The Hidden Monster
August 11, 2008
Already burdened with mounting educational loan debts, students increasingly find themselves the targets of sordid marketing practices. Sometimes the perpetrators are caught, but what about the ogre lurking in the wings?
We’ve exposed the manner in which colleges have partnered with credit card giants to take advantage of their students for their own profit. In yet another example, companies who provide consolidation loans (combining several student loans into one large loan) entered into agreements with many colleges to market their consolidation loans to students, using the logos and mascots of the college to convince students that these consolidation loans carried the blessing of their college.
Student Financial Services (SFS), a Florida company, was forced last year by state prosecutors to cease its deceptive marketing practice and end its contractual arrangements with 63 colleges, including Florida Atlantic and the University of South Florida. SFS had been paying up front fees and kickbacks for each funded loan application at many of these colleges.
- Did your college sell you out?
- What did the Schools get out of the deals?
- What did SFS get out of the deals?
But where did it find the money to fund its deceptive practices? Lurking in the background was Sallie Mae, the nation’s largest student loan company. When Sallie Mae found that it was losing money to these consolidation loans (lost fees and interest payments), it decided to get into the game itself. If you can’t beat ‘em, join ‘em. In 2006 it bought $3.6 billion worth of consolidation debts. In 2007, Sallie Mae gave SFS a $30 million line of credit designed to “encourage” further “lending activities” by SFS.
So SFS got spanked by state prosecutors for its deceptive practices, but Sallie Mae gets off scott free? Sound familiar? Unscrupulous lenders helped bring on the sub-prime mortgage crisis, but it was the big money players behind the curtain, like Fannie Mae and Bear Stearns, who fueled the crisis with bags of money, presumably never bothering to check into the lending practices that foretold doom. The hidden monster just sits back and waits for the next taxpayer bailout.
What’s That Doing On My Credit Card Bill?
July 24, 2008
By Terry Smiljanich and Jim Ross
Ever bought anything online and been offered various “rewards programs,” “free trials,” or “extra 10% discounts”?
Ignored them or turned them down? Better check your monthly credit card statement.
Among the various purchases on your card you may find a monthly charge of as little as $9.95 for these innocuous sounding programs from companies you’ve never heard of. How the heck did they get your credit card number and permission to charge you?
They’re called “negative-option” plans, in which consumers are automatically charged for services or products until they take affirmative action to cancel them. Pop-up ads and check boxes authorize a “free” trial in buying, shopping, and travel clubs, privacy services and health programs. The authorization may come from an errant click or through an automatic sign up that flashes by unnoticed by internet shoppers.
By clicking “yes” or failing to clear a checkbox, you have just authorized the company you are dealing with to give your credit card number to a third party vendor. It’s there in the fine print that nobody reads. Typically, after 30 days of the “free” program, your card will begin receiving monthly charges until you cancel.
One web-savvy shopper told us of a purchase she made through VistaPrint, an online graphic design and printing company. When she accidentally clicked a “$10 savings” window, she found herself signed up for “Passport to Fun,” costing $14.95 a month, and something called “Shopping Essentials,” both automatically charged to her card. After repeated telephone calls over two months, she finally got these services cancelled. She’s still waiting for her refunds.
Thousands of consumers have complained. The company’s response? You clicked “yes” didn’t you? They’ll cancel the service, but you are typically out past payments unwittingly made by you.
It’s all perfectly legal, but more and more state prosecutors are finding that they are being used in deceptive and fraudulent ways. As Iowa’s Attorney General charged, “many consumers don’t know they are members, are not aware that they are being charged yearly or monthly membership fees, and make no use whatsoever of the so-called membership benefits.”
Memberworks was one of the largest “negative-option” vendors. After settling with prosecutors in five states, it changed its name to “Vertrue, Inc.”
Companies that have tie-in agreements with Vertrue companies include VistaPrint, Victoria’s Secret, and Classmates.com. Vertrue boasts on its web pages that it has more than 18 million “members” with over “20 different membership discount programs to choose from.” Business is good, with over $800 million in revenues last year.
5 Warning Signs of a Scam
July 21, 2008
If you’re ready to sign up for a service, product or opportunity, beware of the following signs that what you’re looking at may really be a scam to get your money:
1. “Act now!” Why the rush? If it’s a good deal today, it’ll be a good deal tomorrow, after you’ve had a chance to check up on the company and its claims.
2. “You won’t believe this!” The oldest scam warning in the world is: “if it’s too good to be true, it isn’t true.”
3. “Free” Nothing, I repeat nothing, is free. That “free” credit monitoring or “free” ringtone comes with a subscription to be billed later.
4. “No risk!” Sorry, there’s no such thing as a sure bet. If it’s guaranteed to make money, the seller would be out making money with it instead of hawking it to you.
5. “Fill out this form” Uh-oh, why am I providing personal information to this stranger? Bank account numbers, social security number, etc.? I don’t think so.
FSU Students Get Raw Deal
July 17, 2008
Students at Florida State University are subsidizing the school’s big time athletic program through an exclusive credit card that charges up to 3 percentage points more than the competition.
Fundraisers and school officials agreed to the higher interest rates in a deal designed to funnel at least $10.7 million dollars to the Seminole Boosters, a group that raises money for FSU athletics. The Boosters collect part of every transaction. Read the Consumer Warning Network story uncovering the practice.
Six of 10 credit card offers from other banks afford students a better deal. See the chart below.
Spirit Airlines Gambling With Your Money
May 20, 2008
Spirit Airlines, which prides itself on offering super low fare tickets, has apparently figured out a new way to get folks to gamble on getting $9 airline seats for only $39.95 a year. Only trouble is that after you’ve paid your money, good luck on finding any “$9 tickets.”
Suit claims BB&T hid real estate scheme
December 7, 2007
A fired worker’s complaint is the 2nd in a month claiming banks took part in fraudulent loans in Mitchell County. A former corporate investigator for BB&T filed suit Thursday against North Carolina’s third-largest bank, saying the company fired her in June for refusing to participate in the coverup of a $20 million loan fraud.Amy Stroupe, a sheriff’s detective before she was hired by BB&T in 2005, said the loans were made as part of a failed real estate development in western North Carolina. The development, the Village of Penland, collapsed in May with investors owing banks an estimated $120 million. Read more
Telemarketers Pay for Violating Do-Not-Call List - Reuters
November 16, 2007
WASHINGTON, Nov 7 (Reuters) - Ameriquest Mortgage Co, bed-seller Craftmatic (CRCC.PK: Quote, Profile, Research), security company ADT and other companies paid fines of $7.7 million dollars for telephoning consumers who had put their names on a do-not-call list, the Federal Trade Commission announced on Wednesday. Read more
Chase Changes Due Date Without Warning, Changes APR From 3.9% to 29.99%
November 1, 2007
Steve writes: “I was scammed big by JP Morgan Chase Credit Cards. They apparently have “floating due dates” that we had not encountered in our 10+ years as customers but somehow February of 2007 was the magic month. They moved our due date up by 3 days, our payment was two days late. They raised our interest rate from 3.99% to 29.99%…Amazingly enough, on our March bill the due date is exactly the same as January. They claim they sent us a notification letter, but I never received one. I spoke to the worst customer service person ever, Dennis Broyles, who claimed that no one in the company had the power to change my interest rate back and that he had no supervisor I could speak with. It was outrageous.” Read More
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Recalls and Product Safety News- Sony Recalls Notebook Computers Due to Burn Hazard
- Wolf Appliance Recalls Gas Ranges Due to Burn Hazard
- Pendants and Candle Charms Recalled Due to Risk of Lead Exposure
- Optave Inc. Recalls Action Baby Carriers Due to Fall Hazard
- Cordless Screwdrivers Recalled by Menards Due to Fire and Burn Hazards
- Worldwise Inc. Recalls Retractable Dog Leashes; Metal Clasp Can Break and Cause Facial and Body Injuries to Dog Owners
