Common Law - The FindLaw Consumer Protection Law Blog

May 2009 Archives

Samsung is recalling about 160,000 of its cell phones because of a software flaw that may leave the devices unable to connect with 911 emergency operators in certain no-service areas.

The affected cell phones are Samsung's “Jitterbug” version, model numbers SPH-a110 and SPH-a120, sold at stores and online from March 2008 through May 2009, according to a News Release from the U.S. Consumer Product Safety Commission (CPSC). The problem is that when the phones are in a no-service area, they may display a message that reads “out of range, try again later,” even when callers are trying to connect to 911 in an emergency.

The Samsung "Jitterbug" cell phones, which feature larger keys and a simplistic number of functions, "are aimed at seniors and others who want a device without too many bells and whistles," according to the Wall Street Journal.

Samsung Telecommunications of America and San Diego-based Jitterbug are working to contact phone owners to schedule a free software upgrade. But CPSC is advising people who own the affected phones to call Samsung if they haven't already been contacted regarding the recall.

See the CPSC News Release on the Samsung Jitterbug recall for detailed product descriptions and company contact information. 

That 'As-Is' Tag Won't Necessarily Cut It, Legally Speaking

From televisions to children's toys, if you purchase a new consumer product from a retailer, you're likely aware of the legal remedies available to you if the product turns out to be defective. But you may not know that some degree of legal responsibility also falls on you as a reseller if you turn around and sell those products, in online auctions or even in garage sales.

That's because new federal laws on the sale of used products apply not only to owners of thrift stores and consignment shops, but also to people who sell items privately. How far do a reseller's legal responsibilities go under the new and stricter federal regulations on the sale of consumer products, and what kinds of products carry special rules? Before you hold that sidewalk sale after your spring cleaning -- or if you're a frequent buyer of used consumer products -- keep the following tips in mind.

Resale of Recalled Products. Under the Consumer Product Safety Improvement Act of 2008, ANY selling of recalled products is now unlawful. That means, if you sell a defective product that has been recalled by the manufacturer or federal safety officials, you may be held legally responsible for any injury it causes. So, it's a good idea to pay attention to recent Consumer Product Recalls, from the CPSC. 

Lead and Phthalates. New and stricter restrictions are placed on the resale of products that contain lead and certain types of phthalates, especially in certain toys and child care products, under the new federal product safety laws. Learn more: CPSC Spells Out Enforcement Policy for New Lead Limits in Children's Products.

Do I Need to Test Products I Sell? If you sell consumer products in online auctions and garage sales (and are not considered a manufacturer under the new product laws), you aren't required to test the products you sell for lead and phthalates, but you cannot knowingly sell children’s products that violate federal standards on the safe levels of these harmful materials. Learn more: Guidance on the Consumer Product Safety Improvement Act.

It's May. Do You Know Where Your 1040 Is?

If you rank your favorite federal government agencies in your spare time, chances are the IRS isn't close to the top of your list (maybe it's the U.S. Fish and Wildlife Service and its adorable but endangered species). But now, the agency that ruins the onset of springtime for many may also be dropping the ball when it comes to making sure that consumers' tax documents -- and the sensitive financial and personal information those papers contain -- don't end up in unsecured trash bins behind IRS buildings, according to a federal audit report released today.

As the report from the Treasury Inspector General for Tax Administration points out, over 130 million taxpayers each year are legally obligated to provide the IRS with sensitive financial and personal data. And much of that information is on paper documents that must be disposed of properly so that taxpayer privacy is protected and the risks of identity theft minimized.

But what is actually happening when it comes to IRS disposal of consumers' sensitive documents like 1040s and other tax forms? The federal investigation found documents containing personal identifying information or other sensitive data in regular trash containers and dumpsters outside EVERY Internal Revenue Service facility that was visited, putting untold numbers of U.S. taxpayers at risk of becoming victims of identity theft -- a problem that affects more than 10 million Americans each year, has cost consumers for than $45 billion, and can take a single victim about 328 hours to fix the damage done, as the report acknowledges.

Not surprisingly, the Treasury Inspector General's report concludes that "greater oversight is needed" when it comes to the IRS's methods for disposing of paper waste containing sensitive consumer data -- including the delineation of specific waste disposal responsibilities, enhanced process monitoring, and improved standardization and oversight of vendors that contract with the IRS for disposal of paper waste.

Read the report from the Treasury Inspector General for Tax Administration: Increased Management Oversight of the Sensitive but Unclassified Waste Disposal Process is Needed to Prevent Inadvertent Disclosure of Personally Identifiable Information

New York Attorney General Andrew Cuomo has filed lawsuits against two of the nation's largest debt settlement companies, alleging consumer fraud, deceptive trade practices, and false advertising. The suits are the latest efforts in the New York AG's ongoing probe into how these companies may be preying on consumers who are struggling financially.

Cuomo's office filed separate suits against Credit Solutions of America, Inc. of Texas and Nationwide Asset Services, Inc. of Arizona. According to a Press Release from the New York AG, the companies "have engaged in fraudulent and deceptive business practices and false advertising," and "have made millions of dollars on the backs of New Yorkers by selling misleading debt settlement plans that very rarely deliver the promised benefits to consumers dealing with debt." See details of the lawsuits in a Press Release from the Office of the New York Attorney General.

Also today, Cuomo's office launched, which explains debt settlement scams, allows victims of debt settlement fraud to file complaints, and tracks the AG’s investigation.

Earlier this month, Cuomo's office announced that a number of debt settlement companies had been issued subpoenas and would need to pull back their curtains to show what they're really doing to help their customers. 

Debt Settlement Companies: What To Watch Out For. Debt settlement companies often advertise that they can negotiate with banks and credit card companies to get consumers' debt balances drastically reduced, even to "pennies on the dollar". And it is true that some creditors may be willing to negotiate a reduction in the amount of debt owed, especially if a consumer is on the verge of filing for bankruptcy (think of it as a "something is better than nothing" approach).

But in reality, debt settlement companies can't guarantee that any creditor will agree to accept partial payment of debt that was accrued legitimately (i.e. credit card balances), and you should NEVER follow the advice of a debt settlement company that tells you to start making payments to them instead of to your creditors.

You should also be wary of debt settlement companies that try to charge you fees up-front and tack on percentages. More red flags when it comes to debt settlement companies are promises that your credit report will not suffer if you use their services (it almost certainly will), and guarantees that negative information can be removed from your credit report (it can't be removed, unless the information is inaccurate). Learn more: Debt Negotiation Programs: What to Watch Out For.

Credit Card Reform Bill Passes U.S. Senate Vote

The new credit card reform bill known as the "Credit Cardholders' Bill of Rights" passed a U.S. Senate vote with flying colors today. The legislation, which seeks to clarify the fine print in cardholder agreements and level the credit card playing field for consumers, passed the Senate by a 90 to 5 vote.  

The credit card reform package will likely still be the subject of some negotiation in the next few days between the Senate and the U.S. House of Representatives, which passed a slightly different version of the bill at the end of April by a 357 to 70 vote. Even so, a final version of the bill is expected to be signed into law soon by President Obama, possibly even before this weekend.

As reported here a few weeks ago, a final version of the Credit Cardholders' Bill of Rights will likely contain the following new credit card safeguards for consumers:

  • Require notification of interest rate hikes within at least 45 days of an increase.
  • When interest rates increase because of late payments, consumers must be allowed to revert back to earlier lower interest rates if payments are made on-time for a number of consecutive pay periods (i.e. six months).
  • Card companies would need to mail bills at least 21 days prior to the payment due date, and customers would be given extra days to pay when due dates falls on Sundays and holiday.
  • Card issuers would be required to let cardholders set their own fixed credit ceilings.  

The Credit Cardholders' Bill of Rights has gotten off the ground fairly quickly for such a high-profile piece of federal legislation, but there have been a few roadblocks to progress. Last week, the Senate voted to reject a 15 percent cap on credit card interest rates.

Not surprisingly, the credit card industry isn't a huge fan of the new reform legislation, as the New York Times reports: "The industry has asserted that the legislation may backfire, forcing banks to issue fewer credit cards at greater cost to the current cardholders and making credit harder to get at a time when many Americans need it."

Car Warranty Robocalls: How to Protect Yourself

Three companies have been ordered to stop making car warranty expiration warning "robocalls" and have seen their assets frozen, after the Federal Trade Commission (FTC) filed a lawsuit over the calls last week.

Temporary restraining orders were issued against Voice Touch, Inc., Network Foundations, LLC, and Transcontinental Warranty, Inc., by U.S. District Judge John F. Grady in Illinois late last week. The orders came shortly after the FTC filed a federal lawsuit accusing the companies of "operating a massive telemarketing scheme that used random, pre-recorded phone calls to deceive consumers into thinking that their vehicle’s warranty is about to expire."

These restraining orders and the FTC lawsuit are the latest rounds in the legal fight against car warranty robocalls. As many as 30 states are investigating the calls, as reported here last week, and Indiana Attorney General Greg Zoeller has filed a lawsuit against two telemarketing companies hawking auto service contracts. Now is a good time to learn more about how these car warranty robocall companies operate, and what you should watch out for.  

Car Warranty Scams: Protect Yourself. The sketchy companies behind the growing auto warranty robocall trend are trying to convince consumers that the calls are coming from their car dealer, or from someone affiliated with their car dealer. But really they're just independent (and likely not very reputable) businesses trying to sell service contracts to car owners. These "deals" have nothing to do with your car or your warranty, and the pitches are often made to people who don't even own a car. Worst of all, after all the high-pressure sales tactics, and payment of hundreds or even thousands of dollars, "if you buy a service contract, you may find that the company behind it won't be in business long enough to fulfill its commitments, " according to the FTC.

So, you should ignore robocalls telling you that your car's warranty is about to expire. But if you have legitimate concerns about your car's warranty (i.e. whether it actually has expired and whether additional coverage may be optional) check the paperwork on your vehicle and contact the dealer or the service center listed there.

No matter what, to avoid possible identity theft or other fraud victimization, don't give out your personal or financial information to a company that contacts you via a robocall, since you don't know who is on the other end of the line. Even if an offer sounds legitimate, always ask for more information in writing, and take some time to investigate the business before giving over any information or payment. Learn more: How to Steer Clear of Auto Warranty Scams 

From Capitol Hill comes this progress report on passage of credit card reform legislation that some are calling a "Credit Cardholders' Bill of Rights": the U.S. Senate has voted to reject a measure that would put a 15 percent cap on interest rates that banks can charge cardholders. But the bill is moving forward, and passage could come some time this week.   

The 15 percent interest rate ceiling was proposed by Senator Bernie Sanders, an Independent from Vermont, who argued that such a cap was necessary to give consumers relief from (sometimes arbitrary) card rate increases that can reach 25 to 30 percent, reports.

The Credit Cardholders' Bill of Rights has already won easy approval in a 357-70 U.S. House of Representatives vote, but obviously there are still some kinks to be worked out in the Senate. President Obama has voiced his support for the credit card reform legislation, and is expected to sign the bill once it reaches his desk.

Features of the new credit card reform legislation include increased protections and stricter notice requirements for interest rate increases, elimination of "double cycle" billing and other hidden penalties, enhanced flexibility and grace periods for payment due dates, and the opportunity for cardholders to set their own credit limits. Learn more: What Might a Credit Cardholders' Bill of Rights Look Like? 

While lawmakers look for ways to level the credit card playing field for consumers, the New York Times Magazine reports that banks and card companies are changing their business models to put more focus on their customers' lives and mindsets, and assessing who is more apt to pay their debts: "Gone are the days of handing out cards willy-nilly and hoping that the cardholders who dutifully pay up will offset the losses from those who default."

Hundreds of homeowners in Massachusetts will get foreclosure relief in the form of more affordable restructured home loans, as a result of a settlement between the state and Goldman Sachs & Company, over the investment firm's sub-prime lending practices.

Under the settlement announced Monday by Massachusetts Attorney General Martha Coakley, Goldman Sachs agreed to provide $50 million in loan re-structuring for about 700 Massachusetts homeowners who are struggling with sub-prime mortgages held by Goldman entities. Specifically, Goldman will:

  • Reduce the principal of first mortgages by up to 25 to 35%.
  • Reduce the principal of second mortgages by up to 50% or more.
  • Require borrowers whose first mortgage is "significantly delinquent" to "make a reasonable monthly loan payment while seeking refinancing or until they sell their home. If after six months, a borrower is still unable to find financing or sell his or her home, Goldman will reduce the principal owed on the existing loan to assist the borrower," according to a Press Release from the Massachusetts Attorney General.  

The settlement is part of the state's investigation into the securitization of subprime mortgages given to the state's consumers, a probe that began in late 2007. In addition to the $50 million in loan re-structuring, Goldman Sachs will pay an additional $10 million to the state as a penalty.

According to the Wall Street Journal, yesterday's agreement is a small victory in the ongoing investigation over the undoing of the real estate market: "The settlement follows a probe into how major Wall Street players were involved in writing loans to borrowers with poor credit, and then underwriting securities made up of those loans. Goldman Sachs and other banks were accused of encouraging underwriting of risky loans."

If you're receiving phone calls with a pre-recorded message telling you that your car warranty is about to expire, and offering to sell you a new extended warranty vehicle service contract, you're probably annoyed. But you're not alone, and a number of federal and state officials are doing something about these so called "robocalls."

According to ABC News, attorneys general in as many as 30 states are investigating the "Your warranty is about to expire..." robocalls, and more than 100,000 consumers have contacted the Better Business Bureau to find out whether the calls are legitimate.

So, are the calls legitimate? One thing's for sure, they're deceptive. That's because the companies making the calls identify themselves as "Warranty Division" or "Dealer Services", trying to dupe consumers into thinking that it's their own vehicle's dealer calling, when in fact it's just a third party company that may or may not be on the level, according to ABC News. And often the "coverage" being offered is so fraught with loopholes and caveats that you're left with no protection.

Indiana Attorney General Greg Zoeller has filed a lawsuit against two telemarketing companies after Zoeller's office received "more than 100 complaints about robo-calls from these telemarketers selling auto warranties or service contracts."  

U.S. Senator Charles Schumer has called for a Federal Trade Commission investigation into the calls, according to the New York Daily News, which says the companies behind the robocalls are "pushing phony car warranties, exploiting worries about the fates of American auto giants Chrysler and General Motors."

Consumers got some enhanced protection from "robocalls" in December 2008, when a new Federal Trade Commission rule took effect, which requires that consumers be given the chance to opt out of future pre-recorded calls from soliciting businesses and charities.

Debt settlement companies that may be preying on consumers' financial desperation over credit card debts will need to pull back the curtain and explain what they're really doing to help their customers, under a new investigation launched this week by the office of New York Attorney General Andrew M. Cuomo.

At least 14 companies and one law firm have been subpoenaed in connection with the probe. The subpoenas seek detailed information on the companies' operations, and the impact on customers -- specifically, how the companies' fees for services are set and charged, the number of customers who have actually seen a benefit from the companies' services, and the specific relief being provided to customers, according to a Press Release from the New York AG's Office.

Some of the solutions urged by these debt settlement companies border on the absurd, including suggestions that cash-strapped customers sell their blood plasma, mow lawns in the neighborhood, cut back on the amount of car insurance they're carrying, and seek loans from neighbors and churches, according to Cuomo.

Consumers who are in over their heads where debt is concerned likely have more viable options than these debt settlement companies can provide, Cuomo says: "Many consumers may benefit more from working directly with their creditors, seeking credit counseling, or consulting an attorney about filing for bankruptcy. Additionally, even when enrolled in a debt settlement plan, consumers are often still subjected to collection efforts and lawsuits filed by their creditors."

Ticketmaster will need to defend itself in a class action for allegedly engaging in a type of "bait and switch" tactic that sent ticket buyers to an online Ticketmaster subsidiary which charged much higher prices, if a New Jersey court gives the okay to the lawsuit.

The lawsuit filed Tuesday alleges that fans looking to purchase tickets to concerts featuring popular performers like Britney Spears, Phish, and Hannah Montana were re-directed to, a Ticketmaster subsidiary that resells tickets at much higher prices, according to the New Jersey Star-Ledger.

If class action status is granted for the lawsuit, thousands of consumers may be able to join, provided that they 1) visited after January 15, 2) were automatically re-directed to, and 3) bought tickets at a price that was over face value, according to the New Jersey Star-Ledger.

In class action lawsuits, people with the same (or similar) injuries or damages join together in a single legal action against one or more defendants. In consumer class actions, people who may be affected will usually receive a notice in the mail describing the suit, and are given an opportunity to join or instructions on how to "opt out." (Learn more about Class Action cases.)

Today's announcement of a proposed class action lawsuit against Ticketmaster in New Jersey is just the latest entry on a timeline of legal action between the state and the ticketing giant.

In February, Ticketmaster and New Jersey Attorney General Anne Milgram reached an agreement to settle allegations over the company's online sale of tickets to two Bruce Springsteen concerts, including charges that fans were charged for transactions that were never completed, or were directly referred to a more expensive Ticketmaster subsidiary's website.

Swine Flu Treatment Scam Warning Issued by Feds

As news about the H1N1 influenza (swine flu) virus continues to grab headlines and attention around the globe, it's no surprise that some shady characters are looking to cash in on public fears over the outbreak. U.S. health officials are warning consumers to be on the lookout for the online (and offline) promotion of products that promise to diagnose, prevent, treat, or cure the virus.

The U.S. Food and Drug Administration (FDA) reports that the fraudulent H1N1 treatment products being offered by scammers "come in all varieties and could include dietary supplements or other food products, or products purporting to be drugs, devices or vaccines." FDA warns consumers that these products "will not prevent the transmission of the virus or offer effective treatments against infections caused by the H1N1 influenza virus."

The FDA reminds Americans that only two antiviral medications have been approved by the agency for treatment of the H1N1 influenza (swine flu). The approved medications are Tamiflu (oseltamivir phosphate) and Relenza (zanamivir). FDA advises consumers to "contact their health care providers or legitimate medical supply services if they have questions or concerns about medical products or personal protective equipment."

Reuters reports that the H1N1 influenza scams have included a blitz of phony websites and "spam" emails, including one scam email offering a "'Flu Safety Kit' that contains facial tissues, disinfecting wipes and alcohol-based hand sanitizer."