Senator Ted Kennedy will be deservedly remembered for all the important legislation he shepherded through the Congress to help the least among us, and to help all of us against powerful interests, as well as for the passionate way he went about this work. At PIRG, we were fortunate to work with him on numerous victorious campaigns, including the recent improvements to student loan laws. I will always remember the privilege of working with him on an important, but losing, campaign against the draconian bankruptcy bill. As I blogged last year when the Senator's illness was first disclosed, he'd taken over the fight after the tragic death of Senator Paul Wellstone. Here's more on the relationship of that fight to the current fight for health care reform:

In the final bankruptcy battle on the Senate floor in 2005, Senator Kennedy unsuccessfully offered two important amendments to provide protection to families whose bankruptcies were brought on by illness exacerbated by crushing medical debt. You can read some of his powerful arguments starting on this pdf Congressional Record page and clicking "next page." Excerpt:

[Senator Kennedy on the floor:] The proponents of the bankruptcy bill have said the goal of the bill is to force those individuals who run up bills irresponsibly to take greater personal responsibility. [...] Nothing could be further from the truth for the thousands of individuals who are forced into bankruptcy to deal with the debt they were forced to take on to cope with serious medical expenses and the loss of income when they are unable to work due to serious illness or injury.

We had testimony from Professor Elizabeth Warren of the Harvard Law School last week making clear that more than half of those filings for bankruptcy have been forced to do so at least in part due to medical problems and their aftermath. [...] Those who go to bankruptcy court because of cancer or diabetes and heart attacks have not been irresponsible. Those who file for bankruptcy to deal with medical debts incurred when a child was born early with severe complications or an elderly parent needing costly prescription drugs or placement in a nursing home are not irresponsible. [...] We see health care coverage lost for these families who have paid in for 20 or 30 years. WorldCom closed down, Polaroid closed down, Enron closed down, their health benefits are cut off, they get cancer, the bills run up, and what does this bill do? It puts them into indentured servitude to the credit card companies. We call that fairness? That may be the priority of some in this body, but it is not mine. Who do we in this body represent?[...] That is what we are about in the Senate? We have the problems of unemployment, the escalating costs of prescription drugs, 8 million of our fellow citizens unemployed, school tuition going through the roof, and we are talking about an additional $5 billion for the most profitable industry in America. Hello. Hello. That is what we are debating here. It is extraordinary. [...] I am tired, when one person tries to extend the same kind of health care we [in Congress] have to people out there, of people on the other side who say: Well, we are not going to support you. The problem is the health care problem, and we ought to deal with that. This is a bankruptcy issue. Come on. Come on. They oppose us when we try to pass health care legislation, and then they oppose us when we try to deal with the health care problems that are going to be impacted by the bankruptcy bill. It does not work that way.

U.S. PIRG's Tax and Budget Reform analyst Nicole Tichon has issued a statement on the President's re-nomination of Fed chair Ben Bernanke, urging Congress to ask Bernanke tough questions. Short versions of the questions Congress should ask at Bernanke's hearing:

Full release after the jump:

Washington, D.C.: Bernanke Reappointment – Opportunity to Ask Tough Questions?

Statement of the U.S. Public Interest Research Group on the reappointment of Federal Reserve Chairman Ben Bernanke

“The reappointment of Federal Reserve Chairman Ben Bernanke offers Congress a critical opportunity to question him on important financial reform issues where the Fed has been a disappointment.

“First, why does the Fed oppose President Obama's proposed Consumer Financial Protection Agency, which could reduce overall risk in the system by guaranteeing that products are safe?

“Second, over 280 members of the House of Representatives have called for greater transparency of the Fed by supporting H.R. 1207. This legislation calls for an audit of the trillions of taxpayer-backed dollars invested big banks while average taxpayers lose their homes and their retirement savings. Research shows that 75% of Americans support auditing the Federal Reserve. It is unacceptable that taxpayers still do not know which banks are receiving support from the Fed.

“Third, if the Fed is even to be considered for a greater role in financial regulation, Congress should ask whether Chairman Bernanke will support actions to reduce the power of unelected bankers over the Fed by providing for democratic election of regional Fed bank board members and presidential selection of regional bank presidents?

“Taxpayers have been the blind, involuntary investors in a system supported by bankers, for bankers. Congress should use this opportunity to ask tough and necessary questions.”

Investor protector Mercer Bullard of Fund Democracy has an op-ed column at Morningstar discussing the Bank of America/Merrill's settlement with the SEC recently halted by Judge Rakoff, who wants further information on who is paying the $33 million penalty and whether it is too little or too much.

The parties need Judge Jed Rakoff to sign off on the settlement, but he wants more information. He thinks that the $33 million fine may be too small in light of the large size of the undisclosed bonuses. But he is also concerned about the fine being paid by taxpayers because the government owns shares of BofA, so maybe no fine should be imposed at all. The judge wonders if the fine is inappropriate because the SEC has not alleged any wrongdoing by actual human beings. "Was it some sort of ghost?" asked the judge.

Last night, 100 Sun Country passengers sat on the tarmac in New York for six hours (St. Paul Pioneer Press). So did over one hundred Delta passengers (KARE Channel 11). Both planes were bound for Minnesota, site of the last airline delay debacle just two weeks ago. Storms in New York apparently complicated delays caused by runway construction in Minneapolis. U.S. Senator Chuck Schumer (D-NY) and New York State Assemblyman Michael Gianaris called for federal reform. Following the Valentine's Day fiasco at JFK several years ago, Gianaris had authored the nation's first airline passenger rights law, but the airlines sought and obtained a federal court order preempting the law.

From Maryland PIRG director Johanna Neumann's op-ed column on health care reform in today's Baltimore Sun:

The reality is that the public option will be well-positioned to implement the type of smart cost controls that the private insurers should have adopted long ago. It could create incentives for primary care, prevention and wellness; pay doctors for good health outcomes, not just the number of tests run and procedures performed; create incentives for utilizing patient-centered research on which drugs and treatments work best; and ignore the hyperbolic sales pitches of drug companies. Once a public health insurance plan begins to implement these programs and realize true cost savings, private insurers will have to follow.

Update: Hits just keep on comin'- iReel.com at the Consumerist.

A few days ago I blogged on an important FTC web privacy settlement. Here's more on what I was talking about -- being duped into signing up for and billed for trial offers for lame products, often in circumstances where you don't give up your own credit card information, because it has already been given up for you -- from today's Haggler column in the New York Times:

[Question to Haggler] In January 2007, I bought tickets to “Pan’s Labyrinth” at Movietickets.com. When I’d finished, a message embedded in the confirmation page offered $10 off my next purchase. When I clicked, I was bounced to a page that asked me to enter my e-mail address, twice. I didn’t realize it at the time, but I had inadvertently agreed to a $10 monthly subscription with a company called Webloyalty, which offers a wide array of online discount programs that I never asked for and don’t want.

From the New York Times story Debating How Much Weed Killer Is Safe in Your Water Glass by Charles Duhigg:

Officials at the Environmental Protection Agency say Americans are not exposed to unsafe levels of atrazine. They say that current regulations are adequate to protect human health, and that the doses of atrazine coming through people’s taps are safe — even when concentrations jump. But some scientists and health advocates disagree.

The story goes on to point out that:

Forty percent of the nation’s community water systems violated the Safe Drinking Water Act at least once last year, according to a Times analysis of E.P.A. data, and dozens of chemicals have been detected at unsafe levels in drinking water.

“There’s pretty broad consensus that the laws regarding toxic substances need to be modernized and overhauled, and that the E.P.A. needs more resources,” said Mr. Olson of Pew, who added that the agency’s new leadership had begun addressing many issues. “But in the meantime, people are getting exposed to dangerous chemicals,” Mr. Olson said. “And the E.P.A. isn’t responding swiftly enough.”

Over at Public Citizen Law and Policy blog, Paul Levy explains that at least one federal court is using "scare tactics" against lawyers taking advantage of RECAP, which is new open source software that provides free access to previously viewed federal court documents. Apparently the federal courts have gotten used to making a profit charging 8 cents/page anytime documents are downloaded. As Levy notes, one possible downside to the otherwise positive access to knowledge development is that "free availability of PACER documents makes it easier to obtain private information that is often included in court filings. [... such as birth dates, SSNs...but that the solution is] that Federal Rule 5.2 requires to be redacted from electronic filings and only submitted in paper form if it is essential that the information be provided to the court."

There are some nice tips on what to do about credit cards in this dangerous, uncertain time from Ron Lieber's Your Money column Maybe It’s Time to Change Credit Cards in the New York Times today. His main message: "The best revenge is a better card. Here’s how to find one. "

Transportation Secretary Ray LaHood has released a statement finding that actions by rival Mesaba Airlines prevented passengers trapped on a "cramped" ExpressJet plane from entering the terminal in Rochester, Minnesota a few weeks back.

“The local representative of Mesaba Airlines improperly refused the requests of the captain to let her passengers off the plane. The representative incorrectly said that the airport was closed to passengers for security reasons, which led to this nightmare for those stuck on the plane,” he said.

The FTC has settled a case with an online payday lending lead generator that was automatically adding a fee of $54.95 for an empty reloadable debit card, whenever consumers agreed to click through to a selected payday lender. In this case, the "Yes, I want the debit card" button was automatically checked yes unless the consumer found it and then checked it no. While such costly add-ons are yet one more reason to avoid payday lending, the settlement may have implications for other common unfair online marketing schemes. For example, some sales sites may prominently display a "free trial offer from our partner" balloon. Clicking on the balloon -- without doing anything else -- has resulted in consumers being automatically signed up for junky offers by the partner site, which had obtained your credit card number from the first site and bills you if you don't affirmatively cancel within a short period of time. All these additional terms were never clearly disclosed, but hidden behind a different "terms of service" link.

The Pop Tort blog has a nice entry following up on several recent New York Times stories about how doctors fail to disclose that they get paid by drug companies for signing their names to medical journal "research" articles that are actually written by some medical writing company ghostwriters who are also being paid by the drug manufacturer. Oh, it appears that the articles favorably slant against risks caused by the drug company's product.

We're watching closely a play by United Airlines to pass the costs (2-3% or more) of credit card interchange fees onto travel agents, which could lead to diminished consumer legal rights in the event of disputes. Business Week. The Upgrade blog. The Travel Agent Central blog. The issue is bigger than than the obvious dumping of costs onto someone else. Under the Truth In Lending Act's section known as the Fair Credit Billing Act, consumers generally have certain important legal dispute rights when products or services purchased with a credit card aren't satisfactory. Those rights include a right to demand that the bank do some work investigating the problem. If that right can only be used against tiny travel agents instead of the powerful airlines who actually failed to adequately provide the service, consumer leverage will be diminished. A previous blog on merchant interchange fees and convenience stores.

Following up on recent reports that bank fee income is being led by a whopping $38 billion in overdraft fees, in an editorial today called the Debit Card Trap the New York Times backs urgent calls for reform of bank practices associated with fee-laden debit cards.

According to a 2008 study by the F.D.I.C., overdraft fees for debit cards can carry an annualized interest rate that exceeds 3,500 percent. The banks, which have grown addicted to overdraft fees, will almost certainly resist new regulation in this area. But there are several things that federal regulators must do to protect the public. First, banks must be barred from automatically enrolling customers in overdraft programs. This must be a service that customers opt in to — and only after they are provided full information about the fees and the penalties they will incur. These disclosure statements must meet the same rules laid out in truth-in-lending laws, since overdraft charges are essentially short-term loans.

Check out shareowners.org for more information on the problem of excessive executive compensation at America’s corporations and its negative impact on the economy. You can take action by urging Senators to support meaningful executive pay reforms. Excerpt:

This is the first time Congress has had a chance to impose a meaningful remedy on those CEOs and board directors who have failed to protect the long-term interest of shareowners. It is imperative that the U.S. Senate act in the interests of shareowners now in order to pave the way for additional remedies to follow, including such key steps as giving shareowners a real voice in the election of directors and strengthening legal remedies for defrauded investors.

U.S. PIRG Tax and Budget Reform analyst Nicole Tichon discusses today's announcement that, in a settlement with the U.S. Department of Justice over alleged tax evasion, the secretive Swiss bankers at UBS will disclose over 4,000 names of U.S. tax evaders on Fox Business today (video). More from the Associated Press via San Francisco Chronicle. Our close tax loopholes pages. Excerpt from our latest release:

“U.S. PIRG will continue to work for international tax reforms to end practices that hurt taxpayers, ship jobs overseas and support the culture of secrecy that contributed to the recent economic downturn. This investigation should embolden Congress to act and put other countries and banks on notice.”

The banks don't like to talk about the vulnerability of PIN-based ATM cards. But I just received a complaint from a consumer who used her ATM card at a bank ATM -- the kind inside a little 24-hour card-locked lobby in the branch -- but then was a victim of hundreds of dollars in fraud. When she called to report the fraud, the "nonchalant" call center person said that there "may have been a device" attached to the machine and agreed to refund her money immediately. In this picture of a tampered-with ATM from an Australian consumer guide, note that there appears to be a kind of differently colored template over the actual card reader on this machine. That's a "device" that clones the card info and and sends the information over wireless to a nearby bad guy; there is probably a camera in the block-y box on the left, to copy your PIN. On this recent Channel 39 Houston TV story, you can see more about the problem, including an interview with a police fraud squad expert.

As my readers know, I often remind people of the dangers of ATM debit cards, which can be used without a PIN. Because the Electronic Fund Transfer Act (EFTA) protections are so weak, and because it is your money you are fighting to get back, anyone who uses ATM cards, as well as debit cards, should check their bank statements regularly.

In the case of signature-debit fraud, even if the bank honors its zero-liability promise (and it isn't the law, just a promise), you still have to wait for the bank to give you your money back.

But I am also concerned about the complaints I receive from consumers who claim that they've never given their PIN to anyone, and haven't lost their ATM card, but have still been victims of fraud, and that their bank refuses to honor their claim of ATM fraud "because if your PIN was used, it must be your fault." In this case, since nearly all of the "zero-liability" promises only apply to signature-based, not PIN, fraud, the consumer has to rely solely on the protections of the EFTA, which require you to take swift and vigilant action to uphold your rights but do still hold the bank accountable.

Note that even the not-so-friendly-to-consumers regulator known as OCC rejects the "it must be your fault" defense and reminds banks in this alert that the burden of proof is on them, not the consumer, Regardless, because OCC rarely slaps the hands of banks that break the law, let alone penalizes them, banks try this claim all the time.

Any time your bank refuses to help you, you should cc the OCC. If your bank tries the "your fault" argument, definitely tell them about this alert and also contact occ.gov and file a complaint. Also, keep a log tracking all your communications with the bank about the fraud, including names of officials spoken to/dates and times/call details. Save all receipts and print out out all screens showing details of fraudulent transactions. (If OCC is not the regulator for your bank, it will let you know who is.)

According to the Channel 39 story above, police and the Secret Service recognize this sort of ATM fraud is serious, even if the banks don't like to talk about it.

This blog has a lot of details. This consumer booklet from an Australian bank has more details and advice for consumers about identifying tampered ATM machines. You'd expect to find these in convenience stores, maybe, but bank lobbies? Here is the blog where I found that booklet. This fairly technical blog entry has more about a different kind of ATM card fraud. We'll keep monitoring this situation.

Two dozen state and territorial attorneys general have endorsed the Obama proposal for a new Consumer Financial Protection Agency. Excerpt from their letter to Congressional leaders:

One of the most important reasons that we support this legislation is because it preserves the states’ ability to protect consumers. Historically, states have been proven leaders in fighting unfair and deceptive practices. We believe that state consumer protection laws should apply equally to all banking and financial institutions within the states’ jurisdiction, regardless of whether they are state or federally chartered. The legislation as introduced gives state regulators authority to enforce their consumer protection laws against federally chartered institutions, and we urge Congress to keep this provision in the final bill.

Wired Magazine has posted a copy of the 14 page indictment against hacker-turned-informant-who-still-kept-hacking Albert Gonzalez and his associates Hacker 1 and Hacker 2 for stealing 130 million credit and debit card numbers:

UNITED STATES OF AMERICA v. ALBERT GONZALEZ, a/k/a “segvec,” a/k/a “soupnazi,” a/k/a “j4guar17,” HACKER 1, and HACKER 2 [... both] living in or near Russia

"knowingly and with intent to defraud accessing computers in interstate commerce and exceeding authorized access to such computers, and by means of such conduct furthering the intended fraud and obtaining anything of value, namely credit and debit card numbers and corresponding Card Data..."

The U.S. Consumer Product Safety Commission (CPSC) announced today that TGH International Trading Inc. (TGH), of Los Angeles, Calif., has agreed to pay a $31,500 civil penalty to settle allegations that the company knowingly imported and sold toys that did not meet the requirements of the Federal Hazardous Substances Act. [...] TGH imported more than 11,000 toys into the United States between March 2005 and June 2006. These toys contained small parts that presented choking and aspiration hazards to young children. [...] CPSC is not aware of any incidents or injuries involving toys that were distributed into commerce. “CPSC’s new authority to seek higher civil penalties does not mean we will ignore serious violations by small businesses,” said CPSC Chairman Inez Tenenbaum.

The government has announced (New York Times and Associated Press) the indictment of several hackers in the old data breach case involving 130 million credit and debit card numbers swiped from merchants (Hannaford and 7-11) and a third-party payment processor (Heartland).

Expect all kinds of trolls to come out selling credit monitoring and other sorts of over-priced identity theft protection services at between $5-$20/month or more. Don't do it. These breaches involve fraud against existing accounts, not true identity theft (although such fraud is technically a violation of identity theft laws). If it's your credit card, you shouldn't care because the law protects you well and it is the bank's money after all, so the bank will fight hard to protect it; but anyone who uses debit cards should be watching their deposit account statements regularly all the time since fraud protection on debit cards is not as good (not good at all) as on credit cards, and it is your own money they might take. As for actual identity theft, or bad guys opening new accounts in your name, generally they'd need more information about you, such as your SSN. Only a security freeze that blocks access to your credit report can stop identity theft. None of these so-called identity theft services can.

According to his new website, ctwatchdog.com, former Hartford Courant consumer reporter George Gombossy says he was "fired for doing my job – being the advocate for consumers." He'd had an investigative column about bedbugs in used (but sold as new) mattresses allegedly sold by one of the paper's big advertisers spiked. Over at his Watchdog Nation website, Fort-Worth Star Telegram watchdog Dave Lieber reports that

"One of my comrades on the journalism battlefield has fallen, and anyone who cares about fighting the bad guys should take note."

On Thursday, the first pieces of the Credit Card Accountability, Responsibility and Disclosure Act kick in. While the bulk of the law's prohibitions against unfair and deceitful trickery don't take effect until February, three important pieces start Thursday.

Federal Reserve release explaining the new rules. Nationally-syndicated columnist Michelle Singletary of the Washington Post. The Toledo Blade.

I haven't read the book, but based on the review by Dana Jennings in the New York Times, I think I'd like it! Ripped: How the Wired Generation Revolutionized Music is authored by Greg Kot. Excerpt from the review:

Still, the most fascinating part of the book is its retelling of how the big music companies committed capitalist suicide. The executives couldn’t get their analog heads around the digital future. If industry leaders had always followed their mistrust of technology, we’d still be listening to music on 78-r.p.m. shellac, or maybe even wax cylinders. “Ripped” is another case study in American industrial arrogance, an account of companies that couldn’t (or wouldn’t) learn agility. Instead of adapting to the new reality, they started calling their customers thieves.

1. Authors, composers and performers of musical works, and consumers agree that we have common interests and new opportunities to collaborate. Enormous differences in bargaining power currently lead to unfair outcomes between creative individuals users and the commercial entities that sell culture and knowledge goods.

A U.S. district judge has ruled in favor of expansion of New York's returnable beverage container deposit law to include bottled water (Plastics News). Protecting and expanding the bottle bill has been a longtime major campaign for NYPIRG (Bigger, Better Bottle Bill campaign page). The water guys had hidden behind the Constitution -- generally one of the last refuges of a corporate scoundrel -- in their efforts to continue to externalize and place the burden of excessive beverage container waste on cities and towns and states and consumers, instead of on themselves, the companies whose products create the waste. From the Binghamton Press:

"This decision is more refreshing than an ice-cold beverage on a hot summer day," Laura Haight of the New York Public Interest Research Group said in a statement.

You can watch me ripping the banks for unfair overdraft fees and unsafe debit cards in an interview (video; and transcript) with Stephanie Dhue that ran last night on PBS Nightly Business Report. In this previous blog I count the ways that debit cards are bad for you. Legislation to reform and upgrade consumer and fraud protections in debit and other second-class payment methods is desperately needed. Meanwhile, remedial overdraft fee legislation from Rep. Carolyn Maloney (D-NY) has languished for years under assault from banks and some credit unions.

The New York Times editorial today But They Were Next in Line for Takeoff calls for swift passage of the "merciful" airline passenger rights legislation from Senators Barbara Boxer (D-CA) and Olympia Snowe (R-ME). We agree. Previous blog. The Times also has a letter on The Misuse of Credit Reports from our colleague Bob Hunter of the Consumer Federation of America. Bob is the nation's leading authority on insurance matters (he is an actuary, and former Texas and federal insurance commissioner). Excerpt:

As jobs are lost and incomes fall because of lower prices, many people’s credit scores will deteriorate. Not only might they face prolonged joblessness because of a change in their credit score, but they may also face salt in the wound: raised insurance prices. It is time Congress barred the use of credit scores nationwide except in cases where its use makes sense, in the securing of credit.

While yesterday's announcement (its fact sheet) by the behemoth Bank of America (USA Today) that it was dropping forced arbitration in all future disputes by credit card card, deposit and certain loan account customers was a major step, the PIRG-backed FairArbitrationNow.org coalition points out that

"thousands of other banks, private employers, nursing homes, auto dealers and deposit institutions are still using forced arbitration every day to deny consumers and employees a fair shake. ...] [The NAF settlement with the Minn. AG and the BofA action] reinforce what many advocates of fair arbitration have known for a long time – that the system of forced arbitration is unfair to consumers and employees and allows corporations to escape accountability. Only Congress can protect all Americans by passing the Arbitration Fairness Act, a bill that would prohibit the enforcement of forced arbitration clauses in consumer, employment, and franchisee contracts."

Recognizing that large financial institutions are more complex and pose larger regulatory costs and larger risks to the financial system, the Obama Administration correctly plans to charge higher differential regulatory fees to big banks. Already, the tireless K Street apologists for the Wall Street companies that led the world economy into ruin are bleating: From the Washington Post:

"We think that it's outrageous to disproportionately and unevenly impose the cost of new regulation on the top banks," said Scott E. Talbott, the senior vice president of the Financial Services Roundtable, which represents the largest financial firms. The largest banks, he added, "should not be forced by the government to . . . pay the larger share of the funding costs of the [consumer financial protection agency] and regulatory oversight."

The CPSC has recalled a variety of Little Tikes Children's Workshop toys totaling over 1.6 million units following an incident in which a little boy was hospitalized after choking on an over-sized plastic nail but made a full recovery. Several years ago, two toddlers choked to death on similar but not identical over-sized toy nails from Playskool (previous blog). Parents should be reminded that certain larger toys, such as these nails that do not fail the CPSC small parts hazard test, still can easily block an airway. The toys are sometimes but not always intended for older children; the toys are often wine-cork or ball-like shapes but not always.

Following the well-publicized debacle (previous blog) where 47 passengers were stuffed into a "cramped" regional jet all night long in Rochester, MN, a few weeks ago, the outcry for enactment of passenger rights legislation seems to be increasing. Transportation Secretary Ray LaHood has sent the airlines a letter seeking answers. The business traveler association has reversed position and now is on the same side as the consumer group Flyersrights.org. Senate sponsors Barbara Boxer (D-CA) and Olympia Snowe (R-ME) have issued a new release calling for action on their bill. I appeared last night on local NBC stations (video) urging action. USA Today. Gannett via Jacksonville Observer.

A few weeks ago, when Minnesota Attorney General Lori Swanson brought the National Arbitration Forum to heel over its unfair practices (more on settlement), I predicted that this was the beginning of the end of forced arbitration in all consumer contracts. Now, the Wall Street Journal is reporting that Bank of America is dropping forced arbitration from credit card, consumer bank account, auto loan and some other contracts. Both BofA and the credit card company it purchased a few years ago, MBNA Bank, had been associated with the NAF. From the WSJ:

"We think arbitration is a very fair way to resolve the issue. A lot of our customers did not feel the same way, so we decided to make a change," said a Bank of America spokeswoman.

Michelle Jun of Consumers Union, publisher of Consumer Reports, has a new report with assistance from Consumer Federation of America and National Consumer Law Center. The report, Prepaid Cards: Second-Tier Bank Account Substitutes, analyzes how the growing use of prepaid debit cards (also including gift cards, payroll cards, rebate cards, government benefit cards and others) as bank account substitutes is exposing consumers to massive fees and providing them with less consumer protection while establishing a second-tier financial system-- all the bad parts of the current system, with none of the benefits. The number of fees associated with these cards is astonishing; the complicity of government agencies in signing contractor-friendly agreements to deliver government benefits through cards that take money from the wallets of recipients is embarrassing; and the lack of policymaker attention to the issue makes it worse. Excerpt after the jump:

However, prepaid cards can be inferior to debit cards linked to traditional bank accounts in several ways: • Fees can be high, multiple, and confusing; • Not all prepaid cards provide adequate protection against theft of funds using the cards or card account numbers; • Promised credit lines or features to build a credit record may be expensive and overstated; and • Federal deposit account insurance applies differently and may be capped at less than the value of all of the prepaid cards issued by a particular card program.

Until these consumer problems are solved, consumers using prepaid cards may find themselves stuck in a second-tier and much less desirable banking system.

Our colleagues at Consumer Action have released their annual Credit Card Survey 2009.

The results of the new Credit Card Survey confirm widespread cardholder complaints that even excellent customers who carry a balance are subject to costly, unilateral increases in their credit card bills.

Here is an excerpt from the statement of Nicole Tichon, U.S. PIRG Federal Tax and Budget Reform Analyst on a reported UBS Tax Case Settlement. In that case, the U.S. has demanded the identities of U.S. taxpayers who may be hiding money in offshore accounts at the Swiss bank UBS to avoid taxes.

When banks help to hide billions of dollars for tax dodgers, the rest of the taxpayers must ultimately pick up the tab. Regardless of the powerful and well-funded lobby against reforms, this case sends a clear message to Congress and the President that this issue will not go away on its own. Their goal should be to increase transparency, rather than having to battle this out on a case by case basis in the courts.

Tax lawyers said they expect UBS to disclose thousands of accounts. UBS, based in Zurich, agreed on Feb. 18 to pay $780 million to defer prosecution for aiding tax evasion and also gave data to the Internal Revenue Service on 250 clients. Since then, three UBS clients have pleaded guilty in the U.S. to hiding their bank assets from the IRS.

Statement of Nicole Tichon, Federal Tax and Budget Reform Analyst for the US Public Interest Research Group on UBS Tax Case Settlement

“The settlement of the case between UBS and U.S regulators represents an initial step in bringing the issue of offshore tax secrecy to light. More importantly, it shows the need to address sham transactions, tax avoidance and tax evasion on a permanent basis. When banks help to hide billions of dollars for tax dodgers, the rest of the taxpayers must ultimately pick up the tab.

“Regardless of the powerful and well-funded lobby against reforms, this case sends a clear message to Congress and the President that this issue will not go away on its own. Their goal should be to increase transparency, rather than having to battle this out on a case by case basis in the courts.

“U.S. PIRG will continue to work for international tax reforms to end practices that hurt taxpayers, ship jobs overseas and support the culture of secrecy that contributed to the recent economic downturn. This investigation should embolden Congress to act and put other countries and banks on notice.”

# # #

U.S. PIRG, the federation of state Public Interest Research Groups, is a non-profit, non-partisan public interest advocacy organization. For more information on U.S. PIRG’s campaign to Close Corporate Tax Loopholes click here.

The PIRG-backed Media and Democracy Campaign has released A Public Interest Internet Agenda. Excerpt:

Connecting our entire nation via high-speed broadband will bring remarkable economic, social, cultural, personal, and other benefits. [...]But the quality of U.S. broadband access is lagging. According to the most recent statistics (December 2008) available from the Organisation for Economic Co-operation and Development (OECD), the United States ranks just 15th among developed nations in broadband penetration.

1. Broadband communications is a fundamental right. To ensure this fundamental right, there must be universal and open, non-discriminatory access to high-speed and high-quality broadband. Mobility, abundance, and privacy of broadband should be top priorities.

2. Good policy must be well informed. Federal policymakers must have access to reliable data on where broadband presently exists, at what speeds, of what quality, by what provider, how it is used by consumers, why certain consumers do not use it, and how other consumers integrate it into their lives. These data must be as granular as possible, and should be made available in raw form on the Internet for analysis by the public.

3. Policy should promote competition, innovation, localism, and opportunity. Locally-owned and-operated networks support these core goals of Federal broadband policy, and therefore should receive priority in terms of Federal support. Structural separation of ownership of broadband infrastructure from the delivery of service over that infrastructure will further promote these goals.

4. Government should use public resources and assets wisely. Policymakers should seek to leverage to the maximum extent possible the use of resources and assets such as publicly-owned spectrum, fiber and rights-of-way to achieve the goal of universal broadband access to the Internet.

5. Federal policy must stress digital inclusion and the service of historically disenfranchised communities. Stimulating broadband supply is necessary but not sufficient to achieve the goal of universal broadband. Policymakers must also promote digital inclusion initiatives to stimulate broadband demand and ensure that all U.S. residents have access to the digital skills and tools necessary to take advantage of the Internet’s enormous potential benefits in creativity, economic development and civic engagement. This benefits not just those who would otherwise be left behind on the wrong side of the Digital Divide; it benefits all broadband users.

Senior members (their release) of the House Financial Services Committee including Chairman Barney Frank (D-MA) and subcommittee chairs Luis Gutierrez (D_IL) and Maxine Waters (D-CA) have pre-released a GAO report sharply critical of federal bank regulator enforcement of Fair Lending laws.

“The information in this report is just one of many examples of the need for improved protection for all consumers of financial products. Inadequate enforcement of consumer protection laws hurts all consumers, regardless of color, creed, sex or economic status,” said Congressman Al Green (D-TX). “It is time to work together and create a consumer financial protection agency that will finally give adequate attention to safeguarding consumers from abusive products.”

According to both the Washington Post and the National Senior Citizens Law Center (NSCLC), the settlement of a lawsuit will return over $500 million to hundreds of thousands of seniors and other Social Security recipients wrongly denied benefits after being either wrongly accused as someone else with a similar name or wrongly accused as "fleeing felons" when they may have merely had some minor glitch on their own record that should not have affected their eligibility. Some victims losing benefits ended up homeless, according to NSCLC. The episode gets at both the Kafkaesque problem (see after the jump) of how mere citizens are often frustrated dealing with their government and also at the urgent need for greater protections against database inaccuracies, especially as more and more supposedly accurate databases are "matched" against each other to meet supposed government and private needs. From NSCLC:

In a more egregious case, the SSA automatically cut off benefits to Rosa Martinez of Redwood City, California on January 1, 2008, due to a 1980 Miami drug warrant flagged in the government’s system. Ms. Martinez had never been arrested, never used illegal drugs, and had never even been to Miami. In fact, the arrest warrant describes a woman 5’4” tall when Ms. Martinez is only 4’8.” The Social Security office told Ms. Martinez that she could not appeal and refused to give her an appeal form.

Kudos to consumer champion Hank Klein of Arkansans Against Abusive Payday Lending. In a press conference today, held with an assistant state attorney general and others, the group he founded and tirelessly volunteered with today declared that Payday lending is history in Arkansas.

First American, the final payday lender to cease operations in Arkansas, closed its last store on July 31. [...] The formal end of payday lending in Arkansas occurs nine months after the Arkansas Supreme Court ruled that a 1999 payday lending industry drafted law violated the Arkansas Constitution, and 17 months after Arkansas Attorney General Dustin McDaniel initiated a decisive crackdown on the industry.

Georgetown University Law Center Professor Adam Levitin has posted a research brief on the Consumer Financial Protection Agency proposal to his Credit Slips blog. He wrote it for the Pew Financial Reform Project. Adam writes in his blog:

"Many of the issues discussed in the research brief will be familiar to Credit Slips readers, but one thing that I believe is unique to the brief is a detailed examination of the supposed conflicts between safety-and-soundness and consumer protection. While this has been raised as a general specter [...] precious few examples of potential conflicts have been put forth."

Take the passenger compartments from about 12-14 small beater cars -- Yugos, Fiat sedans, Chevettes, Fiestas and a few VW Squarebacks (not Bugs, I said beater cars, not classics) -- and weld them together in a line. Fill them up with people, some large, some babies. Oh, put a chemical camping toilet in the backseat and a few bottles of water in the front seat. Then leave the people locked in there for six hours in the dark, 50 yards from an airline terminal. That may give you an idea of what it was like for

"47 passengers stuck on a cramped 50-seat Embraer ERJ-145 regional jet operated by ExpressJet, which supplies regional flights under the Continental banner. [...] "The plane is starting to smell bad. There are problems with the bathroom. There is no food. And we were in that plane the entire night,” said Mr. [Link] Christin, a law professor in St. Paul."

Similarly, Nomaan Merchant of the Associated Press reports in the Washington Post story Passengers Kept on Plane for Hours that ExpressJet blamed a lack of security screeners for leaving people on the plane:

The airport manager, Steven Leqve, said that wasn't true. He said passengers could have waited in a secure area. "This is not an airport issue. This is an airline issue," he said.

At a time when our country is struggling with the most serious set of problems since the Great Depression, I'm extremely excited about using this dynamic new medium to give you my unfiltered views on the economy, health care, global warming and the environment, foreign policy and a hundred other critical issues.

Over at the American Banker (pd. subs. MAY be req'd) Maria Aspan reports some good news for consumers:

American Express Co. and Discover Financial Services are eliminating overlimit fees on consumer credit cards, in one of the first concrete examples of how a new law will restrict issuers' abilities to turn a profit.

"American Express Co. and Discover Financial Services are eliminating overlimit fees on consumer credit cards, in one of the first concrete examples of how a new law will restrict issuers' abilities to gouge consumers unfairly, in this case by allowing them to go over their limit, collecting interest and charging a recurring OTL fee until their card is below the previous limit that the bank chose to ignore to collect a fee, plus interest."

A few days ago Adam Levitin blogged over at Credit Slips about a San Antonio Express News story that USAA Bank will allow customers to take pictures of checks and send them to the bank for deposit over their IPhones. The bank already allows this -- called Remote Deposit Capture (RDC) -- from home computers and scanners. From Adam's post, which has several interesting comments also:

RDC, combined with ATM fees waivers and e-banking (for transfers and payments) has the potential to make physical branch banking largely irrelevant. This won't happen immediately...and the fraud risk issues will have to be better addressed. ...But if the bank branch becomes an outdated and expensive method of deposit collection due to RDC, small banks with lower overhead and employee costs will have a leg up on the behemoths with thousands of branches.

The story And You Thought a Prescription Was Private by Milt Freudenheim in today's New York Times will probably shock a lot of people. But the fact is, despite major improvements made by the American Recovery and Reinvestment Act (ARRA) of 2009 to the Health Insurance Portability and Accountability Act (HIPAA) of 1996, neither your prescription privacy nor your medical privacy more broadly are yet fully guaranteed. When the ARRA changes take full effect, you'll be better, but not fully, protected. The story explains how "de-identified" information can be "re-identified;" how hackers and voyeurs can gain access to your records, and also some of the "therapeutic" and other exceptions to supposed limits on marketing. It also explains important efforts by states to rein in drug marketing and protect privacy.

The World Privacy Forum has prepared a detailed Patient’s Guide to HIPAA: How to Use the Law to Guard your Health Privacy, written by Bob Gellman, one of the experts cited in the NYT. The WPF also explains why consumer-controlled Personal Health Records (PHRs) may sometimes be covered by HIPAA, but not if provided for you by a non-covered entity, such as a website. In that case you may only be protected by the website's privacy policy. Other good resources are PatientPrivacyRights.org and the EPIC medical privacy page. Also, check out this New York Times blog page of reader comments largely opposing direct to consumer advertising of drugs.

Update from the Illinois AG's page: The Wells Fargo high cost lending complaint. High cost lending doc. Chart: High cost loans in Chicago area. Map (7 mB): High cost loans in Chicago locations.

Original post: If the national banks had nothing to do with the mortgage meltdown, as they and their regulator (OCC) apologists say, why has one of the nation's most respected state attorneys general, Lisa Madigan of Illinois, sued one of the biggest national banks, Wells Fargo? She charges that Wells and its various subsidiaries

"illegally discriminated against African American and Latino homeowners by selling them high-cost subprime mortgage loans while white borrowers with similar incomes received lower cost loans. “As a result of its discriminatory and illegal mortgage lending practices, Wells Fargo transformed our cities’ predominantly African-American and Latino neighborhoods into ground zero for subprime lending,” said Madigan."

Last week we participated in a press conference to introduce federal legislation banning the use of credit reports by most employers; today the New York Times has a page one story on Another Hurdle for the Jobless: Credit Inquiries. The story reports on several states that have restricted the practice (Washington State and Hawaii) and several where it has been under consideration (Michigan and Ohio, with California governor Arnold Schwarzenegger vetoing a similar proposal). Opposition to use of credit reports is for several reasons:

“How do you get out from under it?” asked Matthew W. Finkin, a law professor at the University of Illinois, who fears that the unemployed and debt-ridden could form a luckless class. “You can’t re-establish your credit if you can’t get a job, and you can’t get a job if you’ve got bad credit.”

Others say that the credit check can be used to provide cover for discriminatory practices.

Over at his Baseline Scenario blog , MIT Professor Simon Johnson analyzes the testimony of the nation's chief bank regulator, Comptroller of the Currency John Dugan of the OCC (my previous blog), and finds it "comes from a parallel universe – one that did not just experience the biggest banking crisis in world history."

Meanwhile, over at his Huffington Post blog, consumer advocate Jamie Love of Knowledge Ecology International analyzes big PhRMA's deal with the president on health care costs and finds its promises wanting:

The so-called cost savings from big pharma of $8 billion per year for 10 years are a joke for an industry that generates more than $300 billion in US sales from products that mostly replicate but do not significantly improve therapeutic benefits over existing medicines.

Over at Business Week, check out Old Banks, New Lending Tricks:

...some of the world's biggest banks are peddling a new generation of dicey products to corporations, consumers, and investors.

"In the past two years lawmakers in 15 states have capped interest rates on short-term loans or kicked out payday lenders altogether. The state of Ohio, for example, has imposed a 28% interest rate limit. But ...nationally chartered banks don't have to follow local rules. ... Cleveland-based Fifth Third, which has 400 branches in [Ohio] ... introduced its Early Access Loan, with an annual interest rate of 120%. "These banks are skirting state laws," says Kathleen Day of advocacy group Center for Responsible Lending."

Update: I hadn't noticed, but reporter Stephanie Clifford had posted a great sidebar to the story discussed below, on her blog. Here it is: An Interview With David Vladeck of the F.T.C.: Excerpt:

"Q: I’m not sure “icky” is a legal term. A: I use that because our chief economist uses that term. I don’t. I talk about dignity."

Original post: For several years, U.S. PIRG and the Center for Digital Democracy have filed detailed petitions to the Federal Trade Commission explaining that certain emerging online advertising practices amount to behavioral tracking intended to result in consumer manipulation -- and that the practices could not be solved by "privacy disclosures." Now, as Stephanie Clifford of the New York Times reports, new FTC Director of Consumer Protection David Vladeck has Fresh Views at Agency Overseeing Online Ads:

Privacy policies have become useless, the commission’s standards for the cases it reviews are too narrow, and some online tracking is “Orwellian,” Mr. Vladeck said.

Now, Mr. Vladeck indicated, the commission would begin considering not just whether companies caused monetary harm, but whether they violated consumers’ dignity. “There’s a huge dignity interest wrapped up in having somebody looking at your financial records when they have no business doing that,” he said.

At another level, though, when Vladeck talks about dignity, he is recognizing what two young lawyers, Samuel Warren and Louis Brandeis, postulated (after Cooley) in the Harvard Law Review over 100 years ago as the "right to be let alone." Later, as a Supreme Court Justice, Brandeis, in a famous dissent in what was I think the court's first electronic privacy case (Olmstead, wiretapping) later expanded that to say:

[privacy is] "the right to be let alone—the most comprehensive of rights and the right most valued by civilized men.”

U.S. PIRG's Larry McNeely speaks in support of health care reform in front of the U.S. Capitol, joined by our 8-foot tall spokesconsumer Health Care Harry and friends. Photo by Brian Walker of our staff. More at our health care pages.

In his press release accompanying his testimony today before a Senate Banking Committee hearing on regulatory reform, the OCC chief, Comptroller of the Currency John Dugan, once again attacks the proposed Consumer Financial Protection Agency (CFPA):

“It makes sense to consolidate all consumer protection rulewriting in a single agency, with the rules applying to all financial providers of a product, both bank and nonbank,” he said in testimony. “But we believe the rules must be uniform, and that banking supervisors must have meaningful input into formulating them. Unfortunately, the proposed CFPA falls short on both counts.” The rules would not be uniform because states could adopt different laws and regulations, and national bank preemption would be repealed, Mr. Dugan said.

State enforcement actions have been hamstrung by the dual forces of preemption of state authority and lack of federal oversight. The authority of state attorneys general to enforce consumer protection laws of general applicability was challenged at precisely the time it was most needed – when the amount of subprime lending exploded and riskier and riskier mortgage products came into the marketplace. For example, the Office of the Comptroller of Currency has taken the position over the past several years that it has authority to prevent state attorneys general from enforcing state fair lending and consumer protection laws against federal banks and bank subsidiaries. This position effectively created a void that was previously covered by state consumer protection and civil rights laws.

At the same time that preemption of state consumer protection powers gained ground, federal agencies failed to fill the gap in regulation with uniform market-wide standards that ensured lenders did not engage in fraudulent, deceptive or unfair lending practices. Our federalist system of government is premised on the notion that federal and state regulation can co-exist and are in fact complementary. Moreover, even if sufficient federal regulations had been promulgated, they are only effective to the extent that the administration in power is interested in enforcing them. Recognizing the important role of the state attorneys general will restore an effective check on banking and financial institutions.

The void created by preemption in the face of a failure of federal oversight added a number of impediments for state attorneys general in pursuing enforcement actions against predatory lenders.

As she often does, Kathy Chu of USA Today has used facts to nail another major bank fee story. In Courtesy overdraft fees hit credit union customers, too she documents that the nation's biggest government-employee credit unions are gouging members (not customers, member-owners!) with costly overdraft fees. Some credit union spokespeople make some desperate quotes in the story, but you cannot defend "courtesy overdraft."

Credit unions are member-owned, but all too often follow the lead of the banks when it comes to opposing remedial legislation. On Capitol Hill, they are currently marching in lockstep with the banks in opposition to the Consumer Financial Protection Agency. Oh, their letters to the hill say they're for it, but go on to say "only under our own terms, of course" -- first exempt us, then gut the CFPA's powers and, finally preempt the states.

Chu does point out that some credit unions, such as massive Navy Federal, don't do it. But too many do. And while I will always tell consumers, "Bank at a credit union, not at a bank," what I told Kathy Chu about these government credit unions applies to a majority of credit unions--

"Government credit unions should serve as a model for what's right rather than a poster child for what's wrong."

Over at the Wall Street Journal (pd. subs. may be req'd), Damian Paletta and Deborah Solomon report:

Treasury Secretary Timothy Geithner blasted top U.S. financial regulators in an expletive-laced critique last Friday as frustration grows over the Obama administration's faltering plan to overhaul U.S. financial regulation, according to people familiar with the meeting.

Only in Washington. Meanwhile, Washington Post columnist Allan Sloan reports in a column on the TARP, Few Gains, Big Losses, that:

"there are plenty of weaklings in the pool. The biggest: Citigroup, where the government has converted $45 billion of its TARP investment into regular preferred and common stock to try to strengthen the bank. The odds of us taxpayers getting back our $45 billion -- plus the 5 to 8 percent that Citi was supposed to pay on its borrowings -- are remote."

Well, this speaks for itself. We like this, and look forward to more.

SEC RELEASE: The Securities and Exchange Commission today charged Bank of America Corporation for misleading investors about billions of dollars in bonuses that were being paid to Merrill Lynch & Co. executives at the time of its acquisition of the firm. Bank of America agreed to settle the SEC's charges and pay a penalty of $33 million.[...]

"Companies must give shareholders all material information about corporate transactions they are asked to approve," said Robert Khuzami, Director of the SEC's Division of Enforcement. "Failing to disclose that a struggling company will pay out billions of dollars in performance bonuses obviously violates that duty and warrants the significant financial penalty imposed by today's settlement."

David Rosenfeld, Associate Director of the SEC's New York Regional Office, said, "As Merrill was on the brink of bankruptcy and posting record losses, Bank of America agreed to allow Merrill to pay its executives billions of dollars in bonuses. Shareholders were not told about this agreement at the time they voted on the merger."