Complaint resolution service publishes case studies, recall information and consumer news.

Ten payday lenders, defined as a company that lends money at usually high interest rates against an upcoming paycheck, are facing Federal Trade Commission (FTC) charges regarding advertising and collection tactics.

The Nevada government added to the federal charges, which allege that payday lenders did not disclose important information about the loans and that their collection tactics were “abusive”.  Potential customers were told that they could borrow several hundred dollars for a fee ranging from $35 to $80 provided that the amount was repaid in the next week.   Borrowers had to provide the companies, some of them based in the United Kingdom, with their bank and social security information.

During repayment, special clauses that the government contends were not disclosed to borrowers would cause the loan amount to increase by many times over.  If the borrower terminated the lender’s access to the account, they were subject to what the government called “abusive” collection tactics.  Borrowers were allegedly told they were subject to arrest or property seizure.

he corporate defendants are Cash Today, Ltd., The Heathmill Village, Ltd., Leads Global, Inc., Waterfront Investments, Inc., ACH Cash, Inc., HBS Services, Inc., Lotus Leads, Inc., First4Leads, Inc., Rovinge International, Inc., and The Harris Holdings, Ltd., each also doing business as Cash Today, Route 66 Funding, Global Financial Services International, Ltd., Interim Cash, Ltd., and BIG-INT, Ltd. The individual defendants are Aaron Gershfield, Ivor Gershfield, and Jim Harris.

Tough economic times can sometimes cause consumers to seek alternative income or lending sources.  As always, checking the lender’s reputation with your local consumer affairs office — at either the local or state level — is the best course of action before borrowing from any well-known lender.

Posted under Finance

Credit unions are becoming more aggressive in the indirect lending market, as credit aggregators are simplifying the process for dealers to finance auto loans through credit unions, according to the J.D. Power and Associates 2006 Consumer Financing Satisfaction Study.

Now in its 11th year, the study measures customer satisfaction with the new-vehicle financing process. Four factors are examined to determine customer satisfaction with automotive finance provider: provider offering, application/approval process, payment/billing process and customer contact experience.

The study finds that at a growing rate, credit unions are forming alliances with dealers to offer new-vehicle financing, representing nearly 10 percent of loans being issued in dealerships—up from nearly 7 percent in 2005 and 3 percent in 2004. Through the indirect lending channel, credit unions are providing more favorable rates, driven primarily by tax advantages gained from their non-profit status. They are also offering longer-term loans. These factors are particularly beneficial to consumers at a time of rising interest rates, as lower APRs and extended terms help to lower the cost of financing a vehicle.

“As the new-vehicle financing environment adjusts to increasing rates and compressed margins, credit unions are positioning themselves as strong competitors to the established captives, banks and independents, which is underscored by the fact that credit unions have historically provided excellent customer service through their very close, personal ties with their customers,” said David Lo, senior research manager of automotive finance at J.D. Power and Associates. “From the dealer perspective, credit unions are currently competing primarily on their rates and terms. Captive providers still have a significant advantage in other offering related areas such as a more competitive reserve and overall compensation per deal.”

Overall, finance provider satisfaction drops in 2006, primarily due to a broad-based shift in interest rates. Of particular note is the industry wide effect of the increasing Federal funds rate, which has caused all finance providers to increase their rates. The net effect of this increase is an industry wide decline in satisfaction.

Ford Credit ranks highest in the luxury lease segment for a second consecutive year, performing particularly well in provider offering. In the non-luxury lease segment, Ford Credit leads the rankings for a fifth consecutive year, receiving the highest ratings in provider offering and the application/approval process.

With strong performances in payment/billing and application/approval process, GMAC ranks highest in the luxury loan segment for a second consecutive year. GMAC also ranks highest in non-luxury loan satisfaction and receives the highest ratings from customers in three of the four factors that determine overall satisfaction: payment/billing, provider offering and application/approval process.

The study also finds that the use of electronic contracting (eContracting), which allows dealers to forego paper contracts by submitting an electronically signed document to capture customer signatures, has a positive impact on customer satisfaction. On average, customers whose contract was processed with eContracting technology are more likely to say they are “delighted” with their overall application/approval process when compared to customers who were processed with traditional documentation. In particular, the largest difference in satisfaction is in the ease of filling out paperwork.

“Currently, only 3 percent of customers report that their contract was processed using eContracting,” said Lo. “While the current penetration is very small, this proportion is likely to increase soon. In our 2006 Dealer Financing Study, we found that 75 percent of dealers who currently use eContracting expect the number of contracts processed with this technology to increase within the next 12 months.”

Posted under Automotive, Finance

A federal judge has issued a temporary restraining order against a nationwide operation that claimed it could reduce consumers’ debt by up to 60 percent, leading many people into financial ruin and bankruptcy. The Federal Trade Commission charged five companies, including Homeland Financial Services, National Support Services and Prosper Financial Solutions, and their principals with deceptive and unfair practices in violation of Section 5 of the FTC Act.

“These defendants are charged with targeting consumers who were knee deep in debt and luring them with false promises,” said Lydia Parnes, Director of the FTC’s Bureau of Consumer Protection. “Consumers should be leery of anyone who says they can eliminate your unsecured debt, or that you can pay it off for pennies on the dollar. Debt negotiation can be very risky.”

According to the FTC’s complaint, the defendants have falsely claimed that, for a non-refundable fee of up to 15 percent of a consumer’s unsecured debt, they could reduce all of their unsecured debts, including credit card balances and medical bills, by as much as 40 to 60 percent. To the extent that the defendants initiate negotiations with creditors, they typically have begun only after a consumer has paid 30 to 40 percent of the fee, which could be up to three months after a consumer has stopped making payments to creditors, as the defendants have advised them to do, the complaint stated. The defendants rarely have negotiated settlements with all of a consumer’s creditors, and even when they have successfully negotiated an account, in many cases, the settlement amount is significantly more than 60 percent of what they owe.

In many instances, the complaint stated, the defendants have not contacted a consumer’s creditors to offer a settlement, and consumers who have stopped making payments have been sued by creditors or debt collectors, resulting in garnishment of their wages, additional interest charged to their account, interest rate increases, and late fees. According to the complaint, many consumers who have enrolled in the defendants’ program have seen their credit rating worsen substantially, and typically within six months of enrolling, most consumers have left the program and have found that their debt has grown as a result of penalties, fees, interest, and other charges.

The FTC charged the defendants with misrepresenting how much they could reduce consumers’ debt; not adequately disclosing the likelihood that consumers would be sued if they took the defendants’ advice and stopped making payments to creditors; not disclosing that consumers’ account balances would grow from interest, interest rate increases, late fees, and other charges; and falsely advising consumers that negative information that appeared on their credit report as a result of participating in the defendants’ program would be removed upon completion of the program.

Posted under Finance

AT&T Inc. today said that unauthorized persons illegally hacked into a computer system and accessed personal data, including credit card information, from several thousand customers who purchased DSL equipment through the company’s online Web store.

The unauthorized electronic access took place over the weekend, was discovered within hours and the online store was shut down immediately. AT&T also quickly notified the major credit card companies whose customer accounts were involved. The company is now working with law enforcement.

Customer notifications are ongoing by email, phone and letter to fewer than 19,000 customers. In addition to notifying those customers who were affected, the company will pay for credit monitoring services to assist in protecting the customers involved.

“We recognize that there is an active market for illegally obtained personal information. We are committed to both protecting our customers’ privacy and to weeding out and punishing the violators,” said Priscilla Hill-Ardoin, chief privacy officer for AT&T. “We deeply regret this incident and we intend to pay for credit monitoring services for customers whose accounts have been impacted. We will work closely with law enforcement to bring these data thieves to account.”

Customers who have been affected have been provided with a toll-free number to call for more information.

Posted under Privacy

Consumers for years have tangled with the three major U.S. credit bureaus because of inconsistent or sometimes inaccurate data. A fourth company actually introduced a credit scoring system using data from the information companies to attempt to predict the creditworthiness of a loan or other obligation.

Now the credit bureaus - Equifax, Experian and Trans Union - are fighting back. They have introduced a new scoring system that makes use of a different scale. The industry standard, known as a FICO score since it was created by Fair, Isaac Corporation, used an 850 point scale. The new program, called VantageScore, uses a 990 point scale.

“The truth is that there were always inconsistencies between the different bureaus’ reports,” said Consumer Help Web President Joan Bounacos. “We simply wish they had entered into an agreement with Fair, Isaac so that consumers were not confused by knowing whether a particular number was good or bad.”

Consumers are entitled to receive a free credit report each year, and some industry experts have expressed concern that the VantageScore, which can be sold, is an attempt to generate more consumer revenue. “We know that they have to make the data available,” Bounacos said. “But now they can simply say that that they have complied by supplying the raw data.”

Fair, Isaac had previously released proportional information that told consumers how their actions could impact their credit score. VantageScore, which is a separate commercial entity owned jointly by the credit bureaus, has released more information, but consumer advocates say the data is harder for consumers to understand and may lead to differing conclusions.

“No one is going to share their secret formula, nor should they,” Bounacos said. “But to help consumers improve their credit, VantageScore should release at least the proportion of different actions that go into computing the score. Nothing will be gained by hiding this information from consumers.”

Posted under Finance

The Federal Trade Commission, U.S. Postal Inspection Service (USPIS), and eight state law enforcement agencies today announced a crackdown on 20 operations that deceptively claim they can remove negative information from consumers’ credit reports – even if that information is accurate and timely.

“Credit repair schemes are a big problem for consumers,” said Eileen Harrington, Deputy Director of the FTC’s Bureau of Consumer Protection. “Credit repair promoters generally charge hundreds of dollars, but don’t deliver on their claims. The fact is, they can’t. No one can legally remove accurate and timely information from your credit report.”

The FTC began coordinating “Project Credit Despair” last year in response to thousands of consumer complaints, which it shared with the USPIS, the State of Louisiana Office of Financial Institutions, and other state law enforcement agencies. The cases involved companies throughout the nation, many of which promised to remove accurate and timely information from consumers’ credit reports, and typically charged hundreds of dollars in advance for the service.

According to the FTC, Bad Credit B Gone, LLC and its principal, Joseph A. Graziola III, made promises such as “the credit you always dreamed of!” and “If we fail to remove any negative credit from your reports, we’ll give you a refund plus $100.” Referring to “charge-offs, collections, tax liens, bankruptcies, repossessions, student loans, child support, late payments, and judgments,” they claimed, “On average, 80 percent of the derogatory information is deleted off your credit report within . . . three months.” The Philadelphia-based company charged $500 per individual and $700 per couple for its services, half of which was due up-front.

The FTC charged Bad Credit B Gone with violating the FTC Act by making false or misleading statements, such as claiming they can improve most consumers’ credit reports substantially and permanently by removing negative information that is accurate and not obsolete. The defendants also allegedly violated the Credit Repair Organizations Act (CROA) by requiring advance payment for credit repair services and by making false or misleading statements. The FTC is seeking to bar them permanently from further violations, to require them to return money to consumers, and to give up their ill-gotten gains.

“We have two goals with this announcement,” Harrington said. “One is very specific. It is to stop Bad Credit B Gone’s deceptive practices, and force them to return their ill-gotten gains to consumers. The other is broad. It is to put other credit repair firms on notice that we are on the beat, and it is to alert consumers that there is absolutely no reason to pay for credit repair – ever. Despite their claims, there is nothing that any credit repair firm can do for you for a fee that you cannot do for yourself at little or no cost.”

Posted under Customer Service, Privacy

California Attorney General Bill Lockyer today announced MyPerfectCredit (MPC) will pay $150,000 in civil penalties and provide restitution to consumers to resolve allegations that the credit repair company engaged in false advertising and unfair business practices.

“MyPerfectCredit deceived customers by falsely telling them the company did not have to comply with laws that protect consumers of credit repair services, and then routinely violated those laws,” said Lockyer. “This settlement will penalize the violations, compensate victims and ensure MyPerfectCredit obeys the law in the future.”

Lockyer today filed the settlement, and a lawsuit the settlement resolves, in San Diego County Superior Court. The court quickly entered a judgment approving the settlement. Aside from MPC, other defendants covered by the lawsuit and settlement include PathwayData, Inc., which does business under the MPC name, and Pathway owner David Coulter.

The settlement requires the defendants to provide restitution to customers who have filed complaints against MPC, and any consumer who files a complaint against the company within 90 days from today. To date, more than 300 consumers in California and other states have filed complaints against MPC. Additionally, aside from the $150,000 in civil penalties, the defendants will pay $6,000 to cover the state’s costs of investigating the case.

MPC operated an online credit repair service. A California law called the Credit Services Act (Act) required MPC to register with the Attorney General’s Office before providing credit repair services to consumers. MPC violated the Act, the complaint alleges, by operating its business from December 2003 to December 2005 without registering with Lockyer’s office. Then, in marketing its credit repair services, MPC falsely told the public it did not have to comply with the Act, according to the complaint.

MPC advertised on the Internet that it could help consumers correct alleged errors on their credit reports. The company told consumers who responded to the ads that MPC would obtain their credit reports from the three major reporting agencies, then forward them electronically to the consumers. Consumers then would have a limited time to determine which negative information on the report they wanted MPC to challenge with the credit reporting agencies.

If consumers did not specify within five days which information should be disputed, MPC frequently challenged all negative information on credit reports, then charged consumers a fee for each challenge on each report, the complaint alleges. MPC charged either $4.95 or $6.95 per challenge. This practice violated a provision of the Act that prohibits credit repair companies from challenging information on credit reports without consumers’ knowledge, the complaint alleges.

MPC also violated the Act’s requirements that credit repair companies provide consumers certain disclosures and written contracts with specific provisions to protect customers.

Additionally, according to the complaint, MPC purchased a portfolio of customers from ClearCredit, a credit repair firm that Lockyer successfully sued in 2003 for violating the Act. Via email, MPC informed ClearCredit customers they automatically would be transferred to MPC’s program unless they opted out within a few days. ClearCredit customers who did not respond were automatically transferred to MPC’s program and charged a monthly fee, even though MPC did not verify the ClearCredit customers had received the email notification. If ClearCredit customers did not pay the monthly fee, MPC employed collection agencies to get the money.

The settlement prohibits MPC from further violating the Act, as alleged in the complaint.

Consumers who wish to file complaints against MPC to become eligible to receive restitution should send their complaints to:

Complaints should include substantiation for any restitution the consumer seeks.

The MPC case is the fifth brought by Lockyer in the last three years against credit repair and debt management operations. Prior successful lawsuits, in addition to the ClearCredit case, included actions against Housing Assistance Services, Inc., Briggs & Baker, Integrated Credit Solutions, Inc. and Lighthouse Credit Foundation.

Lockyer warned consumers to be wary of businesses which boast they can repair credit. “If negative information on a credit report is current and accurate, it cannot be removed regardless of how many disputes a credit repair business lodges,” he said.

Posted under Finance

Consumerinfo.com, Inc., doing business as Experian Consumer Direct, has settled Federal Trade Commission charges that it deceptively marketed “free credit reports” by not adequately disclosing that consumers automatically would be signed up for a credit report monitoring service and charged $79.95 if they didn’t cancel within 30 days, in violation of federal law. The settlement requires Consumerinfo to pay redress to deceived consumers, bars deceptive and misleading claims about “free” offers, requires disclosure of terms and conditions of any “free” offers, and requires the defendant to give up $950,000 in ill-gotten gains.

According to the FTC complaint, the defendant drove consumers to their www.freecreditreport.com and www.consumerinfo.com Web sites with radio, television, e-mail and Internet ads that promised free credit reports and a bonus – free trials of a credit-monitoring service. Ads made claims such as:

FREE! FREE! FREE! Get Your FREE Credit Report Online in Seconds!!!!Click here to get a FREE copy of your online Credit Report Instantly!And that’s not all. . . along with your INSTANT credit report, we’ll giveyou 30 FREE days of the Credit Check Monitoring Service at no obligation.

Consumers were required to provide detailed personal information and a valid credit card account number to get their credit report. They were assured that, “Your card will not be charged during the free trial period. However, valid credit card information is required to establish your account.”

According to the FTC’s complaint, Consumerinfo’s advertising and Web sites failed to explain adequately that after the free trial period for the credit monitoring service expired, consumers automatically would be charged a $79.95 annual membership, unless they notified the defendant within 30 days to cancel the service. Consumerinfo billed the credit cards that it had told consumers were “required only to establish your account,” and, in some cases, automatically renewed memberships by re-billing consumers without notice. The FTC charged that the defendant’s failure to adequately disclose the automatic billing and to get consumers’ consent to bill their accounts violated federal law.

The complaint also alleges that Consumerinfo misled consumers about their association with the annual free credit report program for which U.S. consumers are eligible by federal law. A federal law enacted in December 2003, gives consumers the right to get one free credit report every 12 months from each of the three national consumer reporting companies. This program began in western states on December 1, 2004, and began covering all U.S. consumers September 1, 2005.

Consumers can get their free reports by phone, mail, or at one authorized Web site, www.annualcreditreport.com. The FTC complaint alleges that Consumerinfo deceptively advertised and promoted its “free reports” at its “freecreditreport.com” Web site, without disclosing that it was not associated with the official annual free credit report program.
“Consumers paid the price for ordering free credit reports from freecreditreport.com,” said Lydia Parnes, Director of the FTC’s Bureau of Consumer Protection. “It’s unfair and deceptive to promise consumers something for free and then trick them into paying for products they didn’t want in the first place.”

“Consumers also need to be alert about impostor sites – sites that misspell annualcreditreport.com or use sound alike names, but don’t link to the authorized site. We are sending letters to operators of more than 130 impostor sites to inform them that we know they are out there and that attempts to mislead consumers are illegal,” she said. The settlement is designed to assure that the defendant’s negative-option or “free” offers do not contain misrepresentations, and that they disclose all terms and conditions of the offers. The settlement establishes specific disclosure requirements in promotions for the defendant’s “free credit report” offer. Among other things, the defendant must clearly tell consumers that they will be charged unless they cancel within the trial period, and that the offer is not related to the free credit report program mandated by Congress.

The settlement requires redress for consumers who enrolled in Consumerinfo’s credit monitoring program between 2000 and 2003, canceled the monitoring service and received a partial refund or filed a complaint about the charges for the service. Consumers who qualify for a refund should receive a notice from Consumerinfo by email or first class mail within the next few months. The FTC staff has released answers to frequently asked questions available at www.ftc.gov/freereports to help Consumerinfo customers determine if they’re eligible for a refund. It also has established an information hotline for consumers to call for information on refunds. The phone number is (202) 326-3457.

In addition to the redress program, the settlement requires the defendant to pay $950,000 in ill-gotten gains to the Commission. The money may be used to provide consumer education.
The settlement also contains record-keeping and bookkeeping provisions to allow the FTC to monitor compliance with the order.

Posted under Customer Service

Since August 1, 2005, companies that send “prescreened” solicitations of credit or insurance to consumers will be required to provide simple and easy-to-understand notices that explain consumers’ right to opt out of receiving future offers. The Fair and Accurate Credit Transactions Act of 2003 (FACTA) required the FTC, in consultation with the federal banking and credit union agencies, to prescribe the format, type size, and manner for these opt-out notices. The FTC also is issuing a new consumer education brochure to help consumers understand the prescreening process and what they should consider in deciding whether to opt out.

Prescreened offers of credit or insurance – sometimes called “preapproved” offers - are sent to consumers unsolicited, usually by mail. They are based on information in consumers’ credit reports that indicates that the individuals receiving the offer meet the criteria set by the company making the offer. The Fair Credit Reporting Act (FCRA) limits the circumstances in which consumer reports can be used to make prescreened offers, and all such offers must include a notice of consumers’ right to stop receiving future prescreened offers. The FTC Rule is intended to make these notices simple and easy to understand.

The Rule adopts a “layered” notice approach that requires a short, simple, and easy-to- understand statement of consumers’ opt-out rights on the first page of the offer, along with a longer statement containing additional details elsewhere in the offer. Specifically, the short statement informs consumers about the right to choose not to receive future prescreened solicitations and specifies a toll-free number for consumers to call to exercise that right (1-888-5-OPTOUT). Consumers may choose to opt out for five years or permanently, and may opt back in at any time by calling the same number. The longer part of the notice provides consumers additional information about prescreening that is required by the FCRA. The Rule includes model short and long notices.

FACTA also requires the FTC to educate consumers about prescreened offers of credit or insurance and their opt-out rights. The FTC has created a new consumer brochure, “Prescreened Offers of Credit and Insurance,” which explains how the prescreening process works and provides some of the benefits and consequences of receiving these offers and of opting out.

Copies of the Rule and the FTC’s brochure, “Prescreened Offers of Credit and Insurance,” are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580

Posted under Privacy