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Released: July 05, 2016
Consumer Action INSIDER - July 2016
Table of Contents
- What people are saying
- Did you know?
- Updated educational module spans a lifetime of personal finance
- Out and About: Emerging financial sector trends and consumers
- Hotline Chronicles: When good checks are rejected
- Help for limited English proficient (LEP) consumers
- Class Action Database: Brain games falsify consumer gains
- Coalition Efforts: Privacy, student protections and pyramid schemes
- CFPB Watch: Auto loan tip sheet, payday rules and money transfers
- About Consumer Action
What people are saying
Thank you for posting about the online scammers that are out there [in your SCAM GRAM newsletter] and how they operate. I will take heed. — E.C., New York
Did you know?
You don't need permission from the Federal Aviation Administration (FAA) to fly your “unmanned aircraft system” (aka drone) with or without a camera for fun or recreation. But you must fly it safely and follow the FAA’s rules, which include a registration requirement for your drone if it weighs more than 0.55 pounds and less than 55 pounds. If labeling is required, you must indicate your registration number on the drone and read and understand the FAA’s drone safety guidelines. Users of drones with cameras should respect people’s privacy. Read all of the requirements for hobbyist (non-commercial) drone use at the FAA’s “Fly for Fun” page.
Updated educational module spans a lifetime of personal finance
Over the first half of 2016, Consumer Action updated its three-part Money Management 1-2-3 educational module. Originally created in 2010, the module is the organization’s most comprehensive to date, covering personal finance topics ranging from credit basics in part one to retirement accounts in part two and estate planning in part three.
While the fundamentals of personal finance have remained the same, an update was called for to reflect the many new consumer financial planning resources and online tools available; the implementation of government programs (like the Affordable Healthcare Act and the Treasury’s myRA retirement account); adjustments to important figures (such as the amount you can contribute to retirement accounts); and changes in certain marketplace practices (credit checks are now required on reverse mortgage applicants, for instance). The update also gave Consumer Action the opportunity to expand the module to include new topics, such as the financial implications for grandparents raising grandchildren and the ins-and-outs of student loans and debt collection.
In order to spread the word, Consumer Action planned two Money Management 1-2-3 train-the-trainer events this year (to educate community-based organizations on how to best present the module to consumers). The first, in Visalia, California, took place on June 16. The second one took place June 30 in Phoenix, Arizona (too late for inclusion in this newsletter). Additional ones will take place next year.
At the Visalia training, Consumer Action trainers Linda Williams and Nelson Santiago were met by an audience excited to learn about the new updated tool for providing financial education to their clients. Williams presented the first portion of the module, titled "Getting a strong start." During her presentation, Williams emphasized that it's important for consumers to learn basic paycheck management. It’s crucial, for instance, to know how to read a pay stub, pay attention to taxes withheld and consider taking advantage of tax-sheltered accounts (such as flexible spending accounts, if offered by the employer.)
During the presentation of part two, "Achieving your goals," Santiago explained that after consumers have taken the more basic steps in the first phase of money management, they can move on to more advanced steps such as growing their savings, investing and buying a home. A substantial portion of part two focused on saving and investing. Santiago discussed the differences between the two and described a variety of savings and investing vehicles, including mutual funds. "The objective in the second phase of money management is to build wealth and protect your assets," explained Santiago.
Santiago went on to refer participants to a number of resources for clients who may want to learn how to, for instance, decide between a traditional and Roth IRA or educate themselves on the differences between investing in index funds and actively managed funds. Santiago rounded out the last portion of part two by discussing the various types of insurance that consumers would want to look into to protect their assets, including homeowners, auto, life and disability. Part two also provided information for consumers needing to resolve debt problems.
Williams concluded by presenting the third and final part of Money Management 1-2-3, during which she focused on overcoming retirement challenges, including the loss of spending power, increasing medical expenses and the difficulties inherent in saving enough for retirement.
The entire Money Management 1-2-3 module is available for free download from the Consumer Action website. The module includes a fact sheet for each of the three sections; a trainer’s manual written in Q&A format to provide greater detail on each topic covered in the fact sheets and to help community educators answer consumers’ questions; a seminar lesson plan and class activities for use by community educators in facilitating group personal finance workshops; and a companion PowerPoint presentation designed to be used with the lesson plan to provide a visual element to group presentations.
If you are a community-based organization interested in presenting the module to your clients, the entire Money Management 1-2-3 curriculum can be offered as a single day-long seminar (which lasts approximately six hours, not including breaks between sections) or can be presented in three separate sessions. You can also combine selected parts of each section to create a customized presentation that meets your specific training needs. Accordingly, the lesson plan/activities and PowerPoint slide deck can be downloaded in their entirety or in individual parts.
Consumer Action funded the development of Money Management 1-2-3 and the corresponding roundtables.
Out and About: Emerging financial sector trends and consumers
In June, more than 700 advocates, policymakers, bankers, financial technology innovators and other industry professionals attended the American Banker and Center for Financial Services Innovation (CFSI) EMERGE: Consumer Financial Health Forum in New Orleans, LA. The conference brought stakeholders together in the Big Easy to network, generate ideas and advance innovations in consumer financial health. The theme of this year's conference was “The New Consumer Financial Services Frontier. ”
Consumer Action's Audrey Perrott attended the event and reported back that “the forum was thought-provoking, innovative and engaging” with “great panelists, timely presentations, countless networking opportunities and many interactive activities to keep attendees engaged.”
Conference speakers kicked off the event by emphasizing the fact that 138 million Americans are struggling financially. This demographic not only represents low-income households, it also represents working neighbors and colleagues who earn median or higher incomes but are struggling to save, borrow and plan for their futures financially. Perhaps surprisingly, one-third of U.S. households that earn more than $100,000 annually are still not considered financially healthy. Organizers say this new consumer landscape provides an unprecedented opportunity for financial services representatives to develop responsible, scalable and profitable solutions to meet consumers’ greatest financial needs.
A recurring theme of the conference was that before you can assist others financially, you must first secure your own “oxygen mask,” so to speak. Fortunately for attendees, many industry experts were on hand to outline innovative new solutions that are helping them help consumers. One such speaker was Dickson Chu of the check-cashing app Ingo Money. Dickson outlined how Ingo Money uses technology to assist consumers in cashing checks and moving money over the internet in mere minutes, at a rate 50-90 percent cheaper than in-store check cashers. Another speaker, Nick Maynard of the non-profit Doorways to Dreams (D2D) Fund, which works to improve the economic wellbeing of financially vulnerable populations, explained how D2D offers a prize-linked savings program as well as game-like and challenge-based apps (which operate like entertainment offerings or “Fitbits for savings”) in order to make saving fun and exciting. (A Fitbit is a wearable device that tracks individuals’ activity and other bodily signs of health and fitness.)
The forum also addressed some of the more pressing financial challenges communities are facing. Perrott was particularly impressed with a session called “Physical and Financial Health—Cross-Industry Insights,” in which participants likened bad financial practices to bad health habits. Dr. Roderick King, a physician with a master's degree in public health, and CEO of the Florida Institute for Health Innovation, made the connection clear when he said, “Payday lenders are to financial health what McDonald’s is to physical health.” He explained that people make decisions based on context. If no banks offer personal loans in their communities, consumers may feel their only option is to take out a payday loan with high interest rates and fees.
The conference concluded with a session entitled “The Future of Consumer Financial Health: Point & Counterpoint.” Speakers predicted trends that are likely to impact both consumers and the financial industry, including the rise of the “gig” economy (companies using temporary workers and independent contractors) and its growing impact on consumer health; the increase in FinTech startups, which are threatening traditional financial institutions; and Big Data’s potential for bias in the financial system.
While the future is still not entirely known, the New Orleans EMERGE conference made one thing clear: Those who work on financial and marketplace issues have a lot to digest (and not just the city’s famous beignets).
Hotline Chronicles: When good checks are rejected
Romeo* from New Jersey contacted Consumer Action’s hotline to inquire about his experience at a local retailer. When he wrote a check to pay for a purchase, the cashier told him that his check had been “declined” by the store’s check verification vendor, TeleCheck, owned by the First Data Corporation.
“My checking account had more than enough funds in it to cover the check,” Romeo told us. “How embarrassing it is when you're standing there because your check was declined but you know that you have plenty of money in your account to cover it!”
“How was this possible?” he asked.
Welcome to the world of TeleCheck, where a valid check with sufficient funds can be rejected at the point of sale and the check writer isn’t told exactly why his or her check was declined. In TeleCheck-speak, Romeo’s check was rejected with a “C3” (Code 3), meaning that:
“In most cases, TeleCheck did not perform a funds check on your account at the point-of-sale, and your account balance was not weighed into its risk decisioning. The transaction carried risk indicators independent of bank balance....Also, when your transaction was analyzed, it probably had several characteristics that made it look risky. In fact, if the account number was rarely, or never seen by TeleCheck before, this in itself could be a factor in a decision to decline.”
While you have the right to dispute inaccurate information about you on file with TeleCheck, you can’t dispute—or even learn—the exact nature of a C3 issue. In 2013, ConsumerAffairs asked the TeleCheck communications director about C3. Her reply: “In general, Code 3 is a risk decline that is generated per transaction and is based on but not limited to the consumer’s check writing history, check writing activity, dollar amount and the parameters that TeleCheck has in place with the specific merchant. Unfortunately, the initial generation of Code 3 is not related to how much money a person has in his or her account. There is no way to provide a general answer in response to a Code 3 because that will differ from check writer to check writer.”
The TeleCheck representative suggested consumers in the same situation call customer service at 800-366-2425. This may not be worth your time given the experiences of other consumers who have hit the C3 wall. Long hold times and a lack of details about the check decline were a chief complaint by Facebook users posting at ConsumerAffairs.com. “Being denied is frustrating, embarrassing and annoying. Worse, you get NO explanation because the merchant cannot override,” said one.
Another complained: “Their consumer hotline put me in an endless loop, asking me to input the same numbers over and over. After 5 times of repeatedly inputting my account, routing and other numbers, I received the following message: ‘Due to the high volume of callers, we cannot help you. Click!’ I wasted 30 minutes on their consumer line and never got a human.”
Yet another consumer wrote: “My bank said there was no reason that my check should have been denied. I then called TeleCheck and they would not tell me why my check was denied.”
“Here is yet another example of how ‘black box’ analytics used by companies to judge consumers can harm people,” said Linda Sherry, Consumer Action’s director of national priorities.
TeleCheck is a consumer reporting company subject to the Fair Credit Reporting Act (FCRA), which means that consumers can ask for a free annual disclosure of what is on file about them. In order to get your disclosure, be ready to provide personal information, including a copy of your driver’s license, your Social Security number, a copy of a voided check and a daytime phone number.
*Not this consumer’s real name
Help for limited English proficient (LEP) consumers
As the demographics of the United States evolve, the number of people whose first language is not English increases. Nine percent of the population, or 25.3 million U.S. residents, were limited in their English proficiency in 2014. Because the financial services market is aimed primarily at English speakers, these limited English proficient (LEP) individuals often have greater difficulty navigating the marketplace.
Some predatory companies tailor their sales pitches to reach vulnerable LEP consumers in their own language. After the initial sale, however, many LEP consumers learn that the fraudulent loan terms they unwittingly agreed to were purposefully incorrectly communicated to them (as was frequently the case with home mortgages during the recent foreclosure crisis). Consumer Action joined coalition partners, including Americans for Financial Reform, in urging regulators to make it easier for LEP consumers to understand and navigate the financial system, especially the mortgage market. Together, we called on the Consumer Financial Protection Bureau (CFPB) and other federal regulators to require:
- Key financial documents be made available (upon request) in at least eight languages (Spanish, Chinese, Vietnamese, Korean, Tagalog, Russian, Arabic and Haitian Creole);
- Guidance to financial institutions on language-access standards; and
- Tracking of mortgage applicants’ language preferences.
In addition to our CFPB language access efforts, many members of Consumer Action’s staff also worked to get the word out to the public about the unique concerns of consumers with language barriers. Consumer Action’s Jamie Woo raised awareness in various Chinese communities during interviews on radio and in print with multiple ethnic media outlets including Sing Tao Radio and the Chicago World Journal.
With the help of Consumer Action staffers Nelson Santiago, Ricardo Perez, Jamie Woo and Kathy Li, we also translated our language access issues press release into five languages: Spanish, Chinese, Korean, Vietnamese and Tagalog. Our partner organizations went on to translate the information into Russian, Haitian Creole and Arabic. In addition, staffer Audrey Perrott helped to facilitate communication between leaders of community-based organizations active in LEP issues and CFPB officials. The organizations were able to offer in-depth explanations of the hardships faced by those who have overcome language obstacles and discrimination in their effort to participate in key financial transactions.
In meetings with the CFPB, Consumer Action has found the Bureau to be quite receptive to working on ways to make the financial marketplace more accessible to LEP consumers.
Class Action Database: Brain games falsify consumer gains
Another notable class action added was the Federal Trade Commission v. Lumos Labs, Kunal Sarkar and Michael Scanlon. The Federal Trade Commission (FTC) brought the action against Lumos Labs (which is doing business as Lumosity) and the creators and marketers of Lumosity under the Federal Trade Commission Act’s authority to prohibit unfair or deceptive acts or business practices. The FTC charged that the company deceptively advertised that its “brain training” program would delay memory loss, dementia and Alzheimer’s disease. The defendants agreed to pay $2 million in consumer refunds and make it easy for subscribers to cancel their auto-renewal. The online and mobile app subscriptions ranged from $14.95 per month to $299.95 for lifetime memberships.
Lumosity advertised that scientific studies backed its claims that its 40 games targeted and trained specific areas of the brain and that regular usage would:
1) improve school, work and athletic performance;
2) delay memory decline and protect against dementia and Alzheimer’s disease; and
3) reduce negative cognitive effects from PTSD, ADHD, traumatic brain injury, etc.
The FTC’s investigation found Lumosity failed to disclose that it used contests offering prizes such as iPads, lifetime Lumosity subscriptions or free travel vouchers to obtain favorable customer testimonials.
Besides the $2 million in consumer refunds, Lumosity must contact those subscribers enrolled in auto-renewal to let them know about the settlement and allow them to easily cancel and avoid future billing. Additionally, Lumosity and its corporate officers Sarkar and Scanlon must first provide reliable scientific evidence, such as human clinical testing, before making any claims that its products provide cognitive benefits.
Consumers who paid at least $239 and subscribed to Lumosity between January 1, 2009 and December 31, 2014 may be eligible for a refund.
The claims deadline is Aug. 6, 2016.
Coalition Efforts: Privacy, student protections and pyramid schemes
The FBI is watching you, but who is watching the FBI? Forty-six privacy, civil liberties and immigrants' rights organizations sent a letter to Congress urging them to hold oversight hearings to assess the Federal Bureau of Investigation’s (FBI) Next Generation Identification program and its use of citizens’ biometric data. The FBI’s biometric database and facial recognition technologies raise several privacy, civil liberties and human right issues. The organizations pointed out that all of the agency’s biometric searches have been conducted without judicial oversight or internal audits and that unnecessarily retaining vast amounts of personal and biometric information exposes millions of Americans to a potential data breach. Learn more.
Strong student protections still critical in higher education industry. Consumer Action joined a coalition of advocates in a letter to the U.S. Senate Committee on Health, Education, Labor and Pensions (HELP) urging committee members to ensure that any changes made to the Higher Education Act prioritize students above all else. The letter is in response to concerns that Congress is considering ways to reduce oversight of colleges by implementing recommendations made by a task force composed of representatives of the higher education industry (and not a single student, consumer advocate or non-industry representative). This comes at a time when, more than ever, higher education regulations should instead be strengthened and improved to better protect students and taxpayers and to reduce unnecessary burdens on the colleges that serve students well. Learn more.
Demand real consumer protection from pyramid schemes. Consumer Action joined consumer advocates in urging members of the U.S. House of Representatives to oppose HR 5230, the Anti-Pyramid Promotional Scheme Act of 2016. The bill, which is currently pending before the House Energy and Commerce Committee, purports to strengthen consumer protections from fraudulent pyramid schemes. The groups say that the legislation would instead make it harder for the FTC to challenge illegal pyramid schemes and would allow pernicious forms of deceptive multi-level marketing programs and product-based pyramid schemes to continue. Learn more.
CFPB Watch: Auto loan tip sheet, payday rules and money transfers
Keep your eye on the total cost of the car loan rather than the monthly payment. That’s the key message in the Consumer Financial Protection Bureau’s (CFPB) latest Know Before You Owe guide, this one on getting an auto loan.
Car loans are the second most expensive type of borrowing most people are likely to engage in (after a mortgage). The CFPB has created an auto loan shopping sheet to help you compare costs and estimate how much you will end up paying over the life of the loan.
Did you know that more than just the interest rate is negotiable on auto loans? The CFPB’s loan shopping tools spell out what parts of the loan you can negotiate on, no matter what the lender says. The resource even has a section on sealing the deal.
Ending the payday cycle of debt
Short-term payday loans often charge 300% or more in interest, trapping borrowers in a long-term cycle of debt. The CFPB recently proposed a rule that would require payday and car title lenders to verify that the consumer has the ability to repay a loan without having to reborrow or renew the loan. A 2014 study by the CFPB found that four out of five payday loans were rolled over or renewed.
The proposed rule is being attacked bitterly by payday lenders, who believe they are filling a financial need. But consumers are pushing back. The Bureau unveiled its proposal at a field hearing in Kansas City where hundreds of payday loan opponents rallied to “stop the debt trap.”
The CFPB rule would also require lenders to notify borrowers before debiting their bank accounts and would limit the number of times lenders continued to try to automatically withdraw funds. It would also limit loan flipping, the practice of refinancing a loan to generate fee income. Advocates are seeking to strengthen the protections by banning back-to-back loans and ensuring that the rule applies to all payday loans, no exceptions.
If you are interested in weighing in on the proposed payday rule comments, you can add your own comments at www.stoppaydaypredators.org.
On a related note, in a recently released report, the CFPB revealed that one in five borrowers who take out a car title loan end up having their car or truck seized for failure to repay the debt. Four in five of these loans are renewed the day they are due because the borrower couldn’t afford to pay it off, according CFPB research. The CFPB examined 3.5 million single-payment auto title loans made by non-bank lenders. More than half of the time borrowers renewed these loans four or more times in a row, adding fees and interest to what was meant to be a short-term emergency loan.
Sending money overseas
Good news! Consumers who had inadequate upfront information about international money transfer (remittance) fees and exchange rates are now being given the information needed to compare costs and services. The federal protections for remittances are working, according to a survey of 702 immigrants by the public justice organization Appleseed. The CFPB issued regulations in 2013 to increase the transparency of costs, create a process to resolve errors and allow for remittance cancellations within 30 minutes.
Most consumers are receiving pricing disclosures (84%) and receipts (72%), according to the Appleseed report, and more than half of customers are comparing and choosing remittances with lower fees. More attention is paid to fees and rates when the disclosures are in the consumer’s primary language. Twenty-three percent of customers surveyed said money was still arriving later than expected, but only a small percentage had filed a complaint with the company or the CFPB. Appleseed recommends that consumers use the error resolution rights available to them and encourages the CFPB to help resolve complaints where possible.
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.