Friday, June 29, 2007
Student Loans Still An Issue, 3 Lenders Settle With New York
New York Attorney General Andrew M. Cuomo has announced agreements with three more lenders resulting from his ongoing investigation of the student loan industry:
- National City Bank
- Regions Financial Corporation, and
- Wachovia Education Finance, Inc. (“Wachovia”), a division of Wachovia Bank.
All have agreed to abide by the state's "Code of Conduct" for education loan practices. The agreement with Wachovia, the nation’s sixth largest provider of student loans, means that Cuomo has now reached agreements with the top six largest student loans providers in the country.
Attorney General Cuomo said, “With each agreement, more students and families are protected from corruption, more lenders and schools are compelled to reform their practices, and more integrity is restored to the student loan industry.”
Cuomo’s Code of Conduct was the first piece of legislation in the country aimed at ending the widespread conflicts of interest the student loan industry. Proposed federal legislation regarding the student loan industry also incorporates Cuomo’s Code of Conduct; the Student Loan Sunshine Act that is currently being considered by the U.S. Senate would require schools to adopt a Code of Conduct. The U.S. House of Representatives recently passed this legislation in a virtually unanimous vote of 414-3. Cuomo and Florida Attorney General Bill McCollum have sent letters to President Bush and Senate leaders urging them to support this legislation.
To date, 26 schools have committed to Cuomo’s Code of Conduct, 10 of which have agreed to reimburse students over $3 million for the cost of revenue sharing agreements. With today’s agreements, Cuomo’s investigation has resulted in agreements with the nation’s six largest student loan providers - Citibank, Sallie Mae, JP Morgan Chase, Bank of America, Wells Fargo, and Wachovia - as well as with Education Finance Partners (EFP), CIT, National City Bank, and Regions Financial Corporation. Sallie Mae, Citibank, EFP, CIT, Johns Hopkins University, Columbia University, Mercy College, and Career Education Corporation have also agreed to contribute $11.2 million to a national fund established by Cuomo that will educate high school students and their families about the financial aid process.
The Code of Conduct adopted by the lenders includes the following provisions:
1. Ban on Financial Ties. Lenders are prohibited from giving anything of value to any college in exchange for any advantage sought by the lender. This severs any inappropriate financial arrangements between lenders and schools and specifically prohibits "revenue sharing" arrangements.
2. Ban on Payments for Preferred Lender Status. Lenders may not pay or give colleges any financial benefits whatsoever to get on a college’s preferred lender list.
3. Gift and Trip Prohibition. Lenders are prohibited from giving college employees anything of more than nominal value. This includes a prohibition on trips for financial aid officers and other college officials paid for by lenders.
4. Advisory Board Rules. Lenders are prohibited from paying college employees anything of value for serving on the advisory boards of the lenders.
5. Call-Center and Staffing Prohibition. Lenders must ensure that employees of lenders never identify themselves to students as employees of colleges. No employee of a lender may ever work in or providing staffing assistance to a college financial aid office.
6. Disclosure of Range of Rates and Defaults. Lenders must disclose to any requesting school the range of rates they charge to students at the school, the number of borrowers at each rate at the school, and the lender’s historic default rate at the school. This will ensure that schools will have the information they need to select preferred lenders who are best for students and their families.
7. Loan Resale Disclosure. Lenders shall fully and prominently disclose to students and their parents any agreements they have to sell loans to any other lender.
Labels: Cuomo, student loans
Thursday, June 28, 2007
Laptop Battery Recalls Return
It's Gateway's turn now.
Almost a year after Sony batteries in laptops sold by Apple and Dell made international headlines when
more than four million were recalled, Gateway has a little battery problem of its own.
The company had its own version of a recall last year, but now is recalling 14,000 batteries shipped as the primary or spare battery pack for some Gateway 400VTX and 450ROG series notebooks, The batteries, manufactured in China and imported by Gateway in 2003, are identified by part numbers: 6500760 or 6500761. The part number and “made by SMP” are printed on a label on the underside of the battery pack.
According to the federal agency, consumers should stop using these recalled batteries immediately and contact Gateway to receive a replacement battery. Consumers can continue to use the notebook computers safely by turning the system off, removing the battery pack, and using the AC adapter and power cord to power the system until the replacement battery is received.
Gateway can be called at (800) 292-6813 between 7 a.m. and 10 p.m. CT seven days a week.
Labels: battery, CPSC, Gateway, laptop, recall
Friday, June 22, 2007
Subscription Renewals May Require Your Input
We've all seen renewal notices covering the last copy of a magazine issue advising us that the subscription will soon end. Don't worry -- magazine publishers have no qualms about continuing to send renewal notices in the mail that look like invoices.
What surprised the Consumer Help Web team this week was a wrap around
Smart Money, one of our favorite magazines typically chock-full of useful personal finance advice. This time, we received a notice that our subscription would automatically renew unless we took action!
Marketers call that process an "opt-out". That's fine for email, but the next document we receive from them that looks like an invoice will actually be an invoice. Salespeople call this an assumptive sale. One of our managers called it
the height of chutzpah.
Smart Money has so much good information at a reasonable price that we are reluctant to cancel, but this is an awful precedent. Remember to read everything a company sends you. There is nothing legislating this automatic renewal. For all we know, we missed agreeing to such a thing in the mouse-sized print when we bought the subscription. The biggest irony, of course, is that we suspect
Smart Money would advise against falling for such an automatic renewal.
Labels: magazine, Smart Money, subscription
Wednesday, June 20, 2007
Avoiding Home Repair Scams
Maryland Attorney General Douglas F. Gansler says it’s that time of year again when many consumers consider home improvement projects–and when scam artists may make the rounds. Springtime often brings out roving con artists who knock on people’s doors and offer to do work such as roofing, gutter cleaning, driveway paving or tree pruning. They sometimes appear in the aftermath of hailstorms or tornadoes, offering to repair storm damage. Some warning signs of a scam include:
- an offer of a reduced price because they’ve “just done a job nearby and have materials left over;”
- an offer of a “special” percentage off the repair without being clear about what the bottom-line price will be;
- no street address or telephone number, just a post office box or an answering service; and,
- a refusal to give a written estimate or contract.
Attorney General Gansler offered these tips for consumers who need work done on their homes:
- Get recommendations for contractors from satisfied friends and neighbors.
- Ask to see a contractor’s license, and get the license number and expiration date. In some states, contractors must display their home improvement license number on all of their home improvement contracts, trucks and advertisements.
- Call your local consumer protection agency to ask about any complaints filed against the company.
- Get references and check them to see if the work was done properly, on schedule, and within the contract price.
- Get estimates from at least two or three companies, especially for expensive repairs.
Labels: Gansler, home improvement, scam
Tuesday, June 19, 2007
We're Keeping Cell Phones Longer. Motorola, Sanyo Top List As Prices Drop; JD Power Study
The average reported length of time a customer owns their cell phone has increased by 5 percent since fall 2006, according to the J.D. Power and Associates 2007 U.S. Wireless Mobile Phone Evaluation Study.
The study finds that customers are keeping their mobile handsets for an average of 17.5 months—an increase from 16.6 months since the last reporting period (November 2006).
This marks the first increase in the reported ownership cycle since 2002, when the average was 18.4 months. The increase in ownership tenure is roughly equal across major handset brands.
“One possible reason for this significant increase in the length of handset ownership is that more customers are initiating or renewing their service contracts for a longer period—typically for two years, as opposed to just one year, which was customary a few years ago,” said Kirk Parsons, senior director of wireless services at J.D. Power and Associates. “While these longer contracts help wireless carriers recover the costs associated with offering subsidized cell phones, customers tend to hold on to their current cell phones longer to avoid termination fees when switching service, which may ultimately lead to lower renewal rates.”
The study also finds that
the price a customer pays for their wireless mobile phone has dropped from an average of $103 in 2002 to $93 in 2007. The decline is primarily due to discounts given by handset providers and wireless service carriers to incentivize sales. Currently, 36 percent of customers report receiving a free mobile phone when subscribing to a wireless service—up considerably from 28 percent in the 2002 study.
“It’s clear that wireless service carriers are using mobile phones as bait to increase consumer traffic, applying discounts either through rebates or free limited-time offers,” said Parsons. “The problem with this strategy is that, in most cases, the discounted handsets being offered are older models, which typically lack the latest technological advancements or desired design features.”
The study measures customer satisfaction with wireless handsets by examining five key factors. In order of importance, they are: physical design (24%); operation (22%); features (20%); handset durability (19%); and battery function (15%).
Motorola and SANYO tie to rank highest in overall customer satisfaction with wireless cell phones. Motorola performs particularly well in the physical design, operation and features factors, while SANYO receives high ratings in operation and battery functionality. Following Motorola and SANYO in the rankings and performing above the industry average are Samsung and LG, respectively.
The study also finds several key wireless handset usage patterns:
* Sixty-nine percent of all cell phones owned are a clamshell design—an increase of 19 percent from 2006. This compares to 29 percent for the candy-bar style, and 2 percent for the slide-cover design.
* Handset features that are used most frequently include: speakerphone (51%); camera capabilities (35%); services to send/receive short messages (22%); and gaming (16%).
* More than one-half of all current wireless users compared other handset brands before selecting their current wireless phone. Those customers who compare phones during the selection process are more likely to be satisfied overall with their current handset than those who do not.
Labels: J.D. Power, Motorola, Sanyo, wireless
Wednesday, June 13, 2007
Diabetes Drugs Continue To Come Under Fire
We
wrote last week about Avandia, the diabetes drug from Glaxo, under fire since a prominent cardiologist named Steven Nissen said that use of the drug could cause a higher risk of heart attacks. Diabetics are already in a high risk group for heart attacks, but Nissen concluded that Avandia use increased that risk.
Where the FDA has yet to act, the plaintiff's bar moved fast. On Monday, a New York law firm filed suit against Glaxo, its CEO and its CFO. This suit doesn't have the drama of a health-related suit. Instead, the case, for which firm Kaplan Fox & Kilsheimer are reportedly seeking class-action status, accuses the company of misleading shareholders about Avandia's safety.
Whether the truth comes out as a result of regulatory or legal action is moot. With a growing diabetes epidemic, knowing the truth fast is critical.
In related news, pharma giant Eli Lilly settled nearly 1,000 lawsuits stemming from its drug, Zyprexa. News reports peg the number of cases resolved at approaching 30,000. Zyprexa allegedly causes diabetes.
Labels: Avandia, Eli Lilly, Glaxo, Zyprexa
Tuesday, June 12, 2007
Best Buy Woes Continue
The wagons are undoubtedly circling in Richfield, Minnesota.
That's where Best Buy President Brian Dunn presides over a massive retailer that booked $1.3 billion in net income from $35 billion in sales. The 46 year old Dunn has successfully navigated choppy waters in big box retailing that consumed other players. Income is up, share prices have more than tripled in five years, and there is even a little dividend built in for value investors.
Until recently, Dunn's biggest headache was likely the stock price that had essentially stalled for two years. Now he faces revisiting a headache from
four years ago, when the giant retailer and Microsoft were accused of deceptive trade practices in luring consumers to the latter's Internet service. And the folks in Connecticut aren't helping either. Here's why:
The original case was tossed out in 2003, but now Wall Street is jittery because a Best Buy attorney has
admitted that he altered documents related to the case. The 9th U.S. Circuit Court of Appeals has
now ruled that the companies must stand trial again, this time for violating the RICO Act, more commonly associated in the public's mind with gangsters and organized crime.
On top of those headaches, Connecticut's savvy Attorney General Richard Blumenthal is finally bringing suit against Best Buy on an unrelated matter that the local press broke weeks ago. According to reports, Best Buy used a in-store website that looked identical to its commercial website but showed hire prices. This type of scam was common in the home improvement industry for decades, allowing contractors to show an "invoice price" and then add a healthy markup when the actual price was different. In a reversal of that idea, Best Buy allegedly showed in-store customer higher prices then were actually advertised on the web on a site that looked identical to the store's regular web site.
Blumenthal's comments about the suit were strident. "Best Buy gave consumers the worst deal - a bait-and-switch-plus scheme luring consumers into stores with promised online discounts, only to charge higher in-store prices, he said. The state has reportedly been gathering multiple consumer complaints from shoppers who say they visited Best Buy, but were told that the items set aside for the sales price were gone.
Labels: Best Buy, Blumenthal, Microsoft
Saturday, June 09, 2007
Six Months After California Settlement, Jackson Hewitt In Hot Water Again
Summertime may not be the season most people associate with taxes and tax preparers, but the IRS and Department of Justice are both reported to be examining Jackson Hewitt, the nation's #2 tax preparer.
Hewitt is not a target of the Justice Department's case, which centers on one of its larger franchisees. Meanwhile, the company disclosed that the IRS was examining Jackson Hewitt's corporate situation.
At the beginning of 2007,
we reported that California had reached a settlement with the company. Sometimes, it doesn't rain, but it pours. Hewitt, which has long chased H&R Block (a company with its own share of troubles) has over 6,000 locations in the nation, but about 80% of those are owned by franchisees.
The company continues to book solid, if unspectacular, growth and the stock's beta and pricing are as steady as one could hope for when looking at investments. Even the dividend keeps rising, but the company concedes in official filings that adverse publicity can impact revenue. Meanwhile, the results of the Justice Department's investigation may find that the consistency of preparation and offering of additional services for sale may vary widely between franchisees, creating a shopping issue for consumers.
As with all major chain preparers, consumers should thoroughly investigate the
branch they are visiting, not necessarily the headquarters company. That is good advice whether you are eating at McDonald's, sleeping in a Marriott hotel or having your taxes down by a household name. One simple call to your local (or state) consumer affairs agency should provide you with the information you need. Be sure to call Consumer Affairs instead of a business-sponsored organization like the BBB that has no regulatory authority and cannot compel a company to change its business practices or even respond to complaints.
Labels: Jackson Hewitt, taxes
Thursday, June 07, 2007
Vioxx Award Overturned As Avandia Cases Heat Up
Remember our quote telling consumer that the "
blood is in the water" regarding lawsuits over Merck drug
Vioxx?
That's what we said two years ago on the heels of a $50 million plus verdict against the drug's maker. Juries were apparently buying the argument that using the drug contributed to cardiac difficulties. Merck, makers of
Vioxx, has consistently stood by its product and taken the cases one by one, winning more than losing. And even when losing, Merck has used judicial remedies to manage their liability.
That strategy has paid off now that U.S. District Judge Eldon Fallon has proposed a $1.6 million settlement in lieu of a $50 million cash award. If the plaintiff, a retired FBI agent, does not accept the proposed settlement, the circus starts over again later this year. If the offer is accepted, Merck still lost, but priced down its liability from $50 million to less than $2 million.
Next up? Diabetes drug
Avandia.
Traditional media outlets jumped all over
GSK today when a highly respected physician said he was pressured into remaining quiet about his suspicions that the drug was also involved in cardiac issues. This case is even stickier according to various legal pundits because of the increased cardiac risks diabetics already have. Despite that, the
drugmaker is spending big bucks on full page ads in major newspapers to stand by its product as the attorneys and plaintiffs begin lining up for a whack at another drug's alleged side effects
Labels: Avandia, diabetes, Vioxx
Wednesday, June 06, 2007
Get Off The ATV! Importer Refuses To Help Recall Dangerous Children's ATVs
The U.S. Consumer Product Safety Commission (CPSC) is warning consumers who own a Kazuma Meerkat 50 Youth All-Terrain Vehicle (ATV) that
children are at risk of injury or death due to multiple safety defects with this off-road vehicle.
The agency said that the ATVs, imported by Kazuma Pacific, it determined that the Meerkat 50 lacks front brakes, has no parking brake, is missing a neutral indicator light, and can be started in gear. Additionally, the owner’s manual does not contain complete information on safe operation and maintenance of the ATV.
CPSC staff recommends that consumers stop using the product immediately because it is unsafe. The staff recommends that consumers demand a refund of the purchase price from the importer or dealer due to the defective condition of the ATV.
The risk with these ATVs is severe because these vehicles are intended for children age 6 to 11. In many cases, youth riders are just learning how to operate an ATV and may not have the experience necessary to help them avoid hazards associated with this product’s defects.
For some unknown reason, Kazuma Pacific has refused to provide complete incident or injury information for any of their products. In years of reporting on recalls and other safety issues, we can't remember such a blatant refusal for such a serious issue. The government is unable to determine how many children have been injured. The agency also state that between December 2006 and May 2007, Kazuma Pacific has impeded CPSC’s efforts to protect the safety of children, by refusing to implement a corrective action plan for this ATV.
Kazuma Pacific has sold at least 2,700 Meerkat 50 ATVs and has stated that they are continuing to sell the units that CPSC staff found to be defective. Kazuma dealers and Web retailers nationwide have sold this ATV since 2003 for between $525 and $825.
CPSC staff is requesting that consumers immediately report any incidents involving the Kazuma Meerkat 50 to the CPSC Hotline at (800) 638-2772 or to the CPSC Web site at www.cpsc.gov
Labels: ATV, CPSC, Kazuma
Tuesday, June 05, 2007
FAA Adds To Summer Storm Policy To Avoid Vacation Travel Delays
The Federal Aviation Administration (FAA) is expanding an air traffic program that reduces flight delays during the peak summer season. The Airspace Flow Program, as it is known, gives airlines the option of either accepting delays for flights scheduled to fly through storms or flying longer routes to safely maneuver around them.
The agency successfully launched the program last year at seven locations in the Northeast. On bad weather days at major airports in the region, delays fell by 9 percent compared to the year before. Cost savings for the airlines and the flying public from the program are estimated to be $100 million annually.
“This is a much better way to handle summer traffic,” said FAA Administrator Marion C. Blakey. “If your flight isn’t scheduled to fly through bad weather you don’t have to sit on the tarmac. If it is, your airline has the choice of taking a delay shared evenly by all the affected flights or flying around the storm.”
Before last year, severe storms often forced the FAA to ground flights at affected airports, penalizing flights not scheduled to fly through them. This program allows the FAA to manage traffic fairly and efficiently by identifying only those flights scheduled to fly through storms and giving them estimated departure times. In turn, the airlines have greater flexibility in planning schedules with less disruption for passengers.
This summer, the number of Airspace Flow Program locations — chosen for their combination of heavy traffic and frequent bad weather — will be expanded from seven to 18. The additional locations will ease delays for passengers flying through the South and Midwest, as well as those on transcontinental flights.
“Dynamic” programs will be introduced in other areas to target storms with surgical precision as they develop and move. Airspace Flow Programs will also be used in conditions not related to weather, such as severe congestion near major cities.
Airspace Flow Programs were conceived by the FAA two years ago and developed in close coordination with the airline industry. On bad weather days, agency and airline officials collaborate to decide where and when the programs should be put in place.
Labels: FAA, travel
Friday, June 01, 2007
ChoicePoint Settles Data Breach Again, This Time With The States
Consumer Help Web readers will remember the media frenzy surrounding the first of a well publicized series of data breaches in 2005. Information services giant ChoicePoint was
one of the first to go public that year with a massive breach that was originally thought to potentially impact 140,000 consumers.
Within days, the
United States Senate was threatening hearings, and MSNBC was following a story regarding the timing of insider trading of the company's stock. The company
made good with the FTC a year later, paying $10 million in penalties and another $5 million in consume redress. The penalties were the largest in the FTC's history, and the government agency issued an order requiring ChoicePoint to implement more stringent security measures.
Now the states have bellied up to the bar. A group of 43 states and the District of Columbia have settled with the company for a combined $500,000. That is a stiff fine, of course, and the company has already paid the federal government more than $15 million, but one wonders what was served by the states jumping into the fray for a few thousand dollars each?
ChoicePoint will have to continue upgrading its security safeguards, which is a good thing, but the "piling on" of the states one year after the company took a credibility, business continuity and financial hit seems excessive. Perhaps the money might have been better spent at ChoicePoint to protect consumer data.
Labels: Choice Point, data breach, FTC
