An Ounce of Prevention Worth a Pound of Cure for Mortgage Fraud – National Consumers League

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By John Breyault, Vice President of Public Policy, Telecommunications and Fraud

Last week, the U.S. Treasury Department, along with the Federal Trade Commission, Department of Justice, Department of Housing and Urban Development, and the Attorney General of Illinois announced an unprecedented crackdown on mortgage fraud and foreclosure rescue scams. The State of Illinois filed two lawsuits and the FTC announced five new enforcement actions against companies engaged in fraudulent mortgage modification and foreclosure rescue schemes. The FTC warned dozens more companies about potentially deceptive trade practices related to such activities.

The bursting of the housing bubble has left millions of Americans searching for ways to deal with the increased costs of adjustable-rate or “balloon” loans and stave off foreclosure. Unfortunately, fraudsters see this misery as an opportunity to take advantage of desperate victims and fleece them as exactly the time these consumers can least afford it. The unfortunate reality of these scams is that thousands of consumers end up financially ruined and often out on the street.

While we certainly welcome stepped-up enforcement by federal and state authorities, we believe that such action often comes too late for victims of such scams. Who knows how many consumers could have avoiding becoming fraud statistics if they had been armed with information to help them spot these scams and take advantage of the legitimate resources available to help them negotiate with their creditors and avoid foreclosure?

With this in mind, NCL last week called on the nation’s leaders to place a renewed emphasis on consumer education to empower consumers to avoid mortgage modification, foreclosure rescue, and other forms of mortgage fraud.

Said NCL Executive Director Sally Greenberg:

“Recent multi-agency federal and state actions to tackle the threat of mortgage fraud are a positive step in helping to protect consumers. Fraudsters should be apprehended and brought to justice. All too often, however, victims of these schemes have already been ruined financially by the time mortgage fraud rings are broken up by law enforcement. Now, more than ever, enforcement should be tied to prevention by devoting more resources to educating consumers through churches, community centers, senior centers, schools, and libraries. This is needed particularly in vulnerable low-income, elderly, and immigrant communities, whose members are frequent targets for mortgage fraud.”

Last week, the Treasury Department stated that from July 2002 to June 2008, it had received nearly 180,000 reports suspicious activity related to potential mortgage fraud. While these statistics are shocking, it is likely that thousands more instances of such fraud go unreported. Enforcement against scammers is an important part of the fight against mortgage fraud, but it should not be the only part. For the vast majority of consumers, their homes are the biggest investment they will ever make. They should be empowered with information, through coordinated widely available consumer education efforts to avoid losing those investments to scam artists.

Gift Card Holder’s Bill of Rights – National Consumers League

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The National Consumers League has been joined by Consumer Action and the Montgomery County, Md, Office of Consumer Protection to call on the gift card industry to ease the burden on consumers by lifting expiration dates, lowering fees, and more.

1. Gift cards should have no expiration dates.
Gift card holders have the expectation that their cards are as good as cash at a retailer. They should be able to use their cards regardless of when they received the card

2. The value of a gift cards should not be reduced by arbitrary fees that diminish a card’s value.
The funds available on gift cards are often reduced significantly by a variety of postsale fees (called “dormancy,” “inactivity,” or “maintenance” fees, depending on the card) if the value of the card has not been exhausted within six to 12 months of purchase. We believe the funds stored in these cards should be available to consumers to pay for goods and services, not the card issuer’s administrative costs.

3. Fees assessed on a card purchase should not exceed five dollars or ten percent of the value of the card.
The processing charges or sales fee charged at the point of sale for gift cards should be reasonable and consistent with the expected costs incurred by the card issuer to market the card and service the card post-sale.

4. Card replacement fees should not exceed two dollars or ten percent of the purchase price of the card, whichever is less.
Card holders lose cards for a variety of reasons, including theft. Fees associated with replacing the card should be reasonable.

5. Cards with a balance of five dollars or less should be redeemable for cash with no fee.
Many cards are unusable when consumers attempt to use them to make purchases greater than the value of a card. Many retailers are unable or unwilling to attempt a “split tender” transaction to address this issue. As such, we believe that consumers should be able to redeem gift cards with a remaining value of $5 or less for cash, without a fee.

6. Balance inquiries should not deduct from the value of the card.
Consumers may need to check the remaining balance on their cards from time to time. Doing so should not reduce the value of the card itself.

7. Terms and conditions should be clearly disclosed.
Consumers should be made aware of any fees associated with a card before purchasing it. Such terms and conditions should be viewable on the card itself, the card’s packaging, in-store display, and on an easily accessible Web site.

8. Unused funds should not go into the card issuers’ pockets, but should accrue to a state fund to be used for the specific benefit of consumers.
The residual value of lost or unused cards falling under states’ unclaimed property laws should be used to benefit consumers, not to the bottom lines of big banks and retailers. Appropriate uses of such monies would be a fund to compensate victims of consumer fraud, grants to non-profit organizations fighting fraud, and support for state programs to educate the public about consumer fraud.

9. Funds from the sale of gift cards should be segregated and held in trust accounts so as to be automatically honored in the event of the cards issuer’s bankruptcy.
Recent retailer bankruptcies have resulted in consumers being unable to use their gift cards or only being able to redeem t heir cards for pennies on the dollar. Consumers who purchase gift cards have, in effect, prepaid for goods and services and their purchases should be honored, regardless of the bankruptcy status of the card issuer.

10. These rights should cover any electronic gift card with a banked dollar value.
Consumers generally do not differentiate between gifts cards usable at a single retailer or multiple retailers. The rights afforded them should be consistent regardless of the issuer of the card.

Prevention, not just enforcement, needed to curb growth in foreclosure rescue scams – National Consumers League

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 April 10, 2009

National Consumers League praises Obama Administration for commitment to enforcement, calls for renewed focus on consumer education

Contact: 202-835-3323, media@nclnet.org

Washington, DC — With home foreclosures at an unprecedented and historic high, millions of consumers are more vulnerable than ever to mortgage fraud and bogus foreclosure rescue schemes, warns the National Consumers League (NCL), which has long tracked illegal scams through NCL’s Fraud Center. On Monday, the Obama Administration announced a wide-ranging multi-agency effort to bring loan modification fraud and foreclosure rescue scams under control. As the nation undertakes a much-needed crackdown, it is equally important that there be a renewed focus on consumer education to help consumers avoid falling victim to these criminals in the first place.

Mortgage fraud costs the lending industry an estimated $4-6 billion annually, according to the Prieston Group. At a time when consumer’s pocketbooks are stretched thinner each day due to a worsening economy, homeowners are increasingly vulnerable to fraudsters offering them a way to avoid losing their homes. Unfortunately, for tens of thousands of Americans, these schemes almost always end up with the consumer losing money, having their credit further damaged, and losing their biggest investment: their homes.

“We welcome the recent actions by the federal and state governments to tackle the growing threat of mortgage fraud,” said Sally Greenberg, NCL Executive Director. “However, vigorous enforcement actions – while a critical component of fighting fraud – must be combined with education to help consumers recognize and avoid these scams in the first place.”

Mortgage modification and foreclosure rescue scams come in a variety of guises, but some of the common ones include:


  • Upfront Fee Scam. Fraudster promises, for an upfront fee, to negotiate with homeowner’s bank to pay down back-payments, but scammer ultimately takes the money and disappears.

  • Lease-back or repurchase scams. Con artists promise to pay a mortgage and lease it back to their victims if the consumer signs over the deed. The scammer then raises the rent, sells the house, steals equity, or even evicts the tenant.

  • Refinance fraud. Victim signs over ownership of the house, thinking that they are signing documents for a new loan at a lower payment level.

  • Bankruptcy schemes. The scammer encourages the victim to stop paying their mortgage and offers to file bankruptcy for the consumer, for a fee.

  • Appraisal fraud. An appraiser – in cahoots with a bank – overvalues the home, then secures an unnecessarily large loan at high interest rates for the homebuyer. Another scenario is that the appraiser undervalues the home in order to justify a short sale and subsequent re-sale at market value for profit.

“Recent multi-agency federal and state actions to tackle the threat of mortgage fraud are a positive step in helping to protect consumers,” said Greenberg. “Fraudsters should be apprehended and brought to justice. All too often, however, victims of these schemes have already been ruined financially by the time mortgage fraud rings are broken up by law enforcement. Now, more than ever, enforcement should be tied to prevention by devoting more resources to educating consumers through churches, community centers, senior centers, schools, and libraries. This is needed particularly in vulnerable low-income, elderly, and immigrant communities, whose members are frequent targets for mortgage fraud.”

Consumers who suspect they may be targets of mortgage fraud have a range of resources available to them. NCL’s step-by-step guide to financing the purchase of a home, including critical information for protecting yourself against fraud, is available online at www.mortgagetown.org. The federal government has made numerous resources available online for consumers facing foreclosure, including the U.S. Department of Housing and Urban Development’s “Guide to Avoiding Foreclosure” and HUD’s new www.MakingHomeAffordable.gov Web site, as well a toll-free foreclosure counseling assistance hotline at 1-888-995-HOPE.

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About the National Consumers League

Founded in 1899, the National Consumers League is America’s pioneer consumer organization. Its mission is to protect and promote social and economic justice for consumers and workers in the United States and abroad. NCL is a private, nonprofit membership organization. For more information, visit www.nclnet.org.

Focus on LifeSmarts: Countdown to St. Louis! – National Consumers League

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As we get closer to this year’s National LifeSmarts Championship event, which will take place in St. Louis, MO, April 25-28, we thought it might be a good time to showcase the real-life lessons LifeSmarts offers its participants.

First up: Health and Safety

As the economy worsens, you or someone you know may have difficulty paying medical bills. In LifeSmarts, teen participants learn that it pays to shop around and compare many different options before selecting what to purchase. Good consumers also know that the prices of certain items are negotiable – like new and used cars, houses, and consumer items bought through online auctions.

What you may not know is that many doctors have some flexibility with the rates they charge and may be able to offer reduced fees depending on your circumstances. Check out this recent New York Times article “Bargaining Down the Medical Bills” to find out more about negotiating fees with doctors and to read some helpful tips.

Are You a Locavore? – National Consumers League

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by Mimi Johnson

The First Family is one step closer to being locavores, after recently planting a vegetable garden on the lawn of the White House. There has not been a garden of its kind at 1600 Pennsylvania Avenue since Eleanor Roosevelt planted a victory garden during World War II. Sustainable agriculture, proponents say, is good for your health, as well as the health of the environment. First Lady Michelle Obama said she hoped this garden will help educate children about healthful, locally grown fruit and vegetables, and that they will “begin to educate their families and that will, in turn, begin to educate our communities.” In an age of convenience and attempts to save time, we all too often forget the satisfaction (and importance) of fresh foods. We too hope that this garden plants seeds of prevention in the minds of millions of Americans.

Even technology is getting into the game. With the Locavore 1.0 application, iPhone users can locate local, seasonal food and farmers’ markets across the country.

As the weather becomes warmer and the days longer, you might consider planting a few herbs or vegetables yourself. If your thumbs are not too green, consider taking a trip to your local farmers’ market … in addition to getting some good eats, you’ll also help support local businesses.

NCL survey: consumers demanding more from their DVD collections – National Consumers League

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April 6, 2009

Near-unanimous agreement: Consumers believe backing up DVD content is a Right; many bothered by inability to do so

Contact: 202-835-3323, media@nclnet.org

Washington, DC—Americans’ attitudes towards DVDs are evolving and driving expectations about their use, according to a new survey released today by the National Consumers League. The Opinion Research Corporation survey of 1,000 consumers, aged 18-64, who own a personal computer, conducted March 11-16, finds that—amidst a backdrop of a slowing market and troubled economy, when consumers’ satisfaction may be more important than ever—Americans are overwhelmingly interested in the ability to copy or back up their DVDs to their computers and laptops.

With 69 percent of respondents reportedly watching DVDs on their computers, and with more than a third saying they’ve had to repurchase lost or damaged DVDs in the past, consumers are resoundingly interested in the ability to back-up their DVD content. According to the survey, 90 percent (and 93 percent of those with children in the household) agree that DVD owners should be able to copy a DVD to their computer in the same way that they save music from a CD.

For years, consumers have been able to freely copy and back up the content on their compact disc (CD) collections to their hard drives and other devices. Given the growing availability of affordable hard drives capable of storing the contents of multiple DVDs, NCL wanted to examine whether the expectation of freedom of usage from the CD market is translating to the consumer DVD market. 

Consumers currently have limited options for saving the contents of most commercial DVDs to their computers, whether for back up purposes or simply so that they can easily access their DVD library without carrying around the actual discs.  Some “expanded” editions of DVDs, which are usually sold at an additional cost, come with the ability to save an additional copy to a computer.  NCL, the nation’s oldest consumer advocacy group, commissioned the study to examine consumers’ opinions related to the entertainment content stored in their DVD collections.

“Clearly, advances in technology have left consumers expecting a great deal of freedom when it comes to movies that they’ve purchased,” said Sally Greenberg, NCL Executive Director. “Consumers’ attitudes towards saving content have been shaped by their ability to freely copy the contents of their CD collections to their computers and iPods. Our survey shows that they are eager to have that same ability with their DVDs and are frustrated that the market has not adapted to meet that desire.”

Survey Highlights: DVDs are in widespread use beyond the TV set

More than a third (35 percent) of consumers surveyed reported owning more than 50 DVDs, with the average household owning 78 DVDs, but consumers are no longer exclusively using a conventional television-and-DVD-player configuration:

  • 69 percent of respondents—and 74 percent of those with children—reported that they (or members of their family) use a computer to watch DVDs.
  • Nearly a third of respondents (31 percent) use a portable or in-car DVD player regularly. For respondents with children in the household, portable DVD players are even more common, with 40 percent reporting regular use.
  • More than a third (38 percent) of respondents reported that they have had to repurchase at least one DVD because it was lost or damaged. For respondents with children in the household, this number increased to 45 percent.

“Consumers are taking their DVDs on the road with them,” said John Breyault, NCL’s Vice President for Public Policy, Telecommunications and Fraud. “With the growth in popularity and affordability of hand-held and car-based DVD players and video-capable MP3 players, when and where consumers watch movies has changed dramatically.”

Survey Highlight: Consumers indicate a high desire to copy DVDs
While the majority of consumers (82 percent) have never saved a copy of a purchased DVD to their computers’ hard drives, and a small number (4 percent) has tried and failed, respondents demonstrated overwhelming interest in being able to do so:


  • Nearly all (90 percent; 93 percent with kids in the house) say DVD owners should be able to copy a DVD to their computer in the same way that they save music from a CD.
  • Half of those surveyed (51 percent) were bothered that they can’t save most DVDs to their hard drives without cracking the encryption or purchasing an expanded version of the DVD; these numbers were higher among those respondents with children in the household (56 percent) or between the ages of 25 and 34 (67 percent). In this age group, 92 percent think they should have this right.
  • Nearly half (46 percent) of those who said they should be able to save a copy of a DVD onto their hard drive have had to repurchase DVDs due to loss or damage.

Survey Highlight: The economy and the DVD Market – Is there a further slow-down ahead?

While the great majority of consumers (89 percent) are satisfied with the value they are getting out of the DVDs they purchase, many reported that the economy has changed their DVD buying habits:

  • More than half of respondents (55 percent) said that they are currently purchasing fewer DVDs than they did a year ago.
  • Four in ten (41 percent) said they expect to purchase fewer DVDs one year from now.
  • However, 41 percent said the ability to save a copy of their DVDs to their computer or laptop would make their DVD collections more valuable, and 40 percent said it might cause them to buy more DVDs.

Click here for complete survey results, including an executive summary and a copy of the questionnaire. The National Consumers League thanks RealNetworks for the unrestricted educational grant that made this survey possible.

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About the National Consumers League

Founded in 1899, the National Consumers League is America’s pioneer consumer organization. Its mission is to protect and promote social and economic justice for consumers and workers in the United States and abroad. NCL is a private, nonprofit membership organization. For more information, visit www.nclnet.org.

Survey Methodology

1,000 online surveys were administered to adults 18-64, who personally own a desktop or laptop computer, between Wednesday, March 11th and Monday, March 16th, 2009.  Data was then weighted to better represent the national Internet population.  Variables included in the weighting are gender, region, age, and race.

About Opinion Research Corporation

Opinion Research Corporation, an infoGroup company, has offered innovative solutions to the toughest market research challenges of clients worldwide since 1938. Since the 1960s, ORC has conducted CARAVAN®, the USA’s longest continuously running consumer omnibus. In addition, the firm has been conducting national, speech reaction, state and flash/overnight polls for CNN since April 2006. To learn more, visit www.opinionresearch.com.

DVD Copying Is In the Public Interest – National Consumers League

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By John Breyault, NCL VP of Public Policy, Fraud and Telecommunications

Consumers have an average of 78 DVDs in their collections and are frustrated that for the most part, they are limited to only using the physical discs, according to NCL’s new survey on DVD usage.

For years, consumers have enjoyed to the freedom to copy their compact disc collections for back up purposes or transfer the content of those discs to their computers for personal use. Many consumers have spent years building up vast collections of CDs, so this ability is a welcome way to extend the lives of their collections and listen to their library on different platforms, such as iPods or personal computers.

A confluence of factors led to our interest in the DVD copying issue. The dramatically lower cost of hard drive space, the promulgation of portable video-viewing devices, including in-car players, video-capable personal music devices, and ultraportable laptop computers and the wide availability of DVD-RW drives are all technological advances that have made copying DVD content to hard drives practical for consumers. Our goal in surveying consumers on this issue was to see if these greater technological capabilities, combined with years of expectations related to content use (from the CD market) have translated into greater consumer desire to copy DVDs.

Our survey of consumer attitudes towards DVD copying largely validated our hypothesis. Some of the highlights from the survey results include:

·        90% (93% of households with children) of consumers believe that DVD owners should be able to copy a DVD to their computer in the same way that they save music from a CD.

·        69% of respondents reported watching DVDs on their computers (74% in households with children)

·        31% of consumers use a portable or in-car DVD player regularly, a figure which rises to 40% for households with children.

·        More than one-third (38) of respondents have had to repurchase at least one DVD because it was lost or damaged.

·        41% of respondents said that the ability to copy a DVDs to their hard drives would make their DVD collections more valuable and 40% said that it might cause them to buy more DVDs.

For more information on the new survey, click here.

Ag Secretary Hears Consumer Groups’ Concerns – National Consumers League

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by Sally Greenberg, NCL Executive Director

Consumer and food safety groups recently had the chance to sit down with new Agriculture Secretary, Tom Vilsack. During the campaign, the Secretary had made some important pro-consumer statements, including supporting the creation of a single agency for food safety—something consumer groups have spent a decade working for. After a rash of recalls on everything from contaminated spinach, raspberries, beef, peanut butter, pet food and just this week, pistachios contaminated with salmonella, it has become clear that our food safety system is in need of an overhaul.

Gathering in a beautiful, old conference room in the Agriculture Department’s Whitten Building on the National Mall, the consumer groups and Vilsack, former governor of Iowa, talked about his principles of governing: transparency, participation, and collaboration. He also talked about his close relationship with the incoming Secretary of Health and Human Services, Kathleen Sebelius, current Governor of Kansas. In her role as head of HHS, Sebelius will oversee the work of the Food and Drug Administration and it’s important that these two food safety watchdogs can work together.

The FDA oversees the safety of 80 percent of our food supply, including produce, while the Department of Agriculture regulates 20 percent, including meat, poultry, and eggs. Altogether 20-some separate federal agencies have some responsibility for food safety. Funding for FDA, however, has so diminished in recent years that imported fruits and vegetables have about a 1 percent chance of getting inspected at the border. Domestic produce farms and growers are likely to be inspected only once every 5 years.

Vilsack mostly listened as our consumer groups—including Nancy Donley of S.T.O.P. (Safe Tables Our Priority), whose only child died from eating a fast food hamburger infected with E. coli and has been a food safety activist ever since—talked about including consumer representatives in the Food Safety Working Group, which President Obama has pledged to create, and other issues.

For me, the importance of this meeting lay in the Secretary of Agriculture looking around the table at the 17 people in our meeting who represent the interests of millions of consumers. After this discussion, I think Secretary Vilsack better understands who we are and that consumer groups will need to have a seat at the table—and will play a critical role—in the new Administration’s initiatives on food safety and consumer protection.

Turn the Tables on Scammers this April Fool’s Day – National Consumers League

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By John Breyault

The first day of April often brings with it a raft of pranks, jokes, and other silliness. Unfortunately, scammers consider every day to be April Fool’s Day – and the joke’s on unwary consumers.

This year, we urge consumers to turn the tables on scam artists and get educated about new scams. Scammers frequently tailor their scam’s pitches to an approaching holiday or significant event. For example, every year around the December holidays, we see an increase in charity scams. Similarly, we expect an upswing in reports to NCL’s Fraud Center about scams related to Tax Day as we approach April 15.

Tax Day scams come in many forms, so consumers should be sure to be on the lookout for them. Some of the more common variants include:

  • Phishing Scams – The victim receives an email, fax or phone call, purportedly from the Internal Revenue Service (IRS) or state taxation authority, asking for personal information necessary to process a refund. Consumers who fall victims lose their personal information, which the scammer can use to commit identity theft or drain a bank account (if a bank account number is provided to the scammer). The reality is that the IRS and state taxation authorities will never contact filers in this way to obtain additional information. Consumers should avoid giving any personal information out when they receive such calls and do not click on links in such emails, even if they have an IRS logo (phishers are experts at making “official-looking” emails). For more information on IRS phishing scams, visit the agency’s official site.
  • Home-Based Business Tax Schemes – Promoters of home-based business opportunities (many of which are just masked pyramid schemes) sometimes claim that such businesses can be used to avoid paying taxes by listing most, if not all, personal expenses as tax-deductible business expenses. Consumers falling victim to such schemes could be liable for back-taxes owed, IRS penalties, and even imprisonment. Click here for more information.
  • Abusive Return Preparers – Tax season is a stressful time for many consumers. Difficult-to-understand forms, complicated calculations, and the ever-looming April 15th deadline lead millions of consumers to use tax preparers, most of which are reputable businesses. Unfortunately, abusive return preparers can hit unsuspecting consumers with a double-whammy. First, these scammers often charge outrageous fees and skim profits off the top of consumers’ refunds. Second, such returns often incur the wrath of the IRS. Since the consumer is ultimately responsible for his or her own return, they could be liable for IRS penalties. Click here for tips from the IRS for choosing a reputable tax preparer, and always check out the business with your local Better Business Bureau.
  • Refund Anticipation Loans – While not technically a scam, refund anticipation loans (known as RAL’s in industry jargon and often advertised as “rapid refund” loans) are used to get cash to consumers in as little as 24-48 hours after a return is filed. What is generally not well disclosed to consumers is that such “refunds” are actually loans from the tax preparer, often with hefty fees and even heftier interest rates (over 700% in some cases!). And, for consumers whose tax refunds are unexpectedly withheld from the government, they are still obligated to repay the loan, at the exorbitant interest rate. Such loans are often targeted at low-income and immigrant communities, preying on unfamiliarity with the tax system. For more information on RAL’s, click here.

Consumers who believe that they’ve been the victim of tax scams can file a complaint with NCL’s Fraud Center by using our online complaint form. These complaints are shared with more than 90 federal, state and local law enforcement and consumer protection agencies in the U.S. and Canada.