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Consumer Action INSIDER - February 2016

Table of Contents

What people are saying

I’m writing to thank you for your ‘Put a Lock on It’ online privacy training, especially for your tips on how to create a good presentation. I’ve been incorporating your tactics—including offering games, using PowerPoint and other visuals, and having hands-on activities—and my trainings are much more engaging and interactive! — Felicia Fort, Educational Investor, One Step Closer

Did you know?

Antivirus software is used to prevent, detect and remove harmful and malicious software from computers. It is important that users install antivirus tools because, without them, computers can become infected and stop working the way users expect. ConsumerAffairs.com, a site offering consumer news, recall information and consumer reviews, has put together an Antivirus Software Guide that allows consumers to compare antivirus software brands and read reviews from users. Learn more.

Out and About: “Give us postal banking now!”

Last month, the Campaign for Postal Banking and dozens of representatives from national consumer, labor and civic organizations packed the lobby of the U.S. Postal Service (USPS) headquarters in Washington, DC to demand the USPS take immediate action to establish low-cost financial services in the nation’s 30,000+ post offices.

Consumer Action was in attendance, holding a “Give us postal banking now!” sign, before cheering on Delegate Eleanor Holmes Norton (D-DC), who emphasized the need for additional congressional support and took the lead in delivering 150,000 petition signatures collected by the coalition to Deputy Postmaster General Ron Stroman.

Postal banking can help the nearly 28 percent of U.S. households (100 million people) that are underserved by traditional banks. This vulnerable population often cannot afford banking fees; are geographically located far from a bank; and/or face other obstacles to opening or maintaining bank accounts. Because of this, they are forced to turn to payday lenders and check cashers to borrow money or conduct financial transactions, spending on average 10 percent of their income (a whopping $2,400 a year) on the fees and services charged by a predatory “fringe banking” industry that rakes in $103 billion annually at customers’ expense. According to the Campaign for Postal Banking, the typical interest rate on a payday loan, for instance, is almost 400 percent.

“Without access to affordable banking, it’s easy to see how consumers can become trapped in a cycle of insurmountable debt,” said Consumer Action’s Linda Sherry. “And it’s shameful that the U.S. is the only developed country in the world that has not embraced the simple yet innovative solution that is postal banking.”

The Campaign for Postal Banking states that: “The USPS is a trusted, accessible and secure government agency (that receives no tax dollars for operating expenses) with…branches serving every urban, suburban, and rural community in the country. Non-profit financial services provided by the USPS could help struggling families nationwide achieve financial stability and strengthen the USPS mission to serve the public.”

Postal banks would provide affordable, consumer-driven products and services that range from check cashing to bill payment to savings accounts to small-dollar loans. Presidential candidate and senator Bernie Sanders (D-VT) and Senator Elizabeth Warren (D-MA) have both been outspoken supporters of postal banking. In addition, the U.S. Postal Service’s Inspector General released a white paper last year calling for a return to postal banking to meet the needs of cash-strapped consumers.

Thousands sign petition opposing changes to Lifeline

The federal Lifeline program subsidizes telephone costs for low-income individuals and households, helping them move out of poverty by giving them access to job opportunities, health care and public safety. The Federal Communications Commission (FCC) voted in June to consider expanding Lifeline to also pay for broadband Internet service—an idea Consumer Action supports.

Unfortunately, recommendations from some would limit Lifeline eligibility to households on the federal Supplemental Nutrition Assistance Program (SNAP) and require them to rely on a voucher or other Electronic Benefits Transfer (EBT)-based payment system to receive benefits. Consumer Action opposes these moves for several reasons, outlined here. We recently created a petition to the FCC to counter the recommendations. On Jan. 7, we filed the petition, which was signed by 2,585 consumers who shared our concerns that these steps could seriously narrow or otherwise damage the Lifeline program.

Our petition asks the FCC not to limit Lifeline eligibility to SNAP households, as such a move would result in millions of current Lifeline households who qualified through other benefit programs or by income to no longer qualify.

“In addition, roughly one million of the nation’s poorest people will be cut off from SNAP over the course of 2016, due to the return in many areas of a three-month limit on SNAP benefits for unemployed adults aged 18-50 who aren’t disabled or raising minor children,” said Consumer Action Executive Director Ken McEldowney. “When you add to that the elderly and other key groups who are seriously underrepresented on SNAP, you have a prescription for several million people who are currently eligible for Lifeline being forced out of the program in a needless and entirely unfair way.”

In addition, petitioners urged the FCC not to switch to a voucher system to administer Lifeline phone subsidies to low-income households. A voucher system is unreasonable and could possibly require consumers to incur ATM or other charges.

McEldowney decried the proposal that Lifeline subscribers would have to obtain vouchers (or some equivalent arrangement) each month in order to remain in the program (before submitting these vouchers individually to subsidize their phone and Internet service bills) as bureaucratic and overly complicated. He added that it would likely result in a sharp reduction in the number of Lifeline subscribers who need and rely on the service.

Created in 1985 under the Reagan Administration, the Lifeline program offered a partial subsidy for landline phone connection and service in eligible low-income households. In 2005, Lifeline discounts were extended to eligible low-income consumers for prepaid wireless service plans. Fees paid by service providers fund the program (although most carriers require all phone customers to pay for the fees as a pass-through on phone bills).

In June, the FCC voted 3-2 to move forward with expanding the Lifeline program. Mayors and elected officials from 44 communities spoke out in support of the FCC proposal to improve Internet access for low-income families.

Hotline Chronicles: Merchant’s credit card minimum too high

Elijah* from Los Angeles contacted Consumer Action’s hotline to complain that when he attempted to buy $20 worth of gasoline at a convenience store called ampm, he was told that the business had a $25 minimum purchase requirement. “The gas station required me to spend $25 in order for me to pay with my credit card. I heard that the minimum is $10. What’s up?”

Elijah is correct—merchants may only refuse your credit card for purchases of $10 or less; they cannot establish minimum purchase requirements that are higher than $10. To add to the confusion, minimum purchase requirements are not allowed on debit cards.

We suggested that Elijah complain to the company headquarters (which we provided) and his state attorney general. You can find contact information for your state attorney general at the National Association of Attorneys General website. Elijah could also submit a complaint to his card processor (MasterCard or Visa, for example), as most prohibit merchants that accept their cards from imposing minimum purchase requirements of more than $10.

Merchants, especially smaller stores, favor minimum purchase requirements because they say credit card processing fees eat into their profits, especially on small purchases.

In 2010, when the Dodd-Frank Wall Street Reform and Consumer Protection Act was passed, an amendment to the Electronic Fund Transfer Act was included to decrease the cost that retailers pay to accept debit cards, allowing them to pass on savings to consumers if they choose. At the same time, the rule allowing credit card minimum purchase requirements was adopted. (Before that time, merchants were prohibited from imposing minimum purchase requirements under the terms of card processors, such as Visa and MasterCard.)

Consumers may also face credit card “checkout fees,” or surcharges, at the register. For more about these fees, see “Credit Card Checkout Fees” on Consumer Action’s Know Your Card website.

*Not this consumer’s real name.

At the Movies: The Big Short

Some of you have seen The Big Short, and others may be wondering if it’s worth checking out. Here’s our take.

The film offers an in-depth look at the complicated causes of the 2008 housing collapse and ensuing financial crisis through the eyes of several morally ambiguous and opportunistic stock market investors. These investors, who in 2007 were able to predict the upcoming housing crisis, “shorted” the market by betting against it. Ultimately, they made millions off Wall Street’s greed and corruption. Unfortunately, their windfall didn’t benefit the thousands of middle-class families across the U.S. who lost their homes due to the bad mortgages the banks had been issuing for years before the collapse.

As the film colorfully depicts, the events leading up to the crisis would not have been possible without a toxic combination of reckless bankers run amok; complicit credit rating agencies in bed with industry; and asleep-at-the-wheel regulators who either lacked the authority to take action, or (as the movie insinuates) knew all along but turned a blind eye.

If there is one redemptive moral to the story, it comes right before the credits roll, as one investor-turned-millionaire realizes with disgust that his fortune was created on the backs of the American people. As the scene fades to black, prophetic words appear on the screen stating that we as a country haven’t done much to rein in Wall Street since disaster struck; that we may be up for a sequel soon; and that a select few are still getting rich off risky, ethically dubious investments.

All of this sounds pretty dire, so should you see The Big Short? We think so. Not only is it highly entertaining, it gives the viewer a better understanding of the many parties involved in letting our economy to go to hell. Another reason to see it is to realize how strong action from new regulatory agencies like the Consumer Financial Protection Bureau (CFPB)—which sprung from the ashes of the 2008 collapse in order to reign in Wall Street—might prevent another heartache.

Looking back may be dismal, but looking ahead doesn’t have to be. In order to hold Wall Street accountable, we must push back against any legislation that would weaken financial reform under the critical Dodd-Frank Wall Street Reform and Consumer Protection Act, which was passed after the crisis and which not only established the CFPB, but brought the most significant improvements to U.S. financial regulation since the Great Depression. The laws created under Dodd-Frank (and the enforcement capabilities of the CFPB) give us our best shot at stopping "too big to fail" banks from ruining the economy again; protecting the American taxpayer by ending bailouts; and shielding consumers from abusive financial services practices (like risky home loans).

Perhaps not surprisingly, Dodd-Frank and the CFPB are constantly under attack by industry lobbyists and the politicians who serve them. So what can you do? First, familiarize yourself with the cautionary tales presented in The Big Short and be careful how you manage your own money. Second, contact your members of Congress and let them know that you’re holding them accountable to uphold Dodd-Frank and support a strong CFPB. Finally, encourage others to sign up for our emails, which will alert them to attacks on existing consumer protections and give them opportunities to take actions that could keep the whole country from coming up “short” again.

New coalition aims to keep health care competitive

With large insurance mergers Anthem/Cigna and Aetna/Humana threatening consumers’ access to health care and health insurance affordability, Consumer Action joined a group of consumer advocates, employers and unions to launch the Coalition to Protect Patient Choice (CPPC). The group aims to educate policymakers and the public on the importance of preserving choice and competition in the health care industry.

Competition among health insurers is vital to ensuring lower premiums, improving quality of care and promoting access and choice.

“Consumers throughout the country are facing fewer choices and higher costs because of a tsunami of mergers and anticompetitive conduct,” said Consumer Action Executive Director Ken McEldowney. “Our coalition plans to put a spotlight on this conduct so enforcers and policymakers can do their job in protecting consumers.”

McEldowney noted that the coalition started by taking a hard look at the ongoing health insurance mergers, which threaten to reduce consumer choice and increase premiums.

Today, there are only five national competitors: UnitedHealth, Anthem, Cigna, Aetna and Humana, causing health insurance markets to be highly consolidated and insurance premiums to increase. The U.S. Department of Justice, state attorneys general, state insurance commissioners and Congress are investigating the Anthem/Cigna and Aetna/Humana mergers.

The coalition argues that patient choice will suffer if these megamergers are approved. Costs will also balloon—studies have shown previous health insurance mergers resulted in increases ranging from 7 percent to nearly 14 percent. Merger proponents claim mergers drive down costs, but this applies to business and has no impact on consumers. Past mergers of health insurers have not resulted in savings being passed along to consumers, and insurance costs continue to rise for employers, individuals and families.

The Coalition to Protect Patient Choice has launched a website offering resources to educate and inform policymakers, enforcement officials and the public about the dangers posed by the mergers. The website includes a U.S. map that illustrates which states would experience the greatest health insurance challenges should the mergers be allowed.

While the U.S. Justice Department is reviewing the deals, states typically take the lead on regulating health insurers and enforcing consumer protections. Members of the coalition have submitted comments in Virginia and California:

  • The Coalition to Protect Patient Choice commissioner filed comments on Jan. 11 with Jacqueline Cunningham of the Virginia State Corporation Commission urging the commission to hold public hearings for pending health care mergers. Consumer Action signed on, along with Consumers Union, Virginia Consumer Voices for Healthcare, Virginia Organizing, the Virginia Rural Health Association, The Commonwealth Institute, U.S. PIRG, Consumer Watchdog, SEIU Virginia 512, and DC 37 AFSCME AFL-CIO.
  • Also on Jan. 11, Consumer Action filed comments urging the California Department of Managed Health Care to thoroughly review the Aetna-Humana transaction.

FY2015 annual report reflects year of accomplishments

Consumer Action’s annual report for fiscal year 2015, covering the organization’s activities between April 1, 2014 and March 31, 2015, is available now for download.

As in previous annual reports, the document includes notable department activities; a recap of efforts by coalitions in which we participate; profiles of staff members, volunteers and community-based organizations in our nationwide network; and a financial statement (income and expenses) for the period.

This year’s major accomplishments include:

  • The filling of 1,917 requests for 507,141 free printed copies of our multilingual publications;
  • The updating of six of our most popular existing publications and creation of three new educational modules (on checking and savings accounts, auto insurance and servicemember/veteran economic survival). We also created a pair of new publications that, together, inform consumers of their rights when they owe a past-due debt; a new, stand-alone fact sheet entitled Privacy and Control for Social Media Users; two new publications explaining the IP transition in easy-to-understand, non-technical language (launched along with a related website, NewPhoneNetwork.org); a new Student Loan and Education Resource List that provides useful resources to help students manage their financial obligations; three short videos to help home-based entrepreneurs understand their business insurance needs and options; and four new webinars;
  • Travel by Consumer Action staff to 15 cities to train more than 760 community group staff members and consumers;
  • Responses to 6,354 complaints and communications submitted via website and phone to our multilingual advice and referral hotline;
  • The logging of 84 cases and settlements that were open to claims in our Class Action Database, garnering 153,037 total page views by consumers;
  • The organization and hosting of our fifth annual National Consumer Empowerment Conference, which brought together dozens of consumer educators, counselors and advocates from around the country to address critical consumer issues, learn from subject matter experts, and share best practices in consumer and financial education; and
  • The collection of input from our network of nearly 7,000 multilingual community-based organizations nationwide in order to submit comments in response to the Consumer Financial Protection Bureau’s (CFPB) proposed “language access” plan (designed to guide the agency on some of the most pressing issues faced when educating multilingual consumers).

In addition to the aforementioned accomplishments, in October, Consumer Action held our annual Consumer Excellence Awards at Google’s new offices in Washington, DC, raising a record-setting $240,000 in support of our free, multilingual consumer assistance and referral hotline and our Consumer Action News and INSIDER newsletters. Download our annual report to read more about the event, including the list of award recipients.

How to build a good credit score

Credit scores are an essential part of financial health in the U.S. But establishing credit and building a good score can be challenging, especially for those new to the process, such as students and immigrants.

In an effort to help consumers understand the credit scoring process and its impact on their lives, as well as how they can establish and/or improve their credit history, Consumer Action has partnered with CreditBridge, a New York-based financial technology company. The resulting three-page publication, Credit Scores in the U.S., explains:

  • Who uses credit scores in their decision-making process;
  • What factors go into calculating credit scores;
  • How consumers can obtain their credit reports and scores; and
  • What specific steps consumers can take to establish credit and/or improve their scores.

“Establishing credit in the United States can be difficult and frustrating for newcomers,” said Linda Sherry, director of national priorities for Consumer Action. “A credit history is necessary for so many day-to-day things, from wireless phones to auto and renters insurance to credit cards. In concert with CreditBridge, we hope to make the process a little easier by providing targeted tips and advice.”

CreditBridge.com provides information about banking and credit, with the stated goal of expanding access to credit. “Many in the U.S. find themselves in a catch-22: You need a credit history to obtain a credit card or any other credit product, but you need an existing line of credit to build a credit history,” said Andrew Endicott, co-founder of CreditBridge.

The educational information is geared toward students, immigrants and others who lack the credit score needed to borrow money or achieve their goals.

The credit scores fact sheet is available for free download at the Consumer Action and CreditBridge websites. We’ll alert you when our Spanish version is available.

Just in time for tax season: updated EITC fact sheet

Consumer Action has again updated its popular Earned Income Tax Credit (EITC, or EIC) publication, Get Credit for Your Hard Work. The resource is available in plenty of time for taxpayers preparing their 2015 returns to learn more about the available credit and make sure that they take advantage of it, if eligible. The EITC puts money back into the pockets of qualifying low- and moderate-income working taxpayers when they file their tax returns. Higher income limits and credits this year means more filers will qualify for the EITC, and those who do qualify will get a bigger check. (EITC income limits are changed each year to keep pace with inflation.) Updated for the 2015 tax year, Get Credit for Your Hard Work covers:

  • Qualification guidelines;
  • Income limits for single and married taxpayers with and without children;
  • Credit amounts, depending on marital status and number of children (if any);
  • Information about claiming the EITC; and
  • Resources for learning more and getting tax filing assistance.

There are two big changes for the 2015 tax year: Legally married same-sex couples may file joint federal tax returns—and are eligible for the EITC—regardless of what state they were married in. And, for the first time, California joins 25 other states and Washington, DC in offering an Earned Income Tax Credit to state taxpayers who qualify. (A link in the Get Credit for Your Hard Work fact sheet takes users to a map showing whether their state offers an EITC.)

Consumer Action’s EITC resource is available for free as an online article or a printable PDF in English, Spanish, Chinese, Korean and Vietnamese.

The EITC helps reduce poverty for working families. Qualifying taxpayers can get a check back even if they don’t owe any taxes, but they must file in order to claim the credit, even if their income is so low that they normally would not file a tax return. Households move into and out of eligibility based on changes in their marital, parental and financial status and changes in EITC income limits, so low- and moderate-income workers should check their eligibility each year, even if they didn’t qualify in previous years.

Class Action Database: Shoddy cell phone insurance

Consumer Action added nine new class action settlements to our Class Action Database in January.

One notable class action is Wineesa Cole v. Asurion Corp., et al.

The plaintiffs filed a class action against cell phone service provider T-Mobile and cell phone insurance provider Asurion alleging that Asurion and T-Mobile misrepresented the terms of their cell phone insurance policy. Plaintiffs allege that the insurance policy did not adequately disclose that Asurion would be able to fulfill lost, stolen, damaged, etc. phone claims with refurbished phones, phones of a different make, phones of a different model or phones valued less than the cost of the deductible. Asurion and T-Mobile denied the allegations but agreed to a settlement to avoid the burden, expense and risk of continuing the lawsuit.

The class members are California residents who purchased a cell phone insurance policy issued by Asurion through T-Mobile between Aug. 1, 2003 and April 2, 2008.

The claims deadline is February 26, 2016.

The other eight class actions added to the database are Colucci v. Private Label Nutraceuticals (Garcinia Cambogia), Douglas v. The Western Union Co., JPMorgan Chase (FCRA), Earth (Exer-Walk Shoe), Midland Credit (TCPA), Blue Buffalo (Pet Foods), Cumberland (Stevia in the Raw), and McLaughlin v. Phelan Hallinan & Schmieg, LLP.

CFPB Watch: Dealer-damaged credit histories and pension payouts

Bogus information was added to the credit reports of 84,000 consumers who had taken out a subprime car loan with CarHop, one of the nation’s largest ‘buy-here, pay-here’ auto dealers, according to the Consumer Financial Protection Bureau (CFPB).

CarHop told consumers with damaged or no credit histories that it would help rebuild their credit records by supplying positive payment information to the credit bureaus each month. Instead, the CFPB says, CarHop deceived consumers by providing inaccurate information to the credit bureaus, reducing the consumers’ credit scores and jeopardizing their future credit and employment opportunities.

According to the CFPB, CarHop and its financing company, Universal Acceptance Corporation, knowingly reported to the credit bureaus that consumers’ cars were repossessed when they were not. The companies also furnished false information stating that consumers owed debts on cars that had been returned months, even years, earlier. The Bureau says these violations occurred between 2009 and 2013.

The CFPB hit CarHop with a $6.4 million fine for unfair and deceptive practices, and has required the dealer-lender to correct the credit report information it knew, or had reason to believe, was wrong. Affected consumers are entitled to a free, corrected credit report. CarHop, also known as Interstate Auto Group, Inc., has about 50 locations in 15 states.

Monthly complaint report. Money transfers were the focus of the latest CFPB Monthly Complaint Snapshot report. Forty-two percent of remittance complaints were related to fraudulent money transfers, with many consumers reporting money transfer scams in which they were told that a family member was in dire need of money. Others complained about the amount of money received after a transfer and of delays in obtaining the funds. Still others reported that when remittance errors occurred, money transfer companies were unhelpful or the information provided was confusing or inadequate to solve the problem.

Click here to report a consumer financial problem to the CFPB.

Pension payouts. Consumers preparing to make retirement income decisions have a new tool to help them evaluate whether they should receive private sector pension funds in one lump sum or in monthly lifetime payments. The CFPB has created a pension payout guide to help consumers understand the long-term financial impact of payouts over time vs. in one lump sum.

Key factors to consider when making the decision include:

  • The length of time you anticipate needing income;
  • Your ability to manage the funds yourself; and
  • Whether or not you will be able to spend the full amount of funds.

The Bureau recommends protecting retirement pension funds by checking earnings history and years worked and combing for calculation errors. It cautions consumers to only seek financial advice from trusted professionals and to consider the future needs of a surviving spouse.

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.

 
 

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