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Consumer Action INSIDER - June 2020

What people are saying

I really want you to know how much I appreciate [Consumer Action’s] support of the Fair Housing conference series. [It] was really powerful, and I’m glad we chose to go virtual, rather than canceling the event. I think people were hungry for it; each session had between 150 and 200 people attending!” —Caroline Peattie, Executive Director, Fair Housing Advocates of Northern California

Did you know?

The U.S. Department of Transportation (DOT) has received a 16-fold increase in formal complaints since the COVID-19 pandemic began restricting most leisure and business travel. Many of these complaints concern refunds for airline tickets that can no longer be used. In a typical month pre-pandemic, the DOT received approximately 1,500 air-travel service inquiries; this last March and April, however, brought more than 25,000. According to the DOT, airlines must provide a refund to a ticketed passenger when the carrier cancels or significantly changes the passenger’s flight and the passenger chooses not to accept an alternative offered by the carrier (such as a voucher for a future flight). In order to clarify its rules and help consumers understand their rights, the DOT has issued answers to “frequently asked questions” pertaining to refunds here.

Out & About: Virtual assembly discusses real-world consumer issues

Several Consumer Action staff members “attended” the Consumer Federation of America’s (CFA) prestigious Consumer Assembly last month from their telecommuting perches; due to the coronavirus pandemic, CFA made the decision to hold its annual assembly entirely online for the first time in 54 years. Consumer and privacy advocates, community groups, lawmakers and allies Zoomed in from across the country for the two-day virtual event.

The assembly kicked off with a keynote speech from Congresswoman Rosa DeLauro (D-CT), who has fought for decades to raise the minimum wage in the U.S. and ensure paid sick and family leave for all workers. DeLauro also oversees food and drug safety on the subcommittee responsible for the U.S. Department of Agriculture and the U.S. Food and Drug Administration (FDA). During her remarks, DeLauro described her work to protect families and workers, particularly those operating “on the front lines” during the coronavirus pandemic—in processing plants, on family farms, and in other positions critical to the nation’s food supply. She discussed how the government’s Paycheck Protection Program (PPP) has helped these vulnerable workers keep their jobs. DeLauro also explained how she’s been urging the Trump Administration to bring government and the private sector together, especially government agencies that may not typically collaborate (such as the FDA and the Centers for Disease Control), to share their expertise in order to help safeguard the nation’s food supply during the pandemic. Finally, she emphasized the need to increase SNAP benefits (aka food stamps) for low-income consumers during this difficult time, as well as the importance of ensuring that school meal programs, Meals on Wheels (food delivery service for seniors) and other non-profit programs committed to serving vulnerable clients are operating to the best of their ability.

The main session of the day, “Turbulent Skies,” began immediately after DeLauro’s keynote and featured experts on the airline industry, including Travelers United President Charles Leocha and Senator Richard Blumenthal (D-CT), who spoke about the need for stronger consumer rights for airline passengers (and how to best achieve this).

Senator Blumenthal was particularly candid in his assessment of the airline industry. He stated that the struggling airlines’ major responsibility is currently to, “at the very least,” provide cash refunds to the many passengers who had bought tickets for trips that have been cancelled due to the coronavirus. The airlines, Blumenthal said, have a “moral obligation” to do this; if they don’t, they will be “tested in the court.” Blumenthal added that the airlines unfortunately have a “history of broken promises, shrinking seats and less comfortable travel.” But, he added, “I am determined to do as much as I can to make sure that the [airlines’] moral obligations, if not legal obligations, are honored.” Blumenthal has proposed airline passenger bill of rights legislation, which he says he will “press for” in Congress. He finished his speech by summing up the current conundrum: “The airline industry has just received a massive taxpayer bailout; now they are screwing the taxpayers who bailed them out. That is the height of arrogance…their first priority should be credibility and trust [with consumers].…Going forward, at the very least, they need to provide cash refunds.”

Democratic Senator Sherrod Brown (D-OH) wrapped up day one of the virtual assembly with a keynote speech on the importance of protecting consumers during this health and economic crisis. Senator Brown stated that he believes the most critical consumer protections now needed are related to housing (keeping people housed), credit scores and stimulus checks (with an emphasis on protecting the payments from predatory debt collectors).

On day two, “Weaponizing Behavioral Psychology in the Cyber Era,” featured computer science and information technology experts speaking about yet another dilemma consumers face: “dark patterns.” Defined by CFA as the “behavioral science-based practices” that websites and other online platforms use to “manipulate consumers,” dark patterns “really prevent [internet] users from making free and informed decisions,” explained panelist Arunesh Mathur, a Princeton University graduate student.

Mathur, who studies these dark patterns for a living, added that they “can create addictions to certain [online] platforms, collect user data in a way that circumvents existing privacy regulations and allow online services to get more and more money from users in ways that are problematic.” Mathur offered up “minimum” credit card payment requirements by online payment portals as an example of dark patterns. Prior to the passage of the CARD Act of 2009, credit card companies would design their websites to “guide” consumers to pay only the minimum monthly amount due on their credit cards (which would cost cardholders more money in interest payments over time, to the benefit of the companies). For instance, the companies would display the “minimum payment” box already checked when consumers signed in to pay their monthly bills online. Now, however, thanks to the CARD Act, banks are required to explain what a minimum payment is and how much longer it would take cardholders to pay off their cards (with interest) if they paid only the minimum each month.

Also on day two, California Attorney General (AG) Xavier Becerra and District of Columbia AG Karl Racine spoke about the importance of using existing law to protect consumers from predatory lenders, price gougers, unethical landlords and others who would take advantage of them, particularly in the current climate. Both are well known for their strong enforcement of laws preventing abusive consumer practices.

For a full list of speakers and bios, as well as recorded video from the virtual assembly, visit CFA’s website.

The walls have ears: New publication helps limit “smart home” intrusions

If you’ve ever experienced living in a dwelling that seems able to predict your every need and respond to your every command, then you understand the appeal of a smart home. Consumer Action’s latest publication, 'Smart' Homes: Data privacy and security for your connected home, helps residents to also understand the potential “backdoor intrusions” into an always-on, internet-connected home and to manage the risks inherent in this brave new world.

According to market research firm Berg Insight, an estimated 63 million American homes will qualify as “smart” by 2022, a number that will continue to rise over the next 10 years as the devices becoming more and more “intelligent” (meaning they are able to learn patterns and anticipate needs). While adopters welcome the convenience and life enhancements offered by these Internet of Things (IoT) devices—smart doorbells, nanny cams and video doorbells among them—many don’t fully understand how to protect their privacy and personal data when using them. An unsecured Wi-Fi network, outdated firmware and software, devices that don’t meet high security standards, easy-to-guess (or unchanged default) passwords, and unvetted apps all provide an opening for hackers and other unwelcome third parties.

Consumer Action’s new guide explains how smart homes work, what to be aware of when introducing smart devices into the home, what steps users can take to protect their data and personal privacy, where to learn more about the threats, and how to carefully manage these devices. Tips range from setting your Wi-Fi router to be invisible to outsiders and always changing default (out of the box) passwords for devices to customizing app settings for optimal privacy and requiring a PIN for purchases made through a home’s digital assistant. There are even tips for those who suspect that their smart TV is spying on them!

'Smart' Homes: Data privacy and security for your connected home is available (in English) for free download from the Consumer Action website.

Hotline Chronicles: Prepaid cards that don’t let cardholders spend their funds

Prepaid debit cards can be a useful way for unbanked consumers to pay bills electronically, as well as purchase items online. Before loading money onto a prepaid debit card, however, it’s important to understand its activation requirements. In order to counter illegal money laundering, the U.S. requires banks and finance firms to “know their customers” through this activation process.

Lara,* who is not a U.S. citizen but is living in Arizona, wrote to Consumer Action’s hotline regarding a recent prepaid card experience gone awry. “I purchased a Netspend Visa prepaid debit card from a local Walmart store,” Lara explained. “Upon purchase, I deposited an amount [of money] on the card. The card clearly stated on the back that it needed activation using a SSN [Social Security number] or some other, unstated forms of ID for non-resident customers. Since the card company did not mention any alternative forms of ID, I assumed my passport and U.S. working visa would suffice. I spent three days attempting to activate [the card], since the online activation system wasn’t accepting the IDs I have and wasn’t suggesting any alternatives. Not Netspend itself, nor Walmart, nor Visa, nor the bank linked to the card answered my calls or provided any guidance [as] to what I [was] supposed to do to either activate [the card] or get my money back. After all this, I have no other choice but to believe that I have been scammed.”

The company requires purchasers to activate its cards before they can be used. As Lara did note, Netspend warns buyers that “Card use and all features [are] subject to activation and ID verification.” However, without a list of acceptable forms of ID, how would consumers know that the company does not accept foreign passports and/or visas? (According to an article we found online, it should be possible to activate a Netspend card with just a Social Security Number or Alien Registration Number—an “A-number”—but this is not mentioned on the Netspend website.)

Since Lara had already attempted to reach Netspend (to no avail), we suggested she take the card and receipt back to her local Walmart and seek a refund for the purchase and the deposit. If this was not possible, we advised her to submit a complaint to the Federal Trade Commission (FTC)—a government consumer watchdog agency—and to the Arizona attorney general’s office. (Find state AG offices here.)

Interestingly, the FTC had already brought an earlier complaint against Netspend. In the matter, settled in 2016, the FTC alleged that “once people have loaded funds onto the [Netspend] cards, many of them find they cannot access their money, either because Netspend denies or delays [legally required] activation of the card, or because it blocks consumers from using it.”

According to the complaint, many people have had difficulty satisfying Netspend’s identity verification process for activation. Often, the consumers—who could not access their funds for weeks, or at all—suffered financial hardships such as evictions, car repossessions and late fees on bills while their money was unavailable. In addition, the FTC’s complaint alleged that consumers who had closed their card accounts and requested refunds waited several weeks for their money. In other cases, consumers’ funds were depleted over time by recurring Netspend fees. To settle the FTC charges, Netspend agreed to provide refunds to those people who couldn’t access their deposited funds.

As former FTC Commissioner Terrell McSweeney noted at the time, “…some consumers never obtained access to the funds loaded onto their Netspend cards; the complaint alleges that Netspend did not activate accounts for many consumers even after they provided [the] additional information or documentation Netspend requested to verify their identity.”

We found many online complaints about Netspend’s card fees and customer service as well. Here is just one recent example from ConsumerAffairs.com: “I grabbed a Netspend prepaid card off the shelf and…put $80.00 on this card…I go…online to the website where the card directs you to activate your card so you can begin to use it, and I do absolutely everything that was asked of me only for it to tell me, ‘Something went wrong,’ and I have to talk to someone in [Netspend’s] customer care department….[After dialing] I’m greeted by an automated message telling me that, due to the coronavirus, they're experiencing a high volume of calls and to please make use of their website or call back later, and [Netspend] hangs up on me....Well, [I’m] going on 3 weeks now [and] I still haven't gotten anyone to answer my probably 50 to 60 phone calls, [where I was] staying on hold [for] up to two-and-a-half hours, on more than one occasion. I am really just at a loss for words at this point.”

Given these issues with verification and activation, we suggest that customers research several brands of prepaid debit cards, looking closely at all card fees, and do not load (deposit) funds on any prepaid card until the card is activated. (For general information, read Consumer Action’s guide to prepaid cards.)

Coalition Efforts: Student protections, price gouging and privacy in the age of COVID

Lawmakers must protect Pell Grants during (and after) the COVID-19 crisis. Lawmakers are busy passing legislation to provide economic relief to U.S. families during the COVID-19 crisis, while also moving forward with the appropriations process for the 2021 fiscal year. It is critical that, amid all this activity, they protect and invest in the Pell Grant program—the nation's cornerstone investment in higher education—to ensure that students have the funds to pursue postsecondary education (both during this emergency and in its aftermath). Pell grants allow nearly 7 million low- and middle-income students to attend and complete college. Student and consumer advocacy groups, including Consumer Action, sent a letter to both the House and Senate urging them to ensure that the grant, at the very least, increases with the rate of inflation. Learn more.

Department of Education must oversee online higher education programs. COVID-19 has made it more important than ever to maintain strong oversight of distance education programs and their use of taxpayer dollars. Significantly changing or weakening government regulations around online learning programs presents a serious risk to students, a fact that coalition advocates pointed out in a letter to the U.S. Department of Education (ED) urging it to maintain basic safeguards in distance education. Strong oversight is particularly critical given the number of schools that have recently moved to online offerings as a result of the outbreak. Learn more.

Californians need protection from price gouging during state of emergency. In a letter to the California state legislature, advocates urged support of Senate Bill (SB) 1196, which aims to combat price gouging in the state during a declared “state of emergency.” California consumers have encountered untold numbers of unscrupulous individuals using the COVID-19 crisis as an opportunity to turn a profit on essential goods and services. SB 1196 would discourage price gouging by strengthening California law to assist law enforcement officials in prosecuting the crime, particularly crimes committed by new sellers who jump in to profit during an emergency. Learn more.

White House should prioritize privacy, equity in COVID-19 technologies. In a letter to the head of the Coronavirus Task Force, Vice President Mike Pence, privacy coalition advocates called on the White House to adopt written principles that would help to protect the privacy of individuals during the COVID-19 pandemic. Among other sensible suggestions, the coalition proposed that digital tools—particularly those used in testing and contact tracing—not only require affirmative consent from users before they are employed, but also be designed in a way that protects vulnerable groups against discrimination and other civil rights violations. Learn more.

CFPB Watch: Coronavirus complaints, housing help and relaxed rules

The Consumer Financial Protection Bureau (CFPB) received a record number of complaints in April—42,774, to be exact—the highest monthly count (two months in a row) since its consumer complaint database kicked off nine years ago. In her virtual report to Bureau advisory board members last month, titled “Consumer Complaints and COVID-19,” CFPB Director Kathy Kraninger explained that most complaints this year have revolved around mortgages—and in April, many of the complaints collected mentioned coronavirus-related financial difficulties. Predictably, consumers have reported struggles to pay their mortgages this year (in addition to troubles with mortgage payment service issues). Credit card complaints were the second most common type of grievance registered in the first quarter of 2020, with credit reporting coming in third, and debt collection fourth.

The director told committee members that even prior to the record-breaking job losses recently caused by the pandemic, consumers were in no position to handle long-term losses in income. According to the CFPB’s 2019 Making Ends Meet survey of 3,000 consumers, 52% of households reported that if they lost their main source of income, they would not be able to cover their expenses for more than two months. Respondents reported that this financial predicament would hold true even after borrowing money, using up savings, selling assets and turning to friends or family for help.

Fortunately, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to help consumers make ends meet. To help struggling homeowners with federally backed loans understand the assistance they are now entitled to under the CARES Act, the CFPB released a new Consumer Relief Guide. The guide details a homeowner’s right to postpone mortgage payments (known as mortgage forbearance).

Website launched to help renters, homeowners during pandemic

The CFPB, the Federal Housing Finance Agency (FHFA) and the Department of Housing and Urban Development (HUD) have launched a new website to offer both homeowners and renters one place to turn to learn about available government mortgage relief, rental protections and housing resources during the pandemic. Included is a list of helpful questions that a struggling homeowner can ask her mortgage servicer to secure mortgage forbearance (or other relief options).

Delaying horrible payday rule revisions

While the Bureau labors to provide helpful pandemic relief resources to consumers, it’s simultaneously preparing to release significant, harmful revisions to its original payday loan rule (created under the Obama Administration)—revisions that would gut the rule’s key provision: that borrowers have the ability to repay the costly small-dollar loans.

It’s not unusual for payday loans to burden borrowers with interest rates of 300% or more, trapping them in a cycle of debt. If the payday rule is gutted, payday lenders will not be required to determine in advance whether a borrower can afford to repay these extremely high-cost loans.

Fortunately for borrowers, just before the Bureau was expected in early May to release a gutted rule, a damning New York Times story broke revealing a former CFPB economist’s allegations that a political appointee at the Bureau had cherry-picked and manipulated research in order to claim there was no need to retain the rule’s protective ability-to-repay requirement.

The CFPB staffer told the Times that “political overseers” pressured CFPB economists “to water down their findings on payday loans and use statistical gimmicks to downplay the harm consumers would suffer if the payday restrictions were repealed.”

At the time of this writing, the CFPB’s decision to dismantle the original payday rule remains in limbo.

Consumers harmed by rolled back or relaxed rules

Current CFPB leadership continues to work toward relaxing rules meant to inform consumers and protect them from bad business practices, fraud, deception, discrimination and other marketplace misconduct.

Most recently, the Bureau rolled back its “remittance rule.” This rollback will allow banks and credit unions to estimate exchange rates and certain fees when consumers send money overseas, instead of disclosing the exact costs of the money transfers (known as remittances). Additionally, fewer money transfer companies will be compelled to follow remaining rules that require notifying customers of costs, cancellation policies and dispute rights; firms that provide fewer than 500 money transfers per year—up from 100—will now be exempt from the rules.

The Bureau also announced new “flexibility” for credit card issuers trying to resolve consumer disputes during the pandemic. Card issuers are legally required to acknowledge a billing dispute within 30 days, and investigate and resolve the problem within 90 days. But since consumers are struggling to make contact with companies and card issuers during the crisis, the Bureau has assured card companies that they will not be cited for delays. A month earlier, the CFPB gave credit bureaus a similar reprieve from dispute deadlines. However, cardholders should know that credit card issuers are still prohibited from collecting the disputed portion of the bill until it is resolved.

Finally, the CFPB has eased requirements around home mortgage data collection, reducing the number of companies that are required to collect it. This Home Mortgage Reporting Act (HMDA) data has historically been used to evaluate whether companies are servicing all segments of the home-loan market, by gathering details about the demographics of people approved for mortgages. The details gleaned from the data have given regulators clues about discriminatory lending practices. Less data equates to less detail around the types of underwriting decisions that negatively impact groups of people based on their race, ethnicity or gender.

These rollbacks have all been conducted in the name of “reducing regulatory burdens” on companies—by a Bureau that was established to protect consumers.

Class Action Database: Target is way off the mark with “so-called” debit cards

A class action settlement involving Western Dental sending unsolicited text messages (even after recipients texted the company to “stop”) was among 10 new settlements added to the Consumer Action Class Action Database during May.

Of note this month is the class action settlement Walters v. Target.

The plaintiffs filed a class action against Target, alleging that the retail giant deceptively marketed its Target Debit Card (TDC) program.

Unlike other debit cards on the market, TDC transactions are processed after a lengthy lag time, grouping multiple customer transactions together over the span of several days, to be submitted to the processing network all at once (a practice that, plaintiffs allege, costs Target less in transaction fees). When plaintiffs viewed their TDC accounts online, the accounts would display the transactions as posting on the same day of purchase, giving the plaintiffs no reason to worry about overdrafting funds or incurring fees. The TDC funds, however, were actually deducted days after they posted to the customers’ bank accounts. Due to Target’s delay in processing the transactions, plaintiffs’ linked checking accounts often did not have enough funds to cover the original Target transactions.

In addition to banks charging the plaintiffs non-sufficient funds (NSF) fees for the overdrafts, Target itself charged the customers an extra $20-$40 in what it called "returned payment fees” (RPFs).

Plaintiffs made the case that true debit transactions would have been deducted from the available funds in their checking accounts at the point of sale, or the transactions would have been declined right then and there if the checking accounts contained insufficient funds. Therefore, according to plaintiffs, Target’s “so-called” card is not a true debit card. Plaintiffs cited Consumer Action’s definition of a debit card in their complaint: “[t]here is no grace period on debit card purchases the way there is on credit card purchases; the money is immediately deducted from your checking account.”

As an example: One plaintiff used his TDC to make a purchase in the amount of $85.37 on Dec. 1, 2015 (when he had sufficient funds in his linked bank account). Target did not submit the transaction to the plaintiff’s bank for processing, however, until Dec. 3, at which point the plaintiff no longer had sufficient funds in his account. As a result, the plaintiff’s bank charged him a $29 NSF (and Target did not receive the funds).

Target then resubmitted the Dec. 1 transaction over a week later (on Dec. 10) in order to receive the plaintiff’s funds (which it had not yet collected). Target charged its own $25 RPF to the plaintiff much later—on Jan. 7, 2016—for the original Dec. 1 transaction that did not go through (with the customer’s bank), even though Target had, ultimately, received the plaintiff’s funds on Dec. 10! As a result, the plaintiff was charged a total of $54 in fees for a purchase of $85.37.

Target, as is typical in class action settlements, denied the allegations.

You are a member of the settlement class if you incurred at least one of Target’s RPFs—which was not refunded or waived—on your TDC account between June 29, 2012 and Dec. 2, 2019.

According to the settlement, Target has agreed to create a $5 million fund to provide cash payments to class members who incurred and paid its RPFs. The payment that members receive will be based on the amount they paid in RPFs. Target has also agreed to waive over $3 million in RPFs currently “due.” The settlement also requires changes to Target’s TDC agreement; the company will no longer be allowed to charge RPFs for TDC transactions of $7 or less.

If the settlement is approved, class members will automatically receive the payments or, if applicable, a reduction in the outstanding RPF balances on their TDC accounts.

The final approval hearing is on June 22, 2020.

About Consumer Action

Consumer Action is a non-profit 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 both in 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 more. 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. Our in-language media outreach allows us to share scam alerts and other timely consumer news with a wide non-English-speaking audience.

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 more than 6,000 community-based organizations. Outreach services include in-person and web-based training and bulk 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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