California Consumer Law Blog

The Federal Trade Commission has released a statistical survey of fraud in the United States that shows that 30.2 million adults – 13.5 percent of the adult population – were victims of fraud during the year studied. More people – an estimated 4.8 million U.S. consumers – were victims of fraudulent weight-loss products than any of the other frauds covered by the survey.

Fraudulent foreign lottery offers and buyers club memberships tied for second place in the survey. Lottery scams occur when consumers are told they have won a foreign lottery that they had not entered. Victims supplied either personal information such as their bank account numbers or paid money to receive their “winnings.” In the case of buyers clubs, victims are billed for a “membership” they had not agreed to buy. An estimated 3.2 million people were victims of these frauds during the period studied.

Fraudulent prize promotion schemes ranked fourth in the fraud survey, with an estimated 2.7 million victims reporting making a purchase, a payment, or attending a sales presentation to receive a prize that either was never delivered or was not what the consumer expected.

Work-at-home programs, in which the purchaser earned less than half of the income the seller had promised, ranked fifth among the fraudulent schemes covered by the survey. An estimated 2.4 million individuals fell victim to these schemes, and many purchased more than one fraudulent work-at-home program.

Twenty percent of African Americans and 18 percent of Hispanics are estimated to have been victims, while the rate for non-Hispanic whites was 12 percent. In addition, the survey found that younger consumers, those who did not complete college, and those with high levels of debt were more likely to be victims of fraud. Consumers between 65 and 74 years of age were 32 percent less likely to report having experienced fraud than those between 35 and 44.

The top 10 frauds listed in the report include:

* Fraudulent Weight-Loss Products (4.8 million victims)
* Foreign Lottery Scams (3.2 million victims)
* Unauthorized Billing - Buyers Clubs (3.2 million victims)
* Prize Promotions (2.7 million victims)
* Work-at-Home Programs (2.4 million victims)
* Credit Card Insurance (2.1 million victims)
* Unauthorized Billing - Internet Services (1.8 million victims)
* Advance-Fee Loans (1.7 million victims)
* Credit Repair Scams (1.2 million victims)
* Business Opportunities (.8 million victims)

Consumers also reported falling victim to other specific scams, including pyramid schemes.

Print advertising – direct mail, including catalogs, newspaper and magazine advertising, and posters and flyers – was used to pitch fraudulent offers in 27 percent of reported incidents. The Internet, including Web sites, auction sites, and e-mail, was used to make 22 percent of the fraudulent pitches. Television or radio accounted for 21 percent of the pitches, and telemarketing accounted for nine percent.

Makler & Baker LLP offers these tips for consumers:

* Know who you’re dealing with: Do business only with companies that plainly provide their name, street address, and phone number.

* Contact a reputable and experienced consumer protection law firm. If you think you have been a victim of fraud, call Makler & Baker LLP at 866-985-3666 to evaluate your legal options.

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"Thanks to America's five major consumer organizations, which have dedicated their work to keeping consumers safer, competition alive and the environment clean, 'The Motor Vehicle Owners' Right to Repair Act' will have an additional boost for passage," stated David Parde, president, The Coalition for Auto Repair Equality (CARE).

The letter of the consumer groups' endorsement, jointly signed by the Advocates for Highway and Auto Safety; Center for Auto Safety; Consumers for Auto Reliability and Safety; Consumer Federation of America; and Public Citizen, have endorsed HR 2694, The Motor Vehicle Owners' Right to Repair Act, by stating that, "the ability to quickly and easily repair computerized vehicle systems is crucial for the safe operation of a vehicle.

"Under the bill, vehicle owners will also be able to choose, on cost and reliability grounds, between competing repair facilities and aftermarket parts. Consumer and independent service sector access to vehicle maintenance information will in turn greatly enhance overall public safety and the environmental effort to clean up our air," continued the joint statement.

Parde added to the consumers organizations' statement by stating that: "'The Right to Repair Act' is about the ability of motoring consumers to actually own their vehicles' repair information, which should have been included with the purchase of the vehicle. Vehicles that are now out of warranty should not be forced back to the higher-priced car dealerships for repair work unless the consumer chooses that venue."

The consumer organizations' endorsement of 'The Right to Repair Act' says, "we request that FTC Chairman Deborah Platt Majoras, uphold her commitment to American consumers through the development of sound antitrust policy and strict enforcement in this area. We are committed to work with Chairman Majoras in order to provide to American consumers the advantages of robust competition in access to automotive repair facilities," continued the letter, which concluded with thanking sponsors of 'The Right to Repair Act' for their leadership and urging other Members of Congress to cosponsor and support 'The Motor Vehicle Owners' Right to Repair Act of 2007."

The joint consumer letter was signed by the leaders of the five major consumer organizations:
Jacqueline Gillan, Advocates for Highway and Auto Safety; Clarence Ditlow, Center for Auto Safety; Rosemary Shahan, Consumers for Auto Reliability and Safety; Mark Silbergeld, Consumer Federation of America; and Joan Claybrook, Public Citizen

The automotive aftermarket employs five million people nationwide in over 495,000 locations, including "mom and pop" shops.

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Posted In: Auto Repairs

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Launching what it described as a counter-marketing campaign, U.S. PIRG set up booths at 40 campuses nationwide Wednesday to parody the way cards are marketed to students. Wearing T-shirts and caps promoting the fictional credit card "Feesa," protesters gave out lollipops emblazoned with the message "Don't be a sucker."

"We believe that college students are victims of unfair credit card marketing practices that we think we can stop," said Ed Mierzwinski, consumer program director for U.S. PIRG, a federation of state Public Interest Research Groups. "Colleges can change their ways, whatever their previous motive."

Colleges have turned a blind eye to aggressive and frequently deceptive credit card marketing on their campuses -- and sometimes even profit from it. Universities commonly allow credit card companies to set up booths in campus bookstores, stuff advertisements in college "welcome" packets and post fliers in cafeterias. Some colleges, in exchange for a fee, give some banks the names, phone numbers and e-mail addresses of students to help in the peddling of plastic. The fees typically go to support student activities.

"Colleges know that students come to our campuses with very little financial savvy," said Becky Timmons, assistant vice president for government relations the American Council on Education. "The changes they are experiencing at that time can make them vulnerable to undertaking credit that they will later come to regret. We see this [campaign] as a way that colleges can help their students to become more sophisticated consumers."

Especially egregious to students are credit card provisions which include so-called universal default rules that allow card companies to raise a borrower's interest rate for a credit transgression with other lenders, low "teaser" rates that quickly convert to high rates, and penalty fees and rates that can boost the cost of credit retroactively -- often when the cardholder is already financially stretched.

The credit card companies are pushing something that students can't refuse...easy credit at time either they have never been on their own or have limited funds to cover their expenses (necessary or not.) Often students get themselves into a financial mess with late payments and late charges at a time early in their credit history. Their lack of financial savvy and mistakes mad with credit cards will remain with them many years after they leave college and need good credit to buy a car or house. While I don't disagree that students should learn to use credit wisely, credit card companies should take some responsibility and not be extend credit to those who lack the ability to repay their debts. And since we know corporate America won't do the right thing, college admistrators have to protect their students and curb credit card companies activities' on their campuses.

College administrators must take an active role in determining the type of credit card marketing allowed on their campuses, even to the point of discouraging issuers from including certain controversial terms in card agreements. There is also a great need for schools to boost financial literacy efforts, prohibit the use of gifts as inducements in campus marketing, restrict the appearance of card-marketing posters and fliers on campus, block the dissemination of student lists and stop campus groups from striking deals with lenders.

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Basic Problem: Unregulated Markets Do Not Work

'Market forces, if given complete authority even in the purely economic and financial arenas, produce chas and could ultimately lead to the downfall of the global capitalist system' as put simply by George Soros. Consequently, even those poeple like Soros who believe strongly in the power of the market understand that the market forces must be directed to ensure the viability of the market system.

One of the important factors of our market economy is honest information. If a seller of any type of goods or services misrepresents the value of the goods or services, buyers will purchase from that seller rather than from a different seller who is actually providing BETTER goods and services. In the same way that millions of separate transactions between a knowledgeable buyer and seller can produce a functioning economy, millions of separate transactions based on misinformation will pervert and fundamentally harm an economy.

In this way effective enforecment of our consumer protection laws, like the Truth in Lending Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act and the Equal Credit Opportunity Act is necessary to keep the American economy strong. Consumer lawyers are not just advocating for their client's individual rights but our American way of life, which some believe to be a birthright.

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Posted In: Consumer Protection

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