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Maryland Attorney General J. Joseph Curran, Jr. announced today that his Consumer Protection Division, working in conjunction with 17 other Attorneys General, has reached a settlement with Friedman’s, Inc., which trades under the name Friedman’s Jewelers. In the settlement, Friedman’s, Inc. has agreed to change its practices to provide clear and conspicuous point-of-sale disclosures when offering credit insurance to consumers.

The investigation of the nation’s third largest jewelry chain, alleged that the jewelry company engaged in unfair or deceptive trade practices by failing to adequately inform consumers regarding insurance fees. The States alleged that Friedman’s, Inc., when selling jewelry and financing the purchase, would charge premiums for credit life, credit disability and property insurance without adequately informing consumers that they were purchasing insurance.

In January 2005, Friedman’s, Inc. filed bankruptcy. At that time, Friedman’s had 560 jewelry stores in 21 states. After filing bankruptcy, Friedman’s has 427 jewelry stores in 20 states. Currently, Friedman’s, Inc. has five stores in Maryland.

Friedman’s, Inc. has denied any wrongdoing. However, under the terms of the settlement, Friedman’s has agreed to provide clear and conspicuous disclosures when offering credit insurance to consumers in the future. Additionally, Friedman’s has agreed to comply with Federal Truth in lending laws and with licensing laws before offering credit insurance. Friedman’s is paying $90,000 to Maryland under the agreement.

“It is important that consumers receive clear and adequate information when making a purchase and are not unfairly charged for products they do not want or need,” Curran said.

The Attorney General offers the following consumer tips:

* Before financing with an in-store financing option, check other financing options available to you and compare financing terms such as the interest rate;
* When purchasing any goods or services with a financing agreement, carefully review the financing documents and inquire about any add on fees or costs above those you initially agreed or expected to pay;
* Generally insurance that is sold as a part of a financing transaction is overpriced, so it is advisable to refuse to purchase it;
* When deciding whether to purchase credit insurance, review the terms of the credit insurance contract for all exclusions and compare the price of the credit insurance to the amount that would be paid off; and
* If electing to purchase credit insurance for any transactions, make sure the company is licensed to sell insurance in Maryland and is in good standing.

The other states participating in the settlement are Alabama, Arkansas, Delaware, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Mississippi, Missouri, North Carolina, Ohio, Oklahoma, South Carolina, Tennessee and Texas.

Posted under Customer Service

UAL, the parent company of United Airlines, has elected to keep the company in Chapter 11 bankruptcy protection. The company cited a colaboration with is Creditor’s Committee, in which the two parties agreed that remaining in bankruptcy would “…provide an additional opportunity to continue collaborating on and reviewing the complex, extensive documents as part of the overall confirmation process” as well as provide “a smoother exit process.”

Airline industry observers remain concerned that Delta Airlines and Northwest Airlines may soon also seek bankruptcy protection. Delta has lost billions of dollars since the September 11, 2001 terrorist attacks despite massive cost cutting, including employee concessions. Northwest has fared little beter and faces a looming strike date next week when mechanics may walk off their jobs. The airline says it has contingency plans that will allow it to continue operating even if its mechanics strike, but the last major US aviation work stoppage was also a Northwest action that cost the company millions.

“This isn’t a ’strand travelers with tickets’ bankruptcy issue,” said Joan Bounacos, President of Consumer Help Web. “Even if Delta or Northwest were to seek protection from the bankruptcy courts, there is every indication that they will continue flying their normal schedules and honoring all tickets. We urge consumers to more carefully watch the possible Northwest strike action for next week as that may disrupt air travel more than any financial restructurings the airlines do.”

Posted under Finance

Dealing a harsh blow to the consumer finance industry, the Supreme Court unanimously voted yesterday to exempt IRA accounts from bankruptcy proceedings.

The Court, which originally heard in the case in December 2004, found that two critical provisions of three elements be met. Those provisions are:

1) the right to receive payment must be from a stock bonus, pension, profitsharing (sic), annuity, or similar plan or contract, and

2) the right to receive payment must be “on account of illness, disability, death, age, or length of service”

Writing for the Court, Justice Clarence Thomas noted that the tax penalty imposed on individuals who withdraw funds from an IRA prior to age 59 1/2 is “substantial”.

“We’re pleased,” said Jean Constantine-Davis, a senior lawyer for AARP, in a statement. “It’s really important to encourage people to contribute savings in their working years and to keep those savings sacrosanct.”

Posted under Finance

Eleven former WorldCom (now MCI) members of the board of directors have pledged to pay more than $20 million of their own funds to settle a class action lawsuit brought by shareholders of the embattled company’s stock.

The directors’ settlement is part of a total of more than $55 milion, with the balance being paid by insurance companies. The company’s two lead investment banks have pledged an additional $4.6 billion, and estimates are that the total amount paid out in the suit will surpass $6 billion.

A settlement of that size means that many shareholders will receive a substantial portion of their loss in stock value when the company engaged in accounting fraud and spiraled into bankruptcy.

Posted under Customer Service