Consumers around the country share similar concerns and problems.
That's the message that Gary Hansen, the director of the Utah Division of Consumer Protection, brought back from meetings of the National Association of Consumer Agency Administrators this summer.With the exception of pyramid schemes and multi-level marketing plans, which seem to be "hotter" in Utah than in most other parts of the country, many state consumer agencies report dealing with the same kinds of complaints.
Topics that generated the most discussion, Hansen says, include:
- Extended warranties and service contracts. "I know we've had complaints about these, but I was surprised to see that it is a problem of such magnitude nationwide."
Major concerns with the warranties include:
- Duplicate coverage - consumers paying more for coverage they are already getting.
- Cancellation policies. This can work both ways. "You see a box that says cancelable/non-cancelable and you think, `of course I don't want them to be able to cancel this policy,' " explains Hansen, "so you check the other box. Then you get in a car wreck and total the car, but because the policy is non-cancelable, you end up paying the premiums."
- Questions about who should offer service contracts. California, for example, requires anyone selling such contracts to be licensed insurance agents.
- Ethics among public administrators. There is evidence of the growing concern about ethics in all segments of society, Hansen says. The problem is that there are varying perceptions of what is really ethical.
- Auto broker scams. These involve brokers who offer to find used cars for consumers. They collect an up-front fee, but never seem to be able to find the car. "I really can't imagine why anyone would pay someone else to find them a car, but apparently lots of consumers are doing it and getting ripped off," Hansen says.
- Gulf war scams: Not surprisingly, as soon as the war came along, so did the rip-offs. Among them, finder's fees for lining up jobs to rebuild Kuwait. The jobs, however, were non-existent. "We got that one stopped here really fast," Hansen says. "But it has been going on in a number of places."
- Auto repairs: While most mechanics are honest and do a credible job, there are enough that cause problems to keep this on the list year after year. Complaints include making unnecessary repairs, overcharging on parts and labor, replacing parts with inferior quality, and not making repairs.
- Telemarketing fraud: As the country gets more high-tech, so do the scams. Common problems include misuse of 900 and 976 numbers, cheap credit and credit repair offers, prize giveaways that cost you more than the merchandise is worth and charitable solicitations.
It is reassuring to know there is a network of consumer agency administrators out there who are dealing with common problems, Hansen says. "We can exchange information and shut things down more quickly. And it's also good to know that consumers all around the country are being helped."
Read small print on `negative options'
Early this summer, TCI, the cable company, notified its Utah customers that it would begin transmitting the Encore channel. After an initial free trial period, TCI would start charging unless customers contacted TCI and declined the service.
Numerous questions and complaints about this "negative option" marketing came to the Utah Division of Consumer Protection. TCI has similarly advertised the Encore channel in other states, many of which were also concerned about the practices. After much discussion around the country, TCI elected to discontinue its marketing plan and to offer consumers a "positive option" - if consumers wanted the new service, they must order it.
The whole thing raised a lot of questions about negative option plans and just how they work.
Negative option marketing is nothing new and is not necessarily deceptive. It is a popular way of marketing for such things as book and record clubs.
But, says the Federal Trade Commission, which has a negative option rule, you should clearly understand what a negative option plan involves before you sign up.
Under a negative option plan, the seller periodically sends you announcements that describe the current selection and newest offerings from the seller's inventory. Once you receive the announcement, you can decide whether you want the selection or not. If you do not want the selection, you must tell the seller not to send it.
You may also use the announcement card to order an alternate offering. Under the terms of your contract, you may be required to buy a certain number of selections during a specified period of time.
Under the negative option rule, sellers must clearly and conspicuously give you certain information about their plan in any promotional materials. (This was the problem the cable company ran into; consumers were not informed of the negative option possibilities at the time they signed up for cable.)
The seller must tell you:
- How many selections you must buy, if any.
- How and when you can cancel your membership.
- How to notify the seller when you do not want the selection.
- When to return the negative option form to cancel shipment of a selection. You have 10 days to decide whether you wish to receive the selection. The form will either mention a "return date," which is the date the form must be received by the seller, or a "mailing date," which is the date the form must be mailed to the seller. Be sure you know which you are dealing with.
- When you can get credit for the return of a selection.
- How postage and handling costs are charged.
- How often you will receive announcements and forms.
To attract new subscribers, some sellers offer special introductory merchandise. Under the rule, the seller must ship this merchandise within 30 days of receiving an order. If merchandise cannot be shipped due to circumstances beyond the seller's control, the seller may offer an equivalent alternative. If you don't want to accept any substitutes, you have the option of canceling your membership.
Before you sign up for such a plan, the FTC advises, be sure you consider the overall cost of the plan, including any shipping charges. If you are required to buy additional merchandise, you may want to compare the club's regular prices against those of other sellers.
If you subscribe, keep copies of the seller's promotional materials, as well as any negative option forms you return and the dates that you mail them.
If you have a problem that you cannot resolve with the seller, you can report it to the FTC Enforcement Division, Washington, DC 20580.
Credit unions feeling little impact of recession, group says
If you belong to a credit union, you'll be happy to know you are part of a healthy, growing industry.
With some exceptions in the Northeast, credit unions have felt little impact of the recession, says the Credit Union Nation Association (CUNA). In fact, says the group, on a national basis, all of the basic safety and soundness ratios improved from 1989 to 1990. Assets grew 7.9 percent to $222 billion by the end of 1990.
In its recently released annual report, CUNA notes that credit union members reacted to the soft 1990 economy by saving more and borrowing less. Savings grew 7.7 percent to $201 billion. The credit union share of all consumer savings crept up a little, to 6.3 percent from 6.1 percent in 1989. During the same period, banks also increased their share of the savings market, while S&Ls lost some of their savings market share.
Credit union membership last year totaled 61.6 million.
According to the report, there are 14,547 credit unions. Slightly more than half are chartered under federal law, the rest under the laws of various states. Utah boasts of 169 credit unions, with a total membership of 836,815.
By year's end, all but six credit unions (five in Idaho and one in New Hampshire) had their credit union savings insured under federal or state programs. Accounts are typically insured up to $100,000.
If you are not a credit union member, you may be interested to know just how they work.
Credit unions are not-for-profit financial cooperatives, organized solely to meet the needs of their members. They offer a variety of savings and lending services. While each individual union is a little different, many offer life insurance coverage for savings accounts and loads at no direct cost to members, payroll deduction plans, share drafts (checking), money orders, credit and debit cards and IRAs.
Each credit union is governed by its members. The membership elects unpaid, volunteer officers and directors who establish the policies under which the credit union operates.
To join a credit union, a person must be within its field of membership. Typical fields of membership include employee groups, associations, religious or fraternal affiliations and residential areas.
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CHART: Distribution of Consumer Savings:
DECEMBER 1990
Commercial Banks Outstanding Market share
$1,591.9 50.0%
Savings institutions 917.2 28.8
Credit Unions 201.1 6.3
MMMF-s 347.8 10.9
U.S. Savings Bonds 125.8 4.0
TOTAL $3,183.8 100.0%
DECEMBER 1989
Outstanding Market share
Commercial Banks $1,449.4 47.2%
Savings institutions 999.8 32.6
Credit Union 187.0 6.1
MMMF-s 312.2 10.2
U.S. Savings Bonds 117.2 3.9
TOTAL $3,065.6 100%
CHANGE 1989-1990
Commercial Banks $142.5 9.8%
Savings institutions -82.6 -8.3
Credit Unions 14.1 7.5
MMMF-s 35.6 11.4
U.S. Savings Bonds 8.6 7.3
TOTAL $118.2 3.9%
(in millions of dollars)