Consumer Action INSIDER - February 2015

Table of Contents

 

What people are saying

Your Economic Survival Guide for Servicemembers and Veterans training was a tremendously eye-opening experience, not to mention the networking advantages. We appreciate the opportunity. — Barbara P. Wiggins, Providential Credit Care Management, Inc., Smithfield, VA

Did you know?

There are new financial services designed to protect seniors from fraud. Older adults are particularly vulnerable to scams, which has led to the creation of at least two services to help families monitor spending by older family members. In late December, National Public Radio featured a story about these companies and what they do. Visit NPR.org to listen or read the story.

Hotline helped 6,000-plus consumers in 2014

Last year, Consumer Action’s free referral and advice hotline responded to 6,366 complaints and other communications via phone and email. The top categories were product/retail (28%), utility/telephone (17%), automotive (12%) and credit/finance (10%). About one-third of the complaints we received fall under a mix of other categories.

A common utility/telephone complaint involved billing disputes over cable plans. Cable companies often promise a discount if the customer upgrades, but customers later find that the discount was not applied to the bill.

Used car “lemons” top the list of automotive complaints. Consumers tend to purchase used cars from dealers “as is,” meaning any defects are the new buyer’s problem. When the car breaks down and the buyer learns that the car needs repairs, they often go back to the dealer. Unfortunately, few states have laws to protect used car buyers from defects that can’t be repaired, and many consumers don’t know about or are not willing to take the steps necessary to invoke used car lemon laws. Visit Lemon Law America to learn more about your state’s lemon laws.

Last year saw an increasing number of fraudulent calls and emails by scam artists purporting to be Internal Revenue (IRS) agents. The scam artists, who leave voicemail if the phone isn’t answered, threaten jail or legal action. Learn more about these calls and protect yourself.

“Free” trial offers are a common issue for complainants in the product and retail category. Oftentimes, consumers sign up for a free sample of a health supplement and provide a payment account to cover the shipping or to establish the trial. What consumers often do not realize, and companies often do not adequately disclose, is that the consumer must cancel within a set period or they will be charged for ongoing monthly product delivery plans or subscriptions. This is an important reason to monitor your bank and payment card accounts closely.

Last year, consumers from all states and the District of Columbia reached out to our hotline. The largest number of complaints by state was received from California consumers (1,723). Other significant states were Florida (569), New York (464), Texas (299) and New Jersey (216).

Our multilingual hotline counselors served mostly English-speaking consumers (85%), with other languages spoken being Cantonese (5%), Spanish (4%) and Mandarin (1%). No language was noted for approximately 5 percent of complaints. Most people told us they had found Consumer Action on the Internet (57%).

Each month in the INSIDER, we feature the “Hotline Chronicles,” a series based on consumer complaints to our hotline. Click here for a collection of past articles.

If you’d like to contact our hotline team about a consumer complaint, click here to submit online in English, and here en español, or call 415-777-9635 and leave a voicemail message in English, Spanish or Chinese (Mandarin and Cantonese dialects spoken).

Consumer Action comments to CFPB on language access needs

Last fall, in an effort to reach out to communities with limited English proficiency (LEP) with useful financial information, the Consumer Financial Protection Bureau (CFPB) proposed a “language access” plan to help it serve disparate U.S. populations.

About 24 million people in the U.S. prefer to speak a language other than English, according to Census Bureau statistics. Most commonly these languages include Spanish, Chinese (Mandarin or Cantonese), French, Haitian Creole, Tagalog, Korean and Vietnamese.

With input from our network of community-based organizations (CBOs) nationwide that cater to multilingual communities, Consumer Action submitted comments to guide the CFPB on some of the most pressing language access issues. Consumer Action encouraged the Bureau to ensure it hires people with fluency in non-English languages as well as expertise in industry “language” for financial products or service areas, such as mortgage servicing.

While commending the Bureau for taking complaints in 180 languages via a translation provider, we suggested that the responses also be routinely provided in the language used by the complainant. (Currently, consumers can call the CFPB and request an oral translation of a complaint response.) Consumer Action urged the Bureau to require that creditors and servicers marketing products in languages other than English also provide important financial documents (terms and conditions updates, debt collection or loan modification information) in the same language.

Consumer Action recommended that complaints be analyzed to detect trends in financial problems or scams that target particular in-language communities. For complaints from Asian communities, we recommended they be broken down by Asian language or dialect to track the most affected communities.

In addition to translating its foreign money transfer (remittance) materials and mortgage rules into Spanish, Tagalog, traditional Chinese, Haitian Creole, French, Korean and Vietnamese, we asked the CFPB to target the following issues for translation: debt collection, credit reporting, payday lending and auto finance. (The CFPB’s sample debt collection letters are available in Spanish.)

Our community-based network partners tell Consumer Action that CFPB educational materials should be available in both simplified Chinese, for Mainland and Singapore consumers, and traditional Chinese for those originally from Taiwan, Hong Kong and Macau.

Consumer Action encouraged the CFPB to build relationships with key community leaders in immigrant communities. Our contacts among ethnic community-based leaders—trusted advisors in their own communities—asked that the Bureau use them as a bridge to get financial education information into the hands of those who need it most.

Click here to read Consumer Action’s comments.

Additionally, Consumer Action joined leading consumer and civil rights groups in a coalition comment on the CFPB’s language access plan. Expanding on the CFPB mandate, the comments advocated that all consumers, no matter what language they speak, should have access to financial products and services that are “fair, transparent, and competitive”. Click here to read the joint comments.

Hotline Chronicles: Consumer complains about bad tax preparer

Jarmaine* from Orlando, FL contacted Consumer Action’s hotline with a complaint about her tax preparer. “The owner is very arrogant and he doesn’t admit any fault for submitting my forms before I had a chance to fully review them and there were mistakes on them.”

Jarmaine paid $55 extra for a refund anticipation loan (RAL) based on the refund amount on her return. She also paid an “add on” fee to the preparer. Now the Internal Revenue Service (IRS) has sent her back a revised return with a much lower refund so she owes money to the RAL provider.

“When I complained about his mistakes and asked for a refund, he said, ‘Take me to court,’” Jarmaine said.

Our hotline counselors told Jarmaine that the IRS has a form that allows taxpayers to file complaints against preparers. (See Form 14157, which can be downloaded from the IRS website.)

Choosing a tax preparer

It can be difficult to comparison shop among paid tax preparers. According to the National Consumer Law Center (NCLC), paid preparers often either decline to give price quotes for preparation services or give widely inaccurate estimates. In the vast majority of states, paid tax preparers are not required to meet any minimum educational, competency or training standards, which has allowed “incompetence and abuses by tax preparers to flourish,” says NCLC.

An April 2014 study from the Government Accountability Office (GAO) found high levels of errors. The GAO sent undercover investigators to 19 paid preparer offices. Only two of the 19 preparers (11 percent) produced returns with the correct refund amount. The mistakes in the returns ranged from giving taxpayers $52 less to $3,718 more of a refund than they were entitled to receive.

Low-income taxpayers have opportunities to file for free using reputable online tax preparers at links provided by the IRS.

Refund loans and advances

Paid preparers often promote unnecessary and expensive refund products. NCLC says that in addition to the $25 to $60 fee charged by the banks that offer the refund products, preparers sometimes charge their own fees on top. These fee products include RALs as well as refund anticipation checks (RACs). NCLC says that a few payday and other non-bank lenders offer RALs that are even more expensive than bank RALs.

Taxpayers who need their refunds faster have some lower-cost or free alternatives. With a bank account, taxpayers can get their refunds at no extra cost in 8-21 days if they e-file and request direct deposit. Taxpayers without a bank account can opt to have their refund deposited to a prepaid card, including an existing payroll or general purpose prepaid card. However, when selecting a new prepaid card, taxpayers should look for one without high fees or monthly maintenance charges. (For more about selecting a prepaid card, see Consumer Action’s educational materials on prepaid cards.)

Walmart announced a free service last month that allows taxpayers filing their tax returns at one of 25,000 participating tax preparation locations to pick up their refunds at one of the company’s stores. (So far no online preparers are participating.) After being notified by email, taxpayers can get their cash refunds of up to $7,500 by visiting the Walmart MoneyCenter or customer service desk. While this service is free, consumers need to guard against impulsive purchases. “Cash has a way of burning a hole in your pocket,” said Linda Sherry of Consumer Action, “which is why we recommend direct deposit.”

*Not this consumer’s real name.

FY2014 annual report chronicles stellar year

Consumer Action recently published its annual report for fiscal year 2014, covering the period April 1, 2013 through March 31, 2014. Download the report here.

Like previous annual reports, this year’s includes a letter from Executive Director Ken McEldowney, a review of notable activities and significant achievements across departments, a recap of our annual Consumer Excellence Awards ceremony and anniversary event, statistics providing an at-a-glance measure of our work’s scope and reach, our financial statement, and lists of our donors, educational partners, cy pres grants, staff and board members.

This year, in addition to featuring two of the vital community-based organizations (CBOs) in our network and two of our own staff members (including one who is celebrating his 40th year with Consumer Action!), we highlight the invaluable contributions of our volunteers, who dedicate themselves to helping consumers learn their rights, resolve problems and protect themselves, and of the young people who participate in our youth staff program and infuse our San Francisco office with energy and enthusiasm every day.

2013-2014 was a year of collaboration (Consumer Action was a member of nearly 50 national and state coalitions that banded together to weigh in on important issues, and partnered with more than a dozen entities to develop and disseminate educational materials, web content and videos), connection (our outreach team traveled to 11 cities to train more than 650 CBO staff members, and brought together 75 community group partners to learn from some of the country’s top community educators and subject matter experts) and success (CFPB Director Cordray was finally confirmed for a five-year term as the head of the consumer watchdog agency and announced an expansion of the agency’s public complaint database, the California “Kill Switch” bill became law, and our 2013 Consumer Excellence Awards event in support of our newsletters and free, multilingual consumer hotline surpassed the previous year’s donations by $35,000). Read more.

Consumer Action joins ‘Stop Mega Comcast’ Coalition

In December, Consumer Action joined a diverse coalition of private companies, public interest groups, labor unions and industry associations to block Comcast’s attempt to acquire Time Warner Cable.

Coalition members, while having different individual concerns, agree that the proposed merger threatens competition, could raise consumer prices, could stifle innovation in programming and technology and runs counter to U.S. antitrust and communications laws. The group is asking federal regulators at the Federal Communications Commission (FCC) and the U.S. Department of Justice to reject the merger.

The coalition’s position papers state that the merger would make cable, Internet and entertainment giant Comcast the virtual gatekeeper to America’s high-speed broadband homes, controlling 50% of the high-speed broadband market. Such market power could give Comcast the ability to increase prices at the expense of consumers, artists, content creators and technological innovations such as “over the top” television delivery, which relies on the Internet.

Comcast would become the nation’s most dominant pay TV provider, while also owning NBCUniversal, one of the biggest programmers in the world. This could give the company the means to advance its own content at the expense of other programmers and to force consumers to pay more for the content it doesn’t control.

Consumer Action’s DC office has been meeting with FCC commissioners and Hill staffers to discuss the ramifications of the merger.

Class Action Database: M&T Bank settles overdraft litigation

Class action settlements involving Gateway, over alleged false advertising claims about its 30-inch XHD3000 monitor, and Alltel, over alleged violations of Arkansas law in relation to early termination fees, were among 11 new cases added to the Consumer Action Class Action Database during January. Click here to visit the Database.

One notable class action is In Re: Checking Account Overdraft Litigation. The plaintiffs filed a class action against M&T Bank claiming that the bank artificially reordered the posting of debit card transactions from highest to lowest, which led to higher daily overdraft fees. M&T Bank denied any violations of law but agreed to a settlement to avoid the burden, expense and risk of continuing the lawsuit.

When banks subtract the largest transaction from your account first, followed by the next largest and so on down to the smallest, the account reaches a zero balance faster than it might have if the smaller transactions were subtracted first. This leaves you with more overdraft transactions, and, since each transaction that overdrafts triggers a separate fee, the bank can charge you more.

For example, say that a bank charges $37 for each separate overdraft. A customer starts the day with a $50 balance and makes four transactions of $10 in the morning and one transaction of $100 in the afternoon. If the bank posts the transactions in the order they occurred, the account holder would be charged one overdraft fee of $37 for the $100 transaction in the afternoon. But if the bank reorders the transactions from highest to lowest, the $100 comes first, which results in a zero balance (-$50) and triggers five overdraft fees, totaling $185. Reordering the transactions cost the account holder $148 more in fees.

Current and former M&T Bank consumer checking account holders who incurred two or more overdraft fees in a single day between Aug. 21, 2006 and Aug. 15, 2010 may be eligible for a share of the $4 million settlement. If the settlement is approved, class members will automatically receive payment or account credit. The final approval hearing is on March 4, 2015.

CFPB Watch: Mortgage kickback scheme foiled and mortgage toolkit unveiled

Last month, the Consumer Financial Protection Bureau (CFPB) and Maryland Attorney General Brian E. Frosh ordered Wells Fargo and JPMorgan Chase to pay $35.7 million (in penalties and compensation to consumers) for illegally steering homebuyers to a title company in exchange for kickbacks. The now-defunct Maryland company, Genuine Title, provided mortgage-closing services to borrowers. The regulators found that bank loan officers referred business to Genuine Title in return for cash, consumer information and marketing mailings to prospective homebuyers.

Wells Fargo will pay $24 million in penalties and $10.8 million to consumers. JPMorgan Chase will compensate consumers with $300,000 and pay $600,000 in penalties. It is illegal under the federal Real Estate Settlement Procedures Act (RESPA) to provide a “fee, kickback or thing of value” in exchange for referring borrowers to companies that provide real-estate related services.

More than 100 Wells Fargo loan officers, in at least 18 branches (mostly in Maryland and Virginia), participated in the scheme. The CFPB said at least six Chase loan officers were involved. While the CFPB says Wells originally failed to stop the illegal referrals, the bank now has fired involved employees and improved its procedures to better oversee the mortgage settlement process. JPMorgan Chase has also terminated employees involved in the scheme.

Mortgage toolkit

Potential homeowners spend countless hours hunting for the “right” house, but only half of those who borrow to buy a home actively compare available mortgage deals to find the best fit, according to a new survey released by the CFPB and the Federal Housing Finance Agency (FHFA).

“You are literally betting the house on the choice you are making when you rely fully on mortgage lenders or brokers who have a stake in the outcome,” CFPB Director Richard Cordray said at a Brookings Institution event last month. “What is best for them is not always best for the consumer.”

The National Survey of Mortgage Borrowers found that fewer than one in four borrowers submitted a loan application to more than one lender or broker. Cordray acknowledged that the mortgage process can be intimidating and said that’s why the Bureau created a set of tools to help homebuyers better understand and participate in the process. The CFPB’s new Owning a Home toolkit includes:

Guide to loan options: Explains the differences in loan length (30- or 15-year), loan type (conventional, FHA, etc.) and interest rate type (fixed or adjustable).

Rate Checker: Allows consumers to review a range of actual interest rates they could expect to pay. Updated daily, the rates vary depending on specific information provided by the borrower, such as state, home price, downpayment, loan type, loan length and credit score range. By inputting, for example, different credit score or downpayment information, borrowers see the effect on mortgage interest rates. The CFPB plans to upgrade the tool throughout 2015, adding such things as closing costs, mortgage insurance and points, and providing the ability to do side-by-side rate comparisons.

Closing checklist: This covers the key items mortgage borrowers need to know and do before, during and after closing, plus there’s a link to a PDF document called “Your closing forms explained” to help consumers understand all the important mortgage forms that they will encounter during the closing process.

Click here to download “Your closing forms, explained.”

Click here to read the mortgage borrower survey.

Coalition Efforts: Protecting the CFPB and E911 data privacy

Consumer Action has been working with its allies on two important issues: The GOP-controlled Congress began the year with new attacks on the Consumer Financial Protection Bureau (CFPB) and advocates have been fighting back to protect the vaunted agency. Meanwhile, efforts to improve location information of cell phone calls to 911 have raised privacy concerns among advocates.

Pushback on attempts to roll back the CFPB. Here we go again—those who have opposed increasing consumer protections and the creation of the Consumer Financial Protection Bureau (CFPB) are at it once more. Consumer Action and its allies at Americans for Financial Reform sent a strong warning to Congress that weakening the CFPB could push the economy into another crisis.

Learn more and read the letter.

Consumers shouldn’t have to sacrifice privacy for safety. It’s important that consumers can get help where they are when they call 911 on their cell phones. But despite the promise of mobile devices as a safety line, the technology needed to respond to an exact location isn’t here yet. A number of wireless companies have proposed leveraging new and existing technologies to pinpoint those needing help. But putting E911 wireless location accuracy in the hands of commercial entities has raised privacy concerns. Consumer Action has joined in efforts to ensure that the Federal Communication Commission (FCC) designate all data collected by E911 technologies as “customer proprietary network information,” or CPNI, a designation with strong privacy and security parameters.

Learn more and read the comment letter submitted by the group to the FCC.

Protecting privacy in an era of smart police

The evolution of surveillance technology has changed the landscape of how police, emergency services and governments do business. The collection of massive amounts of biometric (physical) data also has raised privacy and civil liberties concerns.

On Jan. 21, the California Department of Justice convened a forum at the Milton Marks Conference Center in San Francisco for advocates, law enforcement, government officials and academics to discuss how law enforcement is procuring and using “smart policing” technologies, how local communities are addressing related policy issues and how to develop best practices for balancing the need to keep our communities safe with the essentiality of respecting privacy and protecting civil liberties.

The first session provided information on all of the technologies that are being used, their benefits, and the privacy and civil liberties risks associated with each of the technologies. Robert Morgester, California Senior Assistant Attorney General and head of the state’s eCrime Unit, and Jennifer Lynch, senior staff attorney with the Electronic Frontier Foundation, presented and discussed a wide array of surveillance technologies, including:

  • Automated license plate readers (ALPR) – camera systems mounted in patrol cars or on traffic lights that scan license plates
  • Facial recognition – software that identifies a person in a photo or video based on various characteristics in a person’s face
  • Mobile fingerprint readers – mobile devices used to take fingerprints in the field
  • Mobile device forensics – data collected from a mobile device
  • Digital forensics – data collected from a computer
  • Rapid DNA analyzer – device that is able to analyze DNA in about 50 minutes
  • Body-mounted cameras – small cameras worn by officers to record audio and video
  • Unmanned aerial vehicles (drones) – may carry cameras, microphones or other digital recording devices
  • Cell site simulator (Stingray) – can emulate cell towers to intercept mobile phone communications
  • Physical security information management (PSIM) – software that provides a platform and application to share information from multiple unconnected security devices and use them with one comprehensive user interface
  • Range-R – radar that is used to locate someone within a building

In addition to these surveillance tools, most police officers today have radios, smartphones, tablets and/or computers in their patrol cars.

These technologies give law enforcement an investigative edge, but they also pose some real privacy and civil liberties concerns. For example, ALPRs read thousands of license plates per minute and the numbers are uploaded into a police database, enabling police to track vehicle (and motorist) location. Automated license plate readers have the potential to create permanent records of virtually every place any driver—including the innocent—has been. Because each jurisdiction determines how long the data is stored, retention policies are all over the map.

Advocates also raised concerns about mobile fingerprint readers. In Los Angeles, local police cruise streets where day laborers gather and collect their fingerprints with mobile scanners. The day laborers consent because they do not want to seem uncooperative. The data collection opens them and their families to becoming targets for future searches and investigations.

Attendees agreed that surveillance and other technology enhances the way that law enforcement does their work and that it also helps them to coordinate with emergency services and government. However, participants expressed concern that there should be a public process for procurement of these technologies in order to keep the data secure, community engagement in developing policies for its use, transparency in implementation procedures, and a willingness from law enforcement to understand that they are sitting on a stockpile of highly sensitive data that could be badly misused.

Editor’s note: For those who are interested in learning more about biometric data collection, read the Electronic Freedom Foundation’s 2012 report, From Fingerprints to DNA: Biometric Data Collection in U.S. Immigrant Communities and Beyond. Jennifer Lynch is the author of the report.

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 Consumer-Action.org, 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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