Consumer Action INSIDER - April 2020

 

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What people are saying

Consumer Action is up to date on the problems that occur [with predatory lending, scams, etc.]! — Adolphus Jackson via Consumer Action’s Facebook (reviews) page

Did you know?

Financial scams and abuses that target older people are happening more often, especially because of the growing coronavirus crisis. When you report elder fraud—even if it's attempted fraud and you didn’t fall for it—you can help authorities stop criminals and prevent other people from becoming victims. If you or someone you know has been a target or victim of elder fraud, contact the National Elder Fraud Hotline (run by the U.S. Department of Justice) at 833–FRAUD–11 (833–372–8311). The hotline is open for calls every day from 6 a.m. to 11 p.m. ET, and help is available in English, Spanish and a number of other languages. When you call, you’ll be assigned a case manager to guide you through the reporting process and connect you with additional resources. Want to continue to keep up with the latest scams and frauds? Keep your eyes open for our SCAM GRAM newsletter, delivered monthly to your email inbox!

Out and About: Consumer Action equipped with “New Strategies”

Audrey Perrott, Consumer Action’s director of strategic partnerships, spent a week last month at Georgetown University’s New Strategies Program for Nonprofit Executives. Her attendance was sponsored by JPMorgan Chase.

The four-day advanced training forum, managed by the university’s McDonough School of Business “Business for Impact” arm, offers non-profit staffers the opportunity to learn more about increasing and diversifying their organization’s revenue streams in order to help address some of the world’s most pressing social issues.

Perrott joined New Strategy’s March class of 55 non-profit executives from around the country to hear from experts in the non-profit and philanthropy fields—along with Georgetown’s business school faculty—on best practices in cause marketing; strategies to increase non-profit earned revenue; ways to use predictive analytics to improve individual giving levels; options for deferred and major gift funding; common challenges in funding, such as fewer/less government grant resources; and much more. The training program included a mix of lectures and interactive small group discussions.

The co-director of Georgetown University’s New Strategies program, Curt Weeden (a former Johnson & Johnson vice president), shared “insider” information on strategies for securing corporate, as well as foundation and donor-advised, funds (DAFs). Weeden emphasized DAFs as a critical component of any modern strategic non-profit fundraising program.

DAFs have grown increasingly popular over the last five years. In a DAF arrangement, an individual or employee can choose to give or invest tax-deductible charitable donations through community foundations, wealth-management firms (such as JPMorgan Chase Private Bank) or brokerages (such as Charles Schwab or Fidelity) that manage charitable funds. The donor maintains control over the investment funds as they mature, and eventually allocates the funds to charitable causes of his or her choice. In order to remind non-profit leaders about DAF sponsoring organizations as a potential source of grants, Weeden brought a “DAF-fy” Duck mascot to visit the class.

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Consumer Action's Audrey Perrott poses with "DAF-fy" Duck and Curt Weeden

After the forum wrapped up, Perrott reflected on how insightful and accessible the Business for Impact faculty and facilitators had been, and the plethora of useful resources they had provided to attendees. “Participants gathered to discuss new revenue strategies, but we also got the added benefit of cultivating strategic alliances with other mission-driven and passionate professionals,” she said.

Ongoing access and networking opportunities with the expert speakers and non-profit executives, even after completion of the program, is a hallmark of the New Strategies program.

Participation in the New Strategies program is by invitation only.

Perrott said she is “grateful for the opportunity to explore the ways Consumer Action can grow its revenue stream to advance our critical mission of helping people assert their rights in an increasingly complex marketplace. I look forward to putting all that I’ve learned into action.”

Former CFPB director’s revealing book recounts a legacy of leadership

“Not every (financial) problem is of the consumer’s own making,” Richard Cordray told a room of supporters in early March. The first director of the Consumer Financial Protection Bureau (CFPB) was visiting Washington, D.C., to promote his newly released book, Watchdog: How Protecting Consumers Can Save our Families, Our Economy, and Our Democracy. Consumer Action Deputy Director of National Priorities Ruth Susswein attended the discussion and book-signing event, which she described as both enlightening and sobering.

During the event, held at the headquarters of the consumer advocacy group Americans for Financial Reform, Cordray described in depth his work (under the last presidential administration) to maintain a strong and independent agency that could regulate and enforce the rules established to make sure banks and lenders played fair after the 2008 housing crisis and recession. As advocates at the event noted, the CFPB that Cordray worked hard to create has for some time now been under attack by industry-friendly, anti-consumer interests.

Cordray opened his remarks with the story of Ari, a young servicemember who unwittingly took out a high-cost loan on a used Dodge Ram truck—a loan that ate up a whopping 70% of his monthly military paycheck! A complaint to the CFPB about that loan eventually led the agency to investigate what turned out to be numerous “untold fees and misleading add-on products” from a multitude of predatory lenders that had harmed approximately 50,000 military members! After the investigation concluded, the CFPB returned $6.5 million to those servicemembers who had been cheated by the lenders.

Cordray emphasized that Ari’s story serves as a prime example of how the Consumer Bureau works for consumers—particularly when it is empowered to do so by leadership that supports and values its mission.

Former presidential hopeful and CFPB-creator Senator Elizabeth Warren has recommended “Watchdog” as essential reading for consumers—particularly in these times—stating in the book that: “Cordray describes the tough fights the Consumer Bureau took on…and shows what a difference good government can make for millions of Americans.”

Toward the end of the event, Cordray addressed concerns from the consumer advocates in attendance, who were clearly hungry to return to a time when the Bureau was more focused on consumer protection. The attendees were all too aware, however, that the Q&A was occurring on the same day the Supreme Court was hearing a case on the CFPB’s constitutionality. (See: Consumer Bureau’s structure challenged.)

Cordray’s responses to the advocates’ concerns revealed the critical importance of the CFPB’s mission and the need to defend its very existence in the face of various attacks from the current administration. One of the audience questions—about which enforcement actions during his tenure at the Bureau had the most impact—led Cordray to revisit some of the more infamous cases of corporate wrongdoing made right. “Our first cases on credit card add-on products [optional, fee-based credit protection or identity monitoring services] signaled to the country’s largest credit card issuers that it was not ‘business as usual’ anymore,” Cordray said.

Cordray also highlighted the Wells Fargo “fake accounts” scandal that was first discovered under his term as director, which he noted “is still reverberating today. [Wells] violated customer trust. [Establishing] that was even more important than the money that was returned.”

An additional question, on how important the consumer complaints and the Bureau’s own complaint database have been to the Bureau’s work, prompted Cordray to answer in no uncertain terms that: “Complaints are the voice of consumers. They were and are immensely valuable. Individuals need the ability to get relief—to get a response from financial companies that harm them. With the public database, everyone could know that others have the same problem with a company as you. I’m very pleased that the CFPB under Trump-appointed leadership will maintain the public complaint database.”

Cordray was also asked about current threats to weaken the CFPB’s remittance rule, which mandates that money transfer fees be disclosed to consumers and any errors in the money transfer be corrected, and to gut its payday loan rule. The former director focused on the latter, answering that he “deeply disapproves of the rollback on the ability to repay” requirement for payday loans.” This commonsense requirement would mandate that lenders determine if borrowers could even afford to repay a high-cost loan before the lenders were allowed to issue it.

Cordray added that his “greatest disappointment,” however, was the loss of the CFPB’s arbitration rule. In 2017, a Republican-controlled Congress repealed the rule, which would have prohibited companies from using contracts to keep customers from joining class actions lawsuits against the companies. The rule still would have allowed companies to use binding mandatory arbitration clauses, but would have required them to submit reports about arbitration hearing outcomes to the CFPB.

Cordray wrapped up the discussion by adding that the monthly field hearings he held across the country during his six-year stewardship, along with the legions of consumer complaints filed with the Bureau, were the primary ways the agency had received direct contact with consumers to understand their priorities. He also credited consumer advocates—particularly those organized by the host group Americans for Financial Reform—with being his “biggest prod” on key issues of importance to consumers, while complimenting advocates for “pushing us [the CFPB] all the time” on behalf of consumers.

Hotline Chronicles: When are tax services REALLY free to file?

Through partnerships with the Internal Revenue Service (IRS), some tax preparation services (e.g., TurboTax, TaxSlayer) allow people who earn under a certain amount to prepare and file their federal taxes for free. A consumer’s adjusted gross income (AGI) must fall below the tax prep company’s stated level if they are going to be able to access a truly free tax prep product.

Unfortunately, companies’ conditions around free filing often aren’t made clear (and may be downright deceptive). Donato* from Los Angeles learned about tricky tax prep terms the hard way. He wrote to our hotline to vent that, “TurboTax advertised itself as being free this year [but] they demanded money. This is a fraud no matter what excuses they make.”

This is not the first such complaint we’ve heard. And, according to ProPublica, a non-profit investigative journalism platform, experiences like Donato’s occur because “Companies that make tax preparation software, like Intuit, the maker of TurboTax, would rather you didn’t know” about free-file services. To its credit, since ProPublica wrote these words in its 2019 article, the IRS has made some improvements to its program marketing.

But what can you do if you’re intent on filing for free and using a service like TaxAct? The first thing to know is that the companies that participate in the official IRS Free File online program have different eligibility requirements; you can view them all here.

For example, the IRS Free File program delivered by TurboTax will allow you to prepare and file a free federal return only if:

  • Your adjusted gross income is $36,000 or less, or
  • You are eligible for the Earned Income Tax Credit (EITC), or
  • You are active military with an AGI of $69,000 or less.

Meanwhile, the IRS Free File program delivered by TaxAct will allow you to prepare and file a free federal return if:

  • You are aged 56 or younger and your AGI is $59,000 or less, or
  • You are eligible for the EITC, or
  • You are active military with an AGI of $69,000 or less.

To complicate things further, both of these programs state that you might encounter different conditions then those listed above if you are filing with a foreign address. (Both programs also add that taxpayers who qualify for their free federal returns domestically might also qualify for free state returns.)

Even if you’re sure you qualify, ProPublica also found that those who earned much less that the maximum allowable income for free filing also faced barriers (and often didn’t learn about them until it was time to actually submit the e-file documents). The news outlet featured as an example one woman who learned at the nth moment that independent contractors (such as gig economy workers) didn’t qualify for Free File, even when income-eligible.

So where’s the IRS in this mess? Unfortunately, ProPublica noted that “Intuit [the makers of TurboTax] and other tax software companies have spent millions lobbying to make sure that the IRS doesn’t offer its own tax preparation and filing service. In exchange, the companies [e.g., TurboTax] have entered into an agreement with the IRS to offer [the IRS] ‘Free File’ product to most Americans.”

While we don’t have enough information from Donato to advise any course of action other than reading the fine print on every platform participating in an online IRS Free File program, we are heartened to learn that the IRS has released an addendum to its agreement with tax preparation companies to prohibit them from shenanigans such as hiding the webpages that allow taxpayers to file for free from Google and other search engines. (Yes, they’ve really done this.)

The IRS also has eliminated a restriction against making its own filing software, so we may see more transparent and easier-to-use products in the future.

In the meantime, if you know how to do your own taxes, you have access to your 2018 tax return, and you are willing to pay more for filing your state taxes (check with your state to see if it offers free filing), then you can use what’s known as Free File Fillable Forms (ah, alliteration...). While these interactive forms can make basic math computations for taxpayers (i.e., adding up their income, etc.), they don’t offer any guidance on particular tax matters or situations (like TurboTax and other online filing services do). Taxpayers must also use compatible browsers in order for the forms to work as intended.

*Not this consumer’s real name

Coalition Efforts: Calling for an affordable coronavirus vaccine

When a COVID-19 vaccine is released to the public, it must be affordable. Consumer Action joined nearly 70 organizations in writing to President Trump, entreating him to ensure that vaccines or treatments for the coronavirus disease (COVID-19)—which are developed and purchased with U.S. taxpayer dollars—are reasonably priced and available to the public that funded them. Furthermore, the advocates point out that no one pharmaceutical company should be granted an exclusive license to produce and charge exorbitant amounts for the critical vaccine. Americans will not accept President Trump allowing Big Pharma to profit off a pandemic that continues to claim thousands of lives, the advocates state. Learn more.

Demanding DOT promote fair airline competition and pricing transparency. Three years after the U.S. Department of Transportation (DOT) indefinitely suspended its own request for information (RFI) on the airline industry’s practices regarding the clear distribution and display of airline fares, schedules and other critical information, coalition advocacy groups sent a letter to DOT Secretary Elaine Chao calling for the RFI's reinstatement. Advocates point out that the extended pause is harming consumers by limiting their ability to consider and compare all airline, flight, fare and fee options and to shop in a transparent, convenient and efficient way. The letter signatories are requesting that DOT release a final regulation on the matter in a timely manner to help ensure consumers are treated fairly in the air-travel marketplace. Learn more.

The Department of Education must do right by disabled borrowers. A coalition of more than 30 advocacy groups asked U.S. Education Department (ED) Secretary Betsy DeVos to automatically erase the federal student loan debt of roughly 350,000 student borrowers with what are known as “total and permanent” disabilities (TPDs). These borrowers are already eligible to have their debt erased, but few know that they qualify for loan discharges. And if they are aware, the ED’s application process is so burdensome that most disabled borrowers never get the help they're entitled to under law. In fact, over 60% of eligible borrowers identified have not applied for the relief. In the worst cases, the ED—which is aware that people with TPDs do not owe on their student loan debt—has actually seized the disability benefits that these borrowers depend on to survive as a means to collect on the defaulted federal student loans. Learn more.

Congress: Pass a clean 2021 budget that benefits the public! Advocacy groups in the Clean Budget Coalition recently called on Congress to pass an upcoming federal budget that funds the things Americans care about, not one that funds corporate interests and undoes essential consumer and environmental safeguards through policy riders. Policy riders are sneaky provisions attached to larger pieces of legislation, and they rarely have anything to do with the actual legislation. Most riders are handouts to big corporations or special favors for moneyed interest groups and could not become law on their own merits. The coalition has insisted that, as Congress prepares and votes on the federal budget for fiscal year 2021, they throw out any appropriations titles, packages of bills, or continuing resolutions that contain “poison pill” policy riders contrary to the public interest. This includes policy riders that would threaten Americans’ ability to obtain safe and healthy food, lift restraints on Wall Street abuses, or deny access to justice, fair housing or healthcare. Learn more.

CFPB Watch: Another big bank creates phony customer accounts!

Once again, a big bank is accused of opening phony accounts in customers’ names without their knowledge or consent. The Consumer Financial Protection Bureau (CFPB) has sued Fifth Third Bank for opening unauthorized credit cards, credit lines and other accounts in order to meet sales quotas. Some consumers were even charged fees on these bogus bank accounts!

The Ohio-based institution—one of the largest banks in the Midwest—is accused of opening approximately 1,100 fake accounts. (Consumers may be familiar with a similar type of scandal—at Wells Fargo—which notoriously encouraged its employees to illegally open millions of fake accounts.) According to the CFPB, Fifth Third knew, but did not stop its employees from opening fake accounts—corporate malfeasance that started as far back as 2008.

Fifth Third is fighting the suit, arguing that it acknowledged these violations, fired the employees involved, and reimbursed customers for the “improper customer charges” before the Bureau took action.

The pros and cons of increasing access to consumer financial data

The CFPB held a February symposium on consumer access to financial records to consider how greater access by third-party apps and account aggregators could make consumers’ account information more available, while still keeping the data convenient and secure.

The half-day event covered the benefits and risks of allowing greater access to consumer financial data, including concerns around data accuracy, security and liability in case of lost money or erroneous transactions. These issues require immediate attention, since a growing number of companies—such as makers of FinTech apps—want to retrieve data from consumers’ bank accounts in order to provide services like bill payment, budgeting, credit decisions and automated savings tools.

Industry representatives from financial institutions, credit bureaus, data aggregators and FinTech firms, as well as one consumer advocate, spoke at the event. Topics included the need to standardize consumer consent for data access, how to efficiently and securely transfer financial information between parties, and how to limit access to only the data that is relevant to the particular transaction.

Zombie debt—the undead monster that haunts well-meaning debtors

Debts that are so old that you can no longer be sued over them are called “time-barred” debts, or “zombie” debts. Debt collectors still can hound you for these ancient debts because they are still technically owed, even though the collectors can’t sue you to collect them. The statute of limitations on debt is set by state law, and ranges from three to 15 years.

Under its new proposed rules, the CFPB is considering requiring debt collectors to provide special written notices to consumers regarding time-barred debts. The Bureau might require debt collectors to notify debtors that they cannot be sued due to the age of the debt and explain if and how debt collectors could recover the ability to sue a consumer for an old debt, such as convincing the customer to make a payment, which could, in some states, restart the statute of limitations.

The CFPB’s own research had revealed that even when consumers read disclosures about reinstating their debt, 45% misinterpret the notices, believing that they can be sued for zombie debts, even in cases where the debt is time-barred. What’s more, the CFPB would only require collectors to warn consumers once. If they follow up with a notice or a call, no further disclosure would be needed.

Click here to share your opinion on the Bureau’s zombie (time-barred) debt notification proposal. The deadline to share is May 4.

Class Action Database: Atkins loses millions over bogus weight loss claims

A class action settlement involving cryptocurrency exchange company Coinbase/Cryptsy was among seven new settlements added to the Consumer Action Class Action Database during March.

Of note this month is the class action Smith v. Atkins Nutritionals, Inc.

Plaintiffs allege that Atkins Nutritionals (commonly known as the Atkins Diet) falsely labeled, marketed and advertised its products as having low “net carbs,” even when they contained sugar alcohols such as maltitol. Atkins incorrectly calculated “net carbs” as the “total carbohydrate content of the food minus the fiber content and sugar alcohols.” Plaintiffs claim that Atkins concealed this formula and labeled its products as having a carbohydrate content of zero, even if the products listed maltitol as the first (and, therefore, main) ingredient.

Atkins Chocolate Candies, for example, were advertised as having one gram of net carbohydrate, when the nutrition facts listed on the packaging revealed 19 grams of total carbs, with four grams of dietary fiber, one gram of sugar and 14 grams of sugar alcohol.

Furthermore, Atkins stated that: “Certain sugar alcohols do not affect blood sugar and are acceptable.” Plaintiffs point out that Atkins’ calculation of net carbs was not backed by scientific evidence, and that the company’s statement on blood sugar alcohol was misleading. Plaintiffs add that, according to scientific research, sugar alcohols do impact blood sugar and should, therefore, be included in the carbohydrate count for any food product.

Atkins denied the allegations but agreed to a $3.8 million settlement to avoid continuing the litigation process.

Consumers may be eligible for payment if they bought the products listed on the class action website (under FAQ number 6: “Which Atkins Nutritionals products are included in the settlement?”) between Jan. 1, 2014 and the present day in any state except New York, Missouri or California (in which case customers can have purchased the products a year prior, from Jan. 1, 2013 onward).

The claims deadline is April 27, 2020.

About Consumer Action

Consumer Action is a non-profit 501(c)(3) 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 seven 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 7,000 community-based organizations. Outreach services include training and bulk 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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