Consumer Action INSIDER - November 2018

 

Table of Contents

What people are saying

Consumer Action’s debt collection training greatly increased my knowledge of the federal and state laws surrounding debt collection and scams. I’m excited to use this vital information to empower my clients to protect themselves from unlawful practices and better understand the pitfalls of making bad debt decisions and the importance of managing their credit properly. — Barbara Gorrell, Financial Services Representative, Collaborative Support Programs of New Jersey, Inc.

Did you know?

Since a new law took effect in September, it’s free to place, lift and remove a credit freeze. When you “freeze” your credit file, new credit accounts (e.g., credit cards, car loans and mortgages) cannot be established in your name until you lift the “security freeze.” This is a potent defense against identity theft, a growing crime in which thieves use stolen personal information, such as Social Security numbers, to impersonate victims and open new accounts in their names. Consumer Action has updated its credit freeze fact sheet and other materials to give you all the information you need to decide whether or not to freeze your credit.

Consumer Action at 47 years: Giving credit where credit is due

In October, Consumer Action celebrated its 47 years of consumer advocacy successes during a cocktail awards reception in Washington, DC, honoring Senator Catherine Cortez Masto (D-NV), personal finance website and app NerdWallet and fellow non-profit consumer education/assistance group Credit Builders Alliance for their impactful work in helping consumers to improve their financial lives.

The theme of the anniversary was “Credit Where Credit Is Due.” Advocates and allies from the non-profit, corporate and government sectors met at the AT&T Forum for Technology, Entertainment and Policy to give credit to the foremost champions of fairness and access for consumers in the financial marketplace.

A member of Consumer Action’s event planning committee, Daniel Nestel of credit scoring company FICO, presented the first award to Credit Builders Alliance (CBA) Executive Director Dara Duguay for the non-profit’s work to help low- and moderate-income households build strong credit and other financial assets.

“CBA is honored to have our work showcased at Consumer Action’s anniversary event,” Duguay said. “We will continue to work to promote credit building. It is a critical component in the quest to build financial stability.”

CBA was created by and for a national network of non-profit members in response to a gap in the modern credit reporting system that locks millions 
of individuals with poor or no credit out of the financial mainstream.

credit builders alliance award photo
Dara Duguay of Credit Builders Alliance accepts a Consumer Action 2018 Consumer Excellence Award on behalf of the organization. Daniel Nestel of FICO—an event committee member—presented the Consumer Action award.

“Mission-driven non-profits like Credit Builders Alliance are uniquely positioned to help struggling households build credit as an asset,” noted Audrey Perrott of Consumer Action.

A second member of Consumer Action’s event committee, Hugh Norton of VISA Inc., presented NerdWallet’s award. Kimberly Palmer, a writer and personal finance expert for the online resource, accepted the award. Palmer recounted that NerdWallet’s founders realized there was a need when a friend asked the simple question: “What’s the best credit card?” Since being founded in 2009 by CEO Tim Chen and Jacob Gibson, NerdWallet has answered that question and more, providing consumers with free access to expert content, tools and tailored advice to stay on top of their finances and save time and money.

Nerdwallet award photo
Kimberly Palmer of NerdWallet acccepts NerdWallet’s 2018 Consumer Excellence Award, presented by Hugh Norton of Visa Inc., a member of Consumer Action’s anniversary event committee.

Consumer Action event committee member Jenny Backus of Backus Consulting, LLC, a former Hill staffer, presented the final award to Senator Cortez Masto, who couldn’t attend but sent video greetings displayed on two large screens. As she acknowledged the award, the freshman senator spoke about her career-long effort to fight for working families, first as Nevada’s attorney general, and now as the first Latina and first woman from Nevada to be elected to the U.S. Senate.

During her time as Nevada’s top prosecutor, she helped families recover from the housing crisis by creating the Mortgage Fraud Strike Force to investigate and prosecute lending scams. She also joined the fight to hold the big banks accountable for their role in the housing collapse, and secured a $1.9 billion settlement for Nevada homeowners. She now sits on six Senate committees and works daily to ensure a financial marketplace that offers access and delivers fairness to all.

“Each year our anniversary fundraiser brings much deserved attention to the efforts of the dedicated and committed advocates who have educated, empowered and watched out for consumers and the organizations that serve them,” Ken McEldowney, Consumer Action's executive director, said. “This year, I’d also like to give credit and thanks to our event host, AT&T, and to the generous underwriters, donors and contributors who made this special night possible.”

The event was underwritten by TracFone, Amazon and Capital One. Major donors also included AT&T, DraftKings, Facebook, FICO, Microsoft and Verizon.

Click here for a gallery of photos taken at the event by Stephen Baranovics.

Out and About: FDIC spotlights latest studies on consumer behavior

The daylong 8th annual Federal Deposit Insurance Corporation (FDIC) Consumer Research Symposium was held last month in Arlington, VA. Consumer Action’s Lauren Hall attended to hear academics from across the country present and discuss the latest research on consumers’ preferences, capabilities, knowledge and experiences in the financial services market. Presenters also discussed how public policy affects consumers, communities and financial institutions.

Jeremy Burke of the University of Southern California (USC) kicked off the symposium with the latest findings on how prize-based interventions can improve consumer financial behavior. USC partnered with the credit counseling agency Money Management International (MMI) to learn if consumers entered into a lottery to have $500 knocked off their debt balance every time they made an on-time payment would make more on-time payments, experience fewer delinquencies and defaults and pay down more debt. After two years, the study found that those who entered the lottery program paid off about $2,000 more than those who did not. Burke pointed out, however, that those who opted to enter the lottery were likely to be more conscientious about paying off their debts in the first place. Despite the caveat, he noted that prize-based incentives appear to offer benefits to those who already engage in sound financial practices.

Later in the day, Vyacheslav Mikhed of the Federal Reserve Bank of Philadelphia gave a brief presentation on the impact of Affordable Care Act (ACA) coverage on the finances of young adults. He noted that ACA increased healthcare coverage for those under age 26 (the uninsured rate decreased by 50 percent as of 2016). This, in turn, helped young adults in other aspects of their finances: The number of financial accounts suffering from “days past due” decreased 4 percent among ACA-insured young adults, and the number of new instances of past due/delinquent accounts decreased 16 percent.

Other presenters outlined the latest findings on mortgage origination and home affordability. Matthew Plosser with the Federal Reserve Bank of New York analyzed FinTech mortgage lenders. These centralized, automated lenders are now conducting fully-online operations. But is this a good thing, Plosser questioned? Does it lead to lower defaults for homebuyers? Does it lead to faster/more optimal refinancing? The answer is yes. On average, Plosser pointed out, FinTech lenders issue mortgages about 10 days faster than non-FinTech. And the study found that the loans are no riskier than those issued by brick-and-mortar shops: FinTech borrowers actually default about 25 percent less. Interestingly, it’s not younger buyers using online FinTech loans; it’s mostly financially literate, experienced borrowers (since first-time borrowers are often more intimidated by the homebuying process).

Later in the day, Aurel Hizmo with the Federal Reserve Board of Governors revealed how more financially constrained/less sophisticated home loan borrowers with lower FICO credit scores are less likely to shop around for the best loan rates. This, unfortunately, “punishes” them by causing them to pay more, both at closing and over time. The average FHA borrower, for instance, pays about 2 percent more of their mortgage balance in upfront fees and points than a “jumbo” home loan borrower buying a much more expensive house. Hizmo pointed out that if these FHA borrowers went to the median lender, let alone the least expensive lender, they could easily save $2,500 on a $250,000 mortgage. The additional cost burden carried by this population is on top of any additional fees and interest that FHA borrowers may incur due to lower credit scores, noted Hizmo.

For a full list of FDIC symposium conference speakers and topics, click here.

Hotline Chronicles: Termite plan bugs California homeowner

As readers of this column know, we typically change the names of the consumers we feature. But in this case, we’re going to tell you about a grievance relayed to us by a longtime supporter of Consumer Action who doesn’t want to hide his identity. Arnie Berghoff, a Southern Californian consumer advocate with a lengthy CV that includes a stint as Los Angeles County Consumer Affairs Commissioner, found himself in a frustrating tug of war with Terminix this summer.

On its website, Terminix says it is the leading provider of termite and pest control services in the United States, “safeguarding millions of homes and businesses against all types of pests in 47 states and in 11 countries internationally.”

A quick web search shows that Berghoff is just one of hundreds of people who have complained about the giant pest management company and its prepaid “protection plans.” Their experiences call into question the wisdom of purchasing these pre-need plans.

Online, Terminix boasts of its coverage plans: “Subterranean termites don't stand a chance.” Specifically, Terminix promises to “inspect your home annually for signs of trouble and guarantee that you won't pay for termite treatments or damage repairs as long as you keep your plan.” But, as with any “insurance,” the devil is in the details and in the company’s inclination to pay up or throw up roadblocks for subscribers. These roadblocks often include less-than-obvious exclusions, limitations or just plain stalling when it comes to claims.

Berghoff had been paying for Terminix drywood and subterranean termite coverage plans for about a decade—to the tune of about $500 per year! When replacing his roof, workers (employed by a bonded and insured firm) found extensive termite damage and brought it to Berghoff’s attention.

“I immediately called Terminix at its general 800 number to report the damage on May 25th and to have one of their inspectors come see it while it was exposed with the roof tiles off,” Berghoff explained.

Despite a promise that someone would call him back immediately, Berghoff didn’t hear from Terminix until a representative left a voice mail four days later. He called right back, but was forced to play phone tag until May 31st, at which time the company said it could not come out until June 4th.

“I told them I couldn’t stop the roof job,” said Berghoff. “I asked for the inspector to come while the damage was still exposed, but the company insisted that June 4th was the earliest they could manage.”

The roofers took photos and saved the termite-ridden wood to show the inspector. But when he arrived, according to Berghoff, “The inspector said he wasn’t interested in the photos or the rotted wood.”

Berghoff followed through with a letter to the company in early July seeking reimbursement for roof replacement materials only (not labor). “I’m still waiting [in early October],” he told Hotline Chronicles. “My next step is to take the company to small claims court.”

Other complaints about Terminix can be found here and here.

So, should you buy the type of service plan Berghoff purchased? Consumer Action advises careful scrutiny of such plans. They’re typically nothing better than profit-centers for companies. All too often, we hear about consumers who have to fight to have claims paid after years of paying for protection or extended warranties. Here are some tips to help you decide:

  • If the service is meant to be preventative (as in the case of the Terminix plans), how often are inspections done and what remedial services are included? If damage is missed by these periodic inspections, what are your rights?
  • Make sure you understand the precise situations in which the plan does not provide coverage.
  • Ask about the cost of repairs if you eventually need them—they might be cheaper than the service plan.
  • Confirm with your homeowners insurance provider what is and isn’t covered under your policy (typically, termite-related damage is not covered, but get details about your specific policy from your insurer).
  • Consider saving the money you would pay toward a service plan for use if you ever need it.
  • Be aware that you might have to fight for the rights “guaranteed” by the service plan, even so far as going to court.
  • Consider working with reputable local firms instead of large national chains, which may have less incentive to please customers.

Consumer Action explores soaring airline fees, passenger rights

Sick of soaring airline baggage fees and reduced airline assistance? The latest edition of Consumer Action News explores how hefty airline fees are weighing on today’s travelers and what recourse airline passengers have when their flights are cancelled or delayed, their baggage lost, or they suffer other indignities while flying. The comprehensive guide to airline passenger rights spells out how consumers can seek reimbursement when traveling both domestically and abroad.

What are your air passenger rights?

Believe it or not, travelers are not entitled to a refund on a domestic flight that is cancelled or delayed—only when they are involuntarily bumped from a flight. The lack of U.S. airline consumer protections may come as a surprise, but travel vouchers, meal vouchers and paid hotel stays are primarily based on individual airline policies, called “contracts of carriage.” See the article “Knowing flyers’ rights empowers passengers” in Consumer Action News for more information.

If you are traveling on an international flight, however, you may be entitled to financial relief. For example, if your flight arrives more than three hours late—and departs from a European Union (EU) country—you may qualify for about $700 in compensation. (Distance affects compensation.) Refunds also are available for overseas flight cancellations. For more on where to turn to learn if you’re covered, see the article “Flyers’ rights in the EU and Canada.”

Travel fees

Four of the country’s major airlines—American, Delta, JetBlue and United—recently hiked baggage fees again, costing consumers at least $30 to check a bag. This leaves Southwest Airlines as the only carrier that still allows passengers to fly with two pieces of luggage checked for free.

Until recently, it appeared that Congress might impose limits on travel fees. Unfortunately, the U.S. Senate reversed course and pulled a piece of legislation that would have required airline fees to be reasonable, proportional and based on the cost of providing the service (as well as fully transparent when booking). The Forbid Airlines from Imposing Ridiculous (FAIR) Fees Act was part of the Federal Aviation Administration (FAA) Reauthorization bill (S 1405), but was removed days before a final September vote due to heavy lobbying by the airline industry. While S 1405 was never signed into law, another bill that incorporated parts of S 1405, titled HR 302, was.

Under HR 302, FAIR fees were off the table, but other provisions will require that the FAA establish minimum standards for airplane seat size and ban cell phone conversations and e-cigarette use while flying. The bill will also ban airlines from bumping passengers who’ve already boarded, and require the Transportation Department to determine if weather was the primary factor in a flight’s delay or cancellation. It will demand fee refunds for services never received, ban storing live animals in an overhead bin and allow strollers when flying with a small child. It will also create an aviation consumer advocate and require further rules for drones (unmanned aircraft).

It’s not only passenger rights that need to be stronger, travel insurance coverage does as well. According to a recent study on whether it’s worth the price, Senator Ed Markey’s (D-MA) office discovered that most coverage is “bare-bones,” with an extensive list of exclusions.

“The only thing skimpier than airplane legroom are these travel insurance plans,” said Senator Markey. “Consumers are pressured to buy plans that promise extensive or even total coverage, but in reality offer very little [protection], leaving them without the security they thought they bought.”

Comparing airline offerings

Consumer Action also reviewed the most popular online travel sites that rank specific flights (e.g., Expedia, Orbitz and Travelocity) and help with travel planning and fee comparisons (e.g., Kayak). We found the sites to be transparent in listing the restrictions and fees associated with a consumer’s flight (including baggage and change fees). See our article “Comparing large online third party booking sites,” which also details how these sites use price guarantees to offer the flyer the very best deal for a particular trip.

Coalition Efforts: Cheated student borrowers score a major victory!

A major victory for students cheated out of borrower defense! A federal judge sided with consumer advocates and ruled that Education Secretary Betsy DeVos' delay in implementing a key student borrower protection rule known as the borrower defense rule was improper and unlawful. The judge also rejected a request by an association of for-profit colleges to postpone enforcement of the rule. This means that the 2016 Obama-era regulation aimed at providing relief for scammed student-loan borrowers has taken effect, despite efforts by the Department of Education (under DeVos) and the for-profit college industry to delay it. If you were defrauded by your school, you can file a claim to have your debt cancelled under the rule here. Click here to Learn more.

The FCC must do more to stop annoying, illegal robocalls. Nearly a year ago, the Federal Communications Commission (FCC) approved rules to allow phone companies to block specific categories of illegally spoofed calls. However, no visible progress has been made to actually reduce the volume of unwanted calls received by consumers. A lack of law enforcement around illegal robocalls has prompted consumer advocates to ask the FCC to take additional steps to protect consumers. Learn more.

CFPB ‘anti-discrimination’ official engaged in hate speech as recently as 2016. Controversial blog posts written by senior Consumer Financial Protection Bureau (CFPB) official Eric Blankenstein have caused outrage from civil rights and consumer advocates as well as CFPB staffers, who are calling on the bureau’s interim director, Mick Mulvaney, to fire the public figure. Blankenstein, who is in charge of enforcing fair-lending laws intended to prevent mortgage, student loan and other marketplace discrimination, is under fire for a series of offensive comments pertaining to race and gender. The comments span the last 14 years. Learn more.

Consumer advocates oppose loosening rules for FinTech providers. Consumer Action joined a coalition of 50 public interest groups in sharply criticizing the Consumer Financial Protection Bureau (CFPB) proposal (under interim director Mick Mulvaney) to gut important consumer protection rules, especially for FinTech companies. The coalition argued that the agency does not have the authority to create potentially unlimited exemptions from the very regulations it is obligated to enforce. Learn more.

CFPB Watch: In-language tools and a town hall on financial exploitation

For some consumers with limited English proficiency (LEP), language barriers have landed them with mortgages they didn’t understand and couldn't afford. The Consumer Financial Protection Bureau (CFPB) has introduced new and improved tools designed to help LEP borrowers buy and keep a home.

The CFPB has vastly expanded its Spanish language financial glossary from 300 to 2,000 words to help borrowers understand and lenders better explain the financial terms used when borrowing money.

The Bureau has created a Spanish language section of its website—Prepararse—devoted to helping LEP consumers prepare for buying a home. Prepararse also features a video and other resources intended to help this population build credit and financial capability.

In-language help for consumers is also growing at other federal agencies, like the Federal Housing Finance Agency (FHFA), which now boasts a clearinghouse of mortgage documents available in Spanish to assist housing counselors, lenders and others help consumers understand the home buying process. FHFA’s Mortgage Translations site plans to add documents translated in Chinese, Korean, Vietnamese and Tagalog within the next two years. FHFA said it is also committed to making the site more user-friendly in the months ahead.

CFPB rulemaking plans

The Bureau has released its agenda for future rulemakings, which may include plans to propose or alter rules pertaining to:

  • Debt collection
  • Payday, car title and other high-cost loans
  • Credit reports, consumer disputes and the Fair Credit Reporting Act (FCRA)
  • Property Assessed Clean Energy (PACE) loans
  • Home Mortgage Disclosure Act (HMDA) data collection
  • Unfair, Deceptive or Abusive Acts or Practices (UDAAP) violations

The CFPB is reviewing the 86,000 comments it received (which includes comments from Consumer Action and our CBO network) in response to 12 previous “requests for information.” The Bureau, under the Trump Administration, has issued formal requests to inform its reevaluation of the CFPB’s practices and regulations. The Bureau expects to complete the process before it releases a new rulemaking agenda in the spring of 2019.

Elder exploitation town hall in Baton Rouge

Estimates of senior fraud have always been rather murky, with seniors affected by fraud ranging from one in five to one in 20, and annual cost estimates ranging from $3 billion to $36 billion.

At a CFPB “town hall” meeting on elder financial exploitation in Baton Rouge, LA, last month, the Bureau’s acting director, Mick Mulvaney, joined Louisiana Attorney General Jeff Landry and other fraud fighters for a panel discussing how seniors are exploited. They detailed how this population is often reluctant to report the exploitation, especially if it is their own children, grandchildren or caregivers who are taking advantage of them.

Attendees were told about a Louisiana state law that can help vulnerable seniors by allowing bankers to delay a financial transaction for up to 48 hours when it’s believed “suspicious activity” is at play.

During the question-and-answer session, many individuals and advocates raised concerns about predatory payday lending and urged the CFPB to keep its payday rule intact. The rule as proposed would require lenders to evaluate a borrower’s ability to repay these high-cost, short-term loans. However, Mulvaney has chosen to reconsider the rule and is expected to revise it in ways that would favor the payday loan industry over consumers. At the town hall meeting, Mulvaney defended another recent anti-consumer decision to discontinue CFPB exams for lenders that violate the Military Lending Act (MLA). The acting director said he believes the Bureau doesn’t have the authority to supervise the MLA law without approval from Congress.

A military veteran who joined the public event told Mulvaney he is “wrong to back off from enforcing the Military Lending Act,” which caps interest rates for servicemembers and their families.

After the town hall, the Bureau held a closed-door meeting with industry representatives and consumer advocates focused on mortgage origination.

Class Action Database: Ford scrambles to contain explosive airbag suit

Class action settlements involving automaker Honda’s 2015 CR-V vehicles and American Airlines’ baggage fees were among 11 new settlements added to the Consumer Action Class Action Database during October.

Of note this month is the class action settlement In Re: Takata Airbag Products Liability Litigation–Ford Settlement.

The plaintiffs in the class action allege that Ford knowingly manufactured, distributed and sold certain vehicles equipped with defective Takata airbags. The plaintiffs argue that because Takata (and, by extension, Ford) concealed the defect, they suffered economic losses by overpaying for the vehicles and by paying additional out-of-pocket expenses to repair them.

The airbags were created with phase-stabilized ammonium nitrate, an unstable compound that caused them to rupture and propel deadly debris at drivers and passengers.

Ford and other motor vehicle companies recalled vehicles containing Takata airbags between April 11, 2013 and May 15, 2015. On May 15, 2015, Takata entered into a consent order with the National Highway Safety Administration, leading to more recalls of its airbags. Then, on Jan. 13, 2017, Takata signed a criminal plea agreement with the U.S. Department of Justice acknowledging that it had attempted to conceal the airbag defects.

Ford is joining a number of other automakers who have already settled claims alleging they concealed the defective Takata airbags installed in their vehicles, including: BMW, Mazda, Subaru, Toyota, Honda and Nissan.

Ford denied the allegations but agreed to the $299.1 million settlement.

You are part of the class if:

• As of Sept. 5, 2018, you owned or leased certain Ford vehicles, which you will bring or have brought to Ford for its “Takata Airbag Recall Remedy”; or

• You sold, or returned pursuant to a lease, certain Ford vehicles, which were recalled prior to Sept. 5, 2018. These vehicles were distributed for sale or lease between June 19, 2014 and Sept. 5, 2018.

The four-year settlement program provides aggrieved Ford customers with a rental car/loaner program, an out-of-pocket claims process, a customer support program and potential residual distribution.

Under the rental car/loaner program, the claimant must bring the Ford vehicle under recall to the dealership for repairs and provide proof of insurance to receive a rental/loaner vehicle.

A preliminary list of reimbursable out-of-pocket expenses incurred while waiting for the “Recall Remedy” include reasonable: rental car and transportation expenses, towing charges to a Ford dealer, childcare expenses, out-of-pocket expenses associated with repairs, lost wages associated with the drop-off or pick-up of the vehicle at a Ford dealer, and vehicle storage fees. Class members must submit a timely and fully completed registration/claim form to receive these out-of-pocket expenses.

The final class action approval hearing is Dec. 11, 2018. For more information, click here.

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 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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