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Consumer Action INSIDER - October 2014

“43rd

Table of Contents

 

What people are saying

Your April financial literacy training was very well done. There was a wealth of information presented. Thank you! — Anne Teal, Jackie Robinson Center, Pasadena, CA

Did you know?

It’s a good time to buy a new fridge or freezer. New energy efficiency standards for refrigerators took effect on Sept. 15. Fridges used to be energy guzzlers but one that meets the new standards could use $215 to $270 less per year in electricity than a comparable unit meeting 1978 standards. Learn more at the Appliance Standards Awareness Project.

Strong support for CFPB’s plan to add ‘beef’ to complaint data

The Consumer Financial Protection Bureau (CFPB) has proposed adding more details about consumer complaints to its public complaints database. Predictably, financial services institutions have cried foul, but consumer advocates and other civil society organizations have risen up en masse to publicize the benefits of the proposal.

The “narratives” only would be added to the CFPB public complaint database if consumers consent to making their remarks public. Consumer organizations, including Consumer Action, believe that knowing more details of a complaint would make the information far more valuable to consumers in helping them avoid companies with iffy practices and poor consumer response.

Ruth Susswein, who has worked for three years advocating for the narratives as chair of Americans for Financial Reform’s CFPB Complaint Process committee, said, “You can see dozens of complaints about a lender you are considering doing business with, but currently you have no way to assess the actual problems. If implemented, the proposal would help you to know if others’ concerns are similar to yours and what action, if any, a company has taken to resolve the problems.”

The CFPB plan would:

  • Give consumers timely access to details that put the complaint in context and help prevent them from encountering similar problems;
  • Empower people to report complaints and alert others; and
  • Widen assistance to the CFPB in detecting harmful, unfair patterns and discriminatory practices.

Consumers would also be able to review companies’ specific complaint resolutions and evaluate their commitment to customer service. This also might encourage companies to demonstrate best practices and compete based on service excellence. Under the proposal, consumers would choose whether or not to include their complaints in the public database. Companies, too, would have the opportunity to add their perspective in a response alongside the original complaint.

The Bureau and stakeholders in favor of the proposal recognize that privacy is of utmost importance if the new procedure is put into play. The Bureau has proposed multi-step precautions to protect consumers’ privacy and keep personally identifiable information out of the public eye.

Consumer Action, alongside many other advocates, has been recommending these improvements for several years. Now, 48 diverse advocacy groups, from civil rights and privacy communities to consumer and fair lending organizations, signed on to joint comments supporting the CFPB’s proposal to help consumers make informed financial decisions and avoid expensive, unfair financial disasters. The groups include Privacy Rights Clearinghouse, NAACP, National Fair Housing Alliance, Consumers Union, Center for Responsible Lending, U.S. PIRG, National Consumer Law Center and many more.

Americans for Financial Reform, an umbrella coalition, has posted comments on this issue on one page of its website. Click here to visit the AFR page.

Individual consumers also expressed their support, as did many individual groups including Consumer Action, submitting comments endorsing the CFPB’s commitment to consumer empowerment and transparency in the complaint process.

All comments—pro and con—can be read at Regulations.gov.

When the Bureau announces its final plan on this issue, Consumer Action will report on the outcome.

Department of Defense proposes update to Military Lending Act

The Department of Defense on Sept. 26 issued proposed regulations to reduce predatory lending practices, significantly expand the protections provided to servicemembers and close loopholes in current rules. The new rules, advocated for by the anti-payday loan coalition of which Consumer Action is a part, updates the Military Lending Act (MLA), bipartisan legislation passed by Congress and signed into law by President George W. Bush.

The proposal significantly expands the protections provided to servicemembers and closes loopholes in the MLA. Protections would be extended against all forms of payday loan, vehicle title loan, refund anticipation loan, deposit advance loan, installment loan, unsecured open-end line of credit and credit card. MLA protections would extend to active duty servicemembers and their families when they access the types of credit subject to the protections of the Truth in Lending Act (TILA)—other than loans secured by real estate or to purchase a vehicle.

A 36% interest-rate limit that covers all interest and fees associated with the loan—referred to as the Military Annual Percentage Rate (MAPR)—would apply to all non-mortgage/non-auto purchase credit subject to TILA.

Creditors would be responsible for providing the military borrower with additional disclosures, including a statement that he or she should seek out alternatives to high-cost credit, such as financial counseling and assistance from the Military Aid Societies.

The proposal prohibits creditors from requiring servicemembers to submit to mandatory arbitration and/or waive their rights under the Servicemembers Civil Relief Act.

“Exploitation, in any form, of the very people who protect our country is clearly wrong. The military has rightly identified protecting members of the armed services and their families from abusive lending practices as vital to military readiness,” said Linda Sherry of Consumer Action. “The rules announced today would ensure that servicemembers would be further protected from high-cost credit.”

Consumer Action recently introduced Military Money, an educational module to help servicemembers and veterans recognize and avoid scams and abusive credit terms, identify better borrowing and banking options and understand what special consumer finance protections they may have under the law, including the MLA.

The deadline for commenting on DOD's proposal to expand the 36% rate cap, arbitration ban and other protections of the Military Lending Act to more forms of credit is November 28. To read the proposal and submit comments, visit this Federal Register page.

Hotline Chronicles: ATM provides receipt but no cash

The banking industry says automated teller machine (ATM) mistakes are rare. Even so, when they do happen it can be frustrating for consumers to solve the problem, and it often comes down to a “he said, she said” situation. The good news is, consumers have clear rights under the Electronic Fund Transfer Act (EFTA). It’s important to know that these error resolution rights are subject to time limits.

Maddie* from Maryland contacted Consumer Action’s hotline when she reached an impasse while trying to resolve her ATM complaint. Maddie, who banks with PNC, attempted to withdraw $500 from a Wells Fargo ATM. A receipt came out of the machine showing a $500 withdrawal, but no cash was dispensed. The screen showed the message CASH CURRENCY NOT AVAILABLE.

Smartly, Maddie kept the receipt and took a photo of the ATM with her phone. She said that the same thing happened to the person in line behind her. (At this point, we would have recommended that Maddie go inside the branch if there was one, and complain directly to the branch manager.)

Generally, a national bank can take up to 10 business days to determine if an EFT error has occurred. The bank should respond within three business days of completing its investigation. If the bank cannot make a decision within 10 business days, it may take up to 45 days to determine if an error has occurred. In this case it must provisionally (temporarily) reimburse your account.

Maddie says she immediately complained to PNC bank, which issued a provisional credit to her account. However, when Wells Fargo’s investigation was completed, the bank said that the funds were withdrawn from a teller inside the branch and that Maddie was not entitled to a refund. Wells Fargo told her bank that it did not need to see the photos Maddie took as they had no bearing on the case. PNC removed the provisional amount of $500 from her account, leaving Maddie $500 out of pocket.

Up until now, the complaint was handled as required under EFTA—the bank made provisional credit while an investigation was performed. However the outcome of the investigation left Maddie, well, “mad”!

We advised Maddie to immediately contact the regional manager at Wells Fargo and attempt again to resolve the complaint. We said she should follow up with a certified letter to both PNC and Wells Fargo to establish that she acted within the allowable 60-day complaint window specified under EFTA. (The 60-day clock starts ticking from the date the PNC bank statement containing the disputed transaction was sent. Under federal law, the institution has no obligation to conduct an investigation if you miss the 60-day deadline.)

We advised Maddie to ask Wells Fargo to review the video or photos of the ATM that day to prove she was at the ATM and not inside at the teller window, as well as to reconcile the amounts requested and dispensed from that ATM that day. Banks typically have cameras installed at ATMs but the record may be kept only for a limited time.

If nothing comes of these actions in a timely manner, we told Maddie to submit a complaint to the Consumer Financial Protection Bureau at http://www.consumerfinance.gov/complaint.

Read the full section of EFTA dealing with consumer error resolution.

Employee Volunteers: Web manager donates tech skills to support local schools

“Doing something special for the community I live in by volunteering my time outside work is a rewarding feeling," says Angela Kwan, Consumer Action’s web manager.

In her free time, Kwan volunteers in her children’s public school district by updating and maintaining the content of the Saratoga Education Foundation website when the need arises.

Saratoga Education Foundation is a non-profit organization that raises funds for various important programs in the elementary and middle schools that would not otherwise be supported by the allotted state funds.

Among other things, the funding provides science teachers, librarians, art, music and computer teachers, and physical education (PE) teachers.

“I am happy to apply my technical skills to such a good cause," says Kwan. “There is a growing trend for organizations to generate funds through purchases from affiliated online stores. It’s beneficial to use the education foundation website to share information on how to participate. It’s a quick and effective way to spread the word, and helpful information can be put up for all parents and the community to see.”

Kwan says she feels proud that she is able to contribute in a manner that, despite the school’s Silicon Valley location, doesn’t attract many volunteers.

Kwan points out that with limited state funding to public schools for many years now, almost every public school district has an education foundation established to help raise funds to provide quality education for the students.

For more information on how you can help your school district, look up your district education foundation or ask the principal of your child’s school. Like Kwan, you can make a difference in your community.

Class Action Database: E-book marketing settlement

Class actions involving Chase (telemarketing), Nelnet Business Solutions (telephone recording), Sylvania (automotive lighting defects) and T-Mobile (premium text messaging) were among 10 new cases added to the Consumer Action Class Action Database during September.

One notable class action is In re Electronic Books Antitrust Litigation.

Thirty-three state attorneys general filed an antitrust lawsuit alleging a conspiracy among five U.S. publishers and Apple to fix the price of e-books. The five publishers settled the claims before trial for $166 million. Apple went to trial and on July 10, 2013, the U.S. District Court found that Apple violated antitrust laws. Apple has appealed to the U.S. Court of Appeals for the Second Circuit.

Private attorneys on behalf of consumers in 23 other jurisdictions brought a separate class action regarding e-book prices. On Aug. 1, the same court preliminarily approved the Apple settlement, but the settlement amount depends on the outcome of Apple’s antitrust appeal.

If the Second Circuit upholds the July 10, 2013 decision, Apple will pay $400 million. If it orders a new trial in district court, Apple will pay $50 million. If Apple wins its appeal, the class will not receive payments.

Consumers who purchased e-books between April 1, 2010 and May 21, 2012 published by the following companies may be eligible for partial refunds:

  • Hachette Book Group, Inc.;
  • HarperCollins Publishers LLC;
  • Simon & Schuster, Inc. and Simon & Schuster Digital Sales, Inc.;
  • Holtzbrinck Publishers, LLC, known as Macmillan; and
  • Penguin Group (USA) Inc.

Amazon, Barnes & Noble, Kobo, Sony and Google are providing notice and providing account credits voluntarily. None of the retailers has been sued in this case.

Consumers who purchased e-books through Amazon, Apple, Barnes & Nobles or Kobo either will automatically receive a credit to their accounts or the choice of receiving a check. The deadline to file a check request online is Oct. 31. Consumers who already filed a claim and received a check in the publishers settlement do not need to file a claim in the Apple settlement.

Consumers who purchased e-books through Sony will receive a check automatically.

Consumers who purchased e-books through Google must file a claim by Oct. 31. Consumers who already filed a claim and received a check in the publishers settlement do not need to file a claim in the Apple settlement.

Click here to learn more.

Coalition Efforts: Retirement savings and mobile banking

Consumer Action participated in three group actions recently:

Protecting Americans’ retirement savings. In a joint letter to the U.S. Department of Labor (DOL), advocates asked for more oversight of professional advisors. Currently these professionals are not specifically obligated to act in the best interest of their clients. This, say the advocates, results in a huge drain on retirement savings for many workers and retirees who don’t receive appropriate, tailored advice. Often, consumers lose out because of high fees, poor returns and even substantial risks because the advisors have no fiduciary duty to their clients. The groups asked DOL to finish updating the 40-year old fiduciary duty rule regulating professionals that offer investment strategies for retirement plan participants. Read more.

Mobile banking: Convenient, but is it safe? In response to the Consumer Financial Protection Bureau’s request for information on mobile banking services, Consumer Action joined other advocates in signing the National Consumer Law Center’s comments highlighting issues of concern. Noting that mobile financial products and services are an area of rapid growth, these products and technologies often fit imperfectly within the older framework of legal protections. The comments call for protections around the safety of funds, data security, dispute procedures and measures to control deceptive marketing strategies, among other ideas about how regulators can help consumers and the industry by leveling the playing field and establishing strong minimum standards. Read more.

Ban remotely created checks and clarify check hold times for prepaid cards. In response to a call by the Federal Reserve Board for comments to identify outdated, unnecessary or unduly burdensome regulations on insured depository institutions (required under the Economic Growth and Regulatory Paperwork Reduction Act of 1996), consumer groups said that regulations should not be reviewed for potential burden on financial institutions without also reviewing them for updates and additions needed to strengthen consumer protection. The groups cited banking regulations that did not protect consumers as the main cause of the global economic crisis of 2008. In particular, the groups suggested that banking Regulation CC (Availability of Funds and Collection of Checks) needs to be updated to ban remotely created checks and remotely created payment orders for consumer transactions and to clarify the deposit hold times for check deposits to prepaid cards and by way of remote deposit capture. Read more.

Using online tools to improve financial security

Online personal financial management tools and applications can be very helpful to financial decision-making, but can also carry risks for data privacy, identity theft and hidden costs. Consumer Action’s Linda Sherry, Sue Rogan, director of financial education with the Maryland CASH Campaign, and Pranav Khanna, director of marketing and analytics at Capital One, were panelists at a workshop at The Common Cents Conference in Bethesda, MD, held by the Maryland CASH Campaign to address financial issues. Participants highlighted some of these online tools and discussed how to determine which tool may be most useful and safe.

The conference drew participants—many of them client service providers—from Maryland, Washington, DC, Virginia and West Virginia.

Sherry presented the pros and cons of online financial management tools, pointing out that while there are some drawbacks, such as privacy concerns, these programs can be very helpful for tracking your spending and budgeting. Sherry said the best of the programs allow consumers to see their “financial big picture.”

Sherry advised users to read the privacy policies carefully and to learn in advance how information entered into the applications will be used. “Many of these tools are designed to cross-sell you products and services,” she noted. Click here for Sherry’s presentation.

Rogan presented a number of resources that advocates could use to work with their clients. These included the University of Maryland Extension Service’s “Financial Checkup Tool” and worksheets, OneEconomy’s Beehive and the National Council on Aging’s Economic Checkup. (Many more can be found in Rogan’s presentation, found here.)

Rogan also mentioned privacy and data collection, and warned participants to check not only the privacy policy but also the “terms of service.” She highlighted an especially egregious example of terms lacking in privacy protections belonging to CreditKarma.com. In part, the terms read: You grant to Credit Karma the unrestricted, unconditional, non-exclusive, unlimited, worldwide, irrevocable, perpetual and royalty-free right and license to host, use, copy, distribute, reproduce, disclose, sell, re-sell, sub-license, display, perform, transmit, publish, broadcast, modify, reformat, translate, archive, store, cache or otherwise exploit in any manner whatsoever, all or any portion of your User Content for any purpose whatsoever in all formats; on or through any media, software, formula or medium now known or hereafter developed; and with any technology or devices now known or hereafter developed and to advertise, market and promote the same.

Khanna is a developer of Capital One’s Credit Tracker, an online credit score calculator available for free to the company’s credit card customers. He explained that the tool provides a score based on real-time information from the TransUnion credit reporting bureau and that users can take hypothetical actions, such as paying off a loan, to see the effect such actions would have on their credit scores. Capital One credit card customers can find the tool by logging into their accounts online. Khanna said Credit Tracker might be offered to the general public sometime in the future.

Mariko Chang, PhD, author of “Shortchanged: Why Women Have Less Wealth and What Can Be Done About It,” was the lunchtime keynote speaker and all participants were given a copy of her book, which sheds light on the gender wealth gap and offers policy solutions to closing it that go beyond equal pay and family-friendly workplace policies.

The Common Cents Conference is hosted by free tax preparation and asset building coalitions from Maryland, the District of Columbia and Virginia. These coalitions conduct critical outreach to ensure that low-income families receive the Earned Income Tax Credit, provide free or low-cost tax preparation, and connect families to appropriate financial services and education. These coalitions serve more than 40,000 residents each year. For more about the Common Cents Conference, click here.

CFPB Watch: Vocational colleges, mortgage servicers and a subprime lender

The Consumer Financial Protection Bureau (CFPB) charged Corinthian College with luring students “into loans by lies.” The Bureau sued for-profit Corinthian and its many subsidiary colleges for allegedly persuading tens of thousands of low-income students into taking out private student loans to cover costly tuition. The students were lured by advertisements of “bogus job prospects” peopled with fake employees and employers, charged the Bureau.

The Consumer Financial Protection Bureau also accused Corinthian of using illegal debt collection tactics to harass students into repaying loans while in school and holding back diplomas until they did. The CFPB asked the court to grant relief to students who took out private student loans at Corinthian schools after July 2011.

Tuition and fees at some Corinthian Colleges was $60,000 to $75,000—up to five times the cost of similar programs at public colleges. With a 60% default rate, the Bureau charged that Corinthian fully expected students to default on their loans and bulk up the loans with collections fees.

Corinthian operates more than 100 campuses under the names Everest, Heald and WyoTech. The school has reported plans to close or sell most of the campuses.

The CFPB has created a special fact sheet to help current and former students understand their options. It includes information on which campuses are closing and any refund possibilities as well as students’ rights when dealing with debt collectors. Click here to download the PDF fact sheet.

Preventing trouble after mortgage transfers. The CFPB issued a bulletin with guidance for mortgage servicers that transfer home loans to other servicers. Mortgage servicers collect mortgage payments, handle customer service and administer loan modifications. The CFPB says it will closely review loans transferred with loan modifications in play.

Since the Bureau’s mortgage servicing rules took effect in January, servicers are required to maintain accurate records, credit payments promptly, correct errors and have procedures for smooth transitions when loan transfers occur.

Many consumers and their advocates have complained to the CFPB of loan modification problems during loan transfers, including lost documentation and requirements to re-submit requests. Complaints can be filed with the CFPB online (click here) or by calling 855-411-2372.

Crackdown on distorted credit records. The CFPB charged that subprime auto lender First Investors Financial Services Group failed to fix known flaws in its computer system that provided inaccurate information about customers to credit reporting agencies. The auto financing company was fined $2.75 million and ordered to fix the errors.

“First Investors showed careless disregard for its customers’ financial lives by knowingly distorting their credit profiles for years,” said CFPB Director Richard Cordray.

First Investors sells auto loans directly to customers and indirectly through car dealers. The company specializes in lending to consumers with damaged credit records. The CFPB found that the lender had reported wrong payments and overdue amounts to credit bureaus, potentially limiting future borrowing opportunities for applicants. First Investors had also inflated the number of delinquent payments and falsely reported some vehicles as having been repossessed, also hurting consumers’ credit records.

In addition to the fine, the subprime auto lender must correct credit report errors, help affected consumers obtain a free copy of their credit reports and establish procedures to inspect its system and prevent future problems.

About Consumer Action

Consumer Action is a non-profit 501(c)(3) organization that has championed the rights of underrepresented consumers nationwide since 1971. Throughout its history, the organization has dedicated its resources to promoting financial and consumer literacy and advocating for consumer rights in both the media and before lawmakers to promote economic justice for all. With the resources and infrastructure to reach millions of consumers, Consumer Action is one of the most recognized, effective and trusted consumer organizations in the nation.

Consumer education. To empower consumers to assert their rights in the marketplace, Consumer Action provides a range of educational resources. The organization’s extensive library of free publications offers in-depth information on many topics related to personal money management, housing, insurance and privacy, while its hotline provides non-legal advice and referrals. At Consumer-Action.org, visitors have instant access to important consumer news, downloadable materials, an online “help desk,” the Take Action advocacy database and nine topic-specific subsites. Consumer Action also publishes unbiased surveys of financial and consumer services that expose excessive prices and anti-consumer practices to help consumers make informed buying choices and elicit change from big business.

Community outreach. With a special focus on serving low- and moderate-income and limited-English-speaking consumers, Consumer Action maintains strong ties to a national network of nearly 7,500 community-based organizations. Outreach services include training and free mailings of financial and consumer education materials in many languages, including English, Spanish, Chinese, Korean and Vietnamese. Consumer Action’s network is the largest and most diverse of its kind.

Advocacy. Consumer Action is deeply committed to ensuring that underrepresented consumers are represented in the national media and in front of lawmakers. The organization promotes pro-consumer policy, regulation and legislation by taking positions on dozens of bills at the state and national levels and submitting comments and testimony on a host of consumer protection issues. Additionally, its diverse staff provides the media with expert commentary on key consumer issues supported by solid data and victim testimony.

 
 

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