Consumer Action INSIDER - August 2015


44th Anniversary

Table of Contents

What people are saying

I gotta tell you, usually newsletters are boring and long winded!! Loved the SCAM GRAM!    — G.C., Cocoa, FL

Did you know?

The U.S. is undergoing a phone transition. This ongoing move to more efficient, modern communications networks will shift us away from analog switch and copper-based phone lines to next-generation fiber and IP-based networks. The Federal Communications Commission (FCC) is keen to facilitate this “technology transition” while ensuring that “legacy” networks don’t disappear before adequate replacements exist and consumers fully understand the new choices. FCC Chairman Tom Wheeler explains some of the issues involved in a July blog post that stresses protecting consumers and ensuring public safety during this transition. Read the FCC blog post.

Out and About: A new way to save for retirement

The U.S. Treasury Department last month announced a massive new undertaking to help those without traditional retirement options save for retirement. At a roundtable at its Washington, DC headquarters, the agency rolled out its new myRA (My Retirement Account). The account is based on the Roth IRA, a savings account featuring tax-free retirement withdrawals.

It was clear from the discussion that the Treasury hopes to create more access to low-cost retirement savings options for everyone, including young people just starting out, people working in food service or retail positions and low-income earners.

“The more people save, the less they will need government assistance and the more options they’ll have in retirement,” said Dave Lebrynk, the Treasury Department’s fiscal assistant secretary. “We know it’s hard to save but this can make a real difference in people’s lives.”

Even if your employer doesn’t offer a 401(k) retirement plan or its equivalent, if you change jobs, or if you only have $10 to contribute each payday, you can still have a myRA account.

The myRA is backed by the U.S. Treasury, meaning it will never go down in value, and you can save as much as $15,000. After you’ve hit the $15,000 mark, you have the option to roll your savings over into a private account (through a financial services provider like Fidelity or Vanguard) in order to continue saving.

myRA photo

A myRA account is convenient and easy to use. You can have the money you invest directly deposited from your paycheck and you can check your balance and manage your account online 24/7. There are no fees or costs associated with opening or maintaining the account. Because myRA is a Roth IRA, you can earn interest on the money you invest, and any withdrawals when you reach retirement age are tax free. (However, if you are eligible for a retirement plan at work, you can’t open a myRA. You must have earned income, but those who earn more than $131,000 for individuals and $193,000 for married couples filing jointly aren’t eligible for myRA accounts.)

After Lebrynk and his colleagues described the program, they opened the room for feedback, insights and a discussion to explore future outreach strategies to consumers nationwide. Dozens of leading non-profit groups (including Consumer Action) chimed in with their questions, concerns and recommendations. Based in part on this input, the Treasury will be rolling the myRA program out to the public in the coming months. To learn more and sign up for a myRA, click here.

“We want to make sure that Americans across the country know about myRA. We want to drive awareness, get people to open accounts and encourage continuing participation,” said Treasury Department Deputy Assistant Secretary Melissa Koide.

The Treasury is also encouraging employers (particularly those who do not offer retirement plan options or who have employees who are not eligible to participate in the options they do offer) to tell their employees to sign up for myRAs (at no expense to the employer).

SCAM GRAM: New email alert gets rave reviews

Last month Consumer Action introduced its first SCAM GRAM. The e-newsletter featured Section 8 scammers who prey on low-income renters searching for affordable housing; a crowdfunding con artist who raised over $100k via Kickstarter only to spend it on himself; dishonest immigration consultants who prey on the Latino community; and a practice known as “card popping” that primarily targets young people via social media, duping them out of their debit card information to steal their money.

SCAM GRAM also offered timely tips, including how to avoid online romance and degree scams, how to get a more secure credit card, how to identify a fake call from someone claiming to be with the IRS, what to be on the lookout for if you were part of the recent massive government personnel hack and more.

The first issue of SCAM GRAM was a big hit! We received dozens of emails from readers who found it entertaining, timely and engaging. Don’t be fooled by liars, cheats and deceivers—wise up with SCAM GRAM! If you didn’t see it, check out our first issue online and sign up here.

Hotline Chronicles: How credit card payments are applied

Lara* from Wisconsin wrote to the Consumer Action hotline to ask why her credit card payments were applied to a portion of her balance subject to 3.99% interest before they were applied to a portion she transferred at “zero percent.” The answer lies in a change made under the Credit Card Accountability, Responsibility and Disclosure (CARD) Act that dictates how issuers must apply your credit card payments.

With a credit card, it’s possible to borrow money at different interest rates. For example, you could transfer a balance from another card to take advantage of a zero percent introductory rate. Meanwhile, you could have purchased an item (or items) subject to a purchase rate of 14.99%. Maybe you wrote a credit card convenience check that was charged a cash advance interest rate of 19.99%.

The CARD Act states that when a cardholder sends more than the minimum payment (extra money), the additional payment must be applied to the highest interest rate portion of the balance. However, when you send only the minimum payment, it is typically applied to the balance with the lowest rate.

myRA photo

The CARD Act change ensures that extra sums are applied to the balance with the highest interest rate first. This is good for consumers because they end up paying less in interest on their total card debt over the long term.

There is an exception to the CARD Act’s extra payment rule: If you buy something under a “deferred interest” plan (meaning you are allowed to make payments for a specific time period with no accumulating interest), you can choose to apply any part of a payment over the minimum to the deferred interest balance. This can help you pay off the interest-free balance before the deadline, when retroactive interest is charged on the entire amount you borrowed if you haven’t paid in full by that time. If you don’t request this, only the last two payments you make before the deferred interest period ends will be applied to the deferred interest balance automatically. However, this may not be enough to pay the balance in full and thereby avoid retroactive interest.

“While the CARD Act tweaked this in the consumer’s favor, paying more than the minimum will help you retire your debt earlier,” said Consumer Action’s Linda Sherry. “Also consider carrying only one interest rate balance on your card at one time. Avoid cash advances, convenience checks and promotional offers on any card you use for regular purchases.”

*Not this consumer’s real name.

Consumer Action helps stop a bad auto loan from destroying man’s life

Erika Toriz, executive director of Haven Neighborhood Services in Los Angeles, contacted Consumer Action’ s outreach team in December to obtain guidance and referrals to help assist her client, a disabled, homeless veteran and victim of a predatory auto loan. Toriz is an active network partner; her agency uses Consumer Action publications and resources exclusively to educate consumers on savings, money management, budgeting, building and rebuilding credit, and housing.

Consumer Action advised her to contact Rosemary Shahan, president of CARS (Consumers for Auto Reliability and Safety). Shahan is a long-time ally of Consumer Action and her organization has led the charge to save lives, prevent injury and protect consumers from auto-related fraud and abuse.

A predatory loan is a loan that imposes unfair or abusive loan terms on a borrower. Predatory lending also occurs when a borrower is convinced through deceptive tactics to accept a loan that they don’t need or want or can’t afford.

Shahan provided Toriz with attorney referrals to handle the predatory loan case. It soon became clear that the car salesman had overstated the borrower’s income, added a warranty without the borrower’s knowledge, convinced the borrower that a lease contract was the same as a purchase contract and never discussed the price of the vehicle with the borrower.

At this point, one of the referred attorneys spoke with Toriz’s client regarding his settlement goals and objectives. He then wrote a letter on behalf of the client to the Southern California Toyota dealership. Justice was served when the dealership bought out the client’s contract, returned all the money he’d paid and returned the client’s original trade-in vehicle.

“We are so happy that we were able to assist our network partner to advocate on behalf of her client and help him to get his life back on track,” said Audrey Perrott, Consumer Action’s associate director of outreach and training. “We’re also thankful to CARS for lending its expertise.”

Toriz has reported that her client has been able to use the $700 that he would have been paying monthly for the terrible auto loan to move into permanent housing. He is extremely grateful that he was able to recover his losses and reboot his life.

Mini-grants to financially educate underserved consumers

Consumer Action awarded mini-grants to six community agencies that were trained on or have been using our Checking and Savings Accounts module. The educational module, trainings and mini-grants were made possible by the generous support of the Rose Foundation for Communities and the Environment .

Each group received a $5,000 Rose mini-grant to conduct banking education using the module. Grantees are required to provide financial education to 10 to 15 clients for a five-month period and to track individual client progress during that time. Agencies are also required to document program outcomes in a midterm and final report and to share success stories with Consumer Action.

The agencies selected have demonstrated successful use of Consumer Action’s curricula when providing innovative education programs to diverse groups, including low-income families, immigrants, veterans, seniors, people with disabilities, people with low literacy skills, faith-based communities, teens and formerly incarcerated (re-entry) clients. The agencies will reach consumers in a variety of settings, including workshops, trainings and direct face-to-face counseling.

The grantees selected are: Easter Seals Central Texas; Empowering Students and Parents, Inc. of Glenwood, MD; HOPES Community Action Partnership, Inc. (HOPES) of Hoboken, NJ; Opportunities Industrialization Center of Washington, DC (OIC/DC); Opportunities Industrialization Center of Ouachita, Inc. (OIC), located in Monroe, LA; and Zoe Life Fellowship Center (ZLFC), located in Riverside, CA.

For over 73 years, Easter Seals Central Texas (ESCT) has offered a continuum of support for people with disabilities and their families at all stages of life. Programs and services include: community and housing services, early childhood intervention, comprehensive outpatient rehabilitation, workforce development, employment services and tenant-based rental assistance. ESCT will use the mini-grant to establish a more in-depth training program to meet the needs of rental assistance participants who lack checking and savings accounts.

Empowering Students and Parents, Inc. (ESAP) is a non-profit that provides a system of relevant opportunities that make a positive difference in the lives of children and adults within the community. A key program that ESAP offers is its reentry consortium. The consortium provides direct and referral services to formerly incarcerated men and women of the Baltimore metropolitan area. Some services include: job fairs for individuals with criminal records; group and one-on-one financial education for reentry clients; and training workshops for community leaders using Consumer Action publications. The consortium will use the mini-grant to offer biweekly classes, plan field trips to local banks to establish bank accounts, and provide one-on-one assistance if needed.

HOPES Community Action Partnership, Inc. (HOPES) is a 50-year old agency with a mission to provide services that address the social, educational and training needs of individuals. HOPES works to help clients fight the causes of poverty and overcome barriers to success. Services offered include: early childhood education; youth afterschool and summer enrichment; community education; senior assisted transportation and information and assistance; health, nutrition and wellness; utility bill assistance and financial education, including financial literacy; volunteer income tax assistance (VITA); and assets for independence (AFI) individual development accounts (IDAs). HOPES will utilize the mini-grant in their financial education program.

Opportunities Industrialization Center of Washington, DC (OIC/DC) is a non-profit with 49 years of experience providing job training and placement services for youth and adults. The organization works as a contractor with federal and District of Columbia government agencies and the private sector. Key services include: financial literacy, occupational skills training, job development, and case management and wraparound services. OIC/DC plans to use the mini-grant with its financial literacy program in order to educate unbanked and underbanked consumers on how to establish and maintain checking and savings accounts and how to use bank and credit union services rather than alternative financial services.

Opportunities Industrialization Center of Ouachita, Inc. (OIC) is a non-profit organization that has been in existence for 40 years. The mission of the organization is to educate, train and secure employment for persons who are economically or socially disadvantaged, thus enabling them to lead productive, self-supportive lives. OIC will use the mini-grant to educate consumers participating in its existing banking education program.

Zoe Life Fellowship Center (ZLFC) is a non-profit faith-based organization that seeks to minister to people in all aspects of their lives: faith, family, finances and fitness. The majority of their parishioners are underserved. They offer eight- to 10-week training sessions on a variety of topics including financial management, budgeting, stress management and time management. ZLFC plans to use the mini-grant to host a biweekly banking training session and meet-ups at a local bank and credit union in order to help consumers understand the full spectrum of services they offer.

Thousands make their voices heard in Congress, government

In recent weeks Consumer Action has asked its supporters to speak out on three important consumer issues:

  • The Department of Labor (DOL) has proposed rules to protect workers from conflicts of interest in retirement investment advice. Consumer Action supports the proposal and recommends that consumers send letters of support to the DOL as well as to their representatives in Congress. Without these rules, financial advisors can recommend retirement investments with hidden fees, riskier features and lower returns—investments that earn them more money, even if they aren’t good for your retirement savings goals. At press time, more than 4,000 messages had been sent by Consumer Action supporters. The comment period closed on July 21.
  • We let consumers know immediately when we heard about a sweeping “regulatory relief” bill introduced by Senator Richard Shelby (R-AL), chairman of the Senate Banking Committee, that would roll back key parts of the Dodd-Frank Act. The harmful bill, which would remove sorely needed protections against high-risk, high-fee loans, abusive mortgage lending practices and financial institution risk-taking, cleared the banking committee in late May. So far, Consumer Action supporters have sent more than 4,800 messages to Congress. You can still let your Senators know that you oppose efforts to tinker with the Dodd-Frank Act, which in addition to many excellent consumer reforms, created the Consumer Financial Protection Bureau (CFPB).
  • A U.S. House bill that would threaten consumers’ ability to join class action lawsuits against corporations that harmed or cheated them (financially or otherwise) spurred outrage when Consumer Action sent out a much-needed alert. The bill (HR 1927) could roll back wage-theft protections for workers, antitrust protections for small businesses, and securities fraud protections for investors. So far, supporters have sent more than 6,400 messages to Congress.

“Interest from consumers in joining our grassroots supporters list has grown considerably in recent months,” said Ken McEldowney, Consumer Action executive director. McEldowney added that it’s easy for others to join the list using the Join Our Email List box on Consumer Action’s homepage (just above the Facebook and Twitter icons).

Amicus Briefing: Consumer Action files ‘friend of court’ briefs

In recent months, Consumer Action has submitted amicus briefs in three important court cases that impact consumers.

Alzheimer's drug Namenda. Along with Consumers Union, Public Citizen, U.S. PIRG and others, Consumer Action filed a brief supporting the attorney general of New York in a lawsuit against Actavis and its subsidiary Forest Laboratories to stop them from discontinuing the widely used Alzheimer's drug Namenda. It is alleged that the company improperly extended its monopoly on Namenda past its patent expiration date. This forced patients to switch to a “new” version of the company’s drug before a generic version was made available. In December 2014 a federal judge ruled that the company must continue to sell generic Namenda. The consumer groups filed their brief in February with the appeals court, where the defendants have filed to overturn the ruling. The brief argues that the decision should stand because its “forced switch” of the drug is anticompetitive and harms vulnerable Alzheimer’s patients. The case is New York v. Actavis PLC and Forest Laboratories LLC.

College ‘gainful employment’ regulation. Consumer Action joined a wide range of groups in two amicus briefs, in New York and the District of Columbia, urging the courts to uphold the U.S. Department of Education’s gainful employment regulation, which would prevent for-profit colleges from accessing federal student aid if they can’t prove they provide students with adequate tools to find employment. The Association of Proprietary Colleges brought the New York case, and the Association of Private Sector Colleges and Universities (APSCU) brought the one in DC. In both cases, U.S. Education Secretary Arne Duncan was the defendant. In May, U.S. District Court of New York Judge Lewis Kaplan upheld the rules, and in June, Judge John D. Bates of the U.S. District Court for the District of Columbia dismissed the DC one.

Corporate dentistry abuses. Along with the National Consumer Law Center, National Consumers League and Consumers Union, Consumer Action filed a friend of the court brief in a case objecting to corporate dentistry practices at Aspen Dental clinics, which they argue harm unwary consumers by pressuring them into expensive and prolonged treatment plans, which must be paid for upfront. If patients are unable to pay for their treatment plans, they are urged to pay by opening controversial high-interest medical credit cards, which often split fees with the corporate dentistry outfits. The case is Treiber, et al., v. Aspen Dental Management, et al. pending in the U.S. Court of Appeals, Second Circuit.

Coalition Efforts: Student and driver rights, antitrust enforcement

Consumer Action and its allies have been involved in a number of new issues:

The Mylan-Teva merger is a healthcare disaster for consumers. A proposed merger of the two largest U.S. generic drug makers drew opposition from seven consumer groups. Advocates asked antitrust enforcers at the Federal Trade Commission (FTC) to stop Teva Pharmaceutical Industries’ proposal to purchase Mylan, saying it would lead to higher prices for consumers and more drug shortages. Learn more and read the letter. (Update: In late July, Teva announced, to the satisfaction of consumer advocates, that it would drop its bid to acquire Mylan.)

Servicing standards need to improve for students and families. In response to the Consumer Financial Protection Bureau’s (CFPB) request for information, consumer advocates brought to light issues commonly found within the student loan servicing industry. Widespread problems relating to miscommunication, payment processing errors, dispute resolution and servicer transfers are a few areas the advocates asked the CFPB to address. Learn more and read the letter.

Recalled vehicles should not be rented to consumers. Those who frequently drive rental cars may be able to feel more secure behind the wheel in the future. Senator Claire McCaskill introduced an amendment that will force rental companies to perform recalls on their vehicles before consumers can drive them. An earlier GOP proposal would have allowed unsafe, potentially dangerous vehicles to remain in service or sold as long as the customer was warned of the recall. Learn more and read the letter.

It’s time to end predatory college-bank partnerships. The changes proposed by the Department of Education (DOE) to ”cash management“ rules governing student financial aid disbursements are a firm step towards curbing the misuse of the federal student aid system—specifically college-bank partnerships that aggressively market to students and steer them into high-fee bank accounts. Learn more and read the letter.

CFPB Watch: Happy birthday to the busy Bureau

The Bureau has much to be proud of—last month alone it ruled that Citibank owes consumers $700 million in relief due to unfair and deceptive business practices, while JPMorgan Chase will return $50 million to consumers for illegal debt collection practices. The Bureau also has created financial tip sheets for immigrants and those with limited English proficiency and has released guidelines to help companies ensure that electronic payments remain speedy and safe for consumers. Finally, the CFPB is reviewing the more than 30,000 student loan servicing complaints consumers submitted last month.

On July 21, the CFPB celebrated a wealth of accomplishments in its first four years. Among them, the Bureau has handled over 65,000 consumer complaints (many of which are submitted through its online complaint database) and has held bad actors in the marketplace accountable to the tune of over $10 billion in consumer relief. It has also created a user-friendly database where consumers can research companies and share stories with the public about their experiences. Last, but certainly not least, it has released the first of its new monthly snapshot reports highlighting key consumer complaint trends.

Allies and advocates celebrated the CFPB’s birthday at an event in Washington, DC featuring CFPB Director Richard Cordray, along with a panel including Ruth Susswein of Consumer Action, Lauren Saunders of the National Consumer Law Center, Mike Calhoun of the Center for Responsible Lending, Pam Banks of the Consumers Union, Darian Dorsey of Consumer Response and Ed Mierzwinski of U.S. PIRG.

Citibank to pay consumers $700 million in relief. Close to nine million consumers harmed by Citibank for unfair billing of credit card add-on charges and deceptive debt collection fees will share an estimated $700 million in relief due to a CFPB enforcement action. The CFPB found that Citi’s debt protection products failed to meet promises to cancel or defer a cardholder’s payment during medical, employment or personal hardships and that Citi’s credit monitoring products were sold in misleading or illegal ways.

The CFPB charged that the company’s telemarketers failed to disclose or misstated the cost of these add-on services, misrepresented their value and enrolled consumers in services the company knew they would not be eligible for. Enforcers also charged that Citi pushed an unnecessary $14.95 “expedited fee” on department store cardholders with overdue bills.

Citi agreed to automatically refund consumers who paid for benefits they did not receive and to temporarily stop selling add-on products.

Chase debt collection abuses. Credit card issuer JPMorgan Chase will return $50 million to consumers for illegal debt collection practices. The CFPB (and 47 state attorneys general) have ordered Chase to stop collecting debts on more than half a million accounts and to stop selling debts that are the wrong amount or too old to collect (“zombie” debts). Chase will send refunds directly to eligible cardholders. If collectors for a Chase debt are pursuing you, contact the company to learn if yours is one of the barred debts.

Debt collection is the number one problem that consumers complain about to the CFPB. Check out the Bureau’s new monthly reports, which break complaints down by problem, product, company, location and trends.

To stop a debt collector from contacting you or hounding you about a debt you do not owe, the CFPB has created sample letters that you can customize and send.

Newcomer’s Guides to Managing Money. The CFPB has created tip sheets to help recent immigrants and those with limited English proficiency navigate financial transactions and better understand their choices. The guides include information about:

  • ways to receive a paycheck (direct deposit, cash, payment card)
  • bill payment options (check, money order, debit)
  • opening a bank or credit union account
  • selecting financial services (ATM withdrawals, debit purchases)

The guides are available in Spanish and English, with more languages to follow. For links to other consumer financial brochures in Chinese, French, Haitian Creole, Korean, Tagalog and Vietnamese, click here

Real-time payments. Before long, payments made with debit or credit cards will have the funds distributed in mere seconds, or in “real time.” The CFPB has released consumer protection principles to help companies ensure that faster payments are also safe. The Bureau wants companies developing faster payment systems to incorporate these consumer protection practices into their systems:

  • Clearly state when and how consumers have authorized a payment and how the authorization can be revoked.
  • Collect only the data needed for the transaction.
  • Ensure that consumers have rights for handling errors, fraud and unauthorized transactions.
  • Provide a quick reversal process once mistaken transactions are identified.

Student loan complaint comments pour in. More than 30,000 consumers sent their student loan servicing complaints to the Bureau last month. The CFPB says consumers identified numerous problems with payment processing, servicing transfers, error resolution and income-based repayment plans.

Organizations also weighed in, including Consumer Action, recommending that the Bureau improve student loan servicing by adopting the Bureau’s response to the mortgage crisis as a model to help prevent the same outcome for the student loan market and student borrowers. These include eliminating certain harmful features on loans and ensuring that borrowers can afford loan payments. Consumer Action’s comments can be viewed here.

The CFPB will assist the Department of Education and the Treasury Department in developing a student aid bill of rights commissioned by President Obama.

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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