The Prepaid Calling Card Scam

November 18, 2008

phoneIt’s the perfect fraud — victims who are defenseless and a scam that only involves a few dollars per calling card. Read more

Spam or Scam: How Do They Make Money?

November 14, 2008

Spam messages touting everything from enhanced sexual performance to stock tips clog our daily in-boxes. Current estimates are that over 120 billion spam messages are now sent each day. Some, like the Nigerian money scam, even promise millions just a few clicks away. Ever wonder how these companies stay in business if everyone knows they are scams? A recent empirical study determined that, while almost everyone ignores such obvious spam messages, it only takes an extremely minute percentage of suckers to turn a profit.

Computer scientists at UC Berkeley and UC San Diego recently conducted a unique study of the spamming industry. In order to measure the effectiveness of spamming programs, they in effect went into business as spammers themselves. Setting up a phony pharmaceutical site selling “Viagra” and other male enhancement products, they infiltrated a portion of a worldwide spamming software botnet called “Storm.” Botnets are robotic software distribution networks that spread through captured email programs. “Storm” is a large botnet discovered in early 2007 that has captured an unknown number of PC’s (estimates have ranged from 20,000 to over one million) whose address books are then copied. The researchers were able to insinuate themselves into one small portion of this particular botnet and use it to spread their phony site.

Using the Storm botnet for 26 days, the scientists were able to send out 350,000,000 emails touting their on-line pharmacy. Due to factors such as invalid addresses and blacklists, 82,700,000 emails made it to computers. Spam filters further reduced this number significantly (though harder to measure). Of those emails making it to a person’s in-box, 10,522 users clicked on the link and visited the fake pharmacy. Twenty eight people initiated a purchase averaging $100. At this point, the pharmacy returned an error message, thus preventing the researchers from actually obtaining names and personal credit card information. This came to a daily income of $140 for the campaign. Since the infiltration amounted to only 1.5 percent of the overall Storm network, this translates to a potential revenue of $3.5 million a year for an internet pharmaceutical company using Storm for spam marketing.

In another portion of the study, the researchers used their Storm infiltration to determine how many PC’s they could capture to propagate further spam. They sent out 82 million emails advising recipients that someone had sent them a postcard, which could only be viewed by downloading the “postcard” software. Extrapolating their results, they estimate that Storm self-propagation campaigns can recruit between 3500 and 8500 new computers a day.

Analyzing spam filters and geographical distribution of their results, they concluded that the quality of spam filtering and general anti-spam education were the largest factors driving response rates down. For some reason, American users seemed most susceptible to the postcard scheme, while French users were most susceptible to the male enhancement scheme. Perhaps the French aren’t better lovers after all.

Helping Homeowners A Losing Proposition

November 14, 2008

Homeowners are losing their homes even when lenders could make more money by cutting a new mortgage deal, according to researchers at the Federal Reserve Board.


The middlemen between the borrowers and the lenders see working out deals with homeowners as a losing proposition. So, they haven’t bothered to add the specialized staff needed or change the way they handle delinquent loans, shortchanging everyone else.

These middlemen – called loan servicers – “do not have strong financial incentives” to invest in additional staff or technology required to contact borrowers and re-negotiate loans because investors won’t pay for much of the cost, according to the September 8, 2008 report, The Incentives of Mortgage Servicers: Myths and Realities.

See the Consumer Warning Network report in March 2008 describing how loan servicers turn a profit by foreclosing.

Servicers favor alternatives that are less labor intensive and less costly or which reimburse expenses, the report found. Investors are unwilling to reimburse the costs of loss mitigation, it said.

“Loan loss mitigation is labor intensive and thus raises servicing costs, which in turn make it more likely that a servicer would forego loss mitigation and pursue foreclosure even if the investor would be better off if foreclosure were avoided,” the report said.

In contrast, foreclosures and other parts of the loan default management process are more automated and do not require extensive contact with borrowers. Unlike loan workouts which increase labor and technology costs, foreclosures require few additional personnel. Investors reimburse loan servicers for other out-of-pocket costs, such as foreclosure fees and expenses.

“Loss mitigation costs are an added expense to servicers since a loan served a notice of default will continue through the normal foreclosure process even as loss mitigation is pursued,” the report added.

The type of loan workouts that keep people in their homes increased to about 300,000 per quarter last year. Loan modifications, which change the terms and conditions of the original loan, slightly exceed the number of loan workouts.

Under this “dual track” approach loan modifications and foreclosures proceed simultaneously. Researchers were told of cases where a house was repossessed within days of a feasible modification plan because the foreclosure tracked moved faster than the loss-mitigation track.

The report found:

  • The available evidence suggests that some avoidable foreclosures are being initiated because of inadequate loss-mitigation servicing capacity and various practices of servicers.
  • Given loss rates of 50 percent or more on subprime mortgages, both investors and borrowers could be better off with more effective loss mitigation.
  • The legal arrangements that govern loan servicing provide little guidance about how servicers should deal with delinquent loans, leaving the decisions up to the servicers. This lack of guidance appears to “dampen” loan workouts.
  • Loan servicers fear that they will be sued when interest rate changes or other loan modifications benefit one class of investors at the expense of another.
  • The holders of second mortgages and other “junior lien holders”  are “reluctant” to make changes without additional payments.
  • Citing the failure of loan workouts, investors fear that loan modifications will ultimately cost them more by delaying what ultimately will result in a foreclosure. Between 18 percent and 50 percent of subprime loan workouts failed within a few months.
  • Loan servicers see little gain from performing well because the prospects of gaining additional business in the subprime mortgage market in the future are dim.

How To Help Homeowners?

November 14, 2008

Courtesy ABC NewsWhat did the Federal Reserve Bank researchers recommend?

  • Create realistic programs that simultaneously help borrowers afford and keep their homes and ensure that lenders are better off than they would be from foreclosures.
  • Pay loan servicing companies an incentive to complete “appropriate” loan modifications that keep borrowers in their homes.
  • Streamline the loan workout process to reduce costs.
  • Spur additional loan workouts by giving servicers immunity from potential litigation by investors who may perceive the changes as being too generous to borrowers.
  • Delay foreclosures for homeowners who are close to reaching a loan workout deal.
  • Increase pressure from Congress, the administration and regulators to establish rules that promote loan workouts, subordinate second mortgages and other liens and raise the “quality of [loan] servicing.”
  • Measure each loan servicer’s success at preventing default through detailed analysis of cure rates. Cure rates track loans that move from delinquency to current as well as loans that move from delinquency to foreclosure.

AIG’s Lavish Seminars Still Business As Usual, But Now Secret

November 11, 2008

In the wake of mass criticism for it’s lavish spa retreats, recently bailed-out national insurer AIG is working to reduce costs for its financial planner seminars. But rather than host these events in more modest accommodations AIG continues to pick opulent, scenic locations racking up resort bills upwards of $343,000  – while at the very same time pleading with the fed to provide another $40 billion in loans.

Fearing how this would appear to the public, AIG instructed the location for it’s most recent event, the Point Hilton Squaw Peak Resort that no “AIG” name or logo should appear on signs anywhere at the hotel. Secrecy was so top of mind that the hotel staff were not even allowed to utter the company name.

Investigative reporters for ABCNEWS affiliate KNXV found the event despite the lack of signage. Their hidden cameras captured AIG execs emerging from the spa, sitting poolside, at cocktail parties and at exclusive restaurants performing business as usual.

See the full story at

How To Stop Harassing Collection Calls

November 11, 2008

Economic times are bad, and defaults rates are at historic levels. Just because you can’t make a payment on your credit card or your car loan does not mean that you have to put up with the collection calls.

You have rights.

Debt collectors cannot use threats of violence, imply that you will be arrested, call your employer, or call you before 8 A.M. or after 9 P.M. The Federal Trade Commission (FTC) and most States have enacted rules to put an end to debt collection harassment. Visit the FTC web site, and this referral page to your particular State laws.

Now the secret on how to stop the collection calls:

  1. Ask the caller to identify themselves.
  2. Next ask them to provide you with their agency’s address.
  3. Send a certified letter to the collection agency telling them to STOP calling.

It is that simple! After receiving the letter the collection agency can only contact you to let you know there will be no further contact or to advise you that the creditor intends to take some further action, like filing suit. Note that sending the letter does not make the debt go away if you actually owe it. You could still be sued by the creditor.

What if the calls continue or you are a victim of debt collection harassment? You can sue the debt collector. You are entitled to actual damages, plus $1,000, plus they have to pay for your attorney and court costs. If you are a victim of illegal calls or debt collection harassment you should contact the National Association of Consumer Advocates to get an attorney in your area.

Just because you have fallen on bad times does not mean that you have to endure harassing calls. You have RIGHTS! Harassing calls do not make matters better they only make your situation worse.

How Safe Is Your Thanksgiving Turkey?

November 10, 2008

More than 270 million turkeys, weighing almost 8 billion pounds, will be raised in America this year, with most of them ending up on our Thanksgiving tables. How good a job does the Department of Agriculture do in making sure that these turkeys are free of biological or chemical contamination? With new looser federal legislation passed in 2008, only time will tell.

Since 1957, poultry inspection by the Food Safety and Inspection Service (FSIS) has been mandatory for all domestic birds slaughtered for consumption. The 2008 Farm Bill, however, now permits some state-inspected poultry products to enter interstate commerce without further federal inspection. All slaughterhouses are still required to have a Hazard Analysis and Critical Control Point (HACCP) plan in effect to maintain sanitary plant procedures, but it looks like enforcement of food safety will increasingly depend on state run inspections.

Despite the federal safeguards in place, it is perhaps inevitable that with so much poultry to inspect some contaminated products slip through the system. In 2000, 2002, 2004 and 2007 there were recalls of processed turkey products, based mainly on contamination with listeria monocytogenes, a virulent bacterial disease causing food poisoning. In 2002 alone, over 27 million pounds of “Pilgrim’s Pride” poultry products were involved in such recalls. None of these recalls, however, involved whole fresh or frozen turkeys.

It remains to be seen whether state inspections can realistically take the place of full federal inspections. Any outbreaks of contamination coming from state-only inspections will undoubtedly give rise to questions over relaxation of safety programs.

With whole turkeys, the best safety program starts at home. Proper kitchen techniques can reduce substantially the danger of contamination. Here are some simple tips:

  1. With fresh turkey, carefully inspect and smell the bird before bringing it home. Any strong or unusual odor should be immediate cause for rejection. Buy such fresh turkeys only 1 or 2 days before you plan to prepare them.
  2. With frozen turkeys, keep them frozen until you are ready to cook them. Never thaw your frozen turkey at room temperature. Defrost them either in the refrigerator, in cold water, or in the microwave following precise guidelines. Once thawed, never refreeze a turkey.
  3. Handle the turkey with freshly cleaned hands, implements, kitchen towels and cutting or cleaning surfaces. Unless you have an FSIS inspector in your kitchen, you are more likely to be the source of contamination than the processing plant.
  4. Handle and remove the internal organs far apart from other foods in order to avoid cross contamination.
  5. Be sure to cook the turkey to an internal temperature of between 165 and 180 Fahrenheit (74-82 Celsius) to be sure to kill any lingering bacteria.
  6. Many recommend that you cook any stuffing separately from the whole turkey, because stuffing can easily pick up bacterial contamination from the turkey cavity and remain insufficiently cooked to kill such germs. Careful monitoring of the cooking turkey can, however, reduce this concern for those who are convinced that stuffing in a cooked turkey just tastes (and looks) better. Just be sure that the stuffing itself warms to a temperature of at least 165 Fahrenheit (74 Celsius). Directly measure the stuffing’s temperature and do not depend on the temperature of the turkey which can be different. If the turkey is done but the stuffing is still not warm enough, your choice is either to overcook the turkey – not recommended – or to take the stuffing out of the turkey and continue to cook it separately.
  7. Carve and serve the turkey as soon as it has set up from the oven (about 20 minutes). Once meat starts to cool down, the contamination process can start all over again.
  8. Leftovers should be cut from the bone, stored in shallow containers, and refrigerated within 2 hours. They should be eaten with 3 days and thoroughly reheated.

As far as getting to that perfect state, where the meat is moist and the skin brown and crusty – sorry, you’re on your own.

Congratulations on Emmy Nominations!

November 6, 2008

The Consumer Warning Network congratulates our Angie Moreschi on 4 Emmy Nominations.   Angie was nominated for Smart Health , a health magazine program she hosts on PBS’s WEDU in Tampa, Florida.

Read more

25% Of Seniors Get Wrong Drugs

November 5, 2008

So much for learning from our mistakes.  21 years ago a major study showed 1 in 4 seniors got the wrong prescription drugs.

The study was conducted by Dr. Steffi Woolhandler of Harvard Medical School in 1987 which concluded that close to a quarter of all Americans 65 or older were given prescriptions for drugs that they should almost never take.  The drugs were ineffective, not needed, or caused serious side effects.

Dr. Jerry H. Gurwitz of Brigham and Women’s Hospital in Boston wrote an editorial about the study and said that he hoped it would serve as “a wake-up call.  I hope that the medical community will take it as seriously as the general public”

Fast forward 21 years and guess what? Not only did the medical community not take it seriously, things have gotten worse!

Just this year the Veterans Administration Health Services Research funded a similar study.  The results – now 26.2 percent of patients over 65 were given drugs identified as inappropriate or suboptimal for older patients.

According to Alex Federman, M.D. assistant professor of medicine at Mount Sinai School of Medicine in New York City, seniors should make sure they have a good primary care doctor, and a geriatrician may be a particularly good choice for some older adults, especially those with multiple chronic diseases and complex health issues.

Bottom line, seniors need to ask questions.  The odds are one in four that you are taking inappropriate or suboptimal drugs.

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