Consumer Action INSIDER - April 2013


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Table of Contents


What people are saying

We learned so much from Consumer Action’s presentation on credit reports. Now we are worried about what’s in our own specialty reports and will check them immediately. The information you provide is valuable for our clients and ourselves. — Shephali Ides, Eviction Defense Collaborative, San Francisco, CA

Did you know?

Almost a quarter (24%) of Americans believe it’s okay to increase an insurance claim by a small amount to make up for deductibles they are required to pay, according to a recent Insurance Research Council (IRC) public opinion study. Surprising as that is, it’s actually lower than the 33 percent who responded similarly in 2002. To learn how we all end up paying for claim padding, visit the Coalition Against Insurance Fraud website and click on the Info tab.

Renewed attack on the ‘$35 cup of coffee’

On a windy day last month on Capitol Hill, consumer advocates flanked Rep. Carolyn Maloney (D-NY) and Rep. Maxine Waters (D-CA) as they introduced the Overdraft Protection Act (HR 1261). The bill, which had 44 cosponsors as of its introduction on March 20, would require a bank or other financial institution to obtain a consumer’s affirmative opt-in to any overdraft protection plan, require clear disclosure of coverage and “reasonable and proportional” fees, ban the manipulation of transaction posting in order to increase bank profits and limit the number of overdraft fees to one per month and six per year.

“Debit cards can now be used to pay for almost anything from dry cleaning to parking meters, and that makes everyday life more convenient,” said Rep. Maloney, senior member of the House Financial Services Committee. “But the omnipresence of swipe-card terminals also makes it easier than ever to overdraw an account and incur an overdraft fee without even knowing it. So a $5 cappuccino can become a $35 cappuccino in an instant.”

“Vulnerable consumers, including young people and low-income populations, are disproportionally impacted by overdraft fees, which can cause them to close their accounts and view all financial institutions with distrust,” said Linda Sherry, Consumer Action’s director of national priorities. “The current overdraft rules are confusing and don't go far enough to protect consumers from multiple overdraft fees and the arbitrary reordering of daily debits.”

“In 2010, regulators slowed the flood of bank revenue from unfair overdraft schemes,” noted U.S. PIRG Consumer Program Director Ed Mierzwinski. “But Congress needs to step in to finish the job so consumers won’t have their wallets emptied by bank tricks and traps.”

“Consumers, particularly consumers that frequently have low account balances, need the assurance that they will be able to pay bills, buy groceries and conduct everyday transactions without punitive and unfair fees,” said Tom Feltner, director of financial services at the Consumer Federation of America. “Preventing multiple overdraft fees and expanding opt-in requirements to checks and other transactions will protect consumers and their bank accounts,

“These fees are unfair and regulators should have reined them in a long time ago,” concluded Ken Edwards, vice president of federal affairs at the Center for Responsible Lending.

The bill, reasonable as it is, faces a tough fight in the GOP-controlled House of Representatives, noted Sherry.

Consumer Action staffers have roles at Consumer Assembly

The Consumer Assembly conference sponsored by the Consumer Federation of America (CFA) is a high point of the year for consumer advocates. As the general session kicked off on March 14, consumer movement hero Senator Elizabeth Warren (D-MA) took the podium. In her usual direct and rousing style, Senator Warren blasted a group of conservative senators who wrote to President Obama last month stating that they would never confirm a director for the Consumer Financial Protection Bureau (CFPB) without a reversal of its independent mandate and funding.

“Blocking Rich Cordray is about weakening the agency. Blocking Rich Cordray is about keeping the game rigged, keeping the game rigged so that consumers remain in the dark—and a few bad actors can rake in big profits,” said the freshman senator, who is widely credited with the existence of the CFPB.

“I know I’m preaching to the choir here at CFA, but it is time for Washington to stop protecting a handful of the big guys. They can protect themselves... This will be a hard fight, but I believe in what we can do together. We’re fighters—the people in this room and the consumers you represent all across the country. We are tough, resourceful, and creative. We can level the playing field. And every time we do that, we get safer and stronger.”

Do-Not-Track panel

Later that day, Consumer Action's senior associate for national priorities, Michelle De Mooy, spoke about the need for consumer control over personal information while participating on a panel at the conference.

“Losing control of personal data has real consequences in today’s world, including higher insurance rates, lower credit scores and loss of potential employment,” De Mooy said. “It's incredibly important for consumers to understand the data collection ecosystem that thrives behind the scenes on their mobile devices and to have the chance to choose what data they want collected and shared, and what they do not.”

De Mooy also discussed the importance of mechanisms like Do-Not-Track for mobile devices, which would allow consumers to determine if they want to be tracked online or not, and the work that Consumer Action is doing to create mobile screens that would provide consumers with more transparency about data collection and sharing.

Moderated by Susan Grant, director of consumer protection for CFA, the panel included Gautam Hans of the Center for Democracy and Technology; Joanne McNabb, director of privacy education and policy in California's Office of the Attorney General; Sarah Hudgins of the Interactive Advertising Bureau, and Jon Potter, president of the Application Developers Alliance.

State and local roundtable

On the first day of the Consumer Assembly, advocates from around the country gathered to exchange information about payday lending, power outages, and homeowners, flood and “force-placed” insurance. Members of the CFA state and local roundtable shared some of their greatest opportunities and challenges for the coming year.

At the gathering, Consumer Action’s deputy director of national priorities, Ruth Susswein, updated participants on the federal government requirement that all recipients of Social Security and other federal payments receive benefits electronically as of March 1. Current options for receiving benefits include direct deposit to a bank or credit union account or loaded onto a prepaid card such as the government-sponsored Direct Express card.

Susswein explained the fees associated with the Direct Express card. After one free ATM withdrawal per month, cardholders will pay for additional ATM cash withdrawals. Cardholders also are subject to a funds transfer fee and a fee for requesting an optional paper statement. Full consumer protections, including FDIC deposit insurance and lost or stolen card coverage under the Electronic Fund Transfer Act (EFTA), apply to the card. For more information on the switch to electronic federal benefits, click here.

Also at the roundtable, Susswein led a group strategy session on how to best respond to financial services issues. For more about the annual Consumer Assembly, visit the CFA website.

Hotline Chronicles: Don’t assume debt collectors are scam callers

Jocelyn,* a Missouri woman, contacted Consumer Action’s hotline about recent harassing calls her sister Laura had received at her home in Kentucky. The caller, Colonial Asset, a debt collection firm, repeatedly dialed Laura’s phone about a debt that Jocelyn allegedly owed. The callers said that Jocelyn “had better contact them about her debts” or they would “serve Jocelyn with court papers.”

Jocelyn told our hotline counselors that she had “Googled” the firm and learned that consumers had frequently posted complaints about this company trying to collect on debts they didn’t owe. The phone number displayed on their caller ID was the same as the one Jocelyn reported. “I know it’s a scam but they keep calling Laura. They say they have tried for three weeks to serve me.”

Our counselors advised Jocelyn not to jump to conclusions that this is a scam. Colonial is a company that buys old debts from other creditors and attempts to collect on them. There are legions of consumer complaints about Colonial on the Internet and many consumers say the company (based in Maryland and California) doesn’t give up trying to collect debts, calls repeatedly and threatens legal action.

One common thread throughout the complaints is that the company can rarely provide information or documentation of the original debt. Every collector must send you a written “validation notice” telling you how much money you owe within five days after they first contact you. This notice also must include the name of the creditor to whom you owe the money, and how to proceed if you don’t think you owe the money.

First, we advised Jocelyn to order copies of her free credit reports from to check if a collection account has been furnished to the credit reporting agencies. If the collection account is listed, Jocelyn should dispute the account with the credit reporting agencies.

Second, Jocelyn should tell her sister to inform the caller not to contact her again. While collectors may contact other people, they can do so only to ask how they can contact you and are generally prohibited from contacting third parties more than once. They are not permitted to discuss your debt with anyone other than you, your spouse or your attorney.

If Colonial reaches Jocelyn directly, she should ask for the company’s mailing address and send a letter stating that she does not owe the money, asking for verification of the debt and demanding that the collector stop calling.

If the harassment continues, call the debt collector from your home phone. If you believe the bill collector doesn’t have your current contact information, hide it by blocking caller ID (or by calling from a public payphone). Ask to speak to the “ethics officer.” State that you believe the collection firm is ignoring your rights under the Fair Debt Collection Practices Act and that you will report the company to the Federal Trade Commission (, the Consumer Financial Protection Bureau (, your state attorney general ( and the collection industry group ACA International (

If the collector sends written verification of the debt and you still believe you do not owe it, consult an attorney who has experience with Fair Credit Reporting Act (FCRA) cases by searching the online directory of the National Association of Consumer Advocates. It is important to protect your rights, as the collection firm may file a lawsuit without informing you. If you don’t show up, they may win the case. If a judgment is issued against you, the creditor or debt collector can attempt to garnish your wages or your bank accounts.

For more information, read the Federal Trade Commission’s publication on debt collection, and the “Dealing with Debt” and “Debt Collection” issues of Consumer Action News.

*Not this consumer’s real name.

A send-off for departing FTC consumer protection head

A crowd of DC's most active and influential consumer advocates gathered on a rainy early March night to toast David Vladeck, who recently retired as director of the Bureau of Consumer Protection at the Federal Trade Commission (FTC).

Despite the weather, the advocates turned out to cheer a man who is, after all, one of them. Vladeck spent 25 years with Public Citizen’s Litigation Group, a non-profit powerhouse that won many court battles on behalf of consumers.

Vladeck oversaw the department within the FTC tasked with protecting consumers and the marketplace from practices that are unfair, deceptive or anticompetitive, working particularly hard during his tenure to stop financial fraud aimed at low-income and vulnerable consumers. Under his leadership, the agency has brought cases against debt collectors, mortgage relief scammers and online marketing fraudsters.

Vladeck also moved the FTC to become more active in online privacy, pushing the agency to create a framework for privacy protection, including the development of a “Do-Not-Track” option on Internet browsers that would allow consumers to turn on or off online tracking by advertisers, and bringing enforcement cases against technology giants Google and Facebook.

“There’s no doubt that the FTC has become a more effective advocate for consumers under Vladeck’s tenure,” said Ruth Susswein, deputy director of national priorities for Consumer Action. “He has made a great difference, certainly in terms of weeding out scammers who prey on low-income consumers.”

Vladeck plans to return to Georgetown University Law Center, where he was previously a law professor and co-director of the Institute for Public Representation. The FTC announced that Charles A. “Chuck” Harwood, who has been a deputy director in the Bureau for three years, would serve as acting director.

Challenging the National Mortgage Settlement monitor

In February 2012, 49 state attorneys general (AGs) and the federal government announced a joint state-federal $25 billion settlement with the country’s five largest mortgage servicers: Ally/GMAC, Bank of America, Citi, Chase and Wells Fargo. The National Mortgage Settlement was to provide immediate aid to homeowners needing loan modifications and those with “underwater” mortgages that currently exceed the home’s value. Instead, 46 percent of the relief borrowers are receiving is coming in the form of short sales, according to the Center for Responsible Lending.

A short sale is when banks allow homeowners to sell their homes for less than the outstanding mortgage. The shortfall is then “forgiven.” (Homeowners who sell their homes in 2013 won’t be taxed on the shortfall.)

In March, housing counselors, consumer advocates and civil rights leaders met with settlement monitor Joe Smith in Washington, DC to discuss what’s working and what’s not. Advocates expressed alarm about the percentage of borrower relief going toward short sales.

“The notion that a short sale is actually homeowner relief is outrageous,” said attendee Mark Seifert, executive director of Empowering and Strengthening Ohio’s People (ESOP).

Advocates warned that mortgage servicers are failing to provide homeowners with principal reductions and other loan modification tools to help families remain in their homes. Smith admitted that he, too, was concerned about the percentage of short sales and assured the audience that at least 30 percent of the relief will end up in principal reductions on mortgages. (Mortgage principal reduction shortens the term of the mortgage, giving the homeowner more equity in the property and, in some cases, more affordable monthly payments.)

Smith blamed some of the problem on flaws in how the AG settlement was designed, with “lots of discretion” for servicers to decide who will get relief and how much they will be given. Smith reminded the audience that servicers receive only 10 cents on the dollar for short sales and second liens vs. full dollar-for-dollar credit on first mortgage modifications and principal reductions.

During a panel discussion following Smith’s remarks, advocates argued that no credit should be given for short sales and second liens, calling settlement dollars for short sales “worthless for families” who want to remain homeowners, particularly in communities of color.

Advocates called on the monitor to collect and release data about who actually has benefitted from loan modifications. While Smith acknowledged that little is known about who is receiving help—especially in the hardest hit communities—he said he did not need it “to get the job done.” There is general worry among advocates that mortgage servicers are modifying loans on a limited number of expensive homes, rather than assisting larger numbers of homeowners with lower-value properties who might really need the help.

Smith invited advocates and the public to alert him to specific mortgage relief problems online at

Moody’s Investors Service said last year that banks have decided that short sales are faster and less costly than foreclosures, which had slowed in response to regulatory probes of abusive practices.

The National Council of La Raza (NCLR), the National Urban League and the National CAPACD (Coalition for Asian Pacific American Community Development) were the hosts of the meeting.

FTC’s proposed Used Car Rule disclosures need some bodywork

The Federal Trade Commission’s proposed new Used Car Rule came as a surprise to consumer advocates, who have labeled it a “lemon.” Consumer Action submitted comments in response to the Rule, noting that the FTC’s proposed language for cars sold “As Is” creates a loophole that could be used by unscrupulous dealers to evade consumer protections and that the proposal fails to require that dealers search all vehicle history through the National Motor Vehicle Title Information System (NMVTIS), a Department of Justice database, and provide the results on every car they sell.

Ruth Susswein, Consumer Action’s deputy director of national priorities, said, “Another key concern is that crucial information about the availability of a manufacturer’s warranty would be hidden on the back of the Buyers Guide. After all, this is a form that must be displayed on the vehicle’s window, so who’d see it on the inside?”

Consumer Action recommends that warranty information be prominently displayed on the front of the form.

Groups including the Center for Auto Reliability and Safety (CARS) and Consumer Action recommend that the FTC avoid using “As Is” disclaimers that lead used car buyers to believe that the dealer bears no responsibility for defects. In cases of fraud or violations of state law, a dealer may be responsible for repairs plus a refund, actual and compensatory damages, attorney’s fees, and even punitive damages.

The FTC proposed Rule would require dealers who sell vehicles “As Is” to post a sticker on these cars that includes: “THE DEALER WON’T PAY FOR ANY REPAIRS. The dealer is not responsible for any repairs, regardless of what anybody tells you.” This is misleading, because under state law in all 50 states, if dealers commit fraud and cheat car buyers, they may have to pay for repairs and may also be liable for refunds or even punitive damages.

Consumer Action also recommended that the FTC require dealers to:

  • Inspect vehicles prior to sale to determine their condition and alert buyers to any known defects in writing.
  • Report to the buyer any history of flood or accident damage and if the car has been labeled a junk or salvage vehicle.

To read Consumer Action’s comments, click here.

Grant supports medical privacy education project

Consumer Action staff are in the process of creating a variety of consumer education materials on medical information privacy in the age of electronic health records (EHRs). The project is being funded by a grant from the Rose Foundation for Communities and the Environment, an Oakland-based public charity that “supports community-based projects and organizations that are building long-term solutions that benefit people, the environment and the economy.”

Under the $100,000 award, Consumer Action plans to educate more than 100,000 low- and moderate-income and hard-to-reach California residents about the privacy implications of health information technology (HIT). As health care providers make the transition from paper to electronic health records, patients are presented with unfamiliar terminology and, in some cases, new choices about how their medical information is stored and shared.

Understanding the risks and benefits of HIT and keeping up with patients’ evolving medical information privacy rights is daunting for anyone, but underserved populations face additional challenges—a language barrier, for example—that may deter or prevent them from making the choices that would allow them to benefit from health care advances.

While various government and non-profit educational efforts have produced important resources about health IT, not all of the information is widely disseminated in print, written in an easy-to-understand way, available in a variety of languages, or developed through a culturally and economically sensitive lens. Consumer Action’s unique reach into LMI and minority communities enables us to fill in the gaps—to prepare consumers to make well-informed decisions about the use of their medical data, protect their privacy and gain a greater sense of security and trust in HIT.

Over the course of the 18-month project, Consumer Action will produce an education module that includes a multilingual brochure (English, Spanish, Chinese, Korean and Vietnamese), a curriculum to be used by community educators in a classroom setting, and a backgrounder guide written in question-and-answer format offering greater detail on the topic. We will distribute 75,000 of these publications to hard-to-reach California consumers through our network of community-based organizations (CBOs) and the community medical facilities that serve them.

The newly created module will also be posted on Consumer Action’s main ( and privacy ( websites for free download. We’ll promote the online module through our grassroots email alerts, on Facebook and in Twitter feeds, and in Web posts that highlight the material.

In addition, Consumer Action will host three comprehensive, daylong train-the-trainer roundtables in targeted California communities to teach CBOs how to effectively use the new medical information privacy module. Each roundtable will train 25-35 CBO staff.

Press releases and in-language interviews in California’s mainstream, Spanish and Chinese media will help to inform on the topic and promote the free materials throughout the state.

This is not the Rose Foundation’s first grant to Consumer Action. “We have had a long and productive relationship with the Rose Foundation, in which they have funded us, at least in part, because of our ability to help educate the hard-to-reach,” said Ken McEldowney, Consumer Action’s executive director.

Previous Rose grants have enabled us to create, update and expand our privacy subsite,, and produce and distribute consumer materials such as "Privacy and Your Credit Report."

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, 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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