Consumer Blog

For National Consumer Protection Week (which runs Feb 4-11 this year), we have unveiled a new consumer tool - the encyclopedia. This will grow with time. It's a searchable reference with definitions and examples of some of the most common consumer topics. Find out what a 419 scam is, when to trust a cashier's check and how to know if it's really the IRS that's emailing you. And much more.

A major identity theft study that comes out every year around this time suggests we are making progress in fighting this crime. The report from Javelin Strategy and Research shows slight decreases in the number of U.S. victims between 2005 and 2006 (8.9 million down to 8.4) and total fraud losses ($56 billion down to $49 billion). Those are not huge drops by any means, but it's significant because for years ID theft has been called the nation's fastest growing crime. For this progress, Javelin cites wiser consumers and security improvements at banks and credit card companies.

Still, don't let your guard down on ID theft. We have lots of tips for you.

A survey of landlords predicts residential rent payments will go up 5% this year. The USA Today story says it's being blamed on the real estate market, which was red hot just a couple of years ago.

Follow along: homes were selling so well between 2000 and 2004 that lots of apartments were converted to condos so their owners could get in on the action and sell them. That means there are a lot fewer rental properties out there right now. That means less supply, higher demand, higher prices.

Consumer advocates have warned forever against driveway repair scams. Today we have allegations of fraud against a Hannibal based paving business for its treatment of homeowners on the other side of the state. Attorney General Nixon filed suit today. For more on driveway scams, see our encyclopedia entry.

There are now more than 1500 payday loan stores in Missouri. You probably live near one — or several.

There's a reason this industry is growing so fast — Missouri has some of the weakest consumer protection laws in the country. Attorney General Nixon this week renewed his call for tighter regulations. The numbers are staggering. Consider:

• Average annual percentage rate on a payday loan in Missouri is 422%
• Missourians paid $300 million dollars just in fees and interest on payday loans in a recent one-year period. That puts us second in the nation, behind only California in terms of raw dollars.
• Missouri allows up to six renewals of loans. This allows a maximum APR of 1,950%.

The A.G. calls this legalized loan sharking. Nationally, these lenders set up shop in minority communities and near military bases. In other words, they go where the low-income communities are. If you're ever in the St. Robert area, check out the number of stores around nearby Fort Leonard Wood. Rich people don't take out payday loans. So the people paying the most outrageous fees are those who can least afford it.

The blog entry about payday loans drew what is, unfortunately, a familiar comment from a reader. He writes:

I have over five payday loans that I owe. Where can I find help? I want to pay them, but I am so much behind I don't know what to do.

This is exactly what Attorney General Nixon refers to when he talks about the addictive cycle of payday loans. Few consumers take out one payday loan. They take out the first, so they're already behind by the time payday comes. Then they have trouble making it to the next payday, so they take out another loan. And so on.

PS, my answer to this consumer was to file a complaint with our office. Sometimes lenders are willing to negotiate a new balance.

I had a voice mail when I came into the office today from a Carmen, saying "we've been trying to reach you for some time - you may have won a Ford Explorer." I don't need to call back - here's what will happen:

• I will be told the exciting news that I could win one of three "fabulous prizes." Perhaps an Explorer, cash or electronics, like a cool TV.
• My wife and I will be given a free weekend at a hotel, likely in Branson.
• During that weekend, all we have to do is attend a 90-minute sales presentation, likely on a travel club or a timeshare.
• After that, we'll find out which of the three prizes we've won.

The 90-minute presentation is the key. You can read about these in our encyclopedia under travel club or timeshares. These are often high-pressure sales situations. The Attorney General gets frequent complaints about their tactics, including the fact that many of these operators will physically block the exit and not let consumers out.

To mark Valentine's Day, here's an item that goes to show you can get ripped off doing just about anything — including looking for a date online.

If you're getting to know that special someone on a dating Web site and you hear sob stories and an eventual request for money, look out. I personally took a call from a consumer a couple of years ago who was convinced she had met (though never in person) her soul mate. The man claimed to live in another country and wanted to move to Missouri to marry her... after he bribed an African government to get his kids released from captivity. Naturally, he needed some of her money to pay the bribe. I couldn't convince her it was a scam.

Never heard the outcome of that story, but good chance he broke her bank account as well as her heart.

At the height of tax season, here are some things to watch for as a consumer - some of them legal, some outright scams:

• Refund anticipation loans. Much like payday loans, these short-term loans are incredibly expensive (again, APR's in the triple digits, like 300% plus) and they are used by the people who can least afford them - low-income taxpayers. See the Attorney General's recent Savvy Consumer column on this topic.
• Phishing. These are emails (or they could be phone calls) that appear to come from the IRS, telling you there's a problem with your tax return, or that you qualify for a speedy refund. They are crooks trying to get your Social Security number. Don't bite. #1 rule of identity theft is to never give out your personal info to anyone who contacts you. Only give it out when you initiate the contact.
• Your mailbox. Your tax return is a jackpot of personal information. If you file by paper, not e-file, make sure you drop your envelope in a secure mailbox, like the blue ones at the post office. Your curbside mailbox with the flag up is not a wise option for this. An ID thief would love to snatch it.

A recent Yahoo! article has more on these three topics.

So far our office has 400+ complaints about price gouging after the ice storm, mainly in southwest Missouri. Attorney General Nixon announced a round of legal actions on Thursday.

We get a lot of questions about the definition of price gouging. In Missouri, price gouging happens when the price of necessary goods and services dramatically jumps during a time of disaster. That happened all over southwest Missouri after last month's storm. We saw abuses in the price of hotel rooms, gasoline, kerosene, generators, even extension cords. We take consumer complaints, then confront the businesses to get their response. The businesses generally fall into categories:

• Eager to work with us and refund money to consumers.
• Willing to give us documents but not willing to refund money. We go to court and ask a judge to order them to pay refunds.
• Not even willing to give us documents. We've taken a Joplin hotel to court for such a refusal - not sure what they are hiding, but the documents are critical, because they show receipts and other evidence of pricing strategy. Also, it's hard for the business to argue when we use their own evidence against them.

Most businesses fall into category 1, realizing it's the right thing to do and it's good for business to have happy customers. Others, unfortunately, fall into categories 2 and 3. Stay tuned for results on those, as well as 40 other businesses we are still investigating for similar complaints. The A.G. expects to have those wrapped up by mid-March.

Some of you will remember that once upon a time, you couldn't buy a home telephone - you had to rent one from the phone company. Of course that changed long ago, but some older consumers are still renting those phones - close to a million people nationwide, by one estimate. One phone company, on its Web site, offers phones ranging from $10 to $30 a month. That's up to $360 a year, obviously WAY more expensive than just about any phone you could buy.

So you might inquire with some of your older friends and relatives about whether they're renting their phones and make sure they know the score. This family did just that.

The 2006 Federal Trade Commission numbers on consumer fraud show wire transfers skyrocketing in popularity among scammers. Of the consumers who filed complaints filed with the FTC, about a quarter paid by wire transfer. The scary part is that we in the consumer advocacy biz have been warning about this for years, but the numbers are soaring: 11% in 2004 to 15% in 2005 to 23% last year.

Wire transfers appeal to crooks because of the immediacy and flexibility: if you use Western Union to wire money to someone, he can pick it up at any Western Union station on the globe.

Western Union teamed up with AG's offices all over the country last year to post warnings at their transfer stations, listing the signs of a scam. Hopefully these will get people's attention.

The biggest warning: never wire money to a stranger.

Attorney General Nixon, who enforces the Missouri No Call list, wants the law expanded to give better protection against telemarketers.

The Missouri Senate looks like it will pass a bill with our priorities - inclusion of fax and cell phone numbers, and a ban on recorded political calls (remember those from a few months ago?). The Missourinet has the audio of Sponsor Sen. Kevin Engler's introduction of the bill on the Senate floor.

The real story, however, is in the House. The last couple of years, the Senate has passed No Call expansion almost unanimously. It hasn't even had an on-the-record vote in the House.

In fact, last year, a House committee chairman asked for a voice vote on it, meaning Representatives don't have to put their votes in writing. Observers in the hearing said the "ayes" had it overwhelmingly. But the chairman said "the measure fails," adjourned the meeting and had no comment.

PS: he lost his re-election bid in a close race in November.

Payday loan companies may be getting nervous. With Missouri and other states calling for tighter regulations of payday loans, the industry has announced some changes it's making on its own.

Attorney General Nixon and other consumer advocates have issued blistering criticism of the industry, as well as Missouri's payday lending law, among the weakest in the nation. Also in the past year, Congress has passed interest rate caps on payday loans to members of the military, and Missouri eliminated payday loans issued by nursing home operators to their employees.

So now, a major payday lending group says its members will start offering a once-a-year extension of due dates for customers who can't repay their loans in time. They could get an extra four months to pay back their loans without extra fees. Lenders also will put more warnings on their marketing materials about the potential of a debt trap. Consumer advocates say it's not nearly enough, and it's no substitute for tigther state regulations.

This is starting to become a springtime tradition. I warned last week about this scam, and now we're starting to get consumer complaints on it.

Con artists are calling Missouri consumers claiming to be from the IRS, asking for verification of Social Security numbers. Make no mistake: this is not the IRS calling. This is a scam. Attorney General Nixon issued a consumer alert on it today.

This scam also happens via e-mail. Here's a sample.

#1 rule of thumb with ID theft: never give our your personal information to anyone who contacts you. Only give it out when you have initiated the contact.

Surely you've heard the commercials for freecreditreport.com - the one place not to go to get your free credit report (I'll explain in a minute).

For the second time in two years, the Federal Trade Commission went after and got a settlement with the company for implying that you get a free credit report from them. Actually, you do get one - but only after your buy something else.

Freecreditreport.com is run by Experian, one of the three national credit bureaus. They got in trouble and settled with the FTC for the same misleading marketing in 2005. They've had to pay more than $1 million in fines for this ad campaign, which has convinced a lot of consumers that they are the place to go for a free report.

As for truly free credit reports, there is only one place to get them with no strings attached. Here are the instructions.

The Federal Trade Commission's annual numbers are out for consumer fraud and identity theft complaints for 2006, and Missouri is, well, right in the middle. We ranked #23 in consumer fraud complaints per capita and #21 for ID theft complaints. The FTC showed 7,331 fraud complaints and 3,753 ID theft complaint.

Some of those people may have filed complaints with our office as well - we got about 40,000 formal complaints from consumers last year - that includes ID theft. In the FTC report, linked above, notice they also compiled their Top 16 complaint categories. If you're curious, you can compare it to our Top 10 list.

The FTC also ranks complaints by metro areas. Not much of interest for Missouri or the Midwest - although Jefferson City ranked 49th in the nation for consumer fraud complaints.

For ID theft prevention

Three different Missouri lawmakers have filed bills to do this. The idea is to prevent identity thieves from opening new accounts using your name. About half the states have a law like this. It freezes your credit file. Here is one of the bills. Rep. Paul LeVota has one that's almost identical, and Sen. Tim Green has one that's a bit different.

In theory, it works like this: let's say a thief, armed with your Social Security #, goes to open a new account in your name. The lender tries to check your credit, and he can't see it because the file's frozen. So that fraudulent account he was hoping to open never gets created.

It's one of the few laws that would be aimed at prevention. Most are aimed at solving problems after the fact: punishing crooks, notification of data breaches, availability of credit reports, etc.

About half the states have a credit freeze law, all passed in the last 2 or 3 years. The bill would also let you unfreeze your credit, so you can open an account when you need to. So far none of the three bills has had a committee hearing, which is the first step in the process.

The state Senate has officially passed the bill we've been pushing - adding cell phones to the No Call list and blocking those recorded political calls like you got last October and November. The bill now goes to the House. The Senate vote was 33-0. That's great, but a bit anticlimactic, in that the Senate the last several years has done that.

The problem lies in the House, which our blog mentioned last week. FYI, this would also allow fax numbers on the No Call list. And by registering your cell phone, you would block text message solicitations as well.