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California Attorney General Bill Lockyer announced the nation’s largest rent-to-own business, Rent-A-Center, Inc. (RAC), will pay more than $7 million in restitution to thousands of California customers under a settlement, finalized this month by the San Francisco County Superior Court, that resolves a consumer protection lawsuit brought by Lockyer.

“Our economic system is not driven solely by the profit motive,” said Lockyer. “To function properly, businesses must deal fairly and honestly with consumers. Rent-A-Center flouted this fundamental principle, violated state law and harmed consumers. This settlement not only will provide restitution to thousands of victims, but also ensure the company reforms its business practices to conform with the law.”

The settlement resolves a lawsuit, filed simultaneously with the settlement, that alleged RAC failed to disclose the true cost of its rent-to-own program to California consumers. Additionally, RAC engaged in deceptive advertising in marketing and selling memberships in its “Preferred Customer Club (Club),” according to the complaint.

The settlement requires RAC to make full or partial refunds to thousands of California consumers who bought Club memberships, or who rented or purchased electronic merchandise, appliances, or computer systems from RAC on or after November 1, 2004. Lockyer’s office estimated the restitution will total more than $7 million. RAC also will pay $750,000 in civil penalties.

RAC rents and sells new and used household merchandise, including televisions, computers, furniture and appliances. Customers typically sign a self-renewing weekly or monthly lease for the rented merchandise. The lease agreements include an option to purchase, either by continuing to pay rent for a specified period of time, or by early payment of some specified portion of the remaining lease payments.

Lockyer’s complaint alleged RAC, in violation of state law, engaged in unfair competition and illegally misrepresented the cash price of certain merchandise.

The complaint also alleged RAC misrepresented the benefits and terms of its Club membership in numerous ways. The misrepresentations included: falsely claiming to provide an extended warranty, insurance, or service contract for rental merchandise; and telling consumers they would receive up to $500 in grocery discounts, without adequately disclosing that to obtain the maximum discounts consumers had to pay RAC more than $100 in additional fees.

Aside from the monetary payments, the settlement imposes reforms of RAC’s business practices. These “injunctive relief” provisions include:

Requiring RAC to comply with California’s Karnette Rental-Purchase Act in all rent-to-own transactions; prohibiting RAC from charging prices that exceed the maximum amount allowed by law; and requiring RAC to clearly disclose all terms of its Club membership, including any costs, benefits, services, features, discounts and cancellation rights.

In addition to the $7 million in restitution, RAC will deposit more than $7 million into a special consumer protection trust fund. The additional $7 million comes from a prior, private lawsuit brought against RAC, and represents restitution funds left undistributed to consumers in that case. The $7 million deposited into the special fund will be used solely to enforce consumer protection laws, and to protect California consumers in the areas of consumer lending and finance, debt collection, and the sale and lease of consumer goods or services.

RAC is based in Plano, Texas and operates 2,880 stores in all 50 states. In 2005, the company’s revenues totaled $2.34 billion.

Posted under Customer Service

Led by representatives from Connecticut, North Carolina and crusading New York Attorney General Elliot Spitzer, a group of states continues chasing H&R Block over loans made to customers in anticipation of a refund. Spitzer was especially dogged, joining the others in a suit against Block at the height of tax season.

Spitzer’s suit claimed that tens of thousands of New Yorkers and hundreds of thousands of consumers nationwide had been steered wrong by the company. The entire tax preparation industry continues to come under fire, while ratcheting up the stakes for lower-income returns that boost profit margins.

The latest wrinkle is the so-called “paycheck stub” loan. In this transaction, a company provides a refund based on a customer’s last paycheck of the year, regardless of what tax liabilities or issues have occurred throughout the year. The rates, Spitzer and others claim, are too high and target an ill-informed consumer market.

Word now comes out of the Missouri company’s headquarters that the tax giant, which will book nearly $5 billion in revenue in 2006, will meet with a representative group of officials from different states. Consumer advocates are wary of the meeting, not only because Block is a mult-billion organizaation, but because a compromise agreement may end up being struck that could involve one of H&R Block’s other three divisions making use of data provided by the tax division to market the same loan.

“At the end of the day, all people want to see is a fast refund,” said Consumer Help Web President Joan Bounacos. “We encourage those people to seek tax counseling earlier in the year so that they are not getting the smallest possible refund. A tax refund sounds like a good idea, but is really an interest-free loan to the government, and because of inflation, ends up costing consumers more than they get back. The net effect is almost always a loss.”

Posted under Customer Service

Attorney General Bill Lockyer announced that he has secured the settlement of a civil lawsuit he filed against Pleasant Care Corporation, the second largest provider of nursing home care in California, that will result in court-enforceable improvements in the quality of care for elderly Californians at 30 facilities statewide.

“All Californians are entitled to know that they are not putting personal life or health at risk when they or an elderly loved one is placed in the care of a nursing facility,” Lockyer said. “Despite dozens of warnings and fines, Pleasant Care was simply unable to provide an appropriate level of care for its residents.

This injunction will make sure that Pleasant Care complies with existing law and also provides the best level of care possible.” The settlement will result in a permanent injunction that resolves a civil lawsuit filed by the Attorney General’s Bureau of Medi-Cal Fraud and Elder Abuse in Los Angeles County Superior Court. Lockyer’s lawsuit stems from numerous allegations of elder abuse and criminally negligent care, including more than 160 citations that the California Department of Health Services (DHS) has issued against Pleasant Care facilities across the state over the last five years for regulatory violations. The injunction was formally approved this morning by Superior Court Judge Laura Matz.

Under the terms of the injunction, all 30 of Pleasant Care’s skilled nursing facilities in California must comply with numerous conditions that will immediately and dramatically improve the quality of care provided to residents occupying the company’s more than 4,300 skilled nursing facility beds, including:

• Mandatory Staff Training - staff must undergo training on proper patient care in such areas as wound treatment, accurate record keeping, and the prevention of malnutrition and dehydration; • Abuse and Neglect Investigations - each facility is required to implement policies to ensure prompt reporting and investigation of any alleged act of abuse or neglect towards a resident, and staff persons reasonably suspected of committing abuse must be placed on administrative leave during the course of the investigation;
• Compliance Officer - Pleasant Care must hire a Compliance Officer who will be responsible for ensuring that each facility complies with the law, properly responds to state and federal investigations, and delivers proper levels of care to residents;
• Independent Monitor - Pleasant Care will pay for an Independent Monitor, selected in consultation with the Attorney General, who has broad authority to order statewide quality of care improvements, and will annually report its findings to the AG over the next five years;
• Nurse to Patient Ratio - Pleasant Care must maintain nurse staffing ratio of 3.2 hours per patient, per day, subjected to outside audits to ensure compliance, and ordered to pay stipulated fines for any failure to maintain the required nurse-to-patient ratio; and,
• Whistleblower Protections - Pleasant Care must establish and maintain a whistleblower program that allows employees, residents and other individuals to anonymously report suspected violations and mistreatment of residents. A log detailing all complaints made and investigation outcomes also must be maintained and made available to the Independent Monitor and the AG.

In addition, Pleasant Care is required to pay $1 million in civil penalties and $350,000 to reimburse the state for investigative costs. Failure to fully comply with any provision of the injunction also could result in civil penalties of up to $6,000 per violation, other sanctions deemed appropriate by the court, and exclusion from receiving funding from both the Medi-Cal and Medicare healthcare programs.

Pleasant Care currently operates 30 skilled nursing facilities in 14 different California counties, including: Alameda, Butte, Kern, Los Angeles, Marin, Mendocino, Riverside, San Diego, San Joaquin, San Mateo, Santa Clara, Santa Cruz, Sonoma and Sutter. Over the last five years, DHS has issued more than 160 citations and fines against numerous Pleasant Care facilities for violations of patient care regulations, with several citations involving violations which presented an imminent danger that death or serious harm would result.

In 2004 alone, for example, eight different Pleasant Care nursing homes in California were found to have delivered “substandard” care to residents in annual surveys conducted by DHS. Other specific instances of deficient service and care also formed the basis for the AG’s lawsuit. In 2003, a resident at the company’s Ukiah facility suffered a seizure and a blocked airway, but the nurse was unable to effectively aid the resident due to the fact that the facilities suction machines had not been kept in working order. The resident died from acute cardiopulmonary arrest stemming from his inability to breath. In 2004, a resident at Pleasant Care’s Novato facility suffered from a pressure sore that was allowed to worsen so severely that the resident ultimately died. The coroner who examined the female resident later told DHS that his examination showed that she had been subjected to “abominable wound care management.”

According to data maintained by the Office of Statewide Health Planning and Developement, Pleasant Care has also consistently failed to staff its chain of nursing homes at the rate of 3.2 nursing hours per patient, per day as required by California law. The failure to adequately staff its facilities with qualified nurses resulted in increased profits for the corporation at the expense of its residents’ health and safety.

Posted under Customer Service

A class action lawsuit filed against American Express in a U.S. District Court in Florida has been settled for $75 million.

Hundreds of thousands of consumers were reportedly affected by the company’s actions, which involved allegedly failing to disclose additional fees charged when a U.S. purchaser used their account for a purchase denominated in foreign currencies. As part of the settlement, American Express admitted no wrongdoing or fault although the company has reportedly changed its disclosure notices

Media sources claim that legal fees could account for more than $10 million of the settlement. Projections are that most consumers who filed as part of the class will receive a $15 settlement.

As of the holiday break, there was no announcement on when settlements would be disbursed to class members.

Posted under Finance

After winning and losing one, reaching a mistrial seemed a natural for beleagured drug maker Merck in its battle to protect itself from what are reportedly thousands of pending lawuits and claims regarding the company’s Vioxx product.

Consumers claim using the drug could cause coronary problems, and the first jury, based in Texas, agreed. That jury award more than $250 million. Unfazed, Merck announced it would individually fight each lawsuit.

U.S. District Judge Eldon Fallon in Louisana’s Eastern District sent the jury home after they reported that they were hopelessly deadlocked. Pundits on both sides claim victory although Wall Street sent the stock down nearly 3% after the mistrial was announced.

Consumer Help Web has published a checklist for former Vioxx users seeking legal representation. When the advocacy organization published the list this fall, Consumer Help Web President Joan Bounacos said, “Merck may be vigorously defending itself, but the blood is in the water. It is critical that consumers pick the right attorney if they intend to participate in legal proceedings.” Bounacos added today that simply using a search engine with the phrase “Vioxx attorney” yields tens of thousands of listings.

Posted under Health

Sony Corporation has paid $1.5 million to settle a class action lawuit alleging that it misled investors.

The suit’s complaint was that Sony had fabricated quotes from multiple movie releases in 2001 and used those quotes in advertising. While savvy consumers take commercial testimonials with the proverbial grain of salt, too many examples of companies using deceptive advertising exist to let a high profile incident smear the landscape.

There were several things wrong with the suit, not the least of which is the settlement amount being ridiculously low. Ultimately, Sony’s advertising deliberately misled consumers. Even if consumers have been trained to discount movie critic (and book critic and other media critic) claims, substantial penalties should be levied when an organization breaches public trust by deliberately advertising falsehoods.

Sony’s settlement ultimately is bad news for consumers. While it is true that a media giant has ‘fessed up to wrongdoing, the company that generates multiple billions of dollars in annual revenue paid a fine of just $1.5 million. That figure represents about 9 minutes of revenue for the giant corporation. Such a paltry amount means that consumers are on their own with regard to advertising claims. Some are apparently worth more than others, and while no one is suggesting that attending a bad movie is worth more than a couple of hours and $20 or $30 in actual costs, the message against consumers was loud and clear.

Lie to consumers and your company could end up paying minutes worth of its annual revenues too.

Posted under Customer Service