Archive: May, 2010
I've been away a few days for a daughter's college graduation, dorm move-out, and other intrusions of everyday life, but I wanted to pass along a couple of updates on ongoing stories, as well as a link to an article about a practice that I've always wanted to believe was 90 percent urban myth: people who cheat retailers by buying items, using them, and returning them for refunds.
(1) I wrote last Sunday's column about the first anniversary of the Credit CARD Act of 2009 - a milestone worth celebrating even if some card issuers used it as an excuse to raise rates pre-emptively on good customers. The column (read it here) focused on one cardholder, Robert Malkin, who pays off his card each month and was miffed - to put it mildly - that Capital One had more than doubled his interest rate.
The good news, as I explained, is that the credit-card market remains very competitive, and that the banking industry's dire warnings (everybody will have to pay annual fees! no more rewards!) haven't materialized. Customers like Malkin may not find long-term 6.9 percent rates anymore, but rates in the 10 to 12 percent range are available, as are balance transfers with attractive terms. So anyone with a decent credit score may benefit from shopping around.
An exhibit filed this week with a new Senate Commerce Committee report should help consumers who believe they've been tricked into signing up online for "membership clubs" that then generate mysterious monthly charges on their credit-card statements.
This is a big problem. According to the Senate report, three Connecticut companies - Affinion, Vertrue and Webloyalty - have charged millions of consumers more than $1 billion over the last decade "for membership clubs and services the consumers did not want and were unaware they had purchased." Other companies have similar business models that originate with direct-mail or telephone pitches.
Typically, the unwitting "sign-up" occurs after a consumer has willingly provided credit-card information to purchase something from the website of a company the consumer knows and trusts, such as Fandango, Priceline or US Airways. A common element is that the consumer is charged by the membership-club company without having taken the full series of steps that typically signify a purchase: providing a credit-card number, security code, and billing address. (You can see the new Senate report here, and my Inquirer column about the original report here. Along with the new report, Chairman Jay Rockefeller introduced a bill intended to crack down on practices he says are to blame; you can read about that here.)
Whether or not it's his goal, Pennsylvania Attorney General Tom Corbett, the Republican gubernatorial candidate, may be testing the limits of Internet anonymity. Reports say Corbett has issued a subpoena to Twitter's "Custodian of Records" demanding the real identities of two critics who go by the handles "bfbarbie" and "CasaBlancaPA."
Techcrunch.com reported the subpoena yesterday here, attaching what appears to be a copy of the document and citing three CasaBlanca tweets. All were linked to longer, equally anonymous blog posts that may really be driving Corbett's concerns:
A federal judge has ordered a stop to three companies' marketing calls - including recorded robocalls - that the Federal Trade Commission says deceptively promised to reduce consumers’ credit card interest rates.
I've gotten several calls lately on my cell phone that fit this description. Like many other people, I mostly just mutter and complain to people around me. Thankfully, enough other consumers have complained to the FTC that the agency went to court today. The judge froze the companies' assets and appointed a receiver to take control of the businesses.
The FTC says:
If you only send the minimum, how long will it take to pay off that nagging credit-card balance? And how much will you eventually fork over?
How about 1,738 years and $854,329?
Those were the numbers that confronted Barry Weintraub of Philadelphia when he opened a recent statement on his BJ's Wholesale Club Visa, issued by Barclay Bank.
Many people who encounter credit-card interest rates as high as 30 or 40 percent (or in one celebrated case, 79 percent), or payday-loan rates topping 400 percent, ask the question: Whatever happened to usury laws?
The answer is that they remain on the books in many states, including Pennsylvania, but have become functionally irrelevant because of the U.S. Supreme Court. A 1978 ruling, known as Marquette, said banks only had to follow the laws of the states where they were based - laws in the states where their customers lived didn't matter. The quick result was that the nation's leading credit-card banks relocated to states such as Delaware and South Dakota that were willing to repeal their usury laws - in the eyes of consumer advocates, a classic "race to the bottom."
Now, Rhode Island Sen. Sheldon Whitehouse and 16 other senators, including Pennsylvania's Bob Casey and New Jersey's Robert Menendez, want to reverse the Marquette ruling with an "Interstate Lending Amendment" to the Senate's financial-reform legislation.
The New York Times buried a good story this week about a fundamental shift in government under the Obama administration - an article that, strangely enough, brought to mind a favorite story from my childhood, "Pigs Is Pigs." I'll explain in a moment.
The Times' story ("Surge of New Rules Show Regulation Is Back") cited new rules "to protect Americans from tainted eggs, safeguard construction workers from crane accidents, prevent injuries from baby walkers and even protect polar bears from extinction," and said the administration was also stepping up enforcement. One example: The Food and Drug Administration, down to 1,309 inspectors nationwide in fiscal 2007, now has 1,800 inspectors "with 150 more on the way."
The Philadelphia area may be witnessing some of the fruits of that nearly 40 percent increase - or suffering from the fallout, depending on your point of view. The recent massive recall of all children's versions of Tylenol, Motrin, Benadryl and Zyrtec by McNeil Consumer Healthcare was apparently the result of a sharply critical April inspection of the company's Fort Washington plant - an inspection accelerated because of a recall last fall connected to problems at a McNeil plant in Puerto Rico. (You can read my recent column about the recalls of McNeil's long-trusted children's products here.)
Peco president Denis O'Brien stopped by the Inquirer today to discuss the rapidly changing power markets. One key message, which he's offering to worried customers everywhere he goes: Despite widespread fears of electricity rate hikes of 20 to 30 percent after Peco's 14-year price caps expire Jan. 1, the Philadelphia utility now expects the cost of power itself to remain relatively flat.
On the other hand, Peco is seeking a distribution-rate increase that will add about 10 percent to the average residential bill - if it's approved as-is by the Public Utility Commission. That's basically the first such increase in 21 years, and O'Brien is understandably fond of asking people he visits to tell him how much prices have risen in their industries over time. (A comparison O'Brien probably doesn't like so much is this one, showing that Peco's residential price of about 14 cents per kilowatt hour is still well ahead of the national average, 10.5 cents.)
Peco has a new website, PecoAnswers.com, where you can get answers to basic questions about what's coming. If you're interested in taking advantage of various energy-saving incentives, an even more valuable site is PecoSmartIdeas.com.