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Released: September 01, 2016
Consumer Action INSIDER - September 2016
Table of Contents
- What people are saying
- Did you know?
- Out and About: Elderly consumers have a ball
- Economic survival for servicemembers and veterans
- Hotline Chronicles: Man questions ‘$19 auto insurance’
- CA report analyzes the CFPB’s catalog of consumer complaints
- Financial and retirement planning at your doorstep
- Coalition Efforts: Clean energy, college loans and class actions
- CFPB Watch: Debt collection, foreclosures and student loans
- Class Action Database: Ugly terms on cosmetic subscriptions
- About Consumer Action
What people are saying
The energy and passion of presenters [at the recent “Economic survival guide for servicemembers and veterans” event in San Diego] was very good. Keep it that way. I was very engaged with the training and look forward to getting this information out to my Marines. — Lt. Nancy Crews, USN Chaplain, 5th Battalion, 11th Regiment, 1st Marine Division, Camp Pendleton
Did you know?
Only 40 percent of renters have insurance policies to protect themselves and their belongings financially, whereas 95 percent of homeowners have home insurance. A recent Christian Science Monitor article points out some of the top reasons why those who rent should have renters insurance. The main reason? Your landlord’s property insurance won’t help you if disaster strikes. Learn more.
Out and About: Elderly consumers have a ball
Each year, TODCO Group, a community-based housing/community development non-profit corporation operating in San Francisco's South of Market neighborhood, holds its Yerba Buena Senior Ball to invite elders from neighborhood senior housing to enjoy a free lunch and entertainment and to socialize with others while receiving helpful financial information from local non-profit organizations. Consumer Action was in attendance at this year’s Hawaiian Luau-themed senior ball.
Ninety percent of senior ball attendees are Chinese-Americans, so TODCO invited about 20 non-profit organizations that provide free Chinese educational publications to take part. Consumer Action’s Cui Yan Xie gave out more than 200 packets of Consumer Action’s financial and marketplace education brochures, including ones on senior scams and ID theft; health records privacy law in California; money management; internet safety; and choosing and using mobile devices.
“I was shocked and happy to see that our materials were so popular that we ran out of them in 90 minutes!” Xie said. “It looks like we need to bring more publications next year, but this is a good problem to have since elderly consumers are often victims of scams and frauds and in need of the type of up-to-date information we offer to help them not only survive but thrive in today’s world.”
“There were about 1,700 elders who attended our senior ball this year,” added Christina Leung, a social worker with TODCO. “This number is almost double the number that attended in the last few years!”
Economic survival for servicemembers and veterans
Consumer Action trainers Linda Williams and Nelson Santiago recently headed to San Diego to introduce organizations serving current and former members of the military to our updated "Economic survival guide for servicemembers and veterans." The module was created (with funding from VISA Inc.) as a tool that organizations can use to help servicemembers, veterans and their family members recognize and avoid scams and unfair credit terms, identify better borrowing and banking options and learn about special consumer protections available to them.
According to the National Center for Veterans Analysis and Statistics, San Diego County was home to almost a quarter of a million veterans in 2014. It is also home to several major U.S. Marine and Naval bases and, as such, represented an ideal location to begin this year's trainings, which will next head to Killeen, TX and Jersey City, NJ.
Williams kicked off the training by discussing a variety of costly financial services that are better avoided, including check-cashing services, payday loans and subprime auto loans. Williams pointed to the safer, mainstream alternatives recommended in the module, such as banking and borrowing services at banks and credit unions.
Williams then went on to provide information about recent amendments to the Military Lending Act (MLA), which was created to protect service members from predatory and risky financial products. The MLA's protections, including a 36% limit on interest rates charged to active duty servicemembers, have been expanded to cover more types of loan products. Under the old rules, lenders had been able to make slight adjustments to the terms of certain loans (e.g., payday loans) in order to skirt the law. Now regulations will be applicable to all types of vehicle title loans, installment loans, unsecured open-end lines of credit, payday loans, refund anticipation loans, credit cards and deposit advance loans. In addition, an existing 36% Military Annual Percentage Rate (MAPR) cap will now include items that might not ordinarily be considered interest, such as credit insurance premiums, and other fees that may include application or annual fees.
While invaluable for servicemembers, the MLA does not protect veterans, and because of this, participants at the training were advised to continue to caution veterans about predatory short-term credit products. A recent federal report on single-payment auto title loans illustrates the risks presented by predatory products. To get these loans, borrowers use their vehicles as collateral. If they don't repay the loans, the vehicles are seized. Some of the alarming findings in the report: More than four in five auto title loans are renewed the day they’re due because borrowers can’t afford to pay them off with a single payment, and four out of five auto title loan borrowers end up with their cars seized or repossessed for failure to pay.
Santiago went on to present the second half of the module, focusing on a variety of entities that target servicemembers and veterans, including for-profit educational institutions. Participants were introduced to Consumer Action's new brochure on choosing a vocational or job training school. While many legitimate for-profit schools exist, bad actors have used deceptive marketing and high-pressure sales tactics to get students to enroll, waste their military education benefits and take out additional expensive loans. Santiago outlined ways to avoid falling prey to a for-profit scam, like asking a "dream employer" whether they would hire graduates of the school or program.
Classic scams like phishing (attempts to steal information or plant malware on a user’s computer by masquerading as a trustworthy entity in an electronic communication like an email) and bogus charities were also covered. These scams tend to target military members and are often successful because they “sound” valid. For example, seven of 27 fake charities listed on the website Charity Navigator appeared to be related to veterans and included in their names the words "veteran," "soldier," "warrior" or "hero."
Click here to download the "Economic survival guide for servicemembers and veterans” publication.
Hotline Chronicles: Man questions ‘$19 auto insurance’
Doc* wrote to Consumer Action’s hotline to express his disbelief about ads promising “$19 car insurance.” He said that he reached out to companies connected to the ads and was told, “Yes, we have that rate but not for you.” Doc thinks this is “bait and switch,” and he doesn’t believe anyone gets that rate.
We agree. After looking for “$19 auto insurance” in a search engine we got “sponsored” results leading to a number of companies, including Insure.com, Geico, QuoteLab.com and others. They all lead to forms where you must fill in a lot of personal information in order to get a “quote.” But is the quote ever $19 per month?
We doubt it. One reason for our skepticism is that Insure.com, one of the sites running the $19 teaser ads, features a 2016 article, Car insurance rates by state, that shows the average annual car insurance premium to be $1,325 ($110 and some change per month). Even in Maine, the state with the lowest average annual premium at $900, the monthly premium would amount to $75. (The annual study compiles rates from six large insurance carriers in 10 ZIP codes in every state. Rates are assuming the same full-coverage policy for the same driver: a 40-year-old man with a clean driving record and good credit.)
A disclaimer on Insure.com states: “Average consumer obtains a $53/month rate for liability only coverage. Advertised rates are based on liability policies for a single, 40-year-old male with a clean driving record and good credit who commutes 12 miles per day, with policy limits of 100/300/50, and a $500 deductible. Safe driver and other discounts may have been applied to achieve the advertised rate, which may not be available to the average consumer.”
Nerdwallet, a personal finance website that offers insurance quotes, conducted a survey to find the “Best Cheap Auto Insurance” and concluded that Geico, Progressive and State Farm were the top three insurers in terms of “cheap” premiums. Cheap is a relative term because Nerdwallet found Geico’s average rate to be $1,297 a year; Progressive’s, $2,821; and State Farm’s, $2,296. Nerdwallet noted that all three companies, like many other insurers, offer additional ways to save with good-driver discounts and other credits for things like short commutes, bundling auto and homeowners premiums and insuring multiple cars. The kind of car you own has a bearing on your insurance rates as well. Insure.com considers this in its average rate survey, and includes only the 20 top selling cars, not luxury or sports vehicles.
“Even if you could find $19-per-month auto coverage, would you want it?” asked Consumer Action’s Linda Sherry. “If you own a car, you need a good insurance policy to protect yourself and others, particularly if you’re involved in an accident that is your fault or that is caused by an uninsured or underinsured driver. Having car insurance helps you protect your assets and use your money to achieve other important financial goals.”
Forty-nine states and the District of Columbia require drivers to carry at least minimal auto liability insurance (coverage that pays for the other party’s injuries and damage in an accident that is your fault). “But minimal coverage is not always the best choice,” said Sherry. “Liability, while necessary, is not the only component of good coverage. Even when you are not the one who caused the accident, uninsured and underinsured motorist, personal injury, medical payments and collision or comprehensive coverage are elements that can make the difference in what you end up paying out of pocket.”
Consumer Action provides free guides to help you choose the best auto insurance policy for your needs.
*Not this consumer’s real name
Report analyzes the CFPB’s catalog of consumer complaints
Since 2012, consumers have logged more than half-a-million complaints in the Consumer Financial Protection Bureau’s (CFPB) complaint database against financial products and services companies. The public database, which allows consumers to learn from others with the same complaint, is a valuable resource that users can consult either before making important financial decisions or after experiencing a problem.
Consumer Action examined the database during the past few months to evaluate its effectiveness and learn more about the outcomes of complaints. Our research has been released in a report and in companion articles in the latest issue of Consumer Action News. We report on what to expect when filing a complaint and offer recommendations on how to continue to improve this first-rate consumer tool.
Josue Chavez, Consumer Action’s 2016 intern from Columbia University, assisted us in researching how to access the information in the database and detailed the types of financial grievances listed. He also helped in analyzing the complaints filed.
The CFPB relies heavily on consumer complaint data to help guide its investigative and policy priorities. Consumers can seek individual answers to disputes through the complaint process and can publicly report the details of their financial complaints (with all personal information removed). Companies are expected to respond and resolve complaints within 60 days.
The CFPB has recently introduced an improvement to its complaint process: a satisfaction rating scale that will give consumers the opportunity to provide feedback to the CFPB on how well companies are handling their complaints. In early 2017, consumers will not only be able to rate companies’ responses using a five-star scale, but will also be able to include details as to why they were satisfied or dissatisfied with the response. Consumers will have the choice to make this feedback public or not.
To learn more about the CFPB complaint database and Consumer Action’s findings, see the Fall 2016 issue of Consumer Action News.
Financial and retirement planning at your doorstep
Consumer Action and the non-profit National Endowment for Financial Education (NEFE) have joined forces to offer an ongoing webinar series for our network partners. The series cover tips, tools, workshops and resources to help consumers manage their money and plan for retirement. The series also aids our partners in effectively delivering financial education to underserved audiences while empowering this population to make the best decisions based on their values and unique circumstances.
The first webinar in the series was held last month and the remaining two sessions will be held this month.
Last month’s Smart About Money (SAM) webinar was facilitated by Peggy Muldoon, project manager of consumer education at NEFE. If you’re interested in learning more, the topics covered in the webinar are offered year-round through free online courses that contain in-depth personal financial advice, budgeting calculators, e-learning modules and tips to help consumers manage their money through life’s ups and downs.
If you conduct financial education trainings within the community or provide direct services (e.g., one-on-one counseling, coaching or case management), you won’t want to miss this month’s trainings, which explore the benefits of using financial workshop kits in your education program and introduce you to NEFE's retirement planning resources.
The Financial Workshop Kits webinar asks: Are you dedicated to helping people manage their finances? Financial Workshop Kits can help you reach out to the community by providing the tools and resources needed to deliver financial education information to underserved audiences. Register now for one of the following sessions:
The Retirement Resources webinar prompts you to learn about NEFE’s retirement resources, including My Retirement Paycheck, a consumer website focused on retirement decision-making. The decision areas highlighted on the site include work, Social Security, home and mortgage, insurance, retirement plans, savings and investments, debt and fraud. The webinar will also explore the Retirement Series, a set of eight workshop kits (following each of the eight decision areas highlighted in My Retirement Paycheck) that can be used by educators and facilitators to conduct community workshops. Register now for one of the following sessions:
Each webinar will repeat twice on the training date. You do not need to register for both sessions on the same date, as the content will be the same. You will have the ability to save the event in your time zone at registration. If you have questions regarding the webinars, please contact Audrey Perrott.
Coalition Efforts: Clean energy, college loans and class actions
Solar panel loans cast shadow on low-income families. The U.S. Department of Energy (DOE) recently drafted a list of nonbinding best practices for states and localities that adopt Property Assessed Clean Energy (PACE) programs. In a letter to the DOE, advocates argue that the guidelines don't adequately protect consumers (PACE loans should be subject to the same rigorous federal disclosure requirements and consumer protections as mortgages) and that the loans will put lower-income borrowers at a greater default and foreclosure risk. PACE loans tend to carry significantly higher interest rates than second mortgages and are structured as assessments that can cause foreclosures on the borrower’s home. Learn more.
A need for racial justice in student lending. In a letter to U.S. Department of Education (ED) Secretary of Education John B. King, advocates urged the department to collect and release the data necessary to ensure that student loans are a tool for economic advancement and not economic devastation for borrowers of color. Since 2007, the department has known that borrowers of color are more likely to default on their student loans than white borrowers and that students of color take on more student debt than white students. However, the ED has not studied the source of these disparities or the extent to which they occur. In order to ensure that student loan policies work for all borrowers, advocates urged the department to collect and release the data necessary to learn the true extent of the impact student loan debt has on communities of color. Learn more.
Consumers have a right to their day in court. Forced arbitration clauses are agreements that large corporations often hide in the fine print of contracts— for things like cell phone service, credit cards or bank accounts—that Americans sign every day. These clauses have big consequences: By restricting access to the court system, they prevent consumers who have been wronged from seeking meaningful legal recourse. The Consumer Financial Protection Bureau (CFPB) has proposed a new rule that will prohibit financial services companies and other businesses from including provisions in their fine-print agreements that prevent class-action lawsuits. Not only do class actions put money back into the pockets of consumers who are cheated, they ensure that consumers have a cost-effective way of settling small-dollar disputes stemming from widespread anti-consumer practices by businesses and corporations. Advocates have responded that while the CFPB rule is a good start toward unraveling the growing stranglehold that forced arbitration has on consumer rights, it would be preferable to ban binding pre-dispute arbitration clauses outright from consumer service agreements. Learn more.
Help for defrauded students and taxpayers. The U.S. Department of Education (ED) has proposed reforms to provide debt relief to students defrauded by unscrupulous educational institutions, such as Corinthian Colleges, and to hold these colleges accountable so that they, not taxpayers, pick up the tab for their wrongdoing. The proposed new rules improve protections for students and taxpayers and will help curb bad behavior by predatory colleges. But advocates urge the ED to strengthen the rules because, as written, they roll back eligibility for student loan relief in some cases and make it likely that many defrauded borrowers will get partial or no relief. Learn more.
CFPB Watch: Debt collection, foreclosures and student loans
About one in three consumers (more than 70 million people) were contacted by debt collectors in the last year, according to estimates by the Consumer Financial Protection Bureau (CFPB). Many of these consumers filed a complaint with the Bureau saying they were being hounded for debts they never owed or no longer owe.
Recently, the CFPB proposed an outline of rules it is considering for required review by a panel of debt collectors from the small business community. (Before releasing a notice of proposed rulemaking, the CFPB and other federal agencies must convene panels of small businesses to provide feedback on forthcoming regulations.) The CFPB debt collection rules aim to enhance existing protections for consumers and provide clearer guidelines for third-party debt collectors. Among the rules being considered:
- Requiring transfer of information, consumer preferences and unresolved disputes from prior collection attempts to new collection agencies;
- Prohibiting collectors from reporting debts on credit reports without first informing consumers that they are trying to collect the debt;
- Requiring collectors to send consumers a one-page statement of rights with their initial validation notice and then again after 180 days;
- Requiring collectors to retain records for three years after the last communication with the consumer; and
- Requiring collectors to obtain new consent from consumers for certain contacts rather than relying on previous consents granted to the original creditor.
Consumer Action supports the Bureau’s first steps but recommends stronger protections. Click here for a summary of the proposed rules and our ideas on how to improve them.
Future of foreclosure prevention. Government regulators, mortgage servicers and consumer groups have been meeting to discuss the best ways to prevent foreclosures once the federal Home Affordable Modification Program (HAMP) program expires at the end of this year. (HAMP was introduced in 2009 to respond to the subprime mortgage crisis.) The CFPB is calling on mortgage servicers to incorporate the following principles into any future home loan modification programs:
- Accessibility: Applying for loan modification options shouldn’t be difficult.
- Affordability: Loan repayment plans should be affordable.
- Sustainability: Loan modifications should be designed with payments that can be continued.
- Transparency: Consumers should receive clear information about servicer decisions.
The CFPB has put mortgage servicers on notice that consumers should have access to a clear and effective complaint escalation process to help prevent homeowners from losing their homes. (Consumer Action and other advocates have worked to encourage the Bureau to require this of servicers.) Foreclosure relief options include loan modifications with new repayment terms or reductions in amounts owed, loan extension plans, forbearance plans (delayed repayment) and short sales (when the home is sold for less than the mortgage balance). Mortgage servicers are not required to offer specific modification options but it is often in the best interest of homeowners, lenders and servicers to do so.
No plan to prevent foreclosures has been agreed upon. Servicers have expressed interest in establishing a uniform loan modification plan that could be used to help struggling homeowners, and consumer and housing groups have been advocating for individually tailored responses for those facing foreclosure.
‘Needless hurdles’ in student loan repayment plan. Thousands of student loan borrowers have filed complaints with the Bureau about the difficulties they encounter obtaining lower monthly payments based on income. According to a new report released by the CFPB’s Student Loan Ombudsman, borrowers complain of long processing delays and incorrect rejections when they apply for income-driven repayment plans for their federal student loans.
Borrowers report application processing delays that can last months. They also report that they are rejected for more affordable repayment plans because of missing information, lost paperwork or an error on their application, without being given an opportunity to correct the application. The Bureau estimates that one in four student loan borrowers is in default or is struggling to meet repayment requirements. The findings detailed in the report put many of them at additional, unnecessary risk for default.
The CFPB has created a “Fix It Form” to help loan servicers quickly resolve errors on income-based repayment applications. The form is intended to help borrowers understand if their application has been approved, denied or needs correction.
Student loan complaints reported to the Bureau have increased 62 percent this spring over last.
Class Action Database: Ugly terms on cosmetic subscriptions
This month we highlight Davis v. Birchbox, Inc., a class action against online beauty/grooming product retailer Birchbox alleging that the company violated California’s Automatic Renewal Law. Plaintiffs alleged that Birchbox failed to state in clear and conspicuous language its policy of automatic subscription renewal, as the disclosure was missing in the subscription, account, checkout and payment pages and was difficult to find in the company’s terms and conditions. The plaintiffs argued that the lack of disclosure meant that Birchbox had failed to obtain consent before charging them for renewals.
Birchbox argued that it provided clear notice of auto-renewal and that consumers gave consent to the enrollment. Birchbox denied the allegations, but agreed to a settlement, as many class action defendants do, to avoid the expense and risk of a trial.
The class members are California residents who bought a Birchbox subscription that automatically renewed between January 1, 2011 and March 6, 2015.
The settlement provides two $5 credits for purchasers of a women’s subscription and two $10 credits for those who bought a men’s subscription. If the settlement is approved, class members will automatically receive the credits by email.
The final approval hearing is on September 22, 2016.
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.
Consumer Action INSIDER - September 2016 (cfpb_dbase_report.pdf)