Consumer Action INSIDER - August 2014



Table of Contents

What people are saying

For consumers, particularly the Latino and Asian-American consumers frequently assisted by a nonprofit advocate like Consumer Action, reliable, easily accessible information is important. Don’t write off the importance of consumer advocacy that leads to [class action] settlements. They may not be the big-money payoffs ... but they remain important reminders to companies that they cannot and should not run roughshod over the needs and interests of consumers. — Rick Cohen, (“Resource for Activists: Free Database on Class Action Lawsuits,” June 2014)

Did you know?

Staying healthy is important, but did you know that digital devices and smartphone apps that track what we eat, how much we exercise, our weight, blood sugar and blood pressure may exist outside of laws that require companies to safeguard the information? Learn more at Privacy Rights Clearinghouse: Mobile Health and Fitness Apps: What Are the Privacy Risks?

Consumer complaints on stage at CFPB field hearing

The Consumer Financial Protection Bureau (CFPB) last month added a new dimension to consumer protection with a proposal to allow consumers who submit complaints to the CFPB to publicly share their descriptions of what happened to them. Complainants would choose whether or not to publicly share complaint details (narratives) in the CFPB’s complaint database. Click this link to read the proposal.

According to the CFPB, adding complaint narratives would provide important context for the complaint, help the public detect specific trends in the market, aid consumer decision-making and drive improved consumer service.

“The stories are the heart and soul of the complaints,” CFPB Director Richard Cordray told the crowd at Chamizal National Memorial Theater in El Paso, TX, where the Bureau held its latest field hearing and announced its proposal. CFPB employees shared videotaped stories about consumers whose stubborn debt collection and credit card problems were resolved after filing complaints with the CFPB. (Watch these compelling stories on the CFPB website.)

Consumer Action, along with dozens of other consumer, civil rights, privacy and open government groups, has long supported a policy to make complaint details public. The CFPB’s proposal empowers consumers with timely, valuable information to prevent problems before they make a purchase. Access to the “beef” of complaints allows consumers to gain from others’ firsthand experiences and steer clear of companies that don’t follow through to resolve complaints.

Consumer Action’s Ruth Susswein, who spoke at the field hearing, said that consumers can use complaint details to identify companies with a pattern of unfair, deceptive or discriminatory practices.

“When we detect dangerous trends like discrimination, financial scams and unfair treatment through others’ complaints, we can reward businesses that treat us with respect and ignore those that won’t,” Susswein told the audience.

Under the proposal, when a complaint is filed, consumers would be able to choose whether or not to share the details of the problem with the public. Companies would also be permitted to present their side of the dispute, which would appear side by side with the complaint, so the public can judge the validity and handling of the problem.

Currently the database offers more general descriptions of complaints. The public database has already helped improve customer care at many companies, according to Scott Pluta, the CFPB’s assistant director for consumer response.

Other panelists at the El Paso field hearing generally supported the proposal to share complaint details, but many companies and corporations are concerned about reputation and fear they won’t be able to adequately represent their side of the story publicly because of customer privacy rules.

Beth Givens, executive director of Privacy Rights Clearinghouse, and a panelist at the field hearing, favors the proposal but expressed the importance of protecting consumers’ personal information. The Bureau assured the audience that it will go to great lengths to remove all personal or identifiable details prior to posting.

Click here to submit comments on the proposal. Deadline: Sept. 22, 2014.

For-profit colleges: Worthless degrees and school closings

Troubled for-profit education giants Corinthian Colleges and ITT Educational Services have been subject to increased scrutiny and loss of federal funding after facing multiple state and federal investigations. The scrutiny has a direct impact on existing students as campuses face closures and being sold. Taxpayers would also be on the hook for forgiven federal student loans at closed schools. Consumer Action has posted an alert for students impacted by school closings. Click here to read the alert.

Corinthian Colleges, which receives $1.4 billion a year in federal aid, reached an agreement with the U.S. Department of Education (ED) earlier this month to sell 85 of the company's 100-plus campuses and to close 12.

Corinthian, which owns Everest College, Heald College and WyoTech schools, serves about 72,000 students in 26 states and Ontario, Canada. Regulators are working to ensure that existing students won’t lose credits they’ve already earned and to ensure that taxpayers aren’t burdened by forgiven federal student loans. According to online Inside Higher Ed, the government has lent students more than $1.2 billion to attend Corinthian schools.

In February, the Consumer Financial Protection Bureau (CFPB) sued ITT Educational Services, claiming the company unduly influenced students to take out high-interest student loans to pay for attendance. Meanwhile, ITT faces increased monitoring as a result of missing the deadline to submit 2013 financial documents to the ED and could potentially lose its ability to offer federal student aid.

The ED says students at for-profit colleges account for about 13 percent of enrollment nationally but close to half of all loan defaults. The government agency has stepped up enforcement of the sector since the 2008 financial crisis. For-profit career education companies face federal and statewide probes into marketing, recruiting and student financing.

GI Bill educational benefits for the military have also been in the news. In “GI Bill Funds Flow to For-Profit Colleges That Fail State Aid Standards,” the Center for Investigative Reporting says “over the last five years, $600 million in college assistance for Iraq and Afghanistan veterans has been spent on California schools so substandard that they have failed to qualify for state financial aid.”

The Obama administration is expected to toughen rules that could end federal aid to for-profit schools whose students have high default rates or have accumulated heavy debt loads. Earlier this year, a provision of the federal proposal—an update of “gainful employment” regulations—was deemed inadequate by advocates.

Consumer Action has been working with a coalition of advocates to strengthen this provision to ensure that for-profit career education colleges deliver on their promises that students can find employment in the fields they are studying. In a direct response to the meager regulatory standards, Consumer Action collected and delivered to ED more than 200 letters of support for improvements to the gainful employment proposal. As of this writing, a decision had not been made on the proposed rule.

Hotline Chronicles: Can undocumented person get a credit card?

Connie* contacted Consumer Action to ask: “Someone I know is undocumented and wants to obtain a credit card. One of the banks he tried is requesting a Social Security number (SSN). Is there any way to apply for a card without a Social Security number?”

It’s a good question, and one that can’t be answered definitively.

Financial institutions generally require a Social Security number or individual taxpayer identification number (ITIN) to open an interest-bearing checking/savings account. (The Internal Revenue Service issues ITINs to individuals who are required to file taxes but who do not have—and are not eligible to obtain—SSNs. ITINs are issued regardless of immigration status to those who have an obligation to file income taxes.) If a consumer is going to open an account that will not earn interest, such as a regular checking account—or even a general-purpose reloadable prepaid card account—the consumer still has to provide documentation that verifies his or her identity. Financial institutions may accept alternative forms of ID, including foreign passports, green cards and consular ID cards (e.g., the Mexican “matrícula consular”).

Whether a bank will issue credit (including credit cards) without a Social Security number or ITIN is up to the bank. Policies may even vary from branch to branch or region to region.

The real issue is not undocumented versus documented, or even SSN versus ITIN—it is that banks are required to “know their customers” under Section 326 of the USA PATRIOT Act. The law allows financial institutions flexibility, within certain parameters, to determine which forms of identification they will accept and under what circumstances. The rule requires that financial institutions develop a Customer Identification Program (CIP) that implements reasonable procedures to: 1) Collect identifying information about customers opening an account; 2) Verify that the customers are who they say they are; 3) Maintain records of the information used to verify their identity; and 4) Determine whether the customer appears on any list of suspected terrorists or terrorist organizations.

Technically, a foreign national should be able to use his or her country’s passport to apply for a U.S. credit card. However, as a practical matter, many undocumented people in the U.S. don’t have homeland passports, or banks are too cautious to accept such identification when issuing credit.

Some banks have experimented within the guidelines. For example, for a period starting in 2007, Los Angeles-area Bank of America branches offered credit cards to customers without a Social Security number who had managed a checking account without any overdrafts for at least three months. (The program is described in a 2008 article.) Just last month, Consumer Action found an institution, Cooperativa Latino Credit Union in North Carolina, that makes credit cards, mortgages, auto loans, etc. available to consumers who can provide either an SSN or an ITIN. There are probably many more such institutions—it’s just a matter of finding them. Financial institutions probably don’t often post their policies on their websites because they may come under fire from people and organizations that are critical of allowing undocumented immigrants to participate in U.S. financial services, as was the case with the Bank of America pilot program.

Consumer Action suggests checking with local banks and credit unions in addition to branches of large nationwide banks. Another option would be to contact financial institution partners of local Bank On programs.

Institutions that accept ITINs from applicants without a credit history might offer them only secured credit cards. To obtain these cards, approved applicants will be asked to submit a security deposit (for example, $300 for an equal line of credit). By using the card wisely and paying all bills on time, applicants may be able to “graduate” to a regular card after six months to a year. (This is often the route even for applicants with SSNs and no credit history.) Other institutions may have similar policies.

*Not this consumer’s real name.

Transatlantic Consumer Dialogue annual meeting in DC

After a day of internal Transatlantic Consumer Dialogue (TACD) meetings hosted by the U.S. Department of State on June 23, members from the EU and U.S. gathered on the second day for a public discussion of the pending Transatlantic Trade and Investment Partnership (TTIP) and its potential impact on consumer protection. Consumer advocates, EU and U.S. government officials and business people attended. Consumer Action’s Linda Sherry represented Consumer Action at the internal meeting and attended the event, hosted by the Pew Charitable Trusts.

If negotiators allow it, trade agreements have the potential to water down, or even completely disregard, regulations designed to protect consumers from privacy invasions, unsafe food, faulty products and more. Often negotiators from one side or another seek to simplify business practices within trade agreements with an eye to avoid what they consider onerous regulation.

Among the morning’s speakers was Robert Adler, acting chair of the U.S. Consumer Product Safety Commission (CPSC), who said differences in regulation in the U.S. and EU represent more an annoyance to industry than a financial cost. Prudent firms, he said, simply comply with the most stringent regulation so that they are covered in any eventuality.

Throughout the day, consumer advocates voiced opposition to efforts by global companies to freely trade consumer data without restriction. The EU and the U.S. have long differed over how to regulate or legislate on data privacy concerns, and the issue remains up in the air in the talks. TACD advocates hold that data protection and privacy rules should be “hands off” during the trade negotiations. Without adequate oversight and transparency, any attempts to include data protections in the transatlantic trade negotiations easily could result in a significant weakening of consumer protections with little or no public input.

Another big issue discussed among members of the TACD was the inclusion in TTIP of Investor-State Dispute Settlement (ISDS), which allows corporations to skirt domestic court systems and directly sue foreign governments for cash damages if they “impede” access to their markets with legislation, regulation or other action. Previous trade agreements have featured ISDS, which is intended to prevent discrimination, contract repudiation and the taking of property without due process of law and appropriate compensation. U.S. Chief Negotiator Dan Mullaney told the TACD assembly that 21st century trade agreements need ISDS to foster investment.

Members of the Trans Atlantic Consumer Dialogue, including Consumer Action's Linda Sherry (center rear in red jacket), gather for internal meetings at the U.S. State Department in DC. Monique Goyens, director general of BEUC, an EU consumer organization, is seen at the podium.

Robert Weissman, president of advocacy group Public Citizen, pointed out that efforts to reform ISDS revealed deep flaws and showed that “if a system requires so many patches to be fixed we should not continue trying to improve it but step back and reconsider the whole thing.” Weissman concluded that those who think they can fix ISDS underestimate the ability of corporate lawyers to find loopholes. He cautioned against “alleviating corporate rights over citizens’ rights.”

During the forum, key points emerged from those who oppose ISDS:

  • ISDS has a potential chilling effect that could lead to lower standards by national lawmakers because governments might avoid actions that would trigger expensive challenges from powerful multinational corporations.
  • The number of cases has exploded in the last decade. If included in the TTIP, ISDS would lead to further increases because of the scale of cross-Atlantic investment.
  • ISDS is not needed in TTIP because transatlantic investors are sufficiently protected via existing judicial systems on both sides.
  • The ISDS mechanism discriminates against national companies and consumers because only foreign companies can use it.

The TACD meets each year, alternating between Washington, DC and Brussels, Belgium, center of EU government. Consumers International coordinates the TACD. For more about the TACD, visit its website.

Seen and Noted: Building bridges to lead people out of poverty

Educators, service providers, advocates, faith-based leaders and life coaches came together in Reno, Nevada, in July for a Bridges Out of Poverty training hosted by the Bridges to a Thriving Nevada. Consumer Action’s Audrey Perrott attended.

Bridges Out of Poverty is a community development model for reducing generational poverty rates, ending poverty and transitioning people out of poverty. The program offers tools for sectors impacted by poverty in their communities including business, health care, education, social and human services and faith-based organizations.

Bridges Out of Poverty sessions provide participants with an understanding of the effects of economic class (i.e., the poor, middle class and wealthy) on sustainable communities. Positing that poverty, middle class and wealth are about an abundance versus a lack of resources, the program aims to help individuals connect to the information and techniques they need to move up the social, educational and economic ladder.

Dr. Debora McDermed, director of community development for Bridges to a Thriving Nevada and board vice president of Advancing Bridges USA, led the training to introduce the program to stakeholders for use in their own communities.

At the meeting, these examples were presented to show how the Bridges Out of Poverty program can be successful:

  • A county judge noticed a high number of bench warrants, arrests and recidivism. Using the Bridges Out of Poverty program, the judge came to understand that there are barriers preventing people from appearing in court at set appointment times. These include lack of transportation, conflicting appointments with other government agencies, work schedule and lack of child care. Under the new system, offenders are permitted to show up at the court on any business day within a two-month period. This shift resulted in a huge savings for the judicial system and a reduction in bench warrants, arrests and recidivism.
  • A local manufacturing plant improved employee productivity, reduced absenteeism and improved employee commitment by negotiating with the local transit operator to lower fares and add a bus stop at the plant, adding a diversity program and implementing on-the-job training.

The Bridges Out of Poverty training sessions and community engagement initiatives are based on a book of the same name by Ruby Payne, PhD, Phil DeVol and Terri Dreussi Smith. The Bridges model has been used in more than 200 U.S. communities and six foreign countries. Here are a couple of additional examples of positive outcomes from the publisher’s website:

  • Schenectady Bridges Initiative, New York, has a Downtown Ambassadors program that employs residents of a homeless shelter as “sidewalk concierges.” The program is so successful that more businesses have joined and increased the demand for ambassadors.
  • Rural Solutions, Colorado, held a program for TANF-eligible residents in the 10 counties of northeast Colorado that produced 165 graduates, far exceeding the target of 90. Among the results: Unemployment among participants dropped from 60% to 42% by program completion, all employed individuals were able to increase the hours worked at their jobs, and the percentage of participants reporting that they felt down or discouraged five or more times per month dropped from 33% to 19%.

Perrott said she left the training feeling empowered to do more in her own sphere of influence to build bridges to end poverty. “I’m enthusiastic about using the information I learned to catalyze change,” she said.

Class Actions: Higher One cardholders in line for settlement funds

In July, Consumer Action added eight class action settlements to its Class Action Database.

Among them is a settlement of the In re Higher One OneAccount marketing and sales practices litigation. Higher One is a company that works with universities and colleges nationwide to provide student accounts for loan disbursement services, tuition payments and a debit card for student spending that doubles as a college ID card.

The plaintiffs filed a class action against Higher One, claiming that the company failed to adequately disclose all the available disbursement methods for the student’s tuition and financial aid refunds. The plaintiffs also alleged that Higher One charged improper fees, such as PIN-based transaction fees and non-Higher One ATM fees.

Higher One denied the allegations but agreed to a settlement.

You are part of the class if you opened a OneAccount bank account between July 1, 2006 and Aug. 2, 2012 and incurred a fee. The OneAccount bank account includes basic OneAccount, OneAccount Flex, OneAccount Premier and OneAccount Edge financial products.

The settlement provides a $15 million fund and requires many changes to Higher One’s policies and fee schedules. Higher One has agreed to obtain consent from students that they agree to pay the fees that come with the account. The company has also agreed to improve the clarity and readability of the fee schedule. The settlement also requires Higher One to eliminate some fees, including fees for lack of documentation, abandoned accounts, delinquencies, insufficient and “non sufficient” funds and overdrafts.

Higher One also will provide a refund of up to $5 per day for non-Higher One ATM fees incurred when Higher One ATMs are out of service due to maintenance or lack of cash.

If the settlement is approved, class members will receive a cash payment dependent on the services used. Click here to visit the settlement webpage. The claim deadline is Jan. 23, 2015.

Financial Inclusion training travels to Texas, East Coast

Consumer Action, with a grant from the Rose Foundation and support from our own Money Management Project, earlier this year created a new financial education training module. The materials are designed to help unbanked and underbanked consumers learn how to use mainstream financial products and avoid high-cost fringe, or alternative, financial products.

After the California debut of the program, Consumer Action trainers Linda Williams and Nelson Santiago headed to Austin, TX, Rockville, MD and Washington, DC, where they introduced participants to the new Checking and Savings Accounts—A Wise Choice.

Sessions also were held on engaging the adult learner and on new consumer protections and resources related to mainstream and alternative financial services.

"What do we mean by financial mainstream?" asked Santiago. "What kinds of institutions are we encouraging consumers to establish relationships with?" The answer, “banks and credit unions,” while simple, becomes quite complex when one delves deeper. “There’s a lot to know about services at banks and credit unions,” he said, suggesting information and resources that participants could use to educate clients about the accounts and services available at large national banks, regional banks, community banks, virtual banks, credit unions and brokerage firms.

Throughout his presentation, Santiago made use of a handy reference sheet (click here to download) listing the resources. For example, he provided links to a community bank locator tool, a high-interest checking account locator and a bank customer satisfaction survey. When he spoke about sending money overseas (international remittances), Santiago named several tools, including Consumer Action's recently updated How to Send Money Home brochure and the Consumer Financial Protection Bureau's remittance fact sheet for stakeholders.

During the discussion of alternative financial services, Santiago focused on transaction-based alternative products and services, including check cashing, money orders, bill payment services, remittances and prepaid cards. Credit-based alternative products, such as payday loans, auto title loans and tax refund related products, were covered by Williams.

Check-cashing services are very costly, said Santiago. He shared examples showing how a consumer earning $1,000 every two weeks and paying 3% to cash a paycheck will end up paying close to $800 per year just for check cashing. A consumer earning half as much would pay almost $400 per year. He pointed out that even a bank account with a fee of $10 per month would be much cheaper at $120 per year. With a bit of persistence, he said, consumers should be able to find low- or no-cost bank accounts.

Santiago emphasized that if consumers are not able to open accounts, for example because of negative information on file with ChexSystems, they could look for affordable alternative products. For example, rather than paying $7 to pay a cable bill through a bill-pay service, an unbanked consumer would be better off using a low-cost money order from the post office. Even banked consumers sometimes are required by a landlord or creditor to pay a bill with a money order. Unless that consumer's bank offers free or low-cost money orders or cashier's checks, a postal or other low-cost money order is the best option.

During the segment introducing the Checking and Savings Accounts—A Wise Choice module, co-trainer Williams spent some time reviewing the lesson plan's exercises and activities. These include a five-page sample ChexSystems report and a hypothetical scenario about a couple that needs advice on reducing bank expenses. The lesson also includes a check-writing exercise and checkbook register activity that Santiago enlarged to poster size so that participants could work on it in teams and compete for prizes.

Early in the training, Williams demonstrated how participants can use a simple true-false pre-training quiz to engage clients in financial education workshops. She posed quiz questions to participants and asked them to work in teams to arrive at their answers. The team with the most correct answers won prizes.

The training also provided an opportunity to showcase several additional Consumer Action publications, including those that focus on prepaid cards, popular as bank account alternatives. Participants were reminded of Consumer Action’s Prepaid Cards booklet and Prepaid Card Survey which, while issued in 2012, contains up-to-date information related to consumer rights in the event of unauthorized card use or disputes with the issuer.

Consumer Action's new Employee's Guide to Payroll Cards was included in participants' packets. Santiago went over some highlights: Employers must offer at least one additional option besides payroll card for receiving wages, such as direct deposit to a bank account; consumers can access their full wages for free at least once per pay period; and protections in the event of unauthorized use are the same as those that apply to bank account debit cards. Participants' reference sheets also included a link to the Consumer Financial Protection Bureau's bulletin warning employers against the exclusive use of payroll cards.

The Maryland training was co-hosted by the City of Rockville. Mayor Bridget Donnell Newton said that one of her goals for the training was to provide local trainers with tools to help families in Rockville’s communities. “Through the development of additional trainers we will be able to reach significantly more individuals and families,” she said.

Community-based organizations around the country can access the Checking and Savings Accounts—A Wise Choice module by clicking here.

Coalition Roundup: Arbitration, used car sales and auto insurance

Consumer Action has recently joined its allies in these important actions:

Gauging attitudes about forced arbitration. The use of forced arbitration clauses continues to undermine consumer protection. Used by big banks and corporations, consumers are often unaware they are agreeing not to take their cases to court or join class actions when they sign phone contracts, open a checking account or "like" a company on Facebook. In June, advocates, including Consumer Action, wrote to the Consumer Financial Protection Bureau (CFPB) to urge it to conduct a survey of credit card holders to learn what consumers know and how they feel about signing away their legal rights in return for being a customer. Click here to learn more.

Does CarMax sell dangerous cars to consumers? Consumer Action joined 10 organizations in asking the Federal Trade Commission (FTC) to investigate auto retail giant CarMax over claims that its advertisements are deceptive because CarMax does not fix used vehicles under recall before it sells them. CarMax, the nation’s largest used-car retailer, runs ads promising that the vehicles it sells have undergone rigorous quality inspections. Click here to learn more.

Advocates ask for auto insurance affordability study. Consumer Action joined over 30 organizations from around the country in urging the U.S. Treasury Department’s Federal Insurance Office (FIO) to collect data from insurance companies in order to assess the affordability of auto insurance for low- and moderate-income Americans and those living in historically underserved communities. Advocates want to know what discounts, if any, are extended to these customers and who qualifies for the programs. Click here to learn more.

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, 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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