Released: February 28, 2015

Consumer Action INSIDER - March 2015

Table of Contents

• What people are saying
• Did you know?
• Effort aims to stop robocalls to cell phones without consent
• Boning up on fair housing issues
• Hotline Chronicles: Consumers find barriers to unlocking phones
• Class Action Database: Green coffee beans are a waste of greenbacks
• California bill would update key privacy rights
• New California law extends protections for reverse mortgages
• CFPB Watch: Advisory board hears about credit scores and medical debt
• About Consumer Action

What people are saying

I just signed your petition asking the FCC not to allow robocalls to cell phones without the user’s express permission. Thanks to Consumer Action for trying to do something about it. — Professor Susan Bock, University of Utah

Did you know?

Solar energy systems are widely available to help homeowners generate electricity. If you’re thinking about purchasing a solar energy system, a new consumer guide from LSU Ag Center provides basic information to help you explore various options, ask important questions and make well-informed decisions. Download the free PDF guide at the Louisiana State College of Agriculture website.

Effort aims to stop robocalls to cell phones without consent

The telemarketing, debt collection and banking industries want the Federal Communications Commission (FCC) to allow “wrong party” robocalls to cell phones, which will subject consumers to intrusive calls and texts if the caller obtains a number previously owned by someone else or if a debt collector associates a number with the wrong person.

More than 58,000 signatures protesting any action by the regulatory agency to allow robocalls to cell phones without consumers’ express consent were delivered to the FCC on behalf of a broad coalition of consumer groups fighting the industry proposal, which they believe would gut a key consumer and privacy law, the Telephone Consumer Protection Act (TCPA). Consumer Action joined Americans for Financial Reform, the Consumer Federation of America, the National Association of Consumer Advocates, the National Consumer Law Center, the National Consumers League, Public Citizen and U.S. PIRG in the campaign.

Powerful industry groups, including the Chamber of Commerce, the American Bankers Association, the American Collectors Association, the Consumer Bankers Association, and others are behind the proposal.

“Americans have shown they don’t want intrusive calls,” said Linda Sherry of Consumer Action, noting that more than 223 million people have placed home and cell phones on the National Do Not Call Registry. In 2013, close to 4 million complained to the Federal Trade Commission (FTC) about do-not-call violations.

In January, Consumer Action joined 83 national and state civil rights, community and consumer groups in a letter to the FCC demanding that the commission keep these important protections for cell phone users mandated by the TCPA. In addition to the petition delivered last month, 14 U.S. senators, led by Senator Ed Markey, sent a letter to FCC Chairman Tom Wheeler urging the agency to be faithful to Congress’s intention to stop intrusive and unsolicited calls to consumer landline and mobile phones.

“We hope the FCC will listen to the will of the people,” said Sherry. Signed into law in 1991, the TCPA restricts telemarketing calls, junk faxes and the use of automated telephone equipment. “This law works—we oppose any efforts to weaken it.”

You still can sign Consumer Action’s petition.

Boning up on fair housing issues

Housing was on the agenda for Consumer Action’s Audrey Perrott in January, when our San Francisco-based Associate Director of Outreach and Training attended a five-day training hosted by the National Community Reinvestment Coalition (NCRC) and a conference hosted by Fair Housing of Marin.

Perrott reports that the NCRC training provided non-profit staff members with a clearer understanding of the U.S. Department of Housing and Urban Development (HUD) and its housing counseling compliance requirements. The course covered topics that included affirmatively furthering fair housing, loss mitigation, recordkeeping, homebuyer education and mortgage default and delinquency. Michelle Lewis, CEO of Northwest Counseling Service, Inc., and Jeffrey May, assistant director of National Neighbors for NCRC, taught the course.

Lewis provided detailed information on current housing counseling requirements as well as a pending proposed rule. Under a HUD-proposed rule published Sept. 13, 2013, all housing counseling agencies would have to employ HUD-certified counselors. Counselors would have to show competency by passing a written exam in six areas: financial management and property maintenance; homeownership and tenancy; fair housing laws and requirements; housing affordability; avoidance of and responses to rental and mortgage delinquency; and avoidance of eviction and mortgage default.

Currently, there are approximately 2,400 HUD-approved counseling agencies. The agencies counseled 1.5 million consumers in 2013. Almost half of all counseling provided was for foreclosure prevention and mortgage default. Approximately 176,000 consumers sought pre-purchase counseling in that same time period. May took students on a historical journey, covering civil rights laws from their earliest days through the present. He discussed how housing counseling agencies need to continue to work to affirmatively further fair housing.

Toward the end of the week, Perrott attended “Housing Equality: The Big Picture,” a conference hosted by Fair Housing of Marin. Government officials, fair housing practitioners, attorneys, real estate industry professionals, advocates and academics attended the event. The gathering gave attendees an opportunity to come together in strategic sessions to discuss barriers to housing choice. The conference had tracks for advocates and government. A documentary film was shown at the conference. A Matter of Place chronicles the history of racial discrimination and examines how it still limits housing choices for consumers today. Click here to view the film.

Prior to joining Consumer Action in 2007, Perrott worked for a non-profit fair housing counseling agency as a compliance and outreach coordinator and grant developer. Perrott also worked for a number of years as both a housing specialist and eligibility/Section 8 supervisor for the Housing Authority of the County of Alameda and the City of Benicia Housing Authority.

Recognizing that tenants and homeowners are confronting difficult choices daily due to rising rents, evictions, housing discrimination and various foreclosure recovery scams, including short sale flipping, Consumer Action will hold a by-invitation-only housing roundtable in Oakland, CA this month to give community-based groups information they need on federal, state and local laws and regulations to assist clients dealing with these issues. We’ll report on the workshop in an upcoming issue of INSIDER.

Hotline Chronicles: Consumers find barriers to unlocking phones

Last month, two consumers contacted Consumer Action’s hotline with complaints about attempts to unlock their phones under rules agreed to by major wireless carriers. The rules are designed to allow people to switch wireless carriers but keep the same phone. Both prepaid and postpaid subscribers are eligible to unlock their devices if their bill is paid and they are not under contract with the carrier.

But when they attempted to unlock their phones with their respective carriers, Karmen* from New Jersey and Kyle* from Maryland report getting the run-around. We advised these consumers to complain to respective carriers’ executive offices and to their state public utilities commissions. Contact information for the state offices can be found at the National Association of Regulatory Utility Commissioners.

The right to unlock mobile devices is part of a voluntary commitment to help consumers make informed choices when selecting their wireless service. With an unlocked phone, consumers may be able to more easily switch carriers. Seven carriers that cover almost 97 percent of the wireless market and the wireless industry association CTIA signed the Consumer Code for Wireless Service.

All the major wireless carriers have signed on to implement the Code, but that doesn’t mean that unlocking your phone will enable you to switch to any carrier you choose. According to online technology news outlet Tech Times, even with an unlocked phone, subscribers to a wireless service provider that uses GSM technology, such as AT&T and T-Mobile, still would not be able to switch to a wireless service provider that uses CDMA technology, such as Verizon and Sprint, and vice versa.

One activist fighting for the right to unlock phones, finds widespread difficulties still facing consumers. Sina Khanifar analyzed the carriers' performance in living up to these conditions. His findings, which call out Sprint and T-Mobile for failing to fulfill half their voluntary commitments under the code, can be found online. (Khanifar is behind a consumer petition to the White House signed by 114,000-plus people asking to be able to unlock their cell phones without risking criminal or other penalties.)

Unlocking should be free of charge. Because the unlocking process varies between providers, Consumer Action recommends contacting the company that sold you the phone. Several of the carriers have instructions and guidelines for unlocking your device on their websites:

• AT&T
• Sprint
• T-Mobile
• Verizon

*Not these consumers’ real names.

Class Action Database: Green coffee beans are a waste of greenbacks

Class action settlements, including one involving Sony’s PlayStation network over inadequate data security measures and another against Arm & Hammer over false advertising, were among six new cases added to the Consumer Action Class Action Database during January. Click here to visit the Database.

One action is Federal Trade Commission (FTC) v. Genesis Today Inc., Pure Health LLC and Lindsey Duncan.

The FTC brought the action against Lindsey Duncan and his companies under the Federal Trade Commission Act prohibiting unfair or deceptive acts and business practices. The FTC charged that the companies deceptively advertised that green coffee bean supplements would cause a 17-pound weight loss and reduce body fat by 16 percent in 12 weeks without exercise and dietary changes. Duncan and his companies agreed to a $9 million settlement for consumer redress.

The FTC investigation showed that the companies relied on a flawed clinical study on the green coffee bean supplement to pitch the product on the Dr. Oz Show and market the supplement in association with Duncan’s appearance on Dr. Oz.

According to the FTC, before Duncan’s appearance on Dr. Oz, he reached out to retailers about his upcoming appearance on the show, claiming that clinical trials showed his supplements worked, and that he bought online advertising to steer search results to the product. After Duncan’s appearance on Dr. Oz, Genesis Today Inc. and Pure Health LLC sold tens of millions of dollars’ worth of the green coffee bean supplement.

Additionally, the FTC charges that Duncan and his paid spokesman failed to disclose their business association with Genesis Today and Pure Health when endorsing the green coffee bean supplements. The FTC investigation found that Duncan and Genesis Today created Pure Health and misled Dr. Oz and the public into believing Pure Health was an independent source supporting the health benefit claims of the green coffee bean supplement.

Under the FTC settlement, the defendants are barred from making deceptive claims about the health benefits or efficacy of any dietary supplement or drug product, and will pay $9 million for consumer redress. Consumer Action will provide more information about possible refunds as we learn it.

California bill would update key privacy rights

Consumer Action is supporting California Senate Bill 178, introduced by Senator Mark Leno (D-San Francisco) and Senator Joel Anderson (R-Alpine), to prohibit warrantless access to consumers’ digital information. The California Electronic Communications Privacy Act (CalECPA) would make sure police go to a judge and get a warrant before they can get access to electronic information about who we are, where we go, who we know and what we do.

Consumer Action’s California legislative coordinator, Joe Ridout, notes that California's privacy laws “have failed to keep pace with technological advances. For example, law enforcement doesn’t have the right to ransack your file cabinet or search through your home computer without a warrant, yet police routinely demand warrantless access to information on citizens’ smartphones, the modern-day filing cabinet.”

The misuse and improper distribution of photos taken from female arrestees’ smartphones by California Highway Patrol officers is just one recent alarming incident. “Consumers should not have to choose between enjoying new technology and protecting their privacy,” says Ridout.

Government entities and law enforcement claim that searches of electronic devices are performed only for legitimate purposes. But after revelations of mass warrantless surveillance conducted by the National Security Administration (NSA), consumers are looking for more protection. SB 178 would prohibit a government entity from compelling the production of or access to electronic communication information or electronic device information without a search warrant or wiretap order, except for certain emergency situations.

New California law extends protections for reverse mortgages

Older homeowners who have paid off their mortgages, or who owe very little, may have the option to borrow against their equity without having to sell their property or even make monthly payments. They can do this with a “reverse mortgage.” These mortgages can be very profitable for lenders, leading disreputable companies to exploit senior homeowners with overpriced and inappropriate deals that can harm their financial security and that of their dependents and heirs.

A new law on the books this year in California requires that borrowers be given a worksheet highlighting important considerations, such as what happens to others living in the home once the borrower dies or moves out of the home, additional assets one may need to avoid defaulting, alternatives to reverse mortgages, and how reverse mortgages may restrict eligibility for government aid. The intent of presenting prospective borrowers with the potential negative outcomes is to balance the sunnier portrayals of reverse mortgages offered by lenders and brokers and help homeowners reach an informed decision about their suitability.

While the foreclosure crisis led to a greater public appreciation of the risks of traditional mortgages, reverse mortgages present different issues, and in some cases additional risks that can be overlooked. For example, the feature of a rising balance and diminishing equity is difficult for many consumers to grasp. Failure to pay taxes and insurance put the borrower at risk for foreclosure, which is why it is troubling that most borrowers currently are taking all or almost all of their available funds upfront at closing. Perhaps as a consequence, 9.4 percent of reverse mortgage borrowers are delinquent on their tax or insurance payments, and may face foreclosure in the future.

Before completing an application for a reverse mortgage, California lenders are required to provide borrowers with a listing of HUD-approved counseling agencies. Lenders are prohibited from taking a reverse mortgage application from borrowers until seven days after the counseling session.

Ultimately, the new law will put potential borrowers in a better position to evaluate whether a reverse mortgage will best suit their needs. To learn more about reverse mortgages from a reputable source, visit AARP’s website.

CFPB Watch: Advisory board discusses credit scores and medical debt

The Consumer Financial Protection Bureau (CFPB) Consumer Advisory Board is an appointed group of experts in consumer protection, community development, consumer finance, fair lending and civil rights convened to provide the CFPB with guidance for its work. Last month, the Consumer Advisory Board (CAB) gathered for its quarterly meeting in Washington, DC, and credit scores and medical debt were on the agenda.

“A credit score can truly unlock people’s financial potential. It’s like a passport to the financial mainstream,” said CAB member Jose Quinonez from Mission Asset Fund at the meeting. That is why many believe medical debt—often incurred unexpectedly—should not be given as much weight as credit-related debts in consumer credit scores.

According to the CFPB, 50 million consumers now have free access to credit scores on their monthly credit card statements, one year after the CFPB launched its Open Credit Score Initiative. Currently, more than a dozen major credit card issuers provide customers with free access to their FICO (Fair Isaac Company) credit score—the magic number that affects whether they qualify for loans, credit cards, insurance, mortgages and jobs, and at what price.

“When companies make credit scores available regularly for free, consumers can see their scores change over time and see the impact of a credit score on their financial lives,” CFPB Director Richard Cordray said when addressing the advisory board.

The CFPB said it learned from recent focus groups that consumers are confused by:

• How credit scores and credit reports from various companies differ
• How to access a truly free credit report
• If checking their reports or scores would hurt their credit standing (it doesn’t)
• How to improve their credit scores

Another area of confusion for consumers is medical debt, also discussed at the CAB meeting. Consumers often don’t know what portion of their medical bills is covered by insurance and what amount they must pay out of pocket. Critics of the medical billing process say it is complex and problematic. The Bureau explained that their research found that medical debt is different from other types of debt, yet it is given the same weight in credit scoring models.

The Bureau’s research shows that people with medical debt tend to be more likely to pay it off. Others are even unaware that they owe a debt. More than half (52%) of consumers with medical debts in collections tend to owe small amounts, with an average of $579, according to the CFPB. In addition, billed amounts are often incorrect.

The consumer bureau concluded that consumers with medical debt are being “over-penalized” in their credit scores. Consumers with paid medical collections are being penalized even more, leaving consumers with lower scores than they deserve. Credit scoring company FICO agreed with the Bureau’s findings and has announced it will weigh medical debts in collections less heavily than other debts when calculating credit scores using its latest FICO 9 scoring model. (Currently the FICO 8 scoring model is in wide use, and it could be many years until companies switch to the latest FICO scoring model for making lending decisions.)

VantageScore, a credit rating product created by the three major credit bureaus (Equifax, Experian and TransUnion), excludes paid medical debt. However, it is less used today than FICO scores.

To learn more about the CFPB Consumer Advisory Board, visit the Bureau’s website.

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 7,500 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.