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Consumer Action INSIDER - August 2016

Table of Contents

 

What people are saying

I just wanted to say “THANK YOU” for the wonderful information and resources you shared at yesterday’s Money Management workshop! I truly appreciate all of the info and can’t wait to see how we can share it with the families we work with that are in the public housing and Section 8 programs here in Maricopa County, AZ. — Lilia Sanchez-Gonzalez, Direct Services Program Specialist at Maricopa County Human Services, Phoenix, AZ

Did you know?

Security issues and flaws relating to internet-connected children’s toys are on the rise. A child’s name, age, location, birthdate, spoken language and gender can be exposed when an internet-connected toy’s software and applications are not secure. With the rise in toys that feature wireless connectivity, kids are often just as vulnerable as adults to security hacks and online threats. Learn more about recent breaches and pending class action lawsuits filed in response on the Lieff Cabraser Civil Justice Blog. Also, read “Questions To Ask Before Buying A Connected Toy” at the Family Online Safety Institute.

A guide to finding the right job training school

As concerns grow that the for-profit education industry leaves too many students shackled with debt and with “credentials” that provide little to no help in obtaining meaningful job skills or employment, what can a student do to ferret out the programs that offer legitimate training? How does one go about choosing a trustworthy program? With funds from its Money Management Project (Managing-Money.org), Consumer Action recently created “A guide to finding the right job training school”—a publication designed to help anyone considering a job training program or vocational school make informed choices, avoid excessive or unwarranted student loan debt and know where to turn if they believe they are a victim of for-profit school fraud. While the brochure and Q&A are currently available online for consumers and community-based organizations alike, the full module (PowerPoint presentation and curriculum) will be available later this summer to serve as a teaching resource for community educators.

Trade schools offer programs to train students for skilled jobs in a particular trade or industry—jobs like medical or dental assistant, hair stylist, paralegal or auto technician. It can be tricky for prospective students to find the right program and to recognize the difference between legitimate training schools and fraudulent programs.

A few of the biggest names in for-profit education, like Education Management (which owns the Art Institutes), Everest, DeVry, Heald, ITT Educational Services and the University of Phoenix, for instance, have been investigated by government agencies including the U.S. Department of Education, the Federal Trade Commission and the Consumer Financial Protection Bureau for fraudulent recruiting practices and exorbitant tuition. Much of these institutions’ revenue comes from students who pay for their education with federal student loans, VA educational benefits and Pell grants. This means the federal government (i.e., taxpayers) are bankrolling schools that often produce abysmal outcomes. As a result, the feds are preparing to ramp up regulatory oversight in an attempt to reform the country’s besieged higher-education system.

The U.S. Department of Education has just proposed new rules in an effort to provide debt relief to students defrauded by unscrupulous colleges and to hold those schools accountable. While the proposed rules are important, they need to be strengthened—as written they roll back eligibility for student loan relief in some cases (like for those students who borrowed outside of a proposed six-year time limit) and make it likely that many defrauded borrowers will get partial or no relief. We are encouraging consumers to comment in support of stronger rules today! (Aug. 1—the date of this publication—is the last day for comments.)

In the meantime, if you’re considering enrolling in a continuing education program, check out your local community college before a for-profit school. Community colleges’ open-admission policies, low tuition and locations close to home make them an important route to postsecondary education and job training for many students.

Whatever school you consider, ask very specific questions about the program and its graduation rates. While many trade schools are reputable and teach the skills necessary to get a good job, others fail to deliver. Some schools exaggerate students’ job prospects as a way to increase enrollment and profits.

If this research seems like a lot of work, consider it an investment in your future. The average for-profit college student graduates with $32,700 in student loan debt, so if you’re interested in enrolling in a for-profit educational program, make sure you’re investing in one that’s reputable and will teach you the skills necessary to get the job you have your eye on. Until the feds succeed in regulating the for-profit education industry, your diligence will be critical in avoiding unfit training programs that aren’t worth your time or money.

Save the date: Consumer Action ‘Celebrates Consumer Champions’

Consumer Action’s 2016 annual awards reception marks our 45th anniversary. With its theme of “Celebrating Consumer Champions,” the Oct. 18 event will focus much deserved attention on the efforts of dedicated and committed advocates who, through their leadership, have forged significant change for consumers.

Our 2016 Consumer Excellence Awards honorees are true consumer champions; their efforts have benefited hundreds of thousands of consumers, if not more, by enforcing laws, informing people of changes in the marketplace and fighting for improved consumer protections.

We hope that all our friends and supporters can join us in Washington, DC to mark Consumer Action’s tradition of working in partnership with all marketplace participants and to honor our 2016 Consumer Excellence awardees:

  • Ken Harney, author of “The Nation’s Housing” column, syndicated by the Washington Post Writers Group and carried by newspapers nationwide;
  • National Fair Housing Alliance, the only national organization dedicated solely to ending housing discrimination; and
  • Richard Cordray, director of the Consumer Financial Protection Bureau, who has led the Bureau’s educational, supervisory and enforcement efforts since 2012.

“This is a great line-up of awardees,” said Consumer Action Executive Director Ken McEldowney. “In recent years, they’ve fought hard to protect consumers, end discrimination and return a measure of sanity to the financial marketplace. We owe a lot to these individuals and organizations.”

For more information about the event, visit our website.

Hotline Chronicles: Ride-share ‘surge pricing’ really stings

Deena*, a resident of a town 30 miles from Nashville, TN, wrote to Consumer Action’s hotline with a complaint about ride-sharing service Uber. “My son attended a concert downtown in Nashville and booked a ride on Uber. His price to get to Nashville was about $20. However, the price for the ride home, same distance, was an astounding $160 due to a supposed ‘surge’ charge. I feel this is absolutely ridiculous, and I am NOT happy that consumers (especially younger people, like my son) are being taken advantage of in this manner.”

Ride-sharing companies like Uber use smartphone apps to connect customers with the drivers that they hire. Surge pricing is a common feature, often in effect in locations where popular, crowded events are occurring, during bad weather, during rush hour and when public transportation is otherwise unavailable. (The public transportation between Deena’s town and Nashville is designed to serve commuters and doesn’t operate late at night.) During surges, riders can be asked to pay up to 10 times the lowest non-surge fares.

Unlike taxi services, the ride-sharing industry is mostly, but not always, unregulated or loosely regulated. Regulation at the state and municipal levels tends to center on specific requirements such as driver background checks and insurance coverage. Price caps are rare and usually self-imposed by companies to counter accusations of gouging. Across the country, cab companies charge that the playing field is tilted in favor of the loosely regulated ride-sharing companies.

We advised Deena to write to Uber CEO Travis Kalanick (.(JavaScript must be enabled to view this email address)) objecting to the charges. Since ride-sharing apps must be tied to a working credit, debit or prepaid card, it’s crucial to know the price before accepting a ride (after you accept and take the ride, the charges are automatic). You won’t pay the surge fare price unless you accept it; the Uber app will always ask you first to confirm the higher fare before sending a driver to your location. You can also opt to wait until the surge ends (this is an option in the app after you request a driver and see that Uber is operating on surge pricing). For a cheaper ride, you can always opt instead to (via the app) share the ride with others, although you may be driven a little out of your way and, because of this, your ride may last a little longer. Or you could take a cab, which might be less expensive.

Tennessee residents can file consumer complaints or check whether there are complaints on file regarding a particular company by contacting the Tennessee Division of Consumer Affairs at 800-342-8385. They also can contact the Consumer Protection and Advocate Division in the Attorney General's Office at 615-741-1671. (For attorneys general in other states, look up contact information at the National Association of Attorneys General website.)

*Not this consumer’s real name

Out & About: A new rule on consumers’ rights to sue

The Consumer Financial Protection Bureau (CFPB) recently released a rule to restore consumers’ rights to join together to hold corporations accountable when they break the law. The proposed rule would limit the financial industry’s use of forced arbitration—an abusive practice in which corporations bury “ripoff clauses” in the fine print of take-it-or-leave-it contracts to prevent consumers from challenging predatory practices such as hidden fees, fraud and other illegal behavior.

In support of the rule, Consumer Action visited the halls of Congress during a lobbying day in Washington, DC. Along with our coalition allies (led by Public Citizen and Americans for Financial Reform), we visited dozens of members to mobilize support for the rule. That same week, we penned an op-ed in The Hill’s Congress blog explaining the ins and outs of forced arbitration to consumers and the real world implications of the practice.

“Let’s say you find out that your cell phone provider has tacked hundreds of dollars in unfair charges on to your bill,” we explained. “But wait, the carrier has a ‘ripoff clause’ in the fine print of your cell phone contract to stop you from suing it in court and, even worse, from engaging in class actions (in which consumers join together in a lawsuit).”

While the CFPB’s proposed rule could be stronger (it does not outright prohibit the use of forced arbitration clauses in consumer contracts), it does stop companies from using one of the most damaging elements of forced agreements—a ban on consumers joining class action lawsuits to seek collective redress in the courts. Keeping customers from joining class actions effectively leaves them with little to no redress and allows corporations to break the law without consequence. Because most consumer claims are small, and individuals don't have the wherewithal to sue on their own, class actions are an important form of consumer protection.

As we emphasized to Congress, we need to fight to make sure this proposed rule becomes reality. Fortunately, you can make your voice heard by those in power as well! Click here to help us by letting your representative know you support a strong arbitration rule!

A look back at the Healthy Children Organizing Project

Last month, the website HealthyChildren.org, a project of Consumer Action founded in the early 1990s as the Lead Poisoning Prevention Project and later named the Healthy Children Organizing Project, was closed. Founder Neil Gendel, who retired from Consumer Action in 2009, headed the project for 19 years. Gendel, a former California deputy attorney general, helped the City and County of San Francisco write its model ordinance to protect children from lead poisoning.

Gendel led the successful community-wide effort to enact safe lead work practices inside and outside older lead-painted residential housing, child care facilities and government buildings (schools, recreation and park facilities) long before other communities and government agencies began to address these issues, which still exist today. He also led and helped to find funding for a city-wide effort to educate parents, particularly in low-income communities, to protect their children and themselves from lead poisoning and other toxins in their homes, child care facilities and schools.

Gendel, interviewed in 2006 by the Collaborative on Health and the Environment (CHE), said he was inspired to join the environmental health movement in 1974, when he was co-counsel in a lawsuit filed against Shell Oil alleging its refinery was polluting the surrounding Martinez, CA neighborhood.

“I became totally committed to the environmental health movement when I stopped practicing law and started the Healthy Children Organizing Project to protect children from lead poisoning in a city literally painted with lead,” Gendel said.

“I was inspired by San Francisco’s low-income children, the incredible, collaborative family and children service providers helping those children succeed against very difficult odds, and the many wonderful collaborators without whom I could not succeed in my work,” Gendel continued.

Gendel joined Consumer Action full time in 1973 after volunteering for almost two years. He inspired many innovative prototypes that have served Consumer Action well over the decades. For instance, Gendel and his team were instrumental in developing a guide called “Collaborations That Work,” for use by county health departments. The guide was designed around the belief that “no one can do everything, but everyone can do something” to help protect children’s health. It described 20-plus collaborative projects used by health departments throughout California and demonstrated techniques these departments and others can use to promote effective community action to focus attention on childhood health issues.

The Healthy Children Organizing Project also inspired another model used by Consumer Action to this day: educational outreach activities conducted through a community-based network of organizations who serve low- and moderate-income communities of color, immigrants and limited-English speakers.

Gendel also pioneered Consumer Action’s use of surveys that compare services and prices. One such survey-driven resource, “Break the Banks: A Shopper’s Guide to Banking Services,” was published in 1973. The guide brought nationwide recognition to the issue of consumer choice in banking, “and even some money,” said Gendel. “It’s an example of how a small number of people can impact a huge industry.”

In addition, Gendel was instrumental in developing a scathing 1974 Consumer Action expose of the California consumer affairs department. “Deceptive Packaging” revealed that the boards of the ostensibly pro-consumer government agency were in fact made up of state-licensed tradespeople, the very group it was meant to police. “Deceptive Packaging” turned a spotlight on the agency and its $21 million budget and made it more responsive to the needs of consumers.

Many foundations and government entities supported the Healthy Children project’s work, including the U.S. Department of Housing and Urban Development (HUD) under its Local Lead Hazard Awareness Campaign.

Gendel thanked Healthy Children supporters “for their patronage throughout the years” and emphasized that “the time has come to close this project and let others continue its charge. It was a pleasure to work on the project for so long.”

HealthyChildren.org archives can be accessed at the Internet Archive website, where a feature called the “Wayback Machine” allows visitors to view cached versions of websites at various dates in the past. Enter http://www.healthychildrensf.org into the Wayback Machine to see the site.

CFPB Watch: Birthday, Oakland meeting and housing discrimination

On July 21, the Consumer Financial Protection Bureau (CFPB) turned five years old despite critics’ non-stop efforts to “defang” and defund the nation’s important consumer watchdog. Consumer advocates held a small private event in Washington, DC to honor the Bureau’s work on behalf of consumers. (Consumer Action was a co-sponsor).

In the last five years, the CFPB has created new consumer protections for financial services and products and has worked to make the marketplace fairer for all. By rooting out predatory practices, through lawsuits, new rules and oversight, the CFPB has returned $11.7 billion in relief to more than 27 million consumers.

The CFPB, which Senator Elizabeth Warren (D-MA) helped create after the 2008 financial crisis, has handled close to one million consumer complaints about student loans, credit reports, mortgages, debt collection, credit cards, auto loans and more since its inception. The agency has empowered consumers with information to “Know Before You Owe” when planning for retirement, buying a home or getting a student loan, and has created new rules to, for instance, make the mortgage market less risky and money transfers more secure and transparent.

In order to focus its oversight and enforcement efforts on the worst offenders, the CFPB relies on firsthand information from consumer complaints to identify patterns of problems among banks, lenders and other financial services companies.

To see more of what the CFPB has accomplished in just five years, watch this excellent backgrounder and listen to Senator Warren proudly commend the agency for its many accomplishments.

Oakland town hall. Consumer Action participated in a July 22 town hall-style gathering in Oakland with Consumer Financial Protection Bureau Director Richard Cordray and other CFPB staff hosted by Housing and Economic Rights Advocates (HERA), an Oakland, CA-based housing rights organization. The audience of 100 or so members of the public represented small businesses, interested individuals and advocates from other organizations who came to discuss payday loans, mortgages and other financial services with the regulator.

Consumer Action’s Joe Ridout at the meeting expressed gratitude to the CFPB for its hard work in stopping abusive practices by credit card issuers as measured by falling complaint data from Consumer Action’s consumer advice and referral hotline. Ridout explained that for many years credit card complaints were the top hotline complaint category. He noted that since the passage of the CARD Act and the creation of the CFPB, complaints about credit cards have plummeted.

Ridout said, “The CFPB’s many notable actions on behalf of consumers seem to have inspired other federal agencies with overlapping jurisdictions to take stronger measures in favor of consumers than they did in the pre-CFPB years.” This, he said, has “also served to promote greater consumer protection from financial crimes and fraud.”

Other commenters at the meeting spoke about existing payday loan abuses, lending discrimination and credit scoring. HERA introduced a client, David Del Torto, who faced a problem as a “successor in interest”— a resident of the home or heir who wishes to assume a home loan from the deceased primary mortgage borrower. Del Torto said that after he sent a copy of his mother's death certificate to Wells Fargo and requested a modification in his name, he received a number of letters addressed to his late mother asking why she was having difficulty making payments. The speaker’s experience showed how banks often refuse to work with survivors to modify the mortgage.

As part of the recent set of changes to its servicing rules, the CFPB is proposing to expand consumer protections to surviving family members and other homeowners in the event that a borrower dies. Currently, CFPB rules require that servicers promptly identify and communicate with family members, heirs or other parties, known as “successors in interest,” who have a legal interest in the home. The Bureau is proposing to expand the circumstances in which consumers would be considered successors. (In California a pending bill, SB 1150, would prohibit mortgage servicers who learn a borrower has died from recording a notice of default until survivors have a reasonable time to discuss how they can assume or modify the mortgage.)

Monthly complaint snapshot report. Car, installment and title loans were featured in the latest CFPB monthly complaint report. Forty-three percent of consumers who complained about these debts said they struggle to manage their loan, lease or line of credit. Consumers often reported not having the car payments they made credited to their accounts and argued that they did not receive explanations about how fees and interest rates would affect the cost of the loans. Some complained of owing more on a car than the vehicle was worth, which prompted the CFPB to create a new auto loan shopping guide to help consumers avoid the debt trap.

Redlining in Memphis. The CFPB and the U.S. Department of Justice (DOJ) took action against BancorpSouth for discriminating against African Americans by unfairly denying them mortgage loans in Memphis, TN. In other cases, African Americans were given a mortgage but charged more than others with similar qualifications.

After the CFPB sent undercover testers to BancorpSouth branches to observe the discrimination firsthand, it determined that the bank structured its business to “avoid and discourage” minorities from obtaining home loans (known as redlining).

CFPB Director Richard Cordray said that the Bureau’s action “is a reminder that redlining and overt discrimination are not yet remnants of the past, and that federal enforcement is needed to bring real relief to communities and individuals.”

Under a consent order, BancorpSouth will pay $2.78 million directly to African American consumers who were wrongly denied mortgages or overcharged, and will offer these harmed consumers a chance to apply for a mortgage at a discounted rate.

The Bank will also make $4 million in loan subsidies available to qualified mortgage applicants in Memphis minority neighborhoods. This will provide interest rate reductions as well as closing cost and down payment assistance to neighborhoods that have been denied access to credit.

The bank must also open a branch in a majority-minority neighborhood in the city and partner with local organizations to pay for credit education and credit repair for area minority communities.

These conditions must be finalized by the court.

CFPB supervision. CFPB examiners uncovered illegal activities in the auto lending, mortgage, payday loan, debt collection and “fair lending” industries that resulted in a return of $24.5 million to a quarter of a million consumers in the first quarter of this year.

For instance, CFPB examiners discovered that debt sellers were miscoding debts as “owed” when they were, in fact, no longer or never owed because the debtor had declared bankruptcy, the account had been settled or the debt was fraudulent.

As part of its mission to protect consumers, the CFPB carries out on-site inspections of the work of large banks and other financial services companies like mortgage servicers and lenders of payday and private student loans. When the Bureau finds rule violations and unfair behavior, it requires firms to correct their practices, improve employee training or company systems and sometimes pay fines and restitution to consumers.

Class Action Database: Amex plays fast and loose with interest rates

Class action settlements involving Global Marketing Research Services, Inc. and Vitamin Shoppe were among 15 new cases added to the Consumer Action Class Action Database during July.

One notable class action is Lopez, et al. v. American Express Bank, FSB, et al.

The plaintiffs filed a class action against American Express Bank, FSB and American Express Centurion Bank (“American Express”) alleging that American Express violated the federal Truth in Lending Act and California’s Unfair Competition Law. American Express denied the allegations but agreed to a settlement.

The lawsuit alleged that American Express raised the fixed interest rate on its credit and charge card accounts (or changed the rate to a variable interest rate) when consumer cardholders were not behind on payments.

You are part of the class if, between Oct. 1, 2005 and Dec. 31, 2010, you had a consumer or small-business American Express credit or charge card issued by American Express Centurion Bank or American Express Bank, FSB and you:

  • Had a fixed annual percentage rate that was increased or changed to a variable rate; or
  • Had a fixed annual percentage rate and was given notice of an increase or a change to a variable rate.

The settlement provides a $6 million retribution fund. Class members are eligible to submit a claim for an estimated $32.50 cash payment if they had an existing balance that was not in default or delinquent at the time of the rate change and if the American Express account was not written off or charged off.

The claims deadline is Aug. 30, 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.

 
 
 

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