTC) and her state Attorney General. (Click here to find your AG.)

Having examined penny auction websites, Consumer Action advises buyers to steer clear. In addition to being just plain confusing, they make outrageous profits on standard-quality merchandise and, worse, they may also generate leads for marketers and even scammers.

Penny auction sites make their money off of the bids, not the sale of the products. The FTC has received many consumer complaints about penny auctions. Complaints include late shipments, no shipments or products that aren’t the same quality as those advertised. Sites may charge fees (for membership, ongoing subscriptions or shipping) and have difficult-to-fulfill refund policies.

Winning a penny auction doesn't mean you’ve won an item, it just means you've won the right to buy the item at the final price. If you lose, chances are you've said goodbye to your bid money. For example, if you placed 199 bids on a camera at $1 per bid but didn’t make the last “winning” bid, you'd be out $199 and the camera.

The FTC has found that some dishonest auction sites use “bid bots,” computer programs that automatically bid on behalf of the website, and human shills who rig auctions to force artificially higher bids. You may be seconds away from winning an auction when a shill places a bid. That keeps the clock ticking and forces you into a bidding war. Though the bidder appears to be another user, it may be a shill or a bot programmed by the website to extend the auction and keep people spending.

If the lure of penny auction sites is too much for you to resist, make sure you read the site’s terms of use before you register. Also, put the name of the site plus the word “complaints” in a search engine to learn about other consumer experiences.

*Not this consumer’s real name

LA-based group makes good use of Consumer Action materials

Haven Neighborhood Services, a Los Angeles-based non-profit organization, is a great example of a community group that makes full use of Consumer Action’s MoneyWi$e series and other Consumer Action education modules. (MoneyWi$e is a joint financial education project of Consumer Action and Capital One.) Haven relies on the materials exclusively for its financial literacy education outreach and training, as it literally goes door-to-door to reach clients and community partners.

“The MoneyWi$e modules are clear and self-explanatory. We use the modules in our classes and for one-on-one counseling,” said Haven executive director Erika Toriz.

Haven Neighborhood Services provides comprehensive financial and housing counseling. Its mission is to prevent homelessness by helping distressed homeowners keep their homes, assisting home buyers with affordable purchases and educating first-time buyers and potential homeowners about credit and budgeting. Haven also assists clients in writing letters to creditors to negotiate payment plans and lower interest rates, and conducts financial literacy presentations in the community. For more information about Haven Neighborhood Services, visit its website.

Toriz answered some questions about the organization and how it uses client education materials.

Who is your target audience?

We serve low- to moderate-income families, single moms and dads, parolees, and working parents who support college students.

What specific materials are you using in your financial literacy program?

We use most of the Consumer Action educational modules and resources. (See Consumer Action’s Training Modules page.) The basic banking and credit building modules are especially crucial.

How have you been able to integrate Consumer Action’s free financial literacy information into your work?

Haven Neighborhood Services has fully integrated all 12 MoneyWi$e financial literacy modules and the WirelessED phone education module into our programs. Since Haven Neighborhood Services became an independent counseling agency in 2010, the four-person staff and three volunteers have relied completely on the Consumer Action publications because we do not have a large budget for printing. Our staff finds that the Consumer Action publications are easy to understand and easily adapt to the needs of their clients. Our staff meets with clients in workshop settings, and they take each module and break it down into shorter workshops. After the workshops, staff schedule one-on-one counseling sessions with clients to go over the materials and give personalized attention.

How do you reach your clients?

Haven Neighborhood relies heavily on partnerships and grassroots canvassing of neighborhoods to reach our target audience. We have implemented an educational program using Consumer Action’s MoneyWi$e “Teens and Money” in the Los Angeles Unified School District and in charter schools in the cities of Los Angeles and Maywood. We have partnered with the First 5 LA and STAR Education programs to reach families with young and/or school-aged children. We also have partnerships with local housing groups, workforce development agencies, the criminal justice system and community economic development agencies to provide service to residents of the cities of Los Angeles and Maywood. We teach Banking Basics and WirelessED to Latino families and clients on parole.

Consumer empowerment training is a financial awakening for our clients. Some are unbanked because of child support orders. They are afraid to open accounts for fear of garnishment. Other clients don’t have bank accounts because their employers load their wages onto a prepaid card.

What are your methods and approaches to serving clients?

Haven Neighborhood Services’ methodology has an interdisciplinary, cross-generational approach. We provide workshops not only for adults, but also for youth. By providing workshops that combine a mix of lectures and games, we can engage all learners. As incentives, counselors give out piggy banks as prizes at banking basics workshops.

We find that we are able to reach more clients when we come to them, rather than have them come to us. Paying for transportation to a workshop may be a barrier to learning so we train re-entry clients at their halfway houses. We also provide trainings at schools, churches, libraries and any other venue with easy access for clients.

Our staff conducts post-tests after trainings to assess the changes in attitudes about money and to identify other ways in which we can better serve clients.

Editor’s note: In the back of the WirelessED and each MoneyWi$e lesson plan, there is a post-test evaluation.

Amicus Briefing: An end-run around business data reporting

Consumer Action has signed onto an amicus curiae (“friend of the court”) brief in the case of Beeman v. Anthem Prescription Management, currently before the California Supreme Court.

The case involves actions brought by pharmacies against so-called benefits managers, the intermediaries in the reimbursement process between insurers and pharmacies. The suit charges benefits managers with ignoring a law that requires them to collect data on the fees that pharmacies charge to fill prescriptions and submit that data to insurers. The benefits managers claim that being required to submit this data is “unconstitutionally compelling speech,” an act equivalent to forcing them to express beliefs contrary to their conscience.

Alarmingly, the benefits managers' attempt to evade data reporting requirements on free speech grounds has been upheld in three state appeals courts and is now before the state Supreme Court.

Consumer Action believes the case is important because we fear the benefit managers' position that ordinary industry data should qualify as free speech. Such a ruling would threaten a myriad of regulations that require businesses to report data to the government. Lack of such reporting could undermine numerous consumer protection laws, including statutes that govern product labeling, environmental hazards, shareholder protections and privacy disclosures.

Click here to read more about the case.

Keynoting at Military Saves Week at Camp Pendleton

Linda Williams, Consumer Action’s community outreach and training manager, was invited to give the keynote speech at a training held at the Marine Corps’ Camp Pendleton. The base is home to thousands of active and reserve Marine, Army and Navy units.

The event marked Military Saves Week, the launch of an annual campaign to encourage military families to save money every month. Military Saves is a partner in the Department of Defense’s Financial Readiness Campaign and a project of the Consumer Federation of America.

Williams provided servicemembers with an in-depth training on Consumer Action’s newly revised MoneyWi$e identity (ID) theft module, which includes a section on specialty consumer reports. During the training session, Williams described the different forms of ID theft, such as financial, medical and criminal, and warned the audience of the increasingly high threat of identity theft in this country.

She stressed the importance of being aware of the signs of Identity theft, such as unusual transactions on financial accounts, and ways consumers can protect themselves from becoming victims, noting that ID theft awareness and prevention is of particular importance to those who may undergo security clearance investigations. A security clearance investigation is an inquiry into an individual’s background, including specialty consumer reports and credit history. This information is used to evaluate an individual’s trustworthiness, financial responsibility and any history of criminal activity, Williams said. A loss of security clearance can cause an active duty servicemember to lose a job or promotion opportunities and may even lead to a bad conduct discharge.

Williams highlighted ways that servicemembers can ensure their identity is protected:

  • Regularly check credit and specialty consumer reports and place an active duty alert on your credit report. Williams urged servicemembers called to active duty or deployed outside their normal duty stations to consider placing an “active duty” alert on their credit reports (for up to one year) to reduce the risk of becoming victims of identity theft. She told the servicemembers that when a business sees an “active duty” alert on a credit report, they are required to verify that person’s identity before issuing credit.
  • Keep personal information safe when online. Williams reminded the audience to make sure websites they visit are legitimate and to always verify with whom they are interacting online. When making online purchases, be sure you are visiting a secure website, with https:// instead of just http:// (missing the “s”) in the URL. Williams also advised the servicemembers to take the time to delete old transaction messages on their mobile devices or computers that might contain hints about where they bank, shop or make payments.
  • Secure electronic devices. Williams spoke about taking the time to password protect mobile devices, apps and any other access points to financial accounts, as well as learning about and activating other device security and privacy features. She added that users should avoid storing login information, and eschew the notepad function on their mobile devices to record banking and other sensitive information.
  • Beware of what you post on social networks. The Federal Trade Commission (FTC) recently has given Social Intelligence Corp, a private business, approval to run social media background checks, Williams revealed. This means that Social Intelligence is permitted to search through Facebook photos, videos and groups to determine an applicant’s social media history. The searches aren’t limited to Facebook; anything positive or negative found on any social media website is considered fair game.

Additional resources:

Chinese community craves consumer education advice

During March and April, Jamie Woo, Consumer Action’s San Francisco-based community outreach manager, conducted radio interviews for Chinese-language programs at Sing Tao, Metro Radio and Rush Hour Radio.

Woo was interviewed on a variety of money management topics, including debt management plans, credit card surcharges, rewards scams and pyramid schemes.

Noting that the Chinese-American community is still reeling from the 2008-2009 economic crisis, she says that when the radio phone lines were opened for calls from Chinese-speaking consumers, an eager group was waiting to have their questions answered. She said some of the callers asked about consumer rights while others wanted to share their experiences and warn others about potential pitfalls.

She said some callers expressed appreciation for Consumer Action’s in-language consumer education and advocacy and complimented Woo on the wide range of topics covered by Consumer Action’s free multilingual educational publications and its Chinese hotline services. Many Chinese consumers still experience a language barrier, but with the help of Consumer Action they are able to educate themselves and assert their rights in the marketplace.

Woo also presents frequently at events sponsored by Chinese community organizations. Recently, she spoke to an audience of 40 at the Chinese Newcomers Service Center in San Francisco’s Chinatown about electronic banking and online safety.

Helping push back a disastrous state auto insurance effort

Consumer Action’s consumer services manager and legislative liaison Joe Ridout was honored at the Consumer Federation of California's annual Legislative Reception in April for his work to help stop the anti-consumer Proposition 33, which would have allowed auto insurers to raise insurance rates whenever consumers let their policies lapse.

Under Prop 33, funded entirely by Mercury Insurance billionaire George Joseph, drivers who stopped driving because they moved to a job within walking distance, or went car-free due to financial struggles or out of concern for the environment, would have faced steep penalties. Meanwhile, drivers maintaining coverage would not have received any discounts or benefits as a result of keeping their policies in force.

The measure was virtually identical to 2010’s failed Proposition 17, which voters had rejected two years earlier. That effort led the editors of the Sacramento Bee to conclude in an editorial that “Prop 33 is [just] an old jalopy with a new coat of paint.”

Although the insurance tycoon spent 65 times more than pro-consumer forces, the measure failed 55% to 45%. Refreshingly, the fight over Prop 33 shows that money does not always triumph over the public interest.

Coalition Efforts: From milk to student loans

Rental companies should put consumer safety first. While current law prohibits car dealerships from selling recalled vehicles to consumers, no law bans rental car companies from selling or renting them to unsuspecting consumers. The Raechel and Jacqueline Houck Safe Rental Car Act of 2013 would keep unsafe rental cars that have been recalled off the road. Consumer Action joins coalition allies, all major rental car companies and the American Car Rental Association in supporting this bill. Click here to read the statement.

Protecting investors from surrendering their rights. Consumer groups urged the new U.S. Securities and Exchange Commission (SEC) chairman, Mary Jo White, to review and restrict pre-dispute binding mandatory arbitration in securities contracts. Instead of an open system, the current private arbitration system harms investors by forcing them to pay high filing and hourly fees. The neutrality of this private judicial system is also under question. Click here to read the letter.

Dairy Security Act will raise prices on milk and dairy products. The Dairy Market Stabilization Program, included in the Dairy Security Act of the Farm Bill, raises milk and dairy prices for consumers by imposing limits on milk production. Price increases caused by this program would negatively impact federal nutrition assistance programs and the millions of low-income families that depend on them. Consumer Action signed onto a letter of protest sent to the chairman of the House Agriculture Committee. Click here to read the letter.

Protecting students from predatory school loans. When the Consumer Financial Protection Bureau (CFPB) requested input regarding an initiative to promote student loan affordability, consumer groups recommended that the CFPB meet five essential criteria when considering a modification program: affordability, preservation of borrower protections, enforceability, efficiency and scale, and fairness. Click here to read the comments.

About Consumer Action

Consumer Action is a non-profit organization that has championed the rights of underrepresented consumers nationwide since 1971. Throughout its history, the organization has dedicated its resources to promoting financial and consumer literacy and advocating for consumer rights in both the media and before lawmakers to promote economic justice for all. With the resources and infrastructure to reach millions of consumers, Consumer Action is one of the most recognized, effective and trusted consumer organizations in the nation.

Consumer education. To empower consumers to assert their rights in the marketplace, Consumer Action provides a range of educational resources. The organization’s extensive library of free publications offers in-depth information on many topics related to personal money management, housing, insurance and privacy, while its hotline provides non-legal advice and referrals. At Consumer-Action.org, visitors have instant access to important consumer news, downloadable materials, an online “help desk,” the Take Action advocacy database and nine topic-specific subsites. Consumer Action also publishes unbiased surveys of financial and consumer services that expose excessive prices and anti-consumer practices to help consumers make informed buying choices and elicit change from big business.

Community outreach. With a special focus on serving low- and moderate-income and limited-English-speaking consumers, Consumer Action maintains strong ties to a national network of nearly 7,500 community-based organizations. Outreach services include training and free mailings of financial and consumer education materials in many languages, including English, Spanish, Chinese, Korean and Vietnamese. Consumer Action’s network is the largest and most diverse of its kind.

Advocacy. Consumer Action is deeply committed to ensuring that underrepresented consumers are represented in the national media and in front of lawmakers. The organization promotes pro-consumer policy, regulation and legislation by taking positions on dozens of bills at the state and national levels and submitting comments and testimony on a host of consumer protection issues. Additionally, its diverse staff provides the media with expert commentary on key consumer issues supported by solid data and victim testimony.

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