There's always room for reform. Despite the efforts of government regulators and industry self-regulators, gigantic loopholes that let unscrupulous or greedy companies pick the pockets of unsuspecting consumers persist. Maybe a little prioritizing is in order: For the New Year, I have three wishes that, if granted, will save all of us time, money, and aggravation.
First, I hope the U.S. Senate quickly approves the bill creating a Consumer Financial Protection Agency. Last month, the House voted to establish the agency, which promises to be the most important change in consumer protection since the establishment of the Federal Trade Commission almost a century ago.
Our economic recovery might yet sputter and stall if the banks and financiers who drove our system to the brink are allowed to continue business as usual. With little regard for the billions of taxpayer dollars that allowed them to carry on, big banks are already back to paying bonuses and posting hefty profits.
While big business has no trouble getting the ear of government officials, and federal help for small business had its roots in the Great Depression, we small investors, or financial consumers, have been without a dedicated advocate. The CFPA could be our new voice in Washington to reign in the financial industry's exploitative practices.
Wish number two is for the Federal Trade Commission to take strong action against companies that use negative-option ads, those "free trial" offers that mask costly, long-term commitments that you have to go out of your way to decline. In the last few years, the predatory companies luring unsuspecting customers with these schemes have proliferated online. Promises of no-cost trials promote products ranging from teeth whitening to "male sexual enhancement."
Perhaps the most outrageous example of such lures—and a token of how big and mainstream negative-option ads have become—comes from Experian, one of the three major credit bureaus responsible for monitoring the creditworthiness of American consumers.
According to a recent report in The New York Times, Experian executives are aware, but don't care, that their "Free Credit Report Dot Com" advertising campaign tricks some consumers into signing up for an expensive credit-protection service instead of getting their annual credit report for no charge, as mandated by law. Experian took in nearly $700 million in revenue from monitoring services last year.
And Experian is just the most prominent example. Recently I found that five out of six ads on an MSNBC Web page led to negative-option offers. The FTC, which is investigating negative options, needs to ban the practice. It could start simply by requiring that any offer advertised as "free" actually be free—with no costly strings attached. (By the way, the place to get a truly free credit report is www.annualcreditreport.com.)
Wish number three is for the four biggest credit card companies—American Express, VISA, MasterCard, and Discover—to take an ongoing role in combating vendors' deceptive practices. Last June, I was able to convince the Big Four to suspend the card-processing accounts of Central Coast Nutraceuticals, a supplements seller that had drawn complaints from consumers who felt deceived by its free-trial offers. (Arizona's attorney general had filed fraud charges against CCN, but the company was still doing business as usual with its first court hearing months away.)
Less than two weeks after the card companies took action—effectively cutting off CCN's sales—CCN settled out of court for $1.4 million. That's the power of credit-card companies. What's needed is an alert system that lets the card companies, the FTC, and state attorneys general work together to shut down scammers regardless of location, here or abroad. That would protect millions of consumers, and the card industry, rarely beloved these days, could put some shine on its reputation.
If the fairy godmother of consumer action were to grant my three wishes, the fight wouldn't be over, but we'd all have some much-needed relief.