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Consumer Action INSIDER - September 2010

Table of Contents

What people are saying about Consumer Action

“I wanted to express to you how valuable is each and every event presented by Consumer Action MoneyWi$e. We not only get a great deal out of the presentations but also through the networking that takes place. Thank you for all you do!” —Diane Boyer, Budget & Credit Team Leader, Affinity Fed Credit Union

Consumer Action urges better housing data collection

The term “redlining” was coined in the late 1960s to describe an unfair business practice of delineating geographic areas where the company will not do business. Redlining results in lack of, or much higher costs for, key consumer services such as insurance, banks, healthcare and supermarkets for occupants of these areas, which tend to be places where poor people and minorities live.

In 1975 Congress passed the Home Mortgage Disclosure Act (HMDA) to require financial institutions to collect, and submit annual reports to the government, containing demographic information about all home purchases, home purchase pre-approvals and refinancing applications. But many believe that in recent years the government has not collected all the data it needs to actively prevent discriminatory practices by lenders.

The value of HMDA data drew attention in recent months in the midst of a high-profile bank merger, when the Federal Reserve Board reported: “HMDA data alone provide an incomplete measure of an institution’s lending in its community because these data cover only a few categories of housing-related lending [... ]. HMDA data, therefore, have limitations that make them an inadequate basis, absent other information, for concluding that an institution has not assisted adequately in meeting its community’s credit needs or has engaged in illegal lending discrimination.”

On August 10 our Consumer Services Manager Joe Ridout spoke at one of a series of hearings held around the country by the Federal Reserve Board to gather public input on the importance of using HMDA data to eliminate the consequences of redlining. “HMDA must respond to the evolution of mortgage products and the diversity of homeowners by itself continuing to evolve, so that data points can remain relevant in an increasingly complex universe of housing needs and mortgage products,” suggested Ridout.

Many critics of the current system of data collection acknowledge that in 1975 the Federal Reserve Board could not have foreseen the challenges in current day mortgage lending, such as packaged mortgages sold as investments on Wall Street, mortgage modifications to homeowners facing foreclosure, and the various exotic and toxic mortgage products that buoyed the subprime lending industry before its bust in late 2008. Today there are claims that mortgage modifications are racially skewed, but these reports can’t be verified without expanding the scope of the data currently collected.

Ridout presented an example of this in the Asian category in HMDA data collection. By not evaluating the data according to specific Asian American and Pacific Islander (AA/PI) ethnicities, the government risks missing key policy differences between these communities. Under the current practice, it is difficult to track mortgage lending trends and create innovative housing policy for these communities as well as other underserved groups.

Ridout pointed out at the hearing that in the midst of the continuing housing crisis, it is vital for the Federal Reserve Board to base its housing policies on the most accurate and relevant data possible. Failure to do so may cause social problems in overlooked communities to worsen, said Ridout.

FTC bans advanced fees for debt relief services

Consumers probably are all too familiar with the TV ads in which “debt relief” companies claim they can dramatically reduce individual debt, allowing the indebted to repay only a fraction of the total they owe. In reality, these companies encourage people to use what little income they have to pay hefty, non-refundable advance fees for services that yield little to no results.

Working alongside fellow national advocates, Consumer Action fought for several years to gain new protections for consumers against deceptive debt relief.

Starting on October 27, 2010, new FTC rules will prohibit for-profit companies that sell debt relief services over the telephone from charging fees before they have settled or reduced a customer’s credit card or other unsecured debt. The FTC also extended the Telemarketing Sales Rule to cover calls consumers make to debt relief firms in response to the company’s advertising—not just the unsolicited calls companies make to consumers.

According to the new rule, companies cannot collect payment until at least one debt is settled, with both the consumer and creditor agreeing to the new terms. Companies must make sure to keep individual consumer’s funds in a dedicated account. For more about the rule, read the FTC press release.

In the past ten years the FTC has taken action against 259 companies that allegedly used deceptive practices to further injure consumers. “At the FTC we strive every day to make sure America’s middle class families get straight deals for their dollars,” said Commission Chairman Jon Leibowitz.

Linda Sherry, director of national priorities, attended the Middle Class Task Force event at the White House, at which the FTC joined Vice President Joe Biden to announce the new debt relief rule. “This new rule will protect the very consumers who can least afford to lose money to profiteers who falsely claim that consumer debts can be settled for only a portion of what is owed,” said Sherry.

Consumer Action will update its consumer educational materials to reflect the new rules between now and the time they go into effect.

Consumer Action is also pushing for the enactment of the Debt Settlement Consumer Protection Act of 2010, introduced by Senators Charles E. Schumer (D-NY) and Claire McCaskill (D-MO). If passed, the legislation would provide greater disclosure to consumers about how the programs work (or don’t work), limit fees that debt settlement firms can charge, and provide additional enforcement power to state and federal officials to crack down on abusive and predatory companies.

“When consumers are working to get their financial house in order, the last thing they need is for debt settlement scams to bury them deeper into debt,” said Schumer.

Earlier this year, Consumer Action joined the Consumer Federation of America, Consumers Union and the National Consumer Law Center in issuing an alert to warn consumers about using debt relief (also called debt settlement) services. Click here to read the release.

Consumer Action awards grants for financial literacy training

For the past eight years Consumer Action has worked closely with financial institution Capital One to enhance the financial literacy capacity of local organizations across the country. Last year $148,750 in grant money was distributed to 91 organizations. Through tracking of grantee activities, Consumer Action can be sure that the recipients made tangible differences in the lives of their clients and communities.

This year, Consumer Action announces awards to: Catholic Charities Archdiocese of New Orleans, Novadebt, Hope Community Action Partnerships, the Louisiana State University’s AgCenter, Money Management International of Baton Rouge, Newark Now, the New Jersey Coalition for Financial Education, the Opportunities Industrialization Centers of America, the Philadelphia Chinatown Development Corporation, and the Urban League’s Affordable Housing & Community Development Corporation. Each group will receive $5,000 to provide financial education using Consumer Action’s MoneyWi$e financial literacy modules.

Incorporated in 1938, Catholic Charities Archdiocese of New Orleans advocates for the voiceless and empowers the most vulnerable to foster a more just society. The organization currently operates 45 programs, several of which are geared directly toward hurricane recovery. Catholic Charities has been committed to helping rebuild the region devastated by repeated catastrophe.

As part of its Consumer Action/MoneyWi$e project, Catholic Charities Archdiocese of New Orleans will educate 30 participants for 12 weeks. Each week is dedicated to a different financial empowerment module. The training will allow participants to create a realistic budget based on an action plan that accounts for each family’s income and expenses. At the conclusion of the program participants will receive $50 to open a checking account and $25 to deposit in a savings account.

Novadebt is a New Jersey-based non-profit consumer credit counseling agency. Since 1991, Novadebt has provided free financial counseling to consumers, workshops, debt management plans for those in need of debt relief, and housing counseling services including pre-purchase, default and reverse mortgage assistance. With its Moneywi$e grant, Novadebt plans to educate 16 families in the organization’s life skills shelter program. Participants in the Family Promise life skills program live on-site for about 11 weeks. During this time counselors help families develop comprehensive action plans to improve their financial condition and credit scores.

For close to 45 years, HOPE’S Community Action Partnerships Inc. has provided educational and community services to low income communities in Hudson County, New York. HOPES’ goal is to help families attain economic self-sufficiency. HOPE’S CAP will use its grant funds to educate seniors, VITA tax clients and Head Start families using the MoneyWi$e curriculum. The group expects to educate 100 people.

The Louisiana State University Agricultural Center’s mission is to provide the people of Louisiana with research-based educational information to improve their economic well-being. It recently used the MoneyWi$e modules to educate consumers in the wake of the Gulf oil spill. The LSU AgCenter plans to use Consumer Action’s MoneyWi$e materials to teach money management skills to middle and high school students from low-income households.

Money Management International (MMI) CCCS of Baton Rouge provides financial guidance, credit counseling, educational programs, debt management bankruptcy and housing counseling to consumers by phone, internet and in-person. For its MoneyWi$e project, MMI plans to educate 200 high school students at Avoyelles and Rapides Parish high schools using the Good Credit, Rebuilding Credit, and Identity Theft MoneyWi$e modules.

Newark Now was founded by Newark Mayor Cory A. Booker in 2003 to provide Newark residents with skills, tools, and support to transform their neighborhoods. With its grant Newark NOW will host bi-weekly financial literacy classes and provide one-on-one counseling to at least 20 clients per month. In addition, the agency plans to track clients’ successes after meeting with the agency’s credit coach.

The goal of the New Jersey Coalition for Financial Education is to improve the personal financial literacy of all New Jersey citizens. The Coalition plans to offer six 2½ hour workshops for 25 female ex-offenders and their 10 mentors. The agency will also provide one-on-one financial counseling to discuss income and expenses, credit scores, and asset development.

The Opportunities Industrialization Centers of America, Inc. (OICA) is a non-profit organization that operates through a national network of locally affiliated organizations. Since 1977 the center in serving the Arkansas area of Ouachita has provided job skills training in a classroom setting. As part of its stipend project the organization will train clients using a combination of one-on-one counseling and small group workshops to simulate “real world” scenarios.

The Philadelphia Chinatown Development Corporation (PCDC) is a grassroots, non-profit whose mission is to serve the interests of Chinatown residents. Since 1966, it has strived to develop affordable housing projects in Phillie's Chinatown serving low-income residents, particularly those with limited-English proficiency. The organization will distribute MoneyWi$e brochures to 80 attendees of a Quality of Life community fair and conduct three money management workshops with 12 clients per workshop.

The Urban League’s Affordable Housing & Community Development Corporation is working to build the infrastructure and economy of urban neighborhoods. The organization, established as a subsidiary in 1993, revitalizes low to moderate income areas while preserving the fabric of its neighborhoods. As part of its financial literacy initiative, the organization will provide five monthly financial literacy workshops, one–on-one counseling, and technical assistance to low income adults and families. The organization will provide at least 100 families and individuals with assistance in obtaining credit reports, preparing budgets, and providing resources for rebuilding credit and wealth building strategies.

MoneyWi$e promotes financial best practices in the Lone Star state

Earlier this summer, Consumer Action’s train-the-trainer team landed in Texas to hold financial education trainings for local community-based organizations (CBOs) and bankers. During full-day trainings in Dallas and San Antonio, CBO participants learned about best practices for teaching adults about good credit and money management. Our team also conducted half-day trainings on how to teach financial literacy for Capital One bankers in Plano and San Antonio.

At the Dallas training for community groups, Capital One’s Bert Davis kicked off the day with a session on teaching adults. It was followed by the “Sally Walker” exercise which employs a case study for a fictitious client who needs assistance in getting her financial affairs back on track. This group exercise created by Consumer Action’s staff teaches concepts from the Rebuilding Good Credit and Money Management modules. In the process, clients learned the importance of checking their specialty credit reports. Click here to visit Consumer Action's Outreach page, where you will find links to articles, best practices and training tools.

In the Teach Back session, our community outreach managers Linda Williams and Nelson Santiago gave trainees a chance to deliver practice presentations on Banking Basics, Micro Business Basics, Rebuilding Good Credit, and Senior Scams, Saving to Build Wealth, and ID Theft and Account Fraud. (Visit our Modules page for all presentations.) This session showed participants how to use real-world scenarios to deliver financial management concepts to prospective clients.

For a couple years, Consumer Action has conducted trainings for Capital One Bank employees to teach them about how best to use the MoneyWi$e modules in the community. At the Plano and San Antonio bankers’ trainings, Capital One employees expressed enthusiasm for using MoneyWi$e to educate consumers at branches and in the wider community.

Cell phone fraud uncovered in Chinese speaking community

Consumer Action’s advice and referral hotline — which responds to complaints in English, Chinese and Spanish — has seen a sharp uptick in complaints from Chinese speaking consumers about wireless phone fraud. Victimized by false promises at retail stores that profess to be but are not authorized dealers, these consumers end up owing monthly fees under contractual obligation without having a wireless device to make calls.

Consumers are lured into purchasing mobile phones with ads in Chinese newspapers touting rebates of up to $300. When the wireless phones are delivered, the consumers are told not to unpack the phones and bring them back to the shop for “activation.” Instead, consumers are provided with a lesser model or turned away empty-handed.

“Everybody likes a good deal,” said Jamie Woo, a Consumer Action Community Outreach Manager who works in the Asian-American community. “But in this case, consumers who respond to a money-saving offer find themselves owing way more money than they would have saved because they become victims of heartless fraudsters.”

Unfortunately, consumers can be held responsible for unauthorized calls on the phone account established in their name. The customer is responsible if they provided the unauthorized dealer with their personal information and permitted the unauthorized dealer to open a wireless service account for them.

In addition, unscrupulous retailers allegedly have committed fraud by claiming on consumer applications that the consumer qualifies for a discount as an employee of the U.S. Postal Service. Apparently they do this to be able to tell the consumer that they are giving them an even better deal. These misrepresentations are made without the consumer’s knowledge and could result in back-billing and even charges of fraud against the unwitting consumer.

These retailers appear to be using major cell phone company websites to place these orders "on behalf" of consumers. In some cases, the fraudulent retailer appears to be actually posing as the consumer making changes in the account and ordering more products in the consumer’s name.

Consumer Action and AT&T have developed tips for consumers to help them avoid this type of fraud:

  1. Purchase directly from a known wireless company (online or at brick-and-mortar stores) and do not be lured to shops by advertisements promising unreasonably attractive rebates.
  2. Make your purchase with an authorized dealership of the wireless phone carrier of your choice.
  3. Be cautious about offers that involve shipping a device to your home and then requiring you to bring the unopened box to a store for activation.
  4. Beware of rebates offered in monthly installments. Rebates are common, but most carriers offer them in the form of a one-time rebate check or prepaid cards you can use where major credit cards are accepted.
  5. Beware of cash back offers—as stated above, most carriers issue rebates as checks or debit cards.
  6. Most authorized dealers are exclusive to one carrier. If a company is selling phones and contracts from multiple wireless carriers, it might not be an authorized dealer as major carriers have exclusive deals.
  7. Safeguard personal information to minimize the risk of fraud and identify theft.
  8. Make it clear to the retailer that you do not want them to call the carrier on your behalf or use your name to alter your original order without your express permission. Review all contracts before you sign them. Do not allow anyone to claim a discount on your behalf that you are not entitled to.
  9. Be alert. If an offer sounds too good to be true it probably is.
  10. Contact the carrier that is billing you and ask for customer care. If you think you’re a victim, ask how the carrier can help you resolve the situation. If the carrier can’t help, contact your state's public utilities regulator and file a complaint. Find your regulator's contact information at the National Association of Regulatory Utility Commissioners website.

About Consumer Action

Consumer Action is a nonprofit organization that has championed the rights of underrepresented consumers nationwide since 1971. Throughout its history, the organization has dedicated its resources to promoting financial 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.

Financial Education. To empower consumers to assert their rights in the marketplace, Consumer Action provides a range of education resources. The organization’s extensive library of free publications offers in-depth financial information, while its hotline provides non-legal advice and referrals. Consumer Action also publishes an unbiased Annual Credit Card Survey that exposes 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 to moderate income and limited-English-speaking consumers, Consumer Action maintains strong ties to a national network of more than 8,000 community-based organizations. Outreach services include training and free mailings of financial education materials in many languages, including English, Spanish, Chinese, Korean, Vietnamese, and others. Consumer Action’s rapidly expanding 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, regulations, and legislation by taking positions on almost 200 bills per legislative session and testifying at least three times per year. Additionally, its diverse staff provides the media with expert commentary on key consumer issues supported by solid data and victim testimony.

Click here to learn more about our staff.

 

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