Consumer Action INSIDER – January 2012


41st Anniversary Announcement

What people are saying

I really learned a lot at your Financial Empowerment Conference. Now, I’m trying to digest my notes to transfer some of it back into my program and company. Thanks for everything! - Ron Stark, Club Vet HVRP

This month's consumer tip: The 4-1-1 on gift cards

Understand the rules and restrictions that apply to gift cards you gave and received this holiday season, such as expiration dates, service charges and replacements for lost or stolen cards. Learn more.

Consumer Action’s new secured card survey

Over the years, Consumer Action has seen a lot of interest from consumers regarding how they can select and apply for a “secured” credit card. A secured card is a bank credit card backed by money that you deposit and keep in a bank account. That account serves as security for the card. If you don't pay your bill, your deposit may be used to cover the debt.

Secured credit cards offer an opportunity to reestablish a healthy credit history to consumers whose credit was harmed post-2008 by lost jobs and foreclosures. For people who have little or no access to credit because of a poor payment history, a low-cost secured card can be a valuable tool to rebuild a healthy credit score.

Consumer Action’s 2011 Secured Credit Card Survey, released in late November, reveals that the rates and fees charged to secured cardholders vary dramatically from card to card. Consumer Action’s surveyors found interest rates ranging from 0% to 23.99%. Four surveyed card issuers offered rates of less than 10% on purchases (Applied Bank, HSBC’s Orchard Bank, Navy Federal Credit Union and USAA). While many of the surveyed secured cards had reasonable terms, our research found that some cards have hidden fees.

The Consumer Action Secured Credit Card Survey was published in the Fall 2011 issue of Consumer Action News, the organization’s quarterly newsletter. You can find that issue, including the survey results, here.

Full survey data can be downloaded here.

Consumer Action presents to credit unions

Consumer Action was invited to speak at the National Credit Union Administration (NCUA) staff meeting in Nashville, TN in October about our financial empowerment initiatives, consumer education materials and training for community-based organizations.

The invitation came from NCUA’s Office of Small Credit Union Initiatives, responsible for fostering credit union development and the effective delivery of financial services by small, low-income-designated and newly chartered credit unions. The office works to ensure the viability and successful operation of credit unions through training, technical assistance, loans and grants.

Consumer Action is no stranger to providing training to small credit unions, having long provided free educational materials and training guides to credit unions throughout the country. Over the past five years, we trained 69 credit union staff members from 17 states through our financial literacy projects.

During her presentation, Audrey Perrot, associate director of outreach and training for Consumer Action, gave the NCUA staff an overview of Consumer Action’s work, discussed training opportunities available to credit union staff, reviewed our free financial literacy publications, and discussed resources for consumers, service providers and credit union staff. The NCUA staff was given samples of Consumer Action’s “Why Adults Learn” PowerPoint slides to take into the field to give small credit unions pointers for working with adult learners. Perrott offered additional “best practices” tips and techniques for preparing presentations.

Perrott provided samples of financial literacy curriculums developed by Consumer Action and explained the key components of Consumer Action’s educational model: a leader’s guide, a lesson plan with interactive exercises, PowerPoint slides and one or more multilingual consumer brochures. Explaining that many brochures are available in five languages, Perrott showed training modules for Manage Your Money Wisely: Tracking your money and ID Theft & Account Fraud from our MoneyWi$e partnership with Capital One, and Credit Cards: What You Need to Know and Families and Credit Cards, developed in partnership with American Express.

“This opens an exciting opportunity to expand our reach and assist in increasing the capacity of smaller credit unions,” says Perrott. "We have established a great foundation for future trainings and dissemination of materials for the consumers the credit unions serve."

Financial Fitness Forum for America’s armed forces

“When you hear it seven times, seven ways…that’s what it takes for financial information to really sink in.” This statement was echoed throughout the day by U.S. military leaders, financial services companies and consumer groups that gathered in December for the Financial Fitness Forum, hosted by the Office of Servicemember Affairs, a part of the newly created Consumer Financial Protection Bureau (CFPB). Ruth Susswein from our DC office was in attendance.

The daylong forum stressed the unique challenges that impact the financial stability of military members and their families. Military leaders described how servicemembers’ frequent moves may require them to establish new bank accounts and other financial services every two to three years, causing them to forego the benefits of a long-term banking relationship. Deployment often means having to relocate quickly, causing financial hardship for those who have to sell a home, even if the property is worth less than what is owed to the mortgage company.

Participants said that the leading cause of revoked security clearances is financial distress, which can put a soldier’s very livelihood in jeopardy.

Hollister K. (Holly) Petraeus, head of the CFPB’s Office of Servicemember Affairs, explained that her department’s goals are to educate and empower military families and address their financial concerns.

In an informal survey conducted by the Servicemember Affairs office, troops expressed the need for further information on credit scores, credit card minimum payments, car ownership, high-interest loans, mortgages and how to avoid scams.

Some participants said that much of the limited financial training given to troops arrives too late, when members transition out of the military. The recommendation was to offer more and higher-quality financial information at regular intervals in servicemembers’ lives. One example would be to provide financial information and tips for managing money just before bonuses are distributed.

Lenders described financial products and services designed specifically for active duty servicemembers, including:

  • Crediting direct deposits two days early
  • Guaranteed pay even if the government delays disbursement
  • Reduction or waiver of bank fees while on active duty
  • 10% interest-bearing savings incentive program for those serving in a combat zone
  • 5% interest-bearing certificates of deposit (CDs)
  • Short-term loans to provide alternatives to payday loans
  • First-time car loans at lower-than-average rates
  • Mortgage problems addressed through a single point of contact and new loan modification opportunities

Many credit unions and banks told the audience that the lender often takes a financial loss on some of these services, with the intent of building long-term relationships with military families after they leave the service.

Jim Blaine, CEO of North Carolina State Employees Credit Union, described its ongoing effort to provide servicemembers with an alternative to predatory payday lenders that set up shop right outside many military bases. The payday lenders often charge 400% interest, or more, for short-term loans, said Blaine. Instead, his credit union offers a 31-day loan at 12% APR. The short-term loan comes with a mandatory savings component to help troops create a financial cushion for the future. Blaine said this product benefits both the customer and the creditor.

“This is our most profitable loan and we only charge 12%. It’s a short-term loan of up to $500, with a pledged savings account of $25 on a $500 loan that goes to giving servicemembers a way out of this situation over time,” noted Blaine.

Consumer Action worked on spreading financial education to the military community this past year. In partnership with the Consumer Federation of America and Chase, our Outreach team conducted a needs assessment in San Diego to determine what resources veterans and the groups that serve them needed. This information helped shape the agenda for a large meeting of community groups and officials from local military bases last summer.

"We hope to expand the San Diego pilot project to the rest of the country and were excited to see the new consumer agency play a role in reaching out to this critical population," says Consumer Action Executive Director Ken McEldowney.

Hotline Chronicles: Modeling scams prey on vanity and desperation

Earlier this month, Consumer Action’s hotline received a heart-wrenching letter from Rashmi*, a Southern California mother of two, whose husband had been laid off in June. In a well-meaning but misguided attempt to help the family finances, Rashmi responded to a “model search” ad looking for kids with the potential to be models or actors. She emailed photos of her two children and received a call back two days later, inviting her to bring the children to an office in Rancho Cucamonga, CA.

Rashmi brought the children to be “auditioned” and was told afterwards that her kids had been chosen to become clients of the talent agency. Free acting classes were offered to the children, but in order to participate, Rashmi was told she would have to buy two professional photo shoots for the children, at a cost of $1,000 each. Rashmi responded that she would have the photos taken at Sears for much less money, and was told by the promoter that he needed “professional” photos of his clients in order to get them acting and modeling jobs.

Rashmi buckled under the sales pressure. “He was a very good salesman and he talked until I was convinced. He knew I was hoping for my daughters to get acting jobs and save our family’s financial situation.” She signed a contract without reading all of it, and handed over the family’s credit card to pay the $2,000 charge. The salesman gave Rashmi an appointment date for a month or so in the future and said that someone from the photo studio would contact her with additional details.

At home, Rashmi’s husband was upset when she told him what she had done. “Can’t you see that this is a total scam?” he asked. Rashmi called to cancel but the promoter told her it could not be cancelled because he had already set up the appointment. “But it’s more than a month away,” she protested. She asked him for the phone number of the photographer so she could call to ask why she couldn’t cancel. “He would not give it to me and said he will have the photographer call me but no one ever called.”

Rashmi called the credit card company and disputed the charge. She heard nothing else from the talent agency or the photographer. Three months later, she received a letter from her credit card company stating that the charge was valid because she had signed the contract and the $2,000 charge could not be reversed.

Unfortunately Rashmi is the victim of a very prevalent scheme that preys on financial desperation and, for many, vanity. Here are some hallmarks of the con:

  • Flattery and appeals to your vanity (“You’ve got the look.”)
  • High-pressure sales (“Don’t miss the opportunity of a lifetime.”)
  • Promises of “glamorous jobs,” fame and fortune, and huge earnings (“Get ready to be a star!”)
  • Guarantees that you will meet with Screen Actors Guild (SAG) casting agents or other legitimate people in the industry (No one can guarantee that you will get modeling or acting jobs.)
  • Requirements to buy expensive photos, make-up sessions and acting classes (This is the way many of the schemers make money and string you along.)

A quick Internet search finds that others have been taken in by the same outfit as Rashmi. Posting about the same company on Ripoff Report, a consumer writes: “He claimed to be a talent manager and said he can help my child get roles on TV, film and commercials. All I had to do was pay for photos. I paid hundreds of dollars for the photos and my child never got any auditions from them.”

Rose Chan, a Consumer Action hotline counselor, cautions, “Always review any documents before you sign them. Don't let people pressure you into signing papers!”

Chan advised Rashmi to file an appeal with the credit card company and to submit complaints to the:

  • California Attorney General ([url=][/url])
  • Federal Trade Commission ([url=][/url])
  • Better Business Bureau ([url=][/url])

For further information on “model scams” visit:

  • Beware of Modeling Scams. The Federal Trade Commission has developed this resource to help young people spot a scheme. [url=][/url]
  • Schemes, Scams, Frauds and Modeling Scam Checks. Crimes of Persuasion website features a list of suspicious promoters (but don’t trust a company just because it’s not listed here). [url=][/url]
  • Ripoff Report. See what other consumers have posted about modeling agencies. [url=][/url]

* Not this consumer’s real name

Paper to pixels: Health IT and the impact on consumer privacy

When Congress passed the HITECH (Health Information Technology for Economic and Clinical Health) Act in 2009, it took the idea of every American having an electronic medical record and turned it from a far-off technological fantasy into an imminent consumer reality. Billions of dollars have been allocated to turn paper into pixels: By 2013, the entire country will have electronic health records. As the policy provisions roll out, advocates are highlighting some of the serious privacy questions they raise. Consumer Action has been one of only a handful of organizations advocating for consumer health privacy.

"Health IT is rolling out across the country right now," said Consumer Action's Michelle De Mooy, senior associate for national priorities. "It is absolutely crucial that consumer privacy guide everything that happens in health IT; otherwise, it just won't work."

De Mooy traveled to Austin, TX in November to help plan next summer's Health Privacy Summit in Washington, D.C. The Health Privacy Summit was launched last year by Patient Privacy Rights, a patient-advocacy organization based in Austin and one of Consumer Action's coalition partners. The bipartisan event brought together advocates, academics, legislators, policymakers and government officials to identify the major issues in health privacy and begin coming up with solutions. This year's event will focus even more heavily on how to keep consumer health privacy at the forefront of advances in health information medical technology and recordkeeping.

At the meeting, De Mooy worked closely with privacy and medical experts from across the country to develop a cutting-edge and impactful agenda for the meeting, including sessions that discuss how to fix loopholes in the Health Insurance Portability and Accountability Act, otherwise known as HIPAA.

As co-chair of a working group to develop health privacy principles to guide the Summit, De Mooy has been focused on crafting updated principles that keep the consumer viewpoint front and center. The principles will be released in the spring of 2012, in advance of the Summit.

Web Spotlight: Consumer Action’s Coalition Efforts webpage

Consumer Action works on many critical consumer protection issues in coalition with other organizations. Our Coalition Efforts provides updates on recent coalition activities. You can reach the Coalition Efforts page via the Advocacy link that appears in the right-hand sidebar on our home page.

“Being an active participant in close to 30 consumer protection coalitions in housing, financial services, privacy and telecom allows us to work on many issues that we might otherwise have to pass up,” said Linda Sherry, head of Consumer Action’s DC office. “Like the other organizations in these coalitions, we bring unique strengths to the table.”

Here we spotlight some recent coalition efforts:

Senate should enhance consumer credit protections for servicemembers and their families Consumer Action joined a letter of support for Senate provisions in the Defense Authorization Bill that would close legal loopholes that allow payday and auto title lenders to bilk military men and women out of their hard-earned income.

Officials should heed Occupy Wall Street’s call for corporate accountability and transparency Consumer Action signed on to a letter with a select group of privacy advocates supporting Occupy Wall Street's demand for corporate accountability and transparency, particularly in regard to privacy violations by big banks.

FCC must protect consumers from cramming fraud and abuses A coalition of consumer groups led by the National Consumers League urged the Federal Communications Commission (FCC) to adopt its proposed rules on cramming or to, at the very least, strongly consider more aggressive action such as banning wireline third-party billing.

Payphones should be funded and fixed In another letter to the FCC, Consumer Action and the National Consumers League expressed support for two pending petitions from the American Public Communications Council (APCC) regarding ways to preserve payphones in an age of mobile communications.

Mortgage servicers must be held to strong standards by consumer agency Consumer Action signed on to a letter asking the Special Advisor to the Secretary of the Treasury on the Consumer Financial Protection Bureau (CFPB), Raj Date, to advance strong national mortgage servicing standards.

Regulators should address problematic provisions in proposed remittance regulations In a letter to the Federal Reserve Board, Consumer Action joined other advocates in praising new remittance protections for consumers and offering recommendations on problem areas in the regulations.

Regulators should balance fairness and safety in addressing rules for home loans California community groups, with Consumer Action, sent a letter to regulators with specific recommendations to strengthen proposed Qualified Residential Mortgage (QRM) rules, including selling only safe products with fair pricing and abolishing the 20% downpayment requirement for home loans.

Congress should close the unsafe rental car loophole Consumer Action and other advocates for consumer safety asked Congress to enact a law that prohibits rental car companies from renting or selling cars that have been recalled. The letter was prompted in part by the tragic death of two sisters who were driving a rented Chrysler PT Cruiser subject to a manufacturer’s recall.

OCC must drastically strengthen payday loan and overdraft protections In a letter to the Office of the Comptroller of the Currency (OCC), Consumer Action and other members of Americans for Financial Reform commented on the OCC's proposed guidance on payday loans and overdraft programs.

About Consumer Action

Consumer Action is a nonprofit organization that has championed the rights of underrepresented consumers nationwide since 1971. Throughout its history, the organization has dedicated its resources to promoting financial 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.

Financial Education. To empower consumers to assert their rights in the marketplace, Consumer Action provides a range of education resources. The organization’s extensive library of free publications offers in-depth financial information, while its hotline provides non-legal advice and referrals. Consumer Action also publishes an unbiased Annual Credit Card Survey that exposes 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- to moderate-income and limited-English-speaking consumers, Consumer Action maintains strong ties to a national network of more than 8,000 community-based organizations. Outreach services include training and free mailings of financial education materials in many languages, including English, Spanish, Chinese, Korean and Vietnamese. Consumer Action’s rapidly expanding 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, regulations and legislation by taking positions on almost 200 bills per legislative session and testifying at least three times per year. Additionally, its diverse staff provides the media with expert commentary on key consumer issues supported by solid data and victim testimony.

Click here to learn more about our staff.



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