Postal banking, an idea whose time has come… again 

Brian YoungToday’s banking system is failing middle-class Americans. Around 8.4 million U.S. households do not have a bank account, and nearly one in five households are underbanked. One of the biggest complaints low-income consumers have is that the overdraft fees and penalties charged by big banks whittle away the meager funds in their bank accounts. Unfortunately, the problem is not likely to improve as many banks, despite generating massive profits, are increasing their fees, closing branches, and laying off workers. Compounding the harms identified above, since 2008, 93 percent of branch closures have occurred in neighborhoods with a median income below the national average, which—unsurprisingly—only worsens socioeconomic inequality.

In order to fill the void, predatory payday and auto title lenders have popped up across the country. These lenders charge outrageous check-cashing fees and interest rates of nearly 400 percent on average. With these predatory rates, if a consumer takes out a $500 loan at 391 percent interest, they will owe $575 just two weeks later. With 400 percent interest rates, it is perhaps not surprising that the Consumer Financial Protection Bureau (CFPB) found that four out of five consumers who take out these loans either default or renew their payday loan within a year, costing them even more in interest and fees. The CFPB also found that by the time consumers escape these loans, one out of five new payday loans end up costing the borrower more than the amount they originally borrowed.

Fortunately, there is an alternative to trapping consumers into inescapable cycles of debt: postal banking. Postal banking is not a new idea. Many countries, including France and the United Kingdom, already provide access to affordable loans and other financial services via their postal service. The postal sector has been found to be the second-largest contributor to financial inclusion worldwide; only the banking industry has more financial customers. In fact, few know that from 1911 to 1967, the United States Postal Service (USPS) operated a robust Postal Savings System that once controlled more than $3.4 billion in assets.

Today, USPS no longer offers a savings program. That’s unfortunate, since 26.9 percent of American households are underserved by traditional banks, which means that their options are limited and that they are often forced into utilizing predatory financial services to cash their paychecks and make ends meet. Compounding the problem, many brick-and-mortar retail stores have embraced a new trend to refuse cash payments altogether. All of these developments underscore how having access to affordable and sustainable credit and digital payments is critically important.

The USPS is uniquely situated to provide relief to unbanked and underbanked Americas. Of its 30,000 locations, 59 percent are located in banking deserts, where there are either no banks or just one within an entire zip code.

Empowering Americans to participate in commerce is something the USPS could start doing tomorrow without any action by Congress. A 2014 Office of the Inspector report found that the USPS could, with current regulatory authority, offer a suite of financial products that would help underserved Americans collectively save billions of dollars a year from predatory fees, promote savings, and increase customer participation in e-commerce. It’s also a savvy business, in our view, for USPS to use its existing infrastructure to expand its current line of products and in so doing, boost its bottom line.

Indeed, a broad coalition of labor, public interest, and faith groups agree and are encouraging USPS to offer vital financial products that Americans need to climb the economic ladder. In the days and months ahead, NCL is looking forward to joining the postal banking movement and working to provide consumers with a public banking option.

DC City Council should protect consumers from deceptive automatically renewing subscriptions – National Consumers League

Brian YoungThe scenario is all too familiar to thousands of District residents: while looking over a credit card bill, you notice a mysterious charge from a company or service you vaguely remember doing business with a year ago. Why do you keep getting charged for a cleaning service you only used once? If this sounds familiar, chances are that you are the unwitting victim of an automatic renewal clause.

These sneaky clauses typically state that unless you notify the company, your contract will automatically renew at the end of the term. Unsurprisingly, many companies love these clauses as it provides them with guaranteed income. Since consumers are often forced to go through the arduous process to cancel their subscriptions, even consumers who want out of these contracts can find it difficult to extricate themselves.

Not all automatic renewal contracts are wrong, however. For example, I am grateful that I do not have to write a check or pay an online bill each month just to keep using Netflix. However, many companies slip these automatic renewal clauses into the fine print and consumers do not know they have to cancel by a certain date (often as much as 3 months prior to the contract’s end date) to avoid being stuck with another year of service. This leaves consumers and businesses alike saddled with expensive contracts they have no desire to utilize and have no ability to cancel.

Fortunately, 22 states have laws on the books which require that automatic renewal clauses not be buried in pages of fine print. While the District does not yet have this consumer protection, Councilmembers Mary Cheh, David Grosso, and Anita Bonds recently introduced the Consumer Disclosure Act of 2017 which is currently pending before the Committee on Judiciary and Public Safety. This legislation would empower consumers by requiring businesses to provide notice to consumers if their contract is set to renew for a multi-month term. This reminder will need to include clear instructions on how and when consumers must cancel to prevent an automatic renewal of a contract.

The Consumer Disclosure Act of 2017 would not only protect consumers from unscrupulous business practices, but it would also help the District’s businesses and employers. For instance, my employer — the National Consumers League — recently found out that we were on the hook for a contract which automatically renewed for the year at the tune of $23,000. We were responsible for this large sum merely because we failed to provide a written notice of our intention to cancel the contract more than 90 days prior to the contract’s end. The person originally arranging for this service was no longer on staff and management wasn’t aware of the contract’s automatic renewal provisions. Had the Consumer Disclosure Act been law, not only would we have known before signing the contract that there was an automatic renewal clause, we would have received a notice prior to the contract’s 90-day cancellation window reminding us that we need to make a decision to cancel or renegotiate the contract.

Research suggests that the consumers has around 11 recurring charges. To help deal with this headache and avoid expensive surprises, we urge the DC Council to act quickly on this bill and begin giving residents in DC the protections from automatic renewal abuses that citizens in other states already enjoy.

NCL #DataInsecurity Project – National Consumers League

databreach.jpgNCL recently debuted the first issue of The #DataInsecurity Digest, a twice monthly publication curated by NCL’s own, John Breyault, to deliver important consumer-focused data security news, policy and news analysis, and information about upcoming events directly to your inbox. Click here to subscribe.

In 2013, there were 614 data breaches that led to more than 550 million identities compromised. New data breaches means more identity theft and other fraud, and more consumers facing financial loss, great inconvenience, and a loss of trust in the marketplace. That is why NCL is working on the #DataInsecurity Project — to raise awareness about the need for reforms aimed at better protecting consumer data.https://www.youtube.com/watch?v=z6GD9UNbgAs&list=UUXfyCJGEBaMOTcf5l7W_GTg

Data breaches impact consumers, credit unions, banks, and retailers. Last December, the retail giant Target suffered a massive data breach that made national headlines. In the breach, as many as 110 million identities were compromised.

Take a look at the impact of just this single incident:

  • $200 million: the cost to credit unions and community banks for reissuing 21.8 million credit and debit cards
  • 1-3 million: the estimated number of cards stolen in the Target breach that were sold on the black market and successfully used to commit fraud
  • $18-35.70: the price per card stolen from Target and resold on the black market in the months after the breach

Shocking as these numbers are, they represent the fallout from just a single data breach. Data breaches are happening with frightening regularity.

Malicious hackers are going to continue to exploit existing weaknesses, and many businesses lack the incentive or ability to adequately protect their customer data against evolving threats. That is why NCL believes that consumers need to be proactive about protecting their own data and calling on policymakers for improvements.

The current landscape of protection for consumer data is woefully inadequate.

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NCL’s #DataInsecurity Project is calling for reforms such as:

  • Creating a national data breach notification standard, modeled on strong state protections such as California’s;
  • Requiring businesses that maintain consumers’ personal data to protect that information via specific data security requirements;
  • Giving the Federal Trade Commission and state Attorneys General civil penalty authority to enforce violations of data security requirements;
  • Increasing civil and criminal penalties for malicious hacking;
  • Increasing efforts to enhance cooperation with international partners to bring overseas hackers to justice; and
  • Requiring retailers and banks to implement the highest level of security available to protect consumers’ payment data.

To promote these goals, NCL is taking its #DataInsecurity Project on the road to four states across the country, to meet with policymakers, industry experts, consumer advocates, law enforcement officials, and members of the academic and business community. The tour is designed to raise awareness about the frequency of data breaches and to encourage the adoption of comprehensive reforms so that consumers can be better protected.

As a part of the #DataInsecurity Project, NCL has also unveiled important new research by Javelin Strategy & Research investigating the impact of data breaches on consumer trust, on who consumers feel should be responsible for their data, and on current responses to data breaches. Check out NCL’s survey report.

You can get involved!

Help us send the message that the time for reform is now! Sign our petition to the White House calling on policymakers to step up and protect consumers’ data.

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Turning cybersecurity awareness into cybersecurity reform – National Consumers League

Facebook_NCSAM_icon.jpgOctober is National Cyber Security Awareness Month, which is a good time for consumers to take stock of their online safety habits and practices. Great tips and tricks for creating stronger passwords, taking advantage of two-factor authentication and learning to spot phishing scams and other cyber threats abound from organizations like the Federal Trade Commission, Stop. Think. Connect., and NCL’s own Fraud.org.In partnership with the U.S. Department of Homeland Security and the National Cyber Security Alliance, NCL is helping to raise awareness about cybersecurity and give consumers advice on how to protect themselves from hackers and other online scam artists. However, 2014’s NCSAM comes at a unique time. Consumers’ concern about the security of their personal data has rarely been higher. Due in part to massive data breaches at retailers like Target and Home Depot—and, just this week, news regarding JP Morgan Chase—there is a new urgency for action in Washington and in corporate boardrooms to address data security.

While NCSAM is a perfect opportunity to take ownership of your own data, one person cannot protect all of their data by themselves. In today’s connected economy information about consumers is held by hundreds, if not thousands of entities – often without your knowledge. However, a data breach at just one of these companies can expose millions of consumers’ records to fraud.

This summer, NCL organized events in Miami, Los Angeles, and Chicago to raise awareness about the problem of data breaches. Armed with new research from a groundbreaking survey and a report on the consumer impact of data breaches, we met with federal and state law enforcement and consumer protection authorities, local media, and American consumers. What we heard was not surprising: Consumers are fed up with the constant stream of data breaches, which they often feel powerless to stop. They want businesses to do more than just offer up free credit monitoring – they want a way to hold businesses and government accountable when their sensitive data is not protected.

That’s why this October, we’re calling on policymakers in Congress, at the White House and throughout the country to not just be aware of cybersecurity, but to do something about it. Through our #DataInsecurity Project, NCL is working to raise the alarm about the urgent need for data security reforms, including passing a national data breach notification standard, creating meaningful national data security requirements and giving enforcement agencies like the FTC the tools they need to go after hackers and companies that put profits ahead of securing consumers’ data.

As we look towards a new Congress, we at NCL will be redoubling our efforts to make sure our elected leaders don’t sit idly by while hackers profit off our data. Instead, we’ll be making our voice heard in Washington and throughout the country to push for real reforms that start to put a dent in the data security problem.

Dos and Don’ts for College-bound $tudents – National Consumers League

92_college_movein_.jpgMillions of young people are arriving on the nation’s college campuses this month—finally, life without parents for the first time for many! Unfortunately, many of these young people will be entering the consumer marketplace with little understanding of how to navigate it successfully—credit cards? utility bills? rent? And even worse—many students may fall prey to scams targeting college students.Whether they are heading off to college, a job, or to their first apartment, young adults should keep these dos and don’ts in mind this fall:

  • DO read the fine print. While credit card companies are now largely prevented from offering their wares on college campuses, there are still many “gotchas” lurking out there for unsuspecting consumers. Those gotchas love to hide in the fine print of things like apartment leases, gym memberships, cell phone contracts, student loan applications, spring break vacation package agreements and yes, credit card applications.
  • DON’T sign anything until you understand your responsibilities. Will you be locked in to that gym membership for years to come? Does that free t-shirt come with a credit card that has a high interest rate and annual fee? How much will it cost to break the lease on your apartment if your roommate unexpectedly moves out and leaves you with the full month’s rent?
  • DO make sure you have contact info (the phone numbers or Web addresses for services that can help) if you get in trouble. The local Better Business Bureau, Office of Tenant Advocate, and state and local consumer protection bureaus are good numbers to have handy if you feel that a local business or landlord is taking advantage of you.
  • DO create a budget and stick to it. Create a list of all the expenses you’ll be responsible for, like books, regular meals, rent, and transportation. That way you’ll have a system to help make sure nights out with friends don’t eat in to you required living expenses.
  • DON’T leave personal information unsecured. While young consumers may not have a lot of money to drain from bank or credit card accounts, their credit reports are often clean. This makes them tempting targets for identity thieves. File away important documents, shred credit card offers and keep a close eye on credit and debit card statements for suspicious charges.
  • DO watch out for scams targeting young people. For example, educational grant scams regularly make Fraud.org’s list of top scams each year, suggesting that scammers may be going after students looking for ways to pay for college in a tough economic environment. Watch out for scams that promise “guaranteed scholarships” or “an inside track on getting money for college.” Also stay away from any service that requires a credit or debit card account number to apply for or hold a scholarship.
  • DON’T leave your social network privacy settings unattended. Scammers scan these networks for information they can use to pitch believable-sounding scams. It usually only takes a few minutes to set privacy settings to make them more secure. Many college students may be surprised to find just how much of their personal information they were sharing in the first place.

Consider these tips the beginning of your journey to becoming a savvy consumer. Remember that the good consumer habits you develop as a college student can yield benefits in school and beyond.

Exposing discriminatory car loans – National Consumers League

92_bostian.jpgLet’s say you’re at the auto dealership, negotiating terms for your new car. At the next sales desk is a family whose income, credit score, and assets are identical to yours. When all is said and done, however, your loan costs $300 more than your fellow customer’s. How come? Most likely, it’s because you’re African-American and your fellow customer is white. Wait a minute, isn’t that illegal, you wonder? Well, sure, but how do you prove it? 

Who’s overseeing these so-called “interest-rate markups” that so often penalize African-American and Latino customers solely on the basis of race and ethnicity. 

Experts from the Center for Responsible Lending, Office of the Controller of the Currency, and other groups described these offensive practices at at a May 22 congressional briefing chaired by CRL staffer and NCL board member Ken Edwards. In addition to congressional staffers, reporters and advocates attended, as did NCL staffer Amy Sonderman myself. Participants also heard from several Representatives, including Hank Johnson, Steve Horsford, and Tony Cardenas, who decried discriminatory interest-rate markups, saying, “People are cheated out of what they’ve earned!” Rep. Johnson reminded participants that in 2004 Ally Bank (successor to GMAC) paid an $80 million fine to settle a class-action lawsuit filed by the National Consumer Law Center. Despite that, interest rate markups are so lucrative that this discriminatory practice continues. 

What can be done? According to Enrique Lopezlira on the National Council of La Raza, Congress should fix the “carve-out” and give the Consumer Financial Protection Bureau statutory authority to regulate car loans by auto dealers. Michael Archer from the Marine Corps Installations East, urged stronger regulation. “Troops need better financial education, but it isn’t enough. Many don’t even know they’ve been swindled, and too many don’t think it would be effective to register a complaint.”

$300 more per car, just because you’re African-American. This is one tiny aspect of racial discrimination in our “post-racial” America. Let your Representative know what you think.  

With Communities of Color Consumer Protection Symposium, NCL helps celebrate Black History Month – National Consumers League

February is Black History Month and reminds us of NCL’s deep historical connections to the Black community. W.E.B. DuBois, the renowned civil rights leader and first editor of the NAACP’s newspaper, The Crisis, was a brilliant scholar and close friend of Florence Kelley, NCL’s General Secretary. Kelley came from a Philadelphia Quaker family, raised with fiercely abolitionist beliefs with no tolerance for racial prejudice or discrimination.

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She was furious when racial segregation practiced in hotels and restaurants made it difficult for her African American colleagues to attend meetings on minimum wage and child labor.

Earlier this month, NCL sponsored the Communities of Color Consumer Protection and Financial Services Symposium. The Joint Center for Political and Economic Studies – the only African America think tank in the US – co-hosted the program with the Center for Responsible Lending. The conference focused on telecom, fraud, student loans, auto loans and mortgage financing, with an emphasis on protecting the most vulnerable communities. These communities experience higher interest rates, rip off contract terms, and have had their family wealth wiped out by the subprime mortgage crisis in far larger proportions than their white counterparts.

We organized this conference to bring new voices into the consumer protection discussion. Representatives from La Raza, LULAC, NAACP and Urban League spoke at the event, along with Senator Elizabeth Warren (D-MA) and Congressman Keith Ellison (D-MN).

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I learned a lot at about how financial institutions, car dealers and lenders, for profit colleges, and so many others target the black community for predatory practices and make billions in profits at the expense of these communities.

So as we celebrate Black History Month in 2014, it’s more important than ever that communities of color have the benefit of consumer protections and that regulators and legislators work on their behalf. NCL hopes to do a conference like this at least once a year. We will be following the wonderful example of great leaders like Florence Kelley and W.E.B. Dubois who 100 years ago worked together as partners and colleagues for the cause of social justice in America.

College kids and credit: making smart choices – National Consumers League

This time of year, many parents are thinking about giving their college-bound children a credit or debit card to help pay for living expenses. Once they get to campus, many students may be shocked at the costs they encounter and be tempted to open their own credit card accounts. For these young consumers and their families, abiding by a few simple rules could help them avoid costly headaches down the road.

Thanks to the 2009 Credit CARD Act, credit card companies can no longer swarm college campuses armed with marketing “freebies” like t-shirts, water bottles, or pizzas to give to new customers. In addition, consumers under the age of 21 can no longer open a credit card account without a co-signer (usually a parent).

In response to these restrictions (which NCL supported), many major credit card companies, such as Chase and Bank of America, then stated they would no longer target college campuses. However, cards are still marketed to college students in other ways, and many students may be carrying a prepaid debit card or a credit card belonging to their parents.

At an exciting and confusing time of their lives, college students may be unaware of the challenges and responsibilities that come with having a credit card. New cardholders must understand that credit cards are important to building up a credit history but the risks of misuse and abuse – which may cost them and their parents further down the road – are very real. Responsible use of a credit card can pay off in the long-term via lower interest rates when financing a home or automobile purchase.

The financial information blog, Charge Smart, recommends consumers take six steps before and after acquiring a credit card.

  1. Compare offers (specifically avoid 0 percent interest introductory offers because once the introductory period is over, you’re likely to be stuck with higher than usual interest rates)
  2. Set a budget for spending, and pay off as much as possible each month
  3. Read the fine print credit card contracts BEFORE signing on the dotted line. Fees and other costs often lurk in that tiny mouseprint.
  4. Pay on time: It’s important for building up your credit historyCredit limit: The best way to build your credit score is to charge no more than 30 percent each month and pay off the balance promptly
  5. Set up an online account, so it’s easier to pay on time

The Consumer Financial Protection Bureau (CFPB) recently launched a powerful tool to help consumers compare cards: a searchable credit card complaints database. While the tool is still in its beta stage and a bit clunky to use, it can be useful for consumers to see what types of complaints a particular credit card issuer is dealing with. Too many unresolved complaints, particularly for a company you’re not familiar with, could be a sign that it’s time to shop elsewhere.

A consumer who has been taken advantage of by their credit card company can file a complaint, and the CFPB will investigate it. Filing a complaint is easy, and can be done online, by telephone, mail, email, fax, and referral from other agencies. The CFPB reviews each complaint and, if the complaint is complete and legitimate, sends the complaint to the credit card company for response. The company usually responds back to the consumer, who can take a further step in disputing the company’s response. Only about 16 percent of those who file a complaint with the CFPB take that action. The most common complaints are billing disputes, so consumers should always read their contract over extremely carefully before signing.

The CFPB also provides information on its Website about a typical credit card contract, as well as a glossary of common credit card-related terms. Credit card users of all ages can benefit from studying this information carefully before and after acquiring a credit card. If something does happen, don’t be afraid to file a complaint with the CFPB if the issuer can’t resolve the problem to your satisfaction.

Enjoy making smart consumer choices in college!

Denied health claim? Appeal it! – National Consumers League

Have you run into problems with your health plan? You’re not alone! Half of all consumers experience problems with them, but fewer than 1 in every 10,000 tries to fight, or appeal, when a claim has been denied. But appealing a denied claim works—maybe more often than you’d think!

Forty percent of people who file appeals with their health plan are successful. Ten percent of claims denied by a health plan turn out to be a simple mistake, and those are usually resolved quickly. When you find out that a medical service you’ve received (like a visit to the emergency room, a visit to an out-of-plan provider, or a test your doctor asked you to take) has been denied by your health plan, it is important to know your rights. The first denial by your health plan is not the final word, and there are processes in place to appeal these decisions.

NCL’s new brochure can help you be your own best advocate! By doing a little legwork, and following some basic procedures, you may be able to successfully appeal the decision and get the coverage you need for your claim. Download our brochure to learn a few basic steps to guide you in the process.

Debit cards: Know how to use them – National Consumers League

Debit cards are convenient and safer to carry than cash, and they’re more widely accepted by merchants these days than personal checks. But just because they look and feel like a credit card doesn’t mean they work exactly like one, and not understanding the differences could cost you.

Follow this advice, and read NCL’s brochure, Debit cards: Beyond cash and checks

  • Know your balance, and know what overdraft fees you’ll face if your bank lets you withdraw more than you have. When making a purchase with a debit card, make sure there’s enough money in your account to cover it. Deduct debits from the balance in your check register promptly.
  • Don’t forget about checks you’ve already written. Even if they haven’t cleared yet, consider that money gone.
  • Know if there’s a cost for using the card. Some card issuers charge monthly or even per-transaction fees that are automatically deducted from your account.
  • Notify the issuer immediately if the cost is lost or stolen. Under federal law, the amount you could lose if someone uses your debit card depends on how quickly you report the loss once you discover it. Your card issuer may have “zero” liability policies that give you extra protections.