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Released: March 01, 2017
Consumer Action INSIDER - March 2017
Table of Contents
- What people are saying
- Did you know?
- 'Banner' year for Consumer Action
- An early look at California’s 2017 privacy legislation
- Hotline Chronicles: Credit score head scratcher
- Study reveals how communities say 'No way!' to payday lending
- Consumer Action, FICO co-host credit, financial counseling webinars
- Coalition Efforts: Defending the CFPB, U.S. Treasury and nation’s heroes
- CFPB Watch: Failed foreclosure relief, prepaid delays and financial education
- Class Action Database: Bank of America pays for collecting on paid-off loans
- About Consumer Action
What people are saying
Consumer Action’s FICO webinar was an excellent and informative presentation and I was so glad to hear that the information is also available in Spanish! — Anna Enriquez, Bilingual Finance Counselor, Consumer Credit Counseling Service of Northern Illinois, Inc.
Did you know?
When Keeper, an online password manager, analyzed 10 million passwords from 2016 data breaches, it found the top password was “123456.” Keeper also revealed that even when website users attempted to get creative (or tricky), the top passwords they chose could be compromised in seconds by dictionary-based cracking tools used by hackers. If this convinces you to subscribe to a password manager—a service that helps you create and save unique and strong passwords—check out PCMag’s comparison of two dozen popular password programs.
'Banner' year for Consumer Action
Consumer Action's administration and outreach teams got together about a year ago to brainstorm a design for new Consumer Action banners that could easily be shipped to, and displayed at, the organization’s many training events around the country. The ad hoc team agreed on a layout suggested by outreach and training manager Linda Williams. The design included pictures selected to highlight Consumer Action's major focus areas: personal finance, telecommunications, insurance, housing, and privacy.
By spring of 2016, the outreach team unveiled two self-standing banners at various training events. The team soon realized they treasured every minute saved when compared to their former display set-up, which involved taping up or hanging the old emblems.
The excitement over these nearly seven-foot-tall trademarks, however, came to a crashing halt at an event in Visalia, California, when out of the shipping box emerged a damaged case and banner. Although most of us can probably recall a childhood toy that broke after a couple of uses, no one foresaw such a quick end to one of the two brand new banners. Would Consumer Action’s headquarters even risk continuing to ship out what had suddenly become the only spare banner?
Enter Ricardo Perez, Consumer Action's longtime head of mailroom operations. Perez single-handedly prevented the end of the nascent banner project by noting that, although the banner's metal case had been damaged and the banner could not be rolled back in, the banner itself escaped with only a couple of small scratches. Perez was able to make some repairs to the roughed-up case and had the banner back up in no time.
Thanks to Perez’ work, the banner was again unfurled at Consumer Action’s 7th Annual National Consumer Empowerment Conference—where it became a popular prop for group selfies!
Consumer Action trainer Nelson Santiago, who was part of the banner project team, noted that, in addition to Perez, several administration department staffers deserved recognition for their contribution to the success of Consumer Action's new banners, including Vickie Tse (who helped format the design) and Nani Hansen and Kathy Li (who offered valuable input throughout the approval process).
Santiago added, however, that Perez deserved extra special thanks due to his quick repair work. “It's thanks to Ricardo's resourcefulness,” Santiago explained, “that 2016 turned out to be a banner year after all.” LOL!
An early look at California’s 2017 privacy legislation
Several California privacy and safety-related bills have been proposed in early 2017. Unfortunately, none do any good for consumers.
AB 165: California Assemblymember Jim Cooper (D-Elk Grove) sponsored AB 165, which proposes to take away from schoolchildren, teachers and school employees the basic privacy protections of the California Electronic Communications Privacy Act (CalECPA), which prohibits warrantless searches of Californians' cellphones. The landmark CalECPA went into effect a little over a year ago, and legislators are already seeking to undermine it.
More than six million Californians attend and work in the state’s public schools. Like all of us, they rely on digital devices to connect with their communities; to learn about and discuss topics ranging from personal health or finances to religion and immigration; to document private moments in their lives; and even to engage in political activism. CalECPA protects these activities for all Californians.
Consumer Action opposes AB 165 and advocates for privacy protection for teachers and students, who should not have to surrender these protections simply because they walk through a schoolhouse door.
As most of us know, phones and other electronic devices contain not just emails, texts and photos, but also calendars of past and present activities, logs of websites visited and details of our precise locations throughout the day.
It is crucial that CalECPA's protections remain available to all Californians and that digital due process is protected, especially considering that prior to the passage of CalECPA, journalists revealed that state law enforcement officers had made a “game” out of stealing women's nude photos without a warrant.
Unfortunately, AB 165 would exempt any “local education agency” and any “individual acting for or on behalf of a local education agency” from all of the provisions of CalECPA. As a result, any school employee—ranging from a janitor who finds a cell phone to a teacher confiscating a student’s phone due to a classroom disruption—could conduct a digital search.
Without the protections of CalECPA, a school resource officer (or any other law enforcement officer) or an overzealous school employee could even conduct a warrantless and baseless criminal investigation via cell phone. As a result, vulnerable students, teachers, and staff, including those who have already had negative encounters with the criminal justice system, would find both their relationship with law enforcement and their privacy rights further eroded.
AB 342: Assemblymember David Chiu (D-San Francisco) sponsored AB 342, which would authorize a five-year pilot program allowing San Jose and San Francisco to install and test automatic speed cameras. Unfortunately, the pursuit of revenue often drives the practice of privatizing and automating traffic enforcement more than any real concern for public safety. The hefty fines, easily paid by wealthier drivers, have a disproportionate effect on poor people and families, who may be charged $100 or more for driving five miles above the speed limit and who could lose their registration or have their car impounded if they can’t pay.
Because of the profit incentive, California has banned speed cameras since 2000 (although AB 342 would change that), and lately more cities have been removing red-light cameras than installing them.
And while statistics show that U.S. deaths from motor vehicle crashes have risen over the past two years (up 7 percent in 2015 and an additional 6 percent by the end of 2016), research reveals that the cause is not necessarily drivers going over the speed limit. According to studies, using a smartphone—even "hands-free"—is just as dangerous as driving drunk. And some research has actually found electronic distractions to be more hazardous than drunk driving. The New York Times points out that the blame for the biggest spike in traffic deaths in 50 years can be squarely placed on the shoulders of distracted drivers involved in online activity.
Despite this, California currently has the lowest fine in the country for texting while driving ($20). Meanwhile, other states, like Washington, are considering sensible bills that, unlike AB 342, would make a significant difference in reducing crashes and vehicle deaths by increasing penalties for smartphone-distracted driving.
Consumer Action believes that, in order to take traffic death reduction seriously, California legislators must acknowledge the new dangers on the road and sensible laws must be enforced by real law enforcement, not municipalities and companies with a profit incentive. AB 342 fails on both of these counts.
AB 241: Assemblymember Matt Dababneh (D-Encino) sponsored AB 241, which would mandate that state and local governments buy "identity theft protection" services for Californians in the event of a data breach.” Sounds good, right? No one wants his or her identity stolen. The problem: The dirty secret of “ID theft protection” and credit monitoring products is that they do nothing whatsoever to prevent identity theft; they just alert you sooner after your identity has been stolen. In other words, once it is already too late.
Even worse, many of these third-party services ask users to disclose to them even more personal information than was leaked in the original breach—like passport, bank account and phone numbers or driver’s license information.
A credit freeze—which the state legislature gave Californians the right to utilize in 2004—costs only $5. And, unlike identity theft protection products, a freeze will actually prevent an identity thief from opening a new line of credit under the name of the potential victim.
The last time Assemblymember Dababneh introduced this bill, in 2015, a committee analysis found that his plan would cost taxpayers $12-$36 million per every 100,000 people at risk from a data breach. In reality, a major data breach could easily affect several million people, which would require the state to pay up to $1 billion to companies whose products do not actually prevent identity theft.
Mandating ID theft protection services is corporate welfare disguised as consumer protection. Given the potential cost to taxpayers and the state, combined with the proven ineffectiveness of the proposed solution, Consumer Action believes that the legislature should reject AB 241.
Hotline Chronicles: Credit score head scratcher
There are three major credit bureaus in the United States that compile information about borrowers’ use of credit so that lenders can check how individual applicants have managed credit in order to make lending decisions. These companies are Experian, Equifax and TransUnion. The information contained in individuals’ credit files is used to create “credit scores”—typically ranging from 300 (bad) to 850 (excellent).
Grant* from Vermont wrote to Consumer Action’s advice and referral hotline with a complaint about his TransUnion score, which he found “was 75 points lower via their reporting versus [competitors] Equifax and Experian.” The latter were reporting 760, while TransUnion was reporting 685. Grant said a customer service representative told him that he could “fix the problem by comparing all three credit reports to ensure the information is the same on all the reports.”
We told Grant that credit scores can vary because of different information kept by each of the three credit bureaus and because of different scoring “models” that give different weight to certain aspects of a person’s credit history. Also, credit scores are not static—they can change when your use of credit changes, such as when you pay off a loan, miss a few payments or make unusually large credit card transactions. Having accounts in collection can worsen one’s score; using credit wisely can keep the number in good shape.
If you have a credit card account with a major issuer, you may be able to access your FICO score for free whenever you want by creating an online account at your card provider’s website. (The Consumer Financial Protection Bureau has a PDF list of banks that offer free credit scores to customers.) FICO scores, which draw on data from consumer files at the three major credit bureaus, are the ones that the vast majority of financial institutions use to make decisions about an applicant’s likelihood of paying back credit card balances and other loans.
In 2013, FICO launched its Score Open Access for Credit & Financial Counseling program to allow lenders and others to give their customers free FICO scores. These institutions offer free access to the same scores they use to underwrite credit decisions.
Some banks and card companies don’t offer free FICO scores, preferring instead to offer proprietary ”informational scores” or a VantageScore, developed by the three major credit bureaus to compete with FICO. These are not always the scores that financial institutions use to underwrite potential customers and may confuse consumers.
FICO sells scores directly to consumers through its MyFICO website. Your MyFICO score purchase entitles you to see different variations (and actual or very close approximations of) the scores used by various providers of credit cards, mortgages and auto loans.
Scores may vary based on information about you in one bureau’s credit files that is not in another’s files. (This is probably what the customer service representative Grant talked to was referring to.) For example, your TransUnion credit report may contain information that is not in your Experian credit report. Depending on the nature of the information, this could cause a wide variation in scoring.
“It seems to annoy consumers considerably that there is no ‘one score’,” said Linda Sherry of Consumer Action. “But remember, these numbers can vary. The most important thing you can do to improve or maintain your credit standing is to borrow wisely, pay on time and carry a balance only to help you pay for ‘needs’ and not ‘wants’.”
Since your credit score derives from information about how you have handled existing and past credit, get your three free credit reports each year and make sure the information on them is accurate [http://www.annualcreditreport.com]. If you find something you believe is an error, “dispute” the information immediately by calling the number provided on the credit report or visiting the company online at the web address it provides for disputes.
*Not this consumer’s real name
Study reveals how communities say 'No way!' to payday lending
At a time when the fate of the Consumer Financial Protection Bureau’s (CFPB) rule to rein in the dangerous practice of payday lending is uncertain, it is useful and inspiring to be reminded of the many successful local campaigns that have been waged to restrict the practice.
Consumer Action sponsored a recently released report titled The Power of Community Action: Anti-Payday Loan Ordinances in Three Metropolitan Areas funded by the Silicon Valley Community Foundation. In the report, Professors Robert N. Mayer (University of Utah) and Nathalie Martin (University of New Mexico) analyzed campaigns to pass anti-payday ordinances in three metropolitan areas: Salt Lake City, Utah; Dallas, Texas; and San Mateo and Santa Clara counties (Silicon Valley) in California. While there were unique elements to each campaign, the commonalities among them were strong and serve as guideposts for residents in other communities who wish to do what is in their power to address the problems of payday lending.
Mayer and Martin focused on Utah, California and Texas for two reasons: First, these are the three states in the U.S. in which the largest number of cities have passed anti-payday ordinances. In these three states combined, almost 100 such ordinances exist. Second, the states differ dramatically in the liberal-conservative makeup of their political environment as well as in the latitude for action by local governments.
Utah and California are similar to each other and most other states in that state preemption leaves only land use planning and zoning as methods of regulating payday lenders. In Texas, however, the structuring of payday lenders as “loan intermediaries” creates the opportunity for local control of some features of the payday loans themselves.
The report highlights 10 factors that contribute to a successful local ordinance campaign. One of the most important factors is the formation of a broad-based coalition composed of consumer, anti-poverty, labor and religious organizations. Another source of success involves finding and supporting payday loan borrowers who are willing to share their stories in public with members of city planning commissions, city councils and other policy-making bodies. Other crucial factors include cultivating support from local media, especially newspapers; identifying an ordinance champion from within the city council; and effectively rebutting industry objections (especially the argument that there are no viable alternatives to payday loans).
While The Power of Community Action study was not designed to quantitatively measure the impacts of the local ordinances on decreasing payday lending, the authors identified at least five types of impacts that at least suggest the ordinances are doing so. First, the number of payday storefronts declined after the passage of local ordinances. The decline was dramatic in the case of several Texas cities. The decline was much more modest elsewhere, but this is to be expected in the short run given that zoning ordinances “grandfather in” existing lenders. Another impact was an increase in public awareness of the dangers of payday loans due to the measurable increase in media coverage of ordinance campaigns. Third, the passage of ordinances coincided with, and perhaps spurred, the expansion of less-costly alternatives to traditional payday loans, especially new internet-based loans. Fourth, local ordinances maintained the drumbeat for complementary action by state and federal regulators. (Local leaders often lobbied via testimony and written comments for reforms at high levels of government.) Finally, the campaigns increased the organizational capacity and networks of participants and increased the importance placed on policy advocacy relative to social service delivery.
The research was funded as part of the anti-payday grant program of the Silicon Valley Community Foundation, the nation’s largest community foundation.
Consumer Action, FICO co-host credit, financial counseling webinars
FICO® Score Open Access for Credit & Financial Counseling is a valuable program that enables credit and financial counseling providers in the U.S. to share FICO Scores already purchased—for example, for initial customer contact or for debt management plan reviews—with their clients for free and with no additional score fees or program fees.
Consumer Action and FICO co-hosted two webinars on Feb. 8 to educate Consumer Action’s community partners about the program. Approximately 125 community partners attended.
“This is a great resource because it enables consumers to gain insight into how to improve the actual credit scores that lenders review,” said Consumer Action’s Audrey Perrott. “There are many educational scores, and often consumers confuse them with the actual scores used to make credit decisions. It’s important for those applying for credit to understand that they’re not the same, and to be aware of their actual score.”
Roy Pfeifer, a senior consultant with FICO’s Scores program, facilitated both webinars. He pointed out that community-based organizations and others looking to participate in the FICO Score program must meet certain eligibility guidelines. For instance, the organization’s primary mission must be to provide financial counseling and/or financial education services to clients; it must be a consumer reporting agency (CRA) customer that receives CRA data and has a CRA end-user agreement with one or more CRAs (Experian, Equifax or TransUnion); it must have an active end-user agreement with one of the three CRAs or resellers to purchase FICO scores for the purpose of financial counseling or risk management decisions; it must be registered as a 501(c)(3) non-profit organization or a government agency (or other government entity) that provides social services; and it must not be considered a “credit repair organization” as defined in the Credit Repair Organizations Act (CROA).
Click here to learn more about the program or register to become a member agency.
“One of our community partners signed up for the program the day of the webinar!” Perrott exclaimed. “I cannot wait for them to share best practices on how the tool has enhanced their clients’ counseling experience and improved their credit scores.”
Coalition Efforts: Defending the CFPB, U.S. Treasury and nation’s heroes
Hands off the CFPB! Consumer Action and allies penned a very clear response to Delaware Senator Tom Carper’s stated interest in exploring changes to the Consumer Financial Protection Bureau’s (CFPB) structure: “Back off!” The CFPB has been wildly successful at protecting American consumers, and weakening the agency’s oversight would be a grave mistake. Letter signers say the only reason to do so would be to favor the banking and financial industries that jeopardized the world economy and devastated American families during the financial crisis less than a decade ago. Learn more and read the letter.
Mnuchin unfit to serve as Treasury Secretary; Senate should oppose nomination. Eighty-eight advocacy groups, including Consumer Action, signed a letter to the Senate voicing grave concerns about President Trump’s nominee for Treasury Secretary, former Goldman Sachs partner and OneWest Bank Chairman Steve Mnuchin. Known as “The Foreclosure King,” Mnuchin oversaw the eviction of nearly 50,000 families from their homes during the foreclosure crisis. His bank’s aggressive foreclosure practices targeted the country’s most vulnerable populations—particularly the elderly and widowed. By approving his nomination, letter signers warned, the Senate is putting its stamp of approval on his alarming record and choosing to rig the rules for the wealthy rather than protect American families. Learn more and read the letter. Learn more and read the letter.
The CFPB is a champion for student loan borrowers. At a time when the CFPB is under attack by special interests and their cronies in Congress for being too successful at protecting American consumers against the biggest players in the financial industry, Consumer Action and its allies are making sure we clearly communicate to Congress the ways the agency has gone to bat for vulnerable consumers, like debt-laden students—and won. The CFPB has helped crack down on fraudulent for-profit colleges such as Corinthian and ITT tech, and checked student loan servicers who were treating their customers unfairly (such as servicing giant Navient). As the nation continues to tackle high student loan debt, the groups say now is not the time to weaken the CFPB’s impact on students and families. Learn more and read the letter. Learn more and read the letter.
FACT Act punishes nation’s heroes, denies them the support they deserve. The House is poised to vote on a bill that would delay or deny justice for asbestos victims: the deceptively titled “Furthering Asbestos Claim Transparency” (FACT) Act (HR 906). Many organizations, including Consumer Action, who represent the populations most at risk for exposure to the deadly substance that is still legal to use today—veterans, firefighters, emergency responders and teachers—have come out in strong opposition to the dangerous legislation. Learn more and read the letter.
CFPB Watch: Failed foreclosure relief, prepaid delays and financial education
Mortgage servicers CitiMortgage Inc. and CitiFinancial Servicing, LLC will pay $28.8 million for giving homeowners the runaround when trying to obtain foreclosure relief.
According to the Consumer Financial Protection Bureau (CFPB), borrowers who asked CitiMortgage for a chance to modify their loans were forced to send the servicer “dozens of documents” that had nothing to do with the debt relief request they were making.
The consumer bureau has required CitiMortgage to freeze all foreclosures related to its flawed loan modification process and pay $17 million to the approximately 41,000 borrowers who got inappropriate document demands instead of relief.
The CFPB also required CitiFinancial Servicing, a Citibank subsidiary, to compensate consumers who were misled when struggling to save their homes. Homeowners seeking mortgage modification options from the company were given “deferments.” However, the CFPB said, the servicer did not treat the postponed payments as a request for foreclosure relief, as mandated under the mortgage servicing rules.
The Bureau says CitiFinancial also misled borrowers about the date interest was due on their deferred payments, costing them even more money. In addition, the bank continued to charge consumers for credit insurance it should have cancelled. The mortgage servicer also reported harmful, inaccurate information about consumers to credit bureaus and failed to investigate when consumers disputed the reports.
The CFPB required CitiFinancial to return $4.4 million to consumers whose insurance was not cancelled or whose claims were denied.
Prepaid card users often rely on the money in their prepaid accounts to cover basic living expenses, withdraw cash, pay bills, retrieve funds from their direct deposits and more. However, tens of thousands of RushCard prepaid cardholders were hit with fees or unable to access their funds for up to several weeks in 2015, resulting in the CFPB ruling that RushCard must pay $10 million in restitution.
Customers who could not access the money on their cards or customer service help during the breakdown will receive between $25 and $250 each. The CFPB called the problems “preventable” and fined UniRush and Mastercard, which manage Rushcard, an additional $3 million for inadequately addressing the breakdown.
Current cardholders will automatically receive credits to their prepaid accounts, while those with closed accounts will receive refunds by check.
Tools for financial educators
In an effort to link financial educators with the latest information on best practices, research and technical support, the CFPB offers a variety of free financial wellness resources, including webinars, reports and “key findings” sheets. The tools offered in this “Financial Education Exchange” program are designed for financial educators, caregivers, case managers and consumers, and are broken down by topic. Topics range from paying for college or securing a mortgage to handling medical debt or dealing with a hacked personal account.
Class Action Database: Bank of America pays for collecting on paid-off loans
This month we highlight a settlement in Dorado v. Bank of America, N.A., a major class action against Bank of America alleging that the firm’s practice of collecting “post-payment” interest on certain Federal Housing Administration (FHA)-insured home loans violated FHA regulation 24 C.F.R. § 203.558. Post-payment interest is defined as interest the lender collects after the borrower has paid off the full principal of the loan. FHA regulation 24 prevents lenders from collecting post-payment interest unless the lender provides an FHA-approved disclosure form and the borrower made the prepayment on a day other than the installment due date. Plaintiffs claim Bank of America did not use the FHA-approved disclosure form and collected post-payment interest in violation of the FHA regulations.
Bank of America denied the allegations but agreed to a settlement to avoid the burden, expense and risk of continuing the lawsuit.
You are part of the class if you borrowed a home loan from Bank of America and meet the following requirements:
1. Your FHA-insured home loan originated between June 1, 1996 and Jan, 20, 2015;
2. The borrower (you) or lender held the home’s legal title on the date that the total amount due on the loan was brought to zero;
3. Bank of America collected post-payment interest; and
4. The collection of post-payment interest occurred during the statute of limitations period for the FHA loan.
The settlement fund allocates $17 million to Group 1 class members and $12 million to Group 2 class members. If the settlement is approved, class members will automatically be notified of which class they fall under and receive payment.
Group 1 class members who prepaid, inquired about prepayment or requested payoff figures and were sent certain Bank of America will be refunded a percentage of the post-payment interest collected. Likewise, group 2 class members who prepaid, inquired about prepayment or requested payoff figures but were not sent the same forms as group 1 will also be refunded a percentage of the post-payment interest collected.
The final approval hearing is on March 23.
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.