Consumer Action INSIDER - January 2017


Table of Contents


What people are saying

Thank you again for everything that you do to make the Consumer Action conference go smoothly! I was impressed with the speakers that you gathered for this year and always feel like I learn something new and make new connections when I attend! — Bill Druliner, GreenPath Financial Wellness

Did you know?

Cremations have surpassed burials in the U.S., according to the National Funeral Directors Association, which projects that 71 percent of all survivors will choose cremation for a deceased loved one by 2030. There are many reasons why consumers choose cremation, including lower costs, environmental concerns, fewer religious prohibitions and a growing acceptance of the practice. While this might be one topic you’d rather avoid until the time comes, if you are interested in researching options, we encourage you to visit the Funeral Consumers Alliance to learn more. The non-profit’s step-by-step guides provide unbiased information about funeral homes, cemeteries, burials, cremation, organ donation and legal rights.

Consumer Empowerment Conference a huge success

Scores of consumer advocates, housing and credit counselors, and financial education coaches from community-based organizations (CBOs) around the nation gathered in Chicago in November for Consumer Action’s seventh annual invitation-only, multi-day National Consumer Empowerment Conference.

Each year, Consumer Action convenes community group partners along with consumer education experts and advocates, legislative, regulatory and industry representatives and other key stakeholders to address critical issues and share best practices in community-based consumer education.

At this year’s conference, top experts spoke on panels covering topics from payday loan alternatives to low-cost broadband services and protecting consumers’ privacy online. The experts were peppered with audience questions as they shared the latest in news and information to help the CBOs better serve their clients.

In one session on student loan debt and repayment options, for instance, speakers from the National Consumer Law Center, the Consumer Financial Protection Bureau (CFPB) and TICAS (The Institute for College Access and Success) warned CBOs to remind any students they work with to renew their income-based repayment plans each year in order to remain eligible for reduced loan payments.

In another session, attendees viewed videos based on the documentary “When I’m 65,” produced by the Investor Protection Trust. The video draws attention to the benefits of automatic individual retirement accounts (IRAs) and other practical ways to prepare for the realities of retirement, no matter your age.

“Our staff and presenters do an excellent job of making our annual conference informative and engaging every year,” Consumer Action Executive Director Ken McEldowney said. “They’re always providing fresh resources and information to attendees.”

In a session on financial crime and fraud, presenters gave a live demonstration of the Better Business Bureau’s Scam Tracker tool, launched last year. Participants learned that the top victims of financial scams are not senior citizens (as one may think), but Millennials with a sense of invulnerability.

In the session entitled “Data Access: Protecting Your Privacy Online,” advocates explained how companies track and profile the public to target market each of us, before discussing ways to better control the data that links us to our online browsing habits.

Next, attendees were pleased to learn of new alternatives to payday loans, which they could share with clients. With nearly half of consumers admitting that they would be unable to handle a $400 unexpected expense, this session was particularly timely. FlexWage, a program that advances a portion of an employee’s wages to eliminate the need for a payday loan, was discussed, as were affordable no-fee, small-dollar loans and employer-based installment loans (to cover unplanned medical bills, insurance deductibles and other urgent expenses).

Joining the excellent speakers from local and national non-profit and industry groups, a representative from the CFPB reviewed some of the cases of unfair and deceptive business practices that led the regulatory agency to return nearly $12 billion to 27 million consumers.

Finally, a session on affordable housing options, including low-downpayment programs like Self-Help Credit Union/Bank of America’s 3 percent “Affordable Loan Solution,” tackled the challenge of eliminating one of the main barriers to qualifying for a mortgage: the amount of money needed for the downpayment and closing costs. (Also covered was a savings plan built into a rental agreement designed to offer tenants and landlords more renter stability.)

The conference wrapped up by introducing a fun way to pay down debt through a prize-linked savings incentive plan offering free online and mobile games and video downloads.

Presenter and participant costs to attend Consumer Action’s National Conference were fully funded by: Capital One, TracFone, Bank of America, Citi, Comcast, NBCUniversal, 1-800 CONTACTS, FICO, Microsoft, American Express, Enterprise Rent-A-Car, Visa and Walmart.

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

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

Connor v. First Student. Plaintiff Eileen Connor sued the school bus transportation provider First Student, which bought out the company she worked for, for violation of two California laws—the Consumer Credit Reporting Agencies Act and the Investigative Consumer Reporting Agencies Act (ICRAA)—alleging that the notices First Student gave her regarding its intent to conduct background checks failed to comply with the laws. Connor said that the firm did not obtain her written authorization to conduct a background check. The trial court granted summary judgment for First Student, holding that the ICRAA is unconstitutionally vague in its application. The Court of Appeal for the Fourth Appellate District reversed that decision, finding that California's two principal consumer reporting statutes were not unconstitutionally vague just because there happened to be some circumstances in which both applied to the same conduct. Instead, the appeals court said, in those circumstances an employer must comply with both laws. Consumer Action joined an amicus brief on behalf of Connor, asking to uphold the appeals court decision because overlapping laws are numerous in the California Code, and people and businesses should not have the right to avoid following a law simply because another law may also apply. Additional parties filing the amicus brief include the California Reinvestment Coalition, Consumers for Auto Reliability and Safety, Housing and Economic Rights Advocates, National Association of Consumer Advocates, National Employment Law Project, National Housing Law Project and Public Good Law Center. Find the brief here.

Jaime Gonzales, et al. v. Owens Corning. A number of consumer organizations, including Consumer Action, filed an amicus brief in an appeal of a consumer class action against the global building and roofing company Owens Corning. The nationwide class action alleged defective roof shingles. Unfortunately, the Western District of Pennsylvania rejected the class action, a decision that the consumer groups argue is erroneous because, whether the product in question is a washing machine, shingles or other goods, consumer cases are uniquely suited for class actions. Furthermore, if the district court's view that consumer complaint cases should be brought individually were upheld, it would be the end of consumer class actions (in general), which benefit consumers greatly. Find the brief here.

U.S. Department of Justice v. American Express. Consumer Action and U.S. Public Interest Research Group (PIRG) urged the U.S. Court of Appeals for the Second Circuit to review its September decision in favor of American Express, which was sued by the government for antitrust violations related to its contract provisions prohibiting merchants from steering customers toward other credit card networks. The groups filed a joint brief in late November stating that AmEx’s anti-steering rules are anti-competitive because they cause merchants to pay higher fees to the credit card company on each transaction. Furthermore, merchants are not allowed to let customers know about how the fees compare to other card networks. The groups argued that barring merchants from discussing cards with lower transaction fees raises retail prices for all consumers, including people who pay with cash. The brief can be found here.

Federal Trade Commission (FTC) v. AT&T Mobility. Consumer Action joined a dozen consumer groups in an amicus brief urging the Ninth Circuit to review its dismissal on appeal of the 2014 FTC wireless data-throttling suit against AT&T Mobility LLC. The coalition joined the FTC in challenging the dismissal of its suit under Section 5 of the FTC Act, brought because AT&T did not adequately inform unlimited data customers that it would reduce internet speeds if customers exceeded a certain data threshold in any given billing cycle. The court dismissed the suit, saying that AT&T fell under the Federal Communication Commission’s decision to reclassify broadband providers as common carriers and therefore was not under the jurisdiction of the FTC. The consumer group brief argued that, "If the FTC is not on the beat, there will be no one on the beat. No other federal or state agency has sufficient jurisdiction, resources and expertise.” In addition to Consumer Action, groups filing the brief include Consumers Union, Consumer Federation of America, Consumer Federation of California, National Association of Consumer Advocates, National Consumers League, Center for Digital Democracy, Center for Democracy & Technology, Electronic Privacy Information Center, Benton Foundation, Common Sense Kids Action and Privacy Rights Clearinghouse. The brief can be found here.

Expressions Hair Design v. Schneiderman. In September, the U.S. Supreme Court agreed to consider the argument at the heart of this long-running case—that New York state’s ban on credit card surcharges violates retailers’ First Amendment free speech rights. The case highlights the fact that New York retailers are allowed to charge separate prices for cash and credit card customers but that they can’t refer to the price difference as a “credit card surcharge.” Instead they must call it a “cash discount,” which is essentially the same thing. (Credit card issuers support state anti-surcharging laws because they believe that allowing merchants to recoup the costs of accepting credit cards in the form of customer surcharges would discourage the use of credit cards.) The case was first filed in the U.S. District Court for the Southern District of New York by a group of small businesses. The businesses claimed that New York’s credit card surcharge ban violated their constitutional right to free speech because it kept them from telling customers about the fees they paid credit card networks in order to get the networks to accept cards. The district court initially found in favor of the merchants, but its finding was reversed on appeal by the Second Circuit, which said that New York’s law was an economic regulation with no bearing on the First Amendment. In November, Consumer Action and the National Association of Consumer Advocates (NACA) submitted an amicus brief arguing that by restricting merchants’ rights to free speech, the law in turn deprives consumers of crucial information about the cost of various payment options and drives up prices across the board for non-credit card users. The brief can be found here.

Apple v. Federal Bureau of Investigation (FBI). In early March, eight consumer organizations, including Consumer Action, signed an amicus brief written by the Electronic Privacy Information Center (EPIC) arguing that an order to compel Apple to undo encryption features in order to enable the FBI to access data on an iPhone used by a shooter in the 2015 San Bernardino attack would place millions of mobile phone users at risk of criminal hackers, identity thieves and others. The brief was filed in the U.S. District Court for the Central District of California (Eastern Division). A short time later, the U.S. Department of Justice said it had found another way to gain access to the attacker’s iPhone data and the case was dismissed. The brief can be found here.

Hotline Chronicles: Data overages shock mobile internet users

Many mobile internet users have limited data plans that allow them to use a specific amount of data each month, such as two or four gigabytes (2GB or 4GB). If users exceed their allowances, additional charges apply. In the last couple of months, we heard from consumers complaining about additional data charges and saying they had no idea why they were going over their allowances.

We encourage consumers suffering from unexpected overages, sometimes called “bill shock,” to contact their carriers immediately. The billing may be in error, fraud may have occurred or there may be ways that the consumer can control the overages. If you have tried to resolve a billing issue with your carrier and cannot reach an acceptable resolution, you can complain to the Federal Communications Commission (FCC) at 888-CALL-FCC (225-5322) or file a complaint online.

Here are some of the complaints:

  • “I'm on a family data plan and technically we can’t go over. Even with cellular off I’m still getting data charges of hundreds of dollars.” (New York, Verizon customer)
  • “My billing/data cycle ending date is on the 2nd of every month. I do very little online surfing, yet midway through the month I am always over on data.” (Ohio, Verizon customer)
  • “My billing cycle was set to end on the 9th of the month. On the 8th they charged me $15 for an additional GB of data [which the consumer did not need for the one remaining day before their cycle reset].” (Massachusetts, AT&T customer)

Consumers have had help avoiding bill shock since 2011, when major U.S. wireless service providers signed onto a voluntary consumer code for wireless service sponsored by the non-profit industry trade group CTIA. These carriers, who serve approximately 97 percent of wireless customers across the country, agreed to send free, automated text messages to their mobile customers with limited plans when they are approaching their data limits. (Wireless customers do not need to take any action to receive the alerts.) The alerts also go to those consumers without an international plan who may be in jeopardy of incurring additional “roaming” charges while traveling abroad.

Stay in control

Data usage management tools help you to avoid exceeding your data allowance. It’s a good idea to regularly monitor your usage because the amount of data used by new devices, apps and activities will vary. Generally speaking, text files use relatively small amounts of data, graphics and music files use larger amounts of data and video files use very large amounts of data.

You can track your usage by using mobile apps (from your carrier or third-party app developers) that alert you if your data usage reaches a certain level. To find these kinds of apps, check your carrier’s app store.

All major carriers—AT&T, Sprint, T-Mobile and Verizon—make it possible to check your usage at any time on the carrier’s website or receive usage information via text message. All major carriers also offer parental controls. These services vary, but typically allow parents to set limits on their children’s downloads and data usage.

Whenever possible, shut off your carrier’s mobile data and use Wi-Fi. You can connect to your home broadband, or (with caution) use public Wi-Fi available in places like cafes and restaurants.

Your device settings contain features to help you save mobile data. For example, opt to have mobile apps update automatically only if your phone is connected to Wi-Fi, not mobile data. Adjust automatic updates and “push notifications” in your app management settings.

  • In the Apple iPhone operating system, go to Settings > Cellular and scroll down to see a list of apps under “Use cellular data for.” Turn off non-essential services.
  • In Android, go to Settings > Wireless & Networks > Data Usage, where you can “Restrict app background data.”

Consumer Action offers free guides through its Wireless Education Project (WirelessED) to help you keep mobile data charges under control:

Editor’s note: Since late August, reporters at the Cleveland Plain Dealer have been investigating a huge spike in consumer complaints about mobile data overages, most with Verizon but also with AT&T. The investigation found that data was being used when consumers' phones were turned off and even after one phone's owner had died. The companies say they are helping individual consumers, but they apparently have not been able to give a definitive answer as to why this is happening.

*Not this consumer’s real name

Fannie Mae’s UNfair housing

The National Fair Housing Alliance (NFHA) and 20 civil rights groups (including four Consumer Action community partners) filed a federal lawsuit against Fannie Mae for racial discrimination over neglect of foreclosed (real estate owned, or REO) properties in African-American and Latino neighborhoods. The properties were located in 38 metro areas across the US.

Consumer Action staff member Audrey Perrott was able to catch up with executive directors from four fair housing agencies that joined the suit in order to find out more about their roles in exposing and combatting discrimination in their communities. These agencies have partnered with Consumer Action in a variety of ways, including by providing subject matter experts for events, attending Consumer Action trainings and ordering Consumer Action publications.

Perrott first spoke with Anne Houghtaling, the executive director of HOPE Fair Housing (HOPE) in Wheaton, IL and a former National Fair Housing Alliance staffer. The two discussed HOPE’s services and the agency’s role in the case. HOPE was established in 1968. The agency serves 30 counties in Northern and North Central Illinois, working to ensure that everyone has the chance to live in the community, home or apartment of their choice free from discrimination based on race, color, religion, national origin or any other characteristic protected under state or local laws.

In the metropolitan Chicago area, HOPE helped to investigate 353 Fannie Mae foreclosed REO properties between 2012 and 2015. Seventy-one of these properties were located in African-American neighborhoods, 52 in Latino neighborhoods, 50 in majority non-white neighborhoods and 180 in white neighborhoods. Of the properties located in communities of color, nearly 50 percent suffered from trash and debris on the premises, nearly 40 percent from overgrown or dead shrubbery, and over 36 percent from unsecured, broken or boarded windows.

“While we were saddened by what we uncovered, we were very excited to work with other groups like Housing Action Illinois to reveal the extent of the problem and, ultimately, contribute our findings to this critical lawsuit,” Houghtaling said. “I urge everyone working in fair housing to develop partnerships with national fair housing councils and housing counseling centers. Together we can do amazing work to improve our clients’ lives in a tangible, powerful way.”

Perrott also caught up with Gail Williams, the executive director of Metro Fair Housing Services, Inc. (Metro), located in Atlanta, GA. Metro was established in 1974 to promote social justice and eliminate housing and lending inequities. The agency provides education and outreach to the general public and housing industry professionals, offers complaint intake and counseling services, enforces fair housing laws and engages in public policy advocacy. The Department of Housing and Urban Development (HUD) contracts with Metro to serve Fulton, DeKalb, Cobb, Gwinnett and three other counties in the state.

Metro investigated 106 foreclosed REO properties owned by Fannie Mae in the Atlanta metropolitan region between 2011 and 2015. Seventy were located in African-American neighborhoods, two in Latino neighborhoods, eight in majority non-white neighborhoods and 26 in white neighborhoods. Over 61 percent of Fannie Mae properties in predominantly white neighborhoods had fewer than five maintenance and marketing deficiencies, compared to just 10 percent in communities of color. Approximately 90 percent of the REOs in communities of color had five or more deficiencies, compared to just over 38 percent in white neighborhoods. (These statistics are taken directly from the federal lawsuit /complaint filed against Fannie Mae.) Of the properties in the neighborhoods of color, 41 percent suffered from holes in the structure of the home, 40 percent from overgrown or dead shrubbery, and 21 percent from unsecured, broken or boarded doors.

Williams added, “African-American and Latino neighbors who live next door to neglected Fannie properties are particularly impacted by unsecured entrances that invite vandalism and endanger children; overgrown grass/shrubs and trash that affect property values; and no signage to indicate that the house is available to purchase, or to provide neighbors with a way to report problems. Underserved residents shouldn’t be afraid to be vocal and to partner with fair housing agencies like ours.”

Next, Perrott interviewed Cashauna Hill, the executive director of the Greater New Orleans Fair Housing Action Center (GNO Fair Housing). GNO Fair Housing was established in 1995 and works throughout the state of Louisiana across four program areas: education and outreach (particularly relevant to first-time homebuyers and landlord/tenant relations); enforcement (including litigation); homeownership protection (including counseling clients facing foreclosure); and public policy to further fair housing goals.

GNO Fair Housing investigated 80 Fannie Mae foreclosed REO properties in New Orleans and Baton Rouge between July 2011 and October 2015. Of these properties, over 29 percent (located in predominantly white neighborhoods) boasted fewer than five maintenance deficiencies, while none located in communities of color did (but 34 percent had a full 10 or more maintenance deficiencies). Around 17 percent of the properties in the communities of color also suffered from damaged steps and handrails, while none in the white neighborhoods did. Furthermore, over 50 percent of the properties in communities of color had overgrown or dead shrubbery, while only around 18 percent did in the white neighborhoods.

Hill said, “Leaving these properties to rot—properties that were already hard hit by the foreclosure crisis—borders on redlining. It is clear from our investigation that Fannie Mae’s actions are further exacerbating the foreclosure crisis and decreasing the property values in communities of color. These are communities that have already lost record amounts of wealth in the wake of the crisis.”

“While there is a lot of work to be done,” Hill continued, “it is important for us to acknowledge that we have made significant strides. We [fair housing advocates] are in a prime position to give voice to the disparate impact of Fannie Mae’s policies. We must continue to shine a light on this type of blatant discrimination.”

Finally, Perrott spoke with Caroline Peattie, the executive director of Fair Housing Advocates of Northern California (FHANC), located in San Rafael, CA. FHANC started its fair housing program in 1982 under what is now the Homeward Bound program. The agency incorporated under the name Fair Housing of Marin in 1984. It currently serves Marin, Sonoma and Solano counties.

According to FHANC, “Our mission is to ensure equal housing opportunity and to educate the community on the value of diversity in our neighborhoods.” FHANC’s services include: fair housing counseling (incorporating, in some cases, intervention, mediation, enforcement and representation); education, outreach and training; pre-purchase help for first-time homebuyers; foreclosure prevention assistance; aid for distressed homeowners with loan modifications or other options; and systemic investigations to uncover pervasive discrimination.

When FHANC (along with the NFHA) investigated 88 Fannie Mae foreclosed REO properties in Oakland and Richmond, CA and 68 in the Vallejo, CA metropolitan area, it found significant racial disparities. In the Vallejo metropolitan area, 39 percent of the REO properties in communities of color had trash or debris on the premises, as opposed to only 10 percent of those in white communities. Furthermore, 31 percent of the properties in communities of color suffered from holes in the structure of the home, while only 16 percent did in the white communities. Finally, 22 percent of the properties in communities of color had a broken, boarded or unsecured windows, while only 11 percent did in the white communities

Peattie’s advice for other groups that see systemic violations in their communities is to “Talk to those fair housing agencies that have done this work. In terms of REO properties that have not been maintained and communities addressing blight, there are a lot of agencies that have struggled with this issue.” Peattie also encouraged groups to contact NFHA and talk to as many people as possible.

“It was evident from speaking with the fair housing agencies that they are doing an amazing job at righting the wrongs brought about by Fannie Mae and other financial institutions,” Perrott said. “And ultimately, they want to see Fannie Mae abide by established fair housing law. They would also like to see some sort of monetary compensation to rebuild the communities of color that have been hardest hit and lost records amount of wealth.”

In 2009, the NFHA initiated the REO investigations and made recommendations to both Fannie Mae and Freddie Mac about its housing discrimination concerns. (For more information, see “Here Comes the Bank, There Goes Our Neighborhood,” issued by the NFHA on April 11, 2011.) In addition, local NFHA members spoke with their national headquarters about concerns regarding REO properties in their communities, prompting the NFHA to train staff at other fair housing agencies across the U.S. on the evidence collection methods used in its investigations and on how to conduct their own, similar investigations.

The fair housing agencies collected evidence based on 39 data points that were identified as important to protecting, securing and marketing the homes under investigation. Points were deducted for property damage. Investigators also took and reviewed over 49,000 photographs of the properties for visual documentation. From July 2011 to October 2015, the investigators collected evidence from more than 2,300 foreclosed REO properties.

Based on outstanding leadership, Consumer Action awarded the National Fair Housing Alliance the Consumer Excellence Award (Community) at our 45th anniversary event in Washington, DC this past October.

‘Get Up to Speed’ with low-cost broadband programs

Having a high-speed (broadband) internet connection at home has become indispensable for so much, from applying for jobs or establishing a home office to doing schoolwork and banking or paying bills. But according to the Pew Research Center, 33 percent of U.S. households lack this essential tool.

Consumer Action partnered with Comcast to create a free, multilingual educational guide to let those who can’t afford a standard monthly service plan know that they still have options for a high-speed home internet connection. “Getting up to speed: Broadband internet for low-income households” lays out the many benefits of broadband internet and gives an overview of available low-income broadband adoption programs that can help consumers in many parts of the country get online for $10 or less per month. The guide is available on our website in mobile-friendly and printer-ready PDF formats (in Chinese, English, Korean, Spanish and Vietnamese). A free packet of companion flyers, in English, provides detailed descriptions of specific programs that offer low-income households affordable access to the internet, including Comcast’s Internet Essentials, CenturyLink’s Internet Basics, Access from AT&T and Connect2Compete.

“Having access to high-speed internet at home opens up many possibilities and opportunities for individuals and families,” Ken McEldowney, executive director of Consumer Action said. “We’re pleased to have this chance to spread the word that U.S. households no longer have to forgo broadband service, and all the advantages that come with it, due to affordability issues.”

Karima Zedan, senior director of the Internet Essentials program at Comcast (which is one of the plans detailed in the companion flyers), added: “When households lack access to the internet, they are prevented from participating fully in the 21st century digital community and economy. Since launching in 2011, Internet Essentials has helped connect 750,000 families, or three million low-income Americans, to low-cost, high-speed internet service at home.”

Click here to access the “Getting Up to Speed” guide and companion flyers.

Protecting diverse consumer communities from fraud

Paying a bribe may be a common way to access government services in one’s home country, so when approached with that same fraudulent practice here in the U.S., it may seem familiar to immigrants who are told to pay exorbitant (albeit bogus) fees for citizenship documents or legal advice. The Federal Trade Commission (FTC) hosted a full-day workshop in December on the nation’s changing consumer demographics and the need to use different approaches to reach out to and prevent fraud in these more diverse populations.

Consumer Action’s Ruth Susswein was a panelist during the session on Strategies to Protect Diverse Consumer Communities. Susswein spoke about the need to partner with community-based organizations (CBOs) to alert them to the latest scams and scandals and to learn what problems are plaguing individual communities. Consumer Action has often acted as a liaison between ethnic communities and government agencies, alerting them to the latest on-the-ground scams. Susswein also works in coalition with other national consumer groups to urge industry and government agencies to make language access in financial services a greater priority to meet the needs of a growing limited-English-speaking population.

Consumer Action’s extensive in-language outreach has helped forge partnerships through our offering of free financial education training sessions and materials in five languages (Chinese, Korean, Vietnamese, Spanish and English). Consumer Action also regularly conducts interviews with ethnic media in Chinese and Spanish, and offers a free complaint hotline with assistance in Spanish, Chinese and English.

The latest issue of Consumer Action News, which will be available online later this month, will feature government, private and non-profit resources devoted to consumers with limited English proficiency.

Consumer Action slams Wells Fargo in CA Senate testimony

In November, Consumer Action’s Joe Ridout testified at an oversight hearing convened by California’s Senate Banking and Financial Institutions Committee. The chair of the committee, Steve Glazer, invited diverse voices to speak out about California’s response to the widespread Wells Fargo fraud. California was disproportionally affected by the fake accounts that bank employees opened; an estimated 897,972 of the approximately two million bogus accounts originated in the state.

Along with Ridout, other speakers at the hearing included Michael Bostrom from the city attorney’s office in Los Angeles (which first uncovered Wells Fargo’s crimes), Aeisha Mastagni from the California State Teachers’ Retirement System, two other consumer advocates: Rosemary Shahan of Consumers for Auto Reliability and Safety (CARS) and Sean Coffey of the California Reinvestment Coalition, and a number of corporate governance experts.

Bostrom discussed his office’s 16-month investigation into the fraud. During the investigation, the city attorney’s office interviewed about a thousand customers and ex-employees, and also used the Consumer Financial Protection Bureau’s (CFPB) searchable complaint database to build its case.

Next, Aeisha Mastagni, from the California State Teachers’ Retirement System, spoke on the issue of corporate governance. According to Mastagni, in order to avoid conflicts of interest and maintain accountability, corporations should not (as Wells Fargo did) employ a CEO who also is chairman of the board. They should also change auditors every 10 years. (Wells has used the same auditor for over 85 years; a fact that may have contributed to the persistence of illegal or unethical practices.)

Shahan then gave her testimony, stressing the dangers of pushing consumers into arbitration when their rights are violated. Despite public outcry and backlash from advocates, Wells maintains their right to force the consumers wronged in the scandal into arbitration, which will take away their right to go to court and launch them into a parallel justice system, where arbitrators are often paid by the corporations with which the consumer is in dispute and rulings are secret. Perhaps not surprisingly, consumers lose 94 percent of the time under forced arbitration.

Finally, Consumer Action’s Joe Ridout took to the mic, testifying on behalf of the many aggrieved consumers who have contacted Consumer Action in the wake of the crisis. His testimony read as follows:

“Thank you Chairman Glazer and distinguished members of the committee for this opportunity. My name is Joe Ridout, speaking on behalf of Consumer Action, a non-profit consumer advocacy organization based in San Francisco.

I want to first relate some of the complaints Consumer Action has received through our multilingual hotline (from individuals harmed by the account fraud), and then recommend steps that we believe should be taken in order to mitigate potential copycat scams that could target Californians in the future.

One of these victims, a San Francisco woman who speaks only Cantonese, told us that she "went to open one Wells Fargo account but they opened twenty accounts."

Another consumer, relaying her experience from July 2012, applied for a home equity loan with Wells Fargo. Although she was turned down for the loan, the bank secretly opened a checking account in her name. Since this was not a free checking account, she only learned of its existence once it had gone to collection with a $90 negative balance.

Another woman, whose account wound up in collections after the bank re-opened a previously closed account, told us, "When Wells Fargo re-opened my account, I was not notified. The account never showed up on the Wells Fargo website."

It bears repeating that this constitutes organized identity theft by a powerful corporation. Had any of the two million cases of identity theft occurred outside of a bank, this would invite criminal prosecution and possible jail time. We should treat this no less seriously simply because it happened inside a bank.

Incredibly, at the same time that Wells Fargo was committing this organized identity theft, it was also selling a product called "Wells Fargo Identity Theft Protection" for $12.99 a month, which, needless to say, did not disclose when the bank itself was in the process of stealing a customer's identity.

We would recommend that any bank that has engaged in identity theft be prohibited from selling identity theft protection products. To allow this is akin to a team of arsonists selling fire insurance or a ring of burglars selling home security systems that they can circumvent whenever it facilitates their crimes.

In the same way, California should not permit known identity thieves to sell bogus protection connected intimately to their own criminality. Thank you.”

Wells Fargo was also invited to the hearing, but new President and CEO Tim Sloan not only failed to appear, he also neglected to provide a company representative in his stead. Chairman Glazer checked with the Senate historian and found that on only one other occasion had a company ever blown off an oversight hearing. That company was Enron.

CFPB Watch: Reverse mortgage myths, costly campus bank fees

The Consumer Financial Protection Bureau (CFPB) took action against three reverse mortgage companies for misleading consumers and deceptively advertising their loan products. The companies are American Advisors Group, Reverse Mortgage Solutions and Aegean Financial.

“These companies tricked consumers into believing they could not lose their homes with a reverse mortgage,” CFPB Director Richard Cordray said.

A reverse mortgage allows homeowners (62 years and older) to borrow money based on the equity built up in their home and to repay the loan when the house is sold or when the owner moves out or passes away.

According to the CFPB, American Advisors Group (the largest reverse mortgage lender in the country), along with the other two lenders, falsely told customers that they would have no monthly payments and would be able to pay off all debts. In actuality, those who take on a reverse mortgage continue to have a debt and must make payments (on taxes, insurance and property maintenance). Furthermore, they can default on the loan and lose their home if they fail to comply with the loan terms.

In its Spanish language ads, Aegean Financial also implied it had a connection with the U.S. government, which was false.

The CFPB has required the companies to make clear and truthful disclosures in their advertising and pay a combined $800,000 in fines.

For helpful information on reverse mortgage advertising, see the results of a 2015 CFPB study on the topic.

Costly campus bank fees

Despite the availability of safer, more affordable accounts, many campus bank accounts continue to include hidden, costly fees that hit college students hard.

About one in 10 students with college-sponsored bank accounts incurred 10 or more overdraft fees a year, costing $196 on average, according to a new CPFB study. The CFPB analyzed about 500 marketing deals between colleges and big banks and found no limit on the overdraft fees, out-of-network ATM fees and monthly maintenance fees that the banks could impose on students.

According to the CFPB, many of the colleges failed to negotiate the best deals for their students. The Bureau called this a “missed opportunity” and encouraged the colleges to make a better effort to ensure that sound financial products are offered to students. (Colleges often receive a share of the revenue generated from student bank accounts.)

The U.S. Department of Education (DOE) finalized a “cash management” rule last year that requires campus banks with accounts that accept financial aid payments to offer students free ATM withdrawals and to issue a ban on overdraft fees. Although the rule does not apply to all campus bank accounts, all are supposed to consider students’ “best financial interests” and disclose the terms of the agreements online.

The CFPB’s report is the first review of college-sponsored accounts since the DOE’s rule went into effect. The CFPB’s study revealed that Stetson University negotiated a student prepaid account with Fifth Third Bank that contained no overdraft fees and that UC Berkeley/Bank of the West offered refundable out-of-network ATM fees. In contrast, PNC Bank and Wells Fargo failed to offer “baseline protections” against high fees on some campus accounts.

The CFPB advises students to carefully review campus bank account costs and features and shop around. It recommends that schools enter into agreements that include free ATM access, deposit insurance and extra error resolution protections, and that they prohibit overdraft fees on student accounts.

Monthly Complaint Report

Student loan complaints to the Bureau showed the greatest increase (up 108% for the same period this year over last), and prepaid card problems showed the biggest decrease (down 51%).

Debt collection, credit reporting and mortgage complaints continue to top the CFPB’s list, representing about 65 percent of complaints filed.

Other common financial services complaints involved debt settlement and debt relief. Consumers reported problems with upfront fees for debt relief, particularly on student loan debt.

Consumers also complained of upfront fees with no relief and no refund from credit repair companies and money order issuers.

Class Action Database: DeVry’s big claims lead to big trouble

Class action settlements involving Telebrands “As Seen on TV” corporation and automaker Nissan were among nine new cases added to the Consumer Action Class Action Database during December.

This month we highlight a major class action filed by the Federal Trade Commission (FTC) against DeVry University (“DeVry”). The FTC brought the action against DeVry under the Federal Trade Commission Act, which prohibits unfair or deceptive acts or business practices. The FTC charged DeVry with deceptively advertising the employment rate of its graduates as 90 percent within six months of graduation in their chosen fields. According to the FTC, DeVry also falsely claimed that one year after graduation, its graduates would earn an income 15 percent higher than that of other college graduates. DeVry agreed to a $100 million settlement.

The settlement provides:

  • $49.4 million in partial refunds for students who paid for DeVry classes between January 1, 2008 and September 30, 2015;
  • $30.35 million in debt forgiveness for the full balance on all private unpaid undergraduate student loans issued by DeVry between September 1, 2008 and September 30, 2015; and
  • $20.25 million in debt cancellation for tuition, books and lab fees owed to DeVry by eligible students.

Additionally, DeVry must notify eligible students that they will receive debt relief and inform the credit bureaus and collection agencies of the debt forgiveness. The settlement also forbids DeVry from continuing to misrepresent the employment rate and income of its graduates.

The FTC will contact eligible consumers about the refund program. To get more information on the status of the refunds, call the FTC’s refund administrator at 844-578-2645 or check here. All debt relief/forgiveness will occur automatically.

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 7,000 community-based organizations. Outreach services include training and free mailings of financial and consumer education materials in many languages, including English, Spanish, Chinese, Korean and Vietnamese. Consumer Action’s network is the largest and most diverse of its kind.

Advocacy. Consumer Action is deeply committed to ensuring that underrepresented consumers are represented in the national media and in front of lawmakers. The organization promotes pro-consumer policy, regulation and legislation by taking positions on dozens of bills at the state and national levels and submitting comments and testimony on a host of consumer protection issues. Additionally, its diverse staff provides the media with expert commentary on key consumer issues supported by solid data and victim testimony.



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