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Released: December 01, 2015
Consumer Action INSIDER - December 2015
Table of Contents
- What people are saying
- Did you know?
- Consumer Action honors allies at 44th anniversary celebration
- Protecting your privacy online
- Hotline Chronicles: Auto buyer burned by ‘loan packing’
- A short guide to saving money this holiday season
- MoneyWi$e: Helping teens and families to manage money
- Choosing the right prepaid card just got easier
- Coalition Efforts: Data, deregulation and debt collection
- CFPB Watch: Crackdowns, consumer tools and CAB meetings
- Class Action Database: A debt collector pays its dues
- About Consumer Action
What people are saying
Consumer Action empowers consumers via multilingual financial education and community outreach. Check them out! — Investor Protection Institute, via Facebook
Did you know?
Postal banking could provide much-needed affordable, non-profit, consumer-driven financial services while strengthening and preserving the U.S. Postal Service. If you agree, sign this petition asking the Postmaster General to make postal banking a reality now!
Consumer Action honors allies at 44th anniversary celebration
Last month Consumer Action celebrated our 44th anniversary during a cocktail awards reception in downtown Washington, DC. Consumer Action hosted the event, which was held at the offices of a supporter, public affairs firm DCI Group.
The theme of the anniversary was “common ground”—a nod to Consumer Action’s longstanding collaboration with diverse communities, private sector players, coalitions and lawmakers on both sides of the aisle. In keeping with this theme, Consumer Action honored Kenneth Feinberg, a well-known attorney who specializes in mediation and alternative dispute resolution with the DC firm of Feinberg Rozen; the Center for Public Integrity, an investigative news organization whose mission is to help preserve the public trust; and the Center for Financial Services Innovation, a national non-profit that offers increased access to higher-quality products and practices to improve the financial health of Americans.
“I am proud to have served as chair of the 44th Consumer Action Awards reception,” said Rob Shrum, director of political advocacy at CTIA–The Wireless Association. “Collaboration between communities, the private sector and policymakers is vital to ensure that all consumers’ needs are properly addressed. This has been, and will continue to be, a priority of ours, and we are happy to partner with Consumer Action toward this end.”
The event, attended by more than 100, was underwritten by Amazon, Capital One, Credit.com, the National Association of Broadcasters, TracFone Wireless and Verizon.
“Our anniversary was a huge hit and a great opportunity to catch up with staff and friends from across the country to celebrate our successes,” said Consumer Action executive director Ken McEldowney.
Protecting your privacy online
We rely on the Internet for so much these days, from shopping to banking to socializing and entertainment, but there can be risks when so much of our personal information is at stake. To learn techniques for educating their communities in how to avoid problems on the Internet, Washington, DC-area community-based organizations gathered at Google’s DC offices last month. The training, “Put a Lock on It: Protecting your online privacy,” introduced the groups to a new Consumer Action module and offered practical steps for consumers to protect themselves online.
Consumer Action’s outreach and training managers, Linda Williams and Nelson Santiago, kicked off the training by explaining that online privacy and security is a shared responsibility between users and Internet service providers, social media companies and others.
Throughout the training, Williams and Santiago suggested tips for protecting passwords, data and mobile devices, like using two-factor authentication, which requires two pieces of information to access an account rather than just one. They also provided advice on how to avoid online scams.
Participants searched for clues in sample emails and social networking posts—such as awkward grammar and wording—to spot signs of scams or fraud. The trainers shared resources for hiding your IP address when surfing the ‘net and listed services that will safely store passwords.
Participants also experimented with a tool built to teach consumers not to “overshare” on social media and to protect their online reputations. "Anyone up for another Friday ‘sick out’? Can’t stand the thought of work today," was one of the fictional tweets presented in the activity. Another sample post by a Tumblr user read, "Janet, you’re a lifesaver! Thanks again for ‘helping’ me with that term paper." Participants agreed that in real life, like in the activity, people can be careless with their social media posts, leading to serious consequences.
The half-day seminar using materials (lesson plan, activities, slides and brochure) from Consumer Action’s new “Put a Lock on It” module prepared community educators to teach their clients and neighbors how to take advantage of the best of the Internet while still staying safe. The free publications and training were made possible by funding from Google. Consumer Action will be conducting additional module trainings in Philadelphia and Oakland in 2016. Click here to view the materials.
Hotline Chronicles: Auto buyer burned by ‘loan packing’
Deshi* called Consumer Action’s hotline about his recent car purchase. According to him, when he entered a dealership to buy a car, he told the salesman that he wanted to pay cash. The salesman convinced Deshi, who speaks limited English, to finance the car instead. The salesman told him, “It’s a better deal if you get a loan. If you want, you can pay off the loan after two months.”
The salesman also talked Deshi into purchasing an extended warranty, saying it would add only a few dollars to his monthly loan payment. When Deshi said he wasn’t sure he wanted the extended warranty, the salesman offered to throw in a car alarm for free. “If you don’t want the car alarm, you can cancel it within six months,” Deshi was told.
When Deshi got home he reviewed his contract and found that he had been charged $800 for the car alarm. He called the dealership and was told it would be impossible to cancel the alarm service.
Dealers often inflate the overall price of car loans with add-on products. This is known as “loan packing.” Add-ons are sold in packages that can include questionable insurance products, service contracts, credit life and disability insurance, rust proofing, and theft deterrent products such as Deshi’s car alarm. By inflating vehicle cost and loan size, dealers can increase profits.
While Deshi didn’t mention it, auto loans themselves can be costly, even without loan packing, and can also increase dealer profits. The loan comes with upfront fees and interest, money that Deshi would lose if he decided to pay his loan off in full after just a few months. If a buyer has the money to pay in full for a car, there’s little reason to take a car loan. Many car loans quickly become “upside down” when the value of the vehicle falls faster than the remaining loan balance. This makes it difficult to get out of the loan by selling the car.
To make matters worse, Deshi may have little access to justice in the courts. Mandatory arbitration clauses in auto contracts often force the buyer to waive his right to sue and appeal in court. It’s likely that Deshi would have to pursue his complaint through arbitration—a process that often favors dealers because they are repeat customers for arbitration services.
Our counselors advised Deshi to take his complaint to his local district attorney or his state attorney general. We also advised him to call a local television station that accepts consumer complaints for its nightly news, as well as to contact the state’s department of motor vehicles office to see what help, if any, might be offered.
Consumer Action offers a free fact sheet on car buying, “Get a car loan that’s in your best interest.” It covers many of the deceptive practices used by car dealers in order to increase profits.
*Not this consumer’s real name
A short guide to saving money this holiday season
It’s easy to fall into a mindset of “giving” that includes purchasing high-tech gadgets for your child, hosting an extravagant house party or having the most lavishly (or garishly) decorated house on the block. If it seems like you’re breaking the budget every December, it helps to remember the true spirit of the season: family, friends and community celebrating shared experiences and values.
Consumers tend to spend the most money on three things during the holidays: gifts, travel and entertaining. In order to maintain a sensible budget, it’s important to not only find good deals but to manage gift and travel expectations with family and friends. For instance, if you can’t afford to travel across the country to spend time with your sister’s family, let her know early and tell her that you’ll be more than happy to include her (and open gifts together) via video chat.
“Tell everyone that you’re looking forward to celebrating with them but you’re trying to stick to a sensible budget this year and see if you can agree on a per gift limit,” suggests Consumer Action’s Linda Sherry. “Likewise, don’t expect people to spend more than that amount for your gifts. If you can get your entire family to agree, then no one feels pressured to ‘one up’ anyone else and gifts can become more meaningful, since quality will matter more than quantity or cost.”
It seems as if a lot of us are trying to downsize the holidays this year. Experts are predicting this holiday season to be one of the weakest in years for retailers, as many consumers concerned with saving money and responding to a fluctuating stock market are waiting until the last minute to shop. What’s bad for retailers, however, can be good for the savvy shopper who’s ready to pounce on the many deals offered as part of the ever-increasing early holiday push.
The New York Times reports that many big retailers are already slashing prices. What’s more, price matching and other credit card perks can help take the edge off costs, while online shoppers can often get free shipping during the holidays. Consumers should also consider using retailers' apps to track sales and find coupons—Target's Cartwheel app, for example, provides coupons on your smartphone, which you can then use in stores. Other great deals can be found on sites like Groupon, LivingSocial and Amazon Local, which provide online coupons good for 50-70 percent off restaurants, spa packages, computers and more that you can “gift” via email or print out and use as a stocking stuffer.
Make gifts yourself and encourage family and friends to exchange something handmade. An online search for “homemade gifts” yields dozens of sites offering ideas to fit your budget and your talents. Here’s a good one with over 60 gift ideas.
In lieu of expensive gifts, emphasize time spent together. Make get-togethers a communal effort by asking friends and family to bring their best seasonal dish or their favorite bottle of wine to a potluck dinner. While you can play the host (and make the roast), you won’t be spending hundreds on special ingredients, side dishes, expensive alcohol and other trappings.
When decorating your home consider buying lights, greenery, ornaments, wrapping paper and more from discounters and dollar stores (why pay more than $1 for a bucket of tinsel?) or online (a simple Google ‘Shopping’ search for an item like a menorah, sorted by price, can lead to outstanding results). And, to lesson the impact on the environment, recycle wrappings and decorations for next year!
Finally, keep track of how much you’re spending. Costs can easily add up as one shops in different stores or online, on different days (sometimes using different means of payment) throughout the month. This handy holiday budget calculator is useful to figure out how much you can afford in the first place. You can track spending more easily using an app like Mint or simply by saving all receipts in an envelope.
MoneyWi$e: Helping teens and families to manage money
Consumer Action’s Audrey Perrott led two trainings last month using the materials the organization’s Moneywi$e financial literacy partnership with Capital One created. The trainings were developed to provide community-based organizations with the tools to help clients and community members achieve greater financial literacy.
Financial management for Girl Scouts and Boy Scouts
Girl Scouts do more than go on camping trips and sell cookies. The Girl (and Boy) Scouts have evolved with unique programming that offers young participants opportunities to learn about money management, goal-setting, small business enterprise and e-commerce in an effort to help them become future leaders. In November, Consumer Action’s Audrey Perrott contributed to this effort by training members of the San Leandro Girl and Boy Scouts troops and adult volunteers using the MoneyWi$e Teens and Money module.
Girl Scout leader Julie Draper invited Perrott to provide the financial literacy training to her multi-level troop of cadettes (grades six through eight) and seniors (grades nine and ten) and their families. Scouts earn badges by participating in certain activities and programs, and the cadettes were excited to find out that the training would help them earn three proficiency badges in financial literacy: budgeting, comparison shopping and “financing my dreams.”
As a Girl Scouts alumna and adult volunteer, Perrott said, “It is always an honor to have the privilege to combine my two loves: consumer education and youth enrichment. This time, I enjoyed the added bonus of having some Boy Scouts in the audience.”
The training included discussions on tracking spending, budgeting, identifying wants vs. needs, goal setting, selecting a financial institution, saving, understanding the deductions on a paycheck, and learning how to write checks and manage checking accounts.
“Thank you for presenting your financial literacy program for teens. You are a great presenter,” said troop leader Draper. “And the Scouts really enjoyed it.”
Families and money management
Perrott kept the momentum going with another MoneyWi$e training, this time on Tracking Your Money at the San Francisco-based non-profit Portola Family Connections (a longtime partner of Consumer Action). The agency had received a Family Resource Center Initiative grant from San Francisco’s Department of Children, Youth and Their Families “First 5” program and from the Human Services Agency of San Francisco in order to carry out a six-week “Family Economic Success Series.” The series is designed to improve the financial wellbeing of families.
Portola Family Connections support manager Erika Rendon said, “Thank you so much for the workshop on tracking your money. The families and I learned a lot about budgeting, most importantly how to reduce expenses so that we can save for short- and long-term goals.”
The training covered the following concepts: How to budget, how to reduce spending, ideas to generate income or free up funds within the family budget, how to save more and how to set financial goals. The training even inspired Rendon to cut down on her cable expenses and redirect the money she saves to her retirement savings.
The attendees were able to work through case studies within the Tracking Your Money lesson plan. The studies helped them to consider their own financial decisions without actually revealing anything about their personal finances. Perrott provided the families with budget and goal-setting worksheets and encouraged them to discuss some of their personal goals, which ranged from saving to fully fund a wedding without debt to developing emergency savings funds.
Consumer Action collaborates with our network of nearly 7,000 partners to educate consumers across the country on MoneyWi$e and other educational modules. Consumers can benefit from on-demand training at home or in a computer lab through our MoneyWi$e computer-based educational modules. Past webinars may be viewed on Consumer Action’s YouTube channel. For more information on the MoneyWi$e project, click here.
Choosing the right prepaid card just got easier
In pursuing our mission of empowering low- and moderate-income and underrepresented consumers to financially prosper, Consumer Action creates educational materials on a range of financial accounts, including one often targeted at those outside the financial mainstream: prepaid cards.
The latest addition to our library on prepaid cards is an educational module that provides updated information on card costs and features and prepares consumers to select the best prepaid card for their needs.
"A consumer’s guide to choosing a prepaid card" is a four-page guide to how prepaid cards work, the most common potential fees, how to estimate the monthly cost of a particular card, how to reduce or avoid fees, what card features to look for or steer clear of (overdraft coverage!) and what online tools are available to help compare available card options.
Prepaid cards have proliferated, with unbanked and underbanked consumers (those without a traditional checking or savings account) often turning to them to fill the void. Even some consumers who do have bank accounts and credit cards choose a prepaid card for a specific purpose, such as distributing an allowance or paying for travel expenses. And many employers have adopted a form of prepaid card as another way for their employees to receive their wages electronically. (Consumer Action developed two publications on “payroll cards” in early 2014.)
Other pieces of the module include:
Trainer’s manual: This nine-page backgrounder, written in Q&A format, delves into greater detail than the fact sheet and prepares educators to answer common questions about prepaid cards.
Training curriculum: This 24-page packet contains a detailed lesson plan for consumer educators to use with their clients and community members. During the 2½-hour class, participants learn how to choose, use and manage a prepaid card wisely. Two classroom activities provide an opportunity for participants to apply what they’ve learned.
PowerPoint presentation: The companion 17-slide presentation adds a visual element to the group training curriculum.
The module is currently available in English as a PDF download. Consumer Action will translate the guide into Chinese, Spanish, Korean, and Vietnamese in the coming months and distribute printed copies in bulk to community-based organizations (CBOs) at no charge.
Consumer Action’s outreach team will hold one “pilot” roundtable early in 2016 (location to be determined) to train CBO staff on how to use the materials most effectively.
Ken McEldowney, Consumer Action’s executive director, notes, “With more and more consumers trying to make the right choice from among dozens of prepaid card options, these new resources couldn’t come at a better time.”
The new materials were developed with financial support from Visa Inc. as part of our Know Your Card educational partnership. Visit KnowYourCard.org to find all of the free payment card-related educational publications produced under this project.
Click here to access all of the resources in Consumer Action’s prepaid cards library.
Coalition Efforts: Data, deregulation and debt collection
Consumer Action recently joined allies on several important initiatives, including expanding debt collection protections for low-income and minority consumers; reining in government data collection while stopping privacy breaches of government agencies; and pushing back against legislation that would weaken the Consumer Financial Protection Bureau, deregulate banks and outsource Internal Revenue Service (IRS) debt collection.
Expanding debt collection protections for those who need it most. Consumer Action joined a coalition of advocates in supporting Senator Cory Booker’s (D-NJ) efforts to protect consumers by introducing the Stop Debt Collection Abuse Act of 2015 (S 2255). Booker’s bill is an important step on the road to limiting abusive collection of debts owed to the federal government. Current state and local collections of government debts (including taxes, fines and legal penalties) disproportionally burden low-income communities and minority families. This bill seeks to protect consumers from these unfair practices. Learn more and read the letter.
U.S. agencies fail to meet privacy requirements of Executive Order 13107. Consumers’ privacy rights are violated by mass surveillance conducted by the federal government. It’s hard to challenge these abuses because most agencies have failed to follow a law enacted in 1998 under Executive Order 13107 designed to make it easier for people to file complaints about human rights violations. Consumer Action joined the Access Now coalition of human rights, privacy and consumer protection organizations in denouncing the data collection and privacy breaches of government agencies, including the U.S. Department of Justice, the Department of Defense, the Office of the Director of National Intelligence, the Central Intelligence Agency, the Federal Bureau of Investigation and the National Security Agency. Learn more and read the letter.
The highway bill turned into a dangerous road for consumers. A $325 million transportation funding bill has been loaded with more than 260 amendments as legislators attempt to sneak their preferred provisions into law. The proposed Highway Trust Fund bill contains 181 amendments that are transportation related, while 88 of the amendments are non-transportation related and could negatively impact consumer rights. Consumer advocates oppose several of the bill’s amendments that include efforts to weaken the Consumer Financial Protection Bureau, deregulate large regional banks and outsource IRS debt collection to private collectors. Advocates believe that each of these measures is substantive and deserves individual debate instead of being grouped in with unrelated legislation. Learn more and read the letter.
CFPB Watch: Crackdowns, consumer tools and CAB meetings
The CFPB returned $107 million to more than 200,000 consumers this summer after uncovering illegal practices in the mortgage servicing, student loan, debt collection and credit reporting markets that it oversees.
Mortgage servicers ran afoul of the CFPB because of their failure to terminate private mortgage insurance (PMI) and reimburse borrowers when they were eligible to stop paying (when the loan balance has been paid down to 78 percent of a property’s original value).
The CFPB also found issues with student loan servicers, who not only deceived borrowers about late fees but actually caused their accounts to become delinquent. If students paid less than the total due on multiple loans, their payments were divided evenly among each loan, causing late fees to be charged on all of the loans and leaving the loans in default. What’s more, malfunctions in loan servicers’ systems caused unexpected debits and overdraft fees on automated student loan payments.
In addition, the CFPB found that debt collectors were using illegal collection tactics. The collectors failed to state they were calling to collect a debt and continued to call after consumers exercised their legal right to tell them to stop.
Finally, the CFPB took aim at companies that report consumer accounts to the credit reporting agencies (CRAs). Companies that send details of payments and loan balances to CRAs are called “furnishers.” The CFPB determined that furnishers lacked reasonable policies to accurately report information to CRAs and failed to respond to credit report disputes submitted by consumers. Some furnishers, the CFPB found, didn't have systems set up to receive, evaluate or respond to consumer disputes and didn’t notify consumers of dispute outcomes as required by law.
Inaccurate background checks. Job seekers impacted by the shoddy services of two background check companies each will receive about $1,000, for a total of $10.5 million, to help compensate for any job loss or reputational harm caused by the companies. These firms, General Information Services and e-backgroundchecks.com, Inc. (BGC), sold inaccurate reports to prospective employers. The Bureau also found that the background check companies did not prevent old civil lawsuits from appearing on employment screening reports, as required by law.
New Social Security planning tool. Estimates are that the average American will live to age 85 and will need sufficient income and savings to cover about 20 years of retirement. While you can file for Social Security payments at age 62, full retirement benefits don’t kick in until age 66 or 67 (depending on when you were born). And delaying Social Security benefits until age 70 increases payment amounts significantly. The CFPB has released an interactive tool to help consumers decide when to claim Social Security benefits. The new online tool helps consumers estimate the effect of filing age on monthly payments. By sliding a bar to choose the age they’ll begin to receive benefits, consumers can view the difference in payments on a monthly or annual basis. (The tool is also available in Spanish.)
For specific amounts using a consumer’s actual earnings record, you can set up an online account at the Social Security Administration website.
Consumer Advisory Board meeting. Mandatory arbitration and language access were the prime topics at the CFPB’s Consumer Advisory Board (CAB) meeting in Washington, DC last month.
The CFPB is considering a proposal that would put an end to bans on class action lawsuits (where consumers band together as a group to take a company to court to resolve a dispute). Bans on class action lawsuits are common in consumer contracts, such as cell phone, credit card, nursing home, debt collection, medical, bank, and other financial service company agreements.
However, the CFPB is not planning on eliminating mandatory arbitration clauses from individual consumer contracts. When consumers inadvertently sign contracts with an arbitration clause they are required by companies to resolve disputes through private arbitration. Instead, the CFPB may ask companies that force consumers to use arbitration to report the outcomes of the arbitration claims to the Bureau and possibly to the public.
The CFPB considers access to financial information in languages other than English to be part of its mission to empower consumers. The Bureau reported to the CAB that it has created a glossary of financial terms in Spanish and Chinese to help newcomers and limited-English-speakers better understand financial products and services. For more information, see the CFPB’s "Newcomer's Guide to Managing Money" in Spanish, Chinese and English.
Class Action Database: A debt collector pays its dues
Consumer Action added 17 new class action settlements to its Class Action Database during November. One notable class action is LaRocque v. TRS Recovery Services, Inc.
The plaintiffs in this suit filed a class action against the debt collection agency TRS Recovery Services, Inc. (TRS), alleging that it violated the Fair Debt Collection Practices Act (FDCPA). TRS sent a collection letter that plaintiffs charge misled consumers into believing that the agency could create paper drafts that would withdraw funds from their bank accounts and charge state tax (without stating the amount of the state tax). Additionally, in Maine, these firms collected funds from the consumers without notice as required by Maine law. TRS and TeleCheck denied the allegations but agreed to a settlement to avoid the burden, expense and risk of continuing the lawsuit.
The class members are U.S. residents who received a letter coded “RECR3” between March 11, 2010 and July 30, 2015. The settlement fund is over $3.4 million.
The class is divided into three categories:
- Class 1: U.S. residents who received a RECR3 letter are eligible for a pro rata share from 40 percent of the settlement fund.
- Class 1 subclass: U.S. residents who received a RECR3 letter and whose funds were collected by the defendants within 30 days of the RECR3 letter are eligible for a pro rata share from 60 percent of the settlement fund.
- Class 2: Maine residents who paid a returned check fee of $25 due to TRS demand draft are eligible for a pro rata share from the 60 percent of the settlement fund (regardless of having received a RECR3 letter).
The claims deadline is December 22, 2015.
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 7,000 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.