Consumer Action INSIDER - September 2018

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What people are saying

Thank you for allowing me to participate in this train-the-trainer [event]. The presenters were knowledgeable, informative and personable. Each of them made me feel appreciated and accepted. The training gave you that one-on-one atmosphere. — A Renee' Heard, Urban Regional Agent, New Nontraditional Programs, Alabama Cooperative Extension System, Hartselle, AL

Did you know?

U.S. PIRG researchers found toxic chemicals, including lead and benzene, in widely used school supplies. The group conducted laboratory tests of markers (washable and dry erase), crayons, glue (liquid and stick), spiral notebooks, rulers, 3-ring binders, lunchboxes and water bottles purchased across the country at a wide variety of stores, including big box stores, dollar stores, drug stores, online retailers and arts and crafts stores. Learn more about how to avoid toxic school supplies.

Memories and rallying cries: Financial reform 10 years later

“Families were being sold scam loans that stripped hard-fought wealth from them and transferred it to the pockets of shady lenders,” Senator Sherrod Brown (D-Ohio) proclaimed to a rapt crowd gathered on Capitol Hill last month to acknowledge the 10th anniversary of a devastating financial crisis that resulted in millions of foreclosures.

Senator Brown continued, “It took the worst crisis since the Great Depression…to pass Dodd-Frank [the Wall Street Reform and Consumer Protection Act] so that Main Street would never have to bail out Wall Street again.” He credited consumer advocates with ensuring passage of this important financial regulation law, which created the Consumer Financial Protection Bureau (CFPB), the only federal financial regulator with the sole mission of protecting consumers.

Prior to this financial reform, consumer regulations were “the stepchild” at other federal agencies and were given less attention than they were due, according to former Federal Deposit Insurance Corporation (FDIC) chair and event speaker Sheila Bair, who helped stabilize the economy during the crisis.

Bair pointed out that it’s essential to have one regulator—the CFPB—to focus on consumer protection, “especially for mortgages.” She explained that, around the time of the 2008 financial crisis (before the CFPB was created), the Bush administration’s goal was not to prosecute lenders, but to encourage loan modifications that should have been much more robust. According to Bair, mortgage “principal write-downs” could have helped decrease the amount owed on a borrower’s home, provided them with financial relief and prevented some foreclosures.

Bair and some of the other major players who helped set things right during the financial crisis, such as former Treasury official Michael Barr, reminded the audience of how far we’ve come post-crisis: from an era of lenders with no capital to lend and severe constrictions in consumer spending to a healthier and more resilient economy achieved through financial regulation, particularly government oversight of lenders based on their “risk to the system.”

Speakers worried out loud, however, about fading memories and warned that today’s environment of deregulation is putting taxpayers and the economy at risk of another financial crisis.

Just this year, Congress rolled back parts of the Dodd-Frank law and banned group (class action) lawsuits that would help hold corporations accountable for predatory behavior. In addition, the CFPB’s temporary leadership (selected by the current anti-regulation administration) has encouraged the Bureau to retreat from its role as a strong financial industry watchdog, close investigations into payday lenders and other predatory companies, and fail to pursue refunds for wronged consumers.

An anti-regulatory stance isn’t just bad for consumers, as former Treasury Deputy Secretary Sarah Bloom Raskin pointed out. “Consumer protection works for industry too,” she reasoned, since it allows for consumer confidence and trust in the marketplace, which are essential to the functioning of sound markets.

Senator Elizabeth Warren pointed to the success of the CFPB in returning $12 billion to 29 million consumers, “cracking down on cheaters like Wells Fargo” with big fines, and providing real tools to consumers, like the Bureau’s free, searchable public complaint database. She ended her speech by reminding the legislative staff and advocates in the room that their voices are needed as much today as ever, in order to protect vulnerable consumers threatened by income inequality and corporate dominance.

The umbrella group Americans for Financial Reform (AFR), of which Consumer Action is a member, sponsored the 10th anniversary event.

CASH Campaign and Consumer Action strengthen family economic stability

The CASH (Creating Assets, Savings and Hope) Campaign of Maryland has been a Consumer Action partner since the group began its CASH Academy in 2009. The CASH Academy is a clearinghouse of free or very low-cost fact-based financial education classes across the state. CASH promotes economic advancement for low-to-moderate-income individuals and families in Baltimore and across Maryland, and partners with a variety of organizations to offer its free personal finance classes. It accomplishes its mission by operating a portfolio of direct service programs, building organizational and field capacity and leading policy and advocacy initiatives to strengthen family economic stability.

Consumer Action’s Audrey Perrott (AP) caught up with Sue Rogan (SR), CASH’s director of strategic partnerships, to learn more about the CASH Campaign of Maryland. (Rogan also is a member of Consumer Action’s board of directors.)

AP: Who is CASH’s target audience?

SR: While anyone is welcome to attend our financial education classes, our target audience is low-to-moderate-income individuals in the state of Maryland.

AP: Has your staff used Consumer Action publications in your education, counseling, coaching and outreach program?

SR: CASH uses many of Consumer Action’s publications in our financial education classes and promotes your materials to our partners to order for their classes as well. CASH recently used A Guide to Finding the Right Job Training School, for instance, to train local stakeholders. We love that the publications are free and convenient!

AP: Does your staff use Consumer Action publications in languages other than English? If yes, which languages?

SR: We have ordered and distributed publications in Spanish to meet the needs of our many local Spanish-speaking participants. It’s certainly helpful that you offer publications in so many languages.

AP: Has your staff attended Consumer Action training events?

SR: CASH staff has attended many of Consumer Action’s trainings, including the annual National Consumer Empowerment Conference, and, recently, the Insurance in the Sharing Economy and Finding the Right Job Training School trainings. The trainers and the content are always first-rate, well delivered and helpful.

AP: What best practices can you share for using Consumer Action’s publications or attending our trainings?

SR: Consumer Action materials are important to a financial education program because not only are they up-to-date, they are not biased. Participants trust the material because it is not promoting any products or services. It’s helpful to order materials in the winter and summer in order to have enough available for the spring and fall when there seem to be many local outreach events. When attending a training, community-based organizations should plan beforehand for how the content will be used (i.e., will your organization host a workshop with the material and, if so, when?).

AP: Is there anything else that you would like to share about how partnering with Consumer Action has enhanced your financial education, counseling or coaching programs?

SR: Partnering with Consumer Action is an important part of our financial education programs. The trainings and publications contain relevant, non-judgmental, fact-based concepts and education. The newsletters always contain tips that we use to raise awareness of consumer issues. We truly appreciate the advocacy work conducted by Consumer Action to protect consumers, especially the most vulnerable.

Hotline Chronicles: Are credit card surcharges legal?

Dimitri* from San Francisco wrote to Consumer Action’s hotline about a restaurant that charged him an extra fee for using a credit card.

“Is there anything I can do?” he asked.

Since Dimitri lives in California, where retailer credit card surcharges (sometimes called “checkout fees”) are illegal, we advised him to submit his complaint to the California attorney general’s (AG) office, which offers a PDF form you can download, fill out and mail in. According to the AG’s office, each complaint is considered according to its “own particular facts,” so make sure to submit photos, receipts and other information to help make your case.

In addition to California, credit card surcharges also are illegal in Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas. Residents of these states who encounter retailer checkout fees are advised to report them to their state attorney general. Be aware that even in states that prohibit surcharges, merchants generally are allowed to offer a discount for paying with cash or a debit card—this is not the same as a checkout fee.

It may violate state laws prohibiting deceptive or false advertising if a merchant in any state fails to prominently disclose prices and extra fees before you pay for an item. Check the cash register display and your receipt to make sure that the price you’re being charged matches the advertised or posted price of an item.

Merchants must also abide by their contract agreements with card networks (Visa, MasterCard, American Express or Discover), which may allow businesses and organizations to charge “convenience fees” (not considered surcharges, and legal in all states) for certain transactions, such as buying theater tickets by phone or online, using a credit card to pay tuition or taxes and making charitable donations. To learn more about your card’s convenience fee policy, visit CreditCards.com.

For more information, see Consumer Action’s Credit card checkout fees: Consumer rights and retailer responsibilities.

*Not this consumer’s real name

Low-income seniors learn how to avoid fraud, and more

This summer, two Consumer Action staff members, Jamie Woo and Cui Yan Xie, attended San Francisco’s Yerba Buena Senior Ball at the Moscone Center to distribute Consumer Action publications on fraud and scams. The community development non-profit TODCO Group hosted the annual event. The Yerba Buena development houses more than 2,000 seniors, most of whom are Chinese, Filipino or Russian immigrants, and the senior ball has proven to be a well-attended event.

The theme of this year’s ball was “red, white and barbecue” and, fittingly, some of the seniors in attendance could be seen wearing American flag-patterned clothing.

TODCO invited about 15 non-profit organizations to the event to provide educational materials on U.S. financial and marketplace matters. Approximately 90 percent of the elders in attendance were Chinese-Americans. Consumer Action brought about 2,000 educational brochures (mainly in Chinese) to educate participants on senior scams, ID theft, health records privacy, checking and savings accounts, the California LifeLine phone subsidy program and how to file a consumer complaint.

The materials were such a draw that they were all taken in one hour. An event planner told Woo and Xie that 1,200 senior housing residents attended the senior ball this year—200 more than last year.

One elderly couple recognized Woo from her many Chinese-language media appearances. Running up to her, they exclaimed, “We know you! You were on Channel 26 Chinese News and you taught us how to prevent senior scams!”

“It’s a great feeling when you know you’re being heard by a vulnerable population like seniors,” Woo said. “They are often the first victims of scammers and other predators, who believe they are easy prey.”

Coalition Efforts: Threats to investors, Medicare recipients and others

It’s buyer beware with the SEC’s latest “best interest” proposal. Coalition advocates called on the Securities and Exchange Commission to clarify its proposed “best interest” standard, and asked that it make the required disclosures much easier to understand for consumers. The proposed best interest standard, if finalized in its current form, could make shopping for financial advice even trickier for unsuspecting investors. Advocates also asked that the SEC make the best interest standard no less stringent than the existing Advisers Act fiduciary standard. Otherwise, investors may not be aware that investment professionals are selling them products they don’t need in order to turn a profit. Learn more.

Payday alternative loans shouldn’t permit cycles of high-cost debt. In a letter to the National Credit Union Administration, more than 100 coalition advocates opposed changes that would permit credit unions to make bigger profits on short-term loans. The changes would permit customers to take an unlimited number of high-cost loans, resembling the very payday loan debt traps that payday alternative loans are supposed to help Americans avoid. Learn more.

Consumer advocates fight ‘License to Kill’ bills in New Jersey. New Jersey state legislation (S 2740 and A 4292), dubbed “License to Kill” bills, would make regulating auto industries and protecting the safety of New Jersey consumers much more difficult. Backed by auto dealers, the bills would drastically weaken existing New Jersey laws that protect consumers from being defrauded and purchasing unsafe vehicles. Learn more.

Medicare Advantage enrollees could lose critical benefits. Medicare Advantage plans that earn a high “star quality rating” receive a bonus they must apply to enhanced benefits for members (benefits not included in original Medicare). In some counties, a “benchmark cap” prevents these high quality plans from receiving the quality bonuses they’ve earned. As a result, beneficiaries in certain locations do not receive the enhanced benefits enabled by quality incentives. In 2018, over 4 million beneficiaries in 4-star or higher plans were denied enhanced benefits, including reduced cost sharing, due to the cap on these bonuses. In a letter to Congress, coalition advocates supported the bipartisan Improving Seniors Access to Quality Benefits Act (HR 4952), which aims to remove the cap for 4-star or higher plans to ensure all beneficiaries benefit from enrollment in high-quality plans. Learn more.

CFPB Watch: Settling for less, and lessening deserved penalties

In the first seven months of his tenure, Consumer Financial Protection Bureau (CFPB) Acting Director Mick Mulvaney had issued only one enforcement action, hitting Wells Fargo with a huge fine for forcing consumers who had taken out auto loans and mortgages through the bank to pay for unnecessary insurance and rate locks. (The enforcement action did not include Wells Fargo’s recent admission of wrongfully foreclosing on more than 400 people, leaving them without homes.)

In recent weeks, however, the CFPB began wrapping up some of the 50 or so open cases set in motion under its former director. But the current leadership appears to be taking a softer approach in settlements with accused wrongdoers.

The ‘Mulvaney discount’

David Dayen of The Intercept wrote that in at least three cases the CFPB has “explicitly reduced the fine handed down against corporate offenders to a fraction of the initial amount...The smaller fines mean softer punishment for violations of law and, in some cases, less restitution to victims of the misconduct.” Dayen called the phenomenon the “Mulvaney discount.”

In one example, Dayen cites a settlement with the debt collection agency National Credit Adjusters. The collectors were charged with unlawfully overstating the amounts that consumers owed and illegally threatening to sue them. A CFPB settlement permanently barred the company from debt collection, but the case offered no restitution for consumers and no meaningful punishment for National Credit Adjusters outside of two $3 million penalties, including one levied against the company’s CEO. The debt collectors cried foul, claiming they could not shoulder such a “financial burden,” and the fines were slashed to only $500,000 for the collection agency and $300,000 for its chief.

Dayen asserts that the Mulvaney discount also was applied to a settlement with auto title lender Triton Management Group.

The CFPB settles with an auto title/payday lender

The CFPB settled with Triton Management Group for failing to reveal the true finance charges on its auto title loans in Mississippi, and for not disclosing interest rates for the loans in its ads. According to a consent decree, the company had said that a consumer would pay $625 in finance charges on a $2,500 loan. But far from $625, consumers actually paid a whopping $3,437.50 in finance charges.

As a result of the Triton Group settlement, customers of its auto title lenders Always Money and Quik Pawn Shop will receive refunds. Triton (which does business in Mississippi, Alabama and South Carolina) will return $500,000 (a fraction of the $1,522,298 in undisclosed finance charges it collected from borrowers) for misrepresenting its finance charges to consumers. The CFPB (or a firm on behalf of the Bureau) will dispense the refunds.

Dayen notes that the CFPB calculated that “borrowers paid $1,522,298 more than they expected to, based on Triton’s erroneous disclosures.” So, “for the crime of overcharging auto title loan borrowers in Mississippi, Triton was sentenced to making only $1 million in excess profits, instead of $1.5 million,” wrote Dayen. “All because Triton pleaded poverty and got put on a ‘pay-what-you-can’ plan for corporate crime.”

Curbing deceptive overdraft pitches

In another recent settlement, the CFPB ordered TCF National Bank to pay $25 million to consumers for the bank’s misleading overdraft practices. Specifically, the CFPB charged the bank with tricking new accountholders into believing they had to accept an option to overdraw their accounts and be charged hefty fees when they did. According to the law, banks are not allowed to charge overdraft fees on ATM withdrawals or one-time debit purchases without a consumer’s specific consent (opt-in). The Bureau charged the Minnesota bank with adopting a “loose definition” of consumer consent.

According to the CFPB investigation, TCF relied on overdraft fee revenue more than other banks—in fact the bank’s chief executive officer named his boat “The Overdraft.” The CFPB found that by 2014, about 66 percent of TCF customers had “opted in” to overdraft services, representing more than triple the opt-in rate of other banks.

A settlement reached by the CFPB and its fellow regulator, the U.S Office of the Comptroller of the Currency, will return $25 million to consumers. TCF will also pay a $5 million fine to regulators.

Class Action Database: Withholding painkiller proves painful for Big Pharma

A class action settlement involving Lang Pharma Nutrition and its advertising of Coenzyme Q10 (CoQ-10) dietary supplements was among 15 new settlements added to the Consumer Action Class Action Database during August.

This month we want to highlight the class action settlement In re Lidoderm Antitrust Litigation.

Plaintiffs alleged that Endo Pharmaceuticals, Teikoku Pharma USA and Watson Laboratories violated antitrust laws in delaying the release of a less expensive generic version of a Lidoderm painkiller patch.

Teikoku holds the “New Drug Application” (NDA) for the prescription Lidoderm painkiller patch, which, among other uses, treats pain associated with an excruciating complication of shingles (post-herpetic neuralgia). A pharmaceutical company must obtain approval of its NDA before it can bring a medication to market in the U.S.

Teikoku agreed that Endo would sell its Lidoderm in the US. However, Watson (another pharmaceutical company) petitioned the FDA in 2009 to manufacture a generic version of the Lidoderm patch. In 2010, Endo and Teikoku sued Watson for patent infringement, resulting in a 2012 settlement in which Watson agreed to substantially delay the launch of its patch.

Consumer plaintiffs claimed that in doing so, Endo, Teikoku and Watson entered into an unlawful anticompetitive agreement where Endo and Teikoku paid Watson at least $96 million not to sell a generic version of Lidoderm until September 2013. Plaintiffs allege that defendants kept the price of Lidoderm artificially high, since Watson failed to release a generic version for years, despite FDA approval in August 2012.

According to Reuters, “the case is among several in recent years targeting ‘pay-for-delay’ settlements, in which brand-name drugmakers resolve patent lawsuits by paying generic manufacturers to keep their products off the market for a longer period.”

The defendant denied the allegations but agreed to a $104 million settlement to avoid the burden, expense and risk of continuing the lawsuit.

You may be a class member if, while in Arizona, California, Florida, Kansas, Maine, Massachusetts, Minnesota, Nevada, New Hampshire, New Mexico, New York, North Carolina, North Dakota, South Dakota, Tennessee, West Virginia or Wisconsin, you paid some or all of the purchase price of:

  • Lidoderm, between Aug. 23, 2012 and Sept. 14, 2013, and/or
  • AB-rated generic Lidoderm, between Sept. 15, 2013 and Aug. 1, 2014.

However, you are not part of the class if you paid for the product through:

  • A single flat co-pay (i.e., a fixed-dollar co-payment that does not vary on the basis of the purchased drug’s status as branded or generic);
  • A flat generic co-pay (i.e., a fixed-dollar copayment); or
  • The Medicaid program.

The claims deadline is Oct. 1, 2018.

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 seven 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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