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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

In southern Mississippi, a federal judge has ruled that a homeowner’s insurance policy excluded flood damage, greatly reducing the amount that can be collected because of Hurricane Katrina damage.

The judge said that the policy, purchased from Nationwide, reportedly covered damage caused by hurricanes, but he upheld a widely-used interpretation that floodwaters were not covered. Media reports indicate that the court did find that wind damage was coverage, which may provide some relief to Gulf Coast residents, but it appears that case law now exists that allows insurances companies to feel comfortable when denying claims.

Posted under Customer Service

The Insurance Institute for Highway Safety today announces 10 cars (2006 models) that win its first ever Top Safety Pick award. The awards recognize car designs that afford the best protection for people in front, side, and rear crashes, based on performance in Institute tests. The winning vehicles were chosen from among current models of small, midsize, and large cars plus minivans. There’s a winner in three of these four groups. The winners include 2 large car designs, 7 midsize cars, and 1 small car. No minivans meet the Institute’s criteria to earn a Top Safety Pick. Pickups and SUVs weren’t included in this round of awards because side impact tests of most of these vehicles haven’t been conducted yet.

“Now that we’re rating vehicles’ front, side, and rear crashworthiness, based on test performance, we decided to give consumers an overall assessment based on all three tests. These Top Safety Picks are replacing our previous ‘best pick’ designations that were awarded separately for front and side crash test performance,” Institute president Brian O’Neill explains.

“The new awards mean consumers can compare cars’ ratings more quickly and easily. They won’t have to review multiple sets of test results separately. And when we test new car designs as they are introduced next year, it’s possible that some additional models will be added to the 2006 Top Safety Picks.”

Criteria to win gold and silver awards: Top Safety Pick winners reflect an elite fraction of the car market. Winners of the gold award have earned good ratings in the Institute’s frontal offset and side impact crash tests, and their seat/head restraints are rated good for protection against neck injuries in rear impacts. Silver awards go to vehicles with good performance in the front and side crash tests plus acceptable seat/head restraint ratings. Awards are by car size class because vehicle size and weight influence occupant protection in serious crashes. Larger, heavier cars generally afford more protection than smaller, lighter ones. Top Safety Picks indicate the best choices for safety within each size class, but they don’t mean a small car that’s an award winner affords better protection than a larger car that didn’t win a Top Safety Pick.

Almost all of the 10 winners are relatively new designs, and they all have side airbags designed to protect people’s heads. This reflects the improvements manufacturers have been making in the side and rear crash protection afforded by their newer cars (most vehicles have afforded good occupant protection in frontal crashes for several years).

“This is one reason Volkswagen and Audi cars are 5 of the 10 award winners. This company has introduced 5 new designs since the 2005 model year and made the commitment to ensure that these designs perform well in Institute tests,” O’Neill points out.

Winners by vehicle size class: Among large family cars, the Ford Five Hundred and its twin Mercury Montego were new designs for the 2005 model year. However, only the models with optional side airbags are Top Safety Pick winners. Another winner is the Audi A6, a large luxury model that was redesigned for the 2005 model year.

“The midsize group is the heart of the car market,” O’Neill says. “About 40 percent of new cars sold every year are midsize, so it’s good news that consumers have a number of Top Safety Pick choices in this size group from moderately priced to near luxury models.” Seven of the 10 Top Safety Picks are midsize. The Saab 9-3 and Subaru Legacy are gold award winners. The Audi A3, A4, Chevrolet Malibu with optional side airbags, and Volkswagen Passat and Jetta are silver award winners.

The Honda Civic is the only small car among the 13 the Institute has evaluated that meets the criteria for a Top Safety Pick. It’s the only car in this size group that has earned a good overall rating in the Institute’s side impact test.

No minivans are among the award winners. This doesn’t mean minivans are unsafe. It means none of the current designs the Institute has tested meets the award criteria. The Honda Odyssey, Toyota Sienna, and Nissan Quest are rated good for front and side crashworthiness, but their seat/head restraints are marginal or poor.

Posted under Automotive, Safety

Avery vs. State Farm is one of the most famous automotive lawsuits ever filed. The class action suit essentially claims that State Farm encouraged the use of third party “aftermarket” parts when repairing vehicles damaged in collisions.

After the plaintiffs won a stunning $1.2 billion verdict by claiming the parts were less safe than auto manufacturer’s official parts, the company and industry associations swung into action. On August 18, their hard work carried the day when the Illinois Supreme Court reversed the lower court’s decision. The Supreme Court not only found that the plaintiffs had failed to adequately show damages, but the Court also ruled 6-0 that the case should not have been certified as a class action.

The original $1.2 billion verdict was reduced once by a higher court after the initial verdict, but the reversal meant the end of a journey of more than six years for the participants. While some observers believe the case could signal the beginning of tort reform, consumer advocates were outraged.

“You can hold a typical aftermarket part in your hand and compare its weight and shape to the manufacturer’s original part,” said Consumer Help Web President Joan Bounacos. “The aftermarket part made by an independent third party is usually lighter and doesn’t fit as well. State Farm’s assertion that they have saved consumers money is moot if they have also agreed to put non-standard parts on the vehicle. I am hopeful that this case will again have its day in court and be heard on its merits.”

“Only one vote separated the key consumer issue from being a deadlock,” Bounacos said. “That is too close for future consumers to ignore.”

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

If you’ve always assumed that your homeowner’s insurance covers flood damage, think again. Learn how to protect yourself, your family and your property from the #1 natural disaster by sending for the free National Flood Insurance Guide from the Federal Emergency Management Agency.

For your free copy, send your name and address to the Federal Citizen Information Center, Dept. 596M, Pueblo, CO 81009. Or call toll-free 1 (888) 8 PUEBLO

Posted under Customer Service

Insurance giant State Farm announced that an internal audit has discovered that the company improperly titled tens of thousand of vehicles now driven by consumers. At issue is the company’s failure to identify vehicles as a “salvage” or similar designation before reselling the vehicle, typically through a closed auto dealer-only auction.

To its credit, State Farm approached the departments of motor vehicles throughout the United States and disclosed its error. Early estimates project that 30,000 consumers throughout the country may be affected. Consumer advocates including Michigan Attorney General Mike Cox praised the company, saying, “I commend State Farm for proactively entering this settlement and I am confident it will encourage other companies to double check their internal procedures to ensure consumers receive all vital information.”

Under the terms of the settlement, State Farm will pay $40 million to consumers with payments ranging from $400 to $10,000. The reaction by government and consumer officials is far different from the public relations blackeye suffered by the company in 1999 when an Illinois jury awarded $456 million to consumers in a class action suit that found that the company was using less safe non-factory parts when repairing their insured vehicles involved in collisions.

Each state is responsible for setting its own threshhold for salvage vehicles. Most states use a formula that compares the amount of damage to the value of the vehicle, but the rates vary from state to state. The vehicle owner, in this case State Farm, is required to report damage exceeding those threshholds to the state’s department of motor vehicles so the title can be “branded” or marked with a salvage or junk designation.

That designation is supposed to follow the car throughout its remaining life on the roads, but vehicle history companies such as CARFAX routinely find that a vehicle with a salvage title in one state may later get a title without that same designation in another state.

Consumers who believe that their vehicle is one of the State Farm vehicles not properly titled can call toll-free 866-858-1142. Payments to consumers are expected to begin late this year and continue through 2006.

Posted under Automotive, Customer Service