Collection Agency Scams Defunct Magazine Company’s Customers

Just when you think you’ve heard it all as far as collection agency scams go, the folks at Consumer Affairs always break something new. This time it’s collection agencies trying to collect for debts (some not even owed) for a magazine peddling company the FTC put out of business five years ago for fraudulent business practices.

In 2003, the FTC essentially closed the door on Consolidated Media Services (CMS) and the network of companies under the Cross Media Marketing name after they settled for $350,000 and agreed to end the myriad of alleged deceptive sales tactics they were accused of. Although CMS appears to have dissolved, consumers write that a collection agency — Luebke Baker and Associates of Peoria, Ill. — has been trying to collect on CMS debts, some as old as 11 years. Some consumers say they paid the balance of these debts years ago while others say they have never heard of the companies that generate these charges.

Some of Luebke Baker’s clients are reportedly third-party buyers of debt who purchased the names and accounts of the consumers from defunct companies such as CMS and other sources. That explains why a company now out of business is still trying to gather funds and why consumers say Luebke Baker representatives won’t give out company phone numbers or addresses.

FTC Targets Prepaid Calling Card Fraud

The Federal Trade Commission says CTA has been ripping off consumers of its prepaid calling cards, The Press of Atlantic City reports.

The FTC says CTA was advertising a certain amount of minutes per phone card, but was falling short of that advertised amount. The regulatory agency says CTA is one of the largest calling card providers in the nation, racking up more than $28 million in sales for the fourth quarter, 2007, and it wants a U.S. Circuit Court to shut the company down temporarily.

CTA markets the cards primarily to immigrants who use the card to call their native lands. The cards are sold at many retail locations across the nation, including gas stations and convenience stores. They are sold for between $2 and $20 and advertise “no connection fees, also a lie, according to the FTC.

The FTC tested nearly 50 cards and received results far less than advertised. On a 40-minute card, a phone call to El Salvador cut off after 27 minutes. And on a 30-minute card, a phone call to Egypt cut off after 10.

CPSC Recalls Rockers That Injured Children

The Consumer Product Safety Commission (CPSC) is recalling about 122,000 plush rocker toys because they could cause children to tip and fall.

CPSC says the Rock N Ride Plush Rocker Toys’ base can become unstable, which allows the rocking chair to tip back and forth, which poses a fall hazard to children. At least 35 reports of the rockers tipping over have been reported to its manufacturer, Tek Nek Toys Intl. of Southlake, Tex., including 10 injuries (bumps, bruises and lacerations).

The recall involves the Rock N Ride plush rocker, sold in eight models: brown pony, pink pony, pink unicorn, deluxe pony, deluxe bull, lil’ penguin, lil’ propeller plane and Clifford Big Red Rocker.

The toy chairs have molded plastic rocker bases and were sold for children at least 18 months old and up to 65 pounds. A button on the toy’s ear, hat or dash activates a song and phrases when pressed, according to a CPSC report. The recalled rockers have a date code from July 26, 2007 through December 29, 2007. This date is printed on a sticker inside the battery compartment.

The chairs were sold at Wal-Mart, Toys R Us, K-Mart, Target, Atwoods and Pamida stores nationwide and Internet retailers since September 2007 for about $30.

FTC Settles TJ Maxx Security Breach

Retailers TJ Maxx and Marshalls have agreed to have its information audited after their millions of customers’ credit card numbers may have been hacked.

By doing so, the retailer has settled with the Federal Trade Commission charges it “failed to provide reasonable and appropriate security for sensitive consumer information” according to the Associated Press and Tampa, Fla., TV station, WTSP-TV.

The stores say at least 45.7 million card numbers were accessed in a breach of the company’s computer system. Banks that filed court papers against TJ Maxx and Marshalls estimate that number at more than 100 million.

Home Warranty Scams – American Home Shield Exposed by Consumer Affairs

A Consumer Affairs article yesterday put a spotlight on home warranty scams. Or, if they’re not outright scams, they’re pretty close — because home warranty offers aren’t always what they seem.

As David Wood of Consumer Affairs wrote, “Not to be confused with a builder’s warranty, a so-called home warranty — actually a service contract — is typically purchased for existing homes, especially homes sold by real estate agents. These service contracts generally cost $300 to $600 for a yearly basic coverage plan that includes items such as ceiling fans, water heaters, and the furnace… Many consumers do find that these plans work just as advertised. However, many others are reporting serious problems with their warranty company, including American Home Shield (AHS).”

According to Wood’s article, a common thread in the consumer complaints about American Home Shield’s Home Warranties seems to be AHS getting out of making repairs based on technicalities. The small print seems to get the company out of making repairs in cases where there are “grounds of lack of maintenance or abnormal wear and tear” — not easily defined.

President Taps New FTC Head

George Bush is appointing William Kovacic as the new chairman of the Federal Trade Commission, Bloomberg News is reporting. He will replace Deborah Majoras, who is taking a job with Procter & Gamble Co.

Kovacic was previously under the employ of the FTC during Bush’s first term as the agency’s general counsel, but left to teach anti-trust law at George Washington University before returning to the FTC in 2006 as a commissioner.

Bush doesn’t need Congressional approval to appoint Kovacic as chairman of the FTC since he’s already a commissioner, but will need it to fill the void left by Majoras’ departure.

The President is facing strong opposition to his nominees to this and several other key posts in Washington as Democrats look to block any appointees Bush tries to install and serve after he’s gone from office.

California Mortgage Fraud “Stole” Houses

More details have come to light on the Southern California-based home mortgage fraud scheme we reported yesterday.

According to federal indictments against Charles Head, his brother Jeremy and 17 others, the group used practices known as equity stripping and foreclosure rescue pitches to steal more than $12.6 million and fraudulently obtain titles to more than 100 homes.

Victims of this scheme were identified in 14 states as the operation used three different bases of operation: California, Arizona, and Pennsylvania.

Head and his associates perpetrated the mortgage scheme from January 2004 through March 2006, when a complaint from a California homeowner victimized by Head complained.

Head’s group offered to bail homeowners out of impending foreclosure by agreeing to take the title of the home and make payments on the mortgage from “rent” the now former homeowner paid.

Using the title to the home, Head and associates were able to gain loans to purchase more homes and the results ended in big profits for the scammers.

“Operation Homewrecker” Targets Mortgage Fraud

U.S. officials in Sacramento, Calif., have announced charges against 19 people for targeting homeowners facing foreclosure and stealing more than $12.6 million through illegal mortgage and loan activities, Reuters reports.

This crackdown was dubbed “Operation Homewrecker” and is being touted as the largest such mortgage fraud bust in the nation’s history.

Three licensed mortgage brokers are included among the 19 people charged under the sealed indictment, Reuters continues. The scams were perpetrated on a nationwide level.

Allegedly 115 homeowners were duped into turning over their home titles to these scammers as they faced near certain foreclosure. Rather than getting repaired credit and a roof over their head, as promised by those now under indictment, the homeowners were out on the street.

Those involved collected a rent on the home once they secured the titles and rather than covering the mortgage payments, used the equity in the home to borrow more money.

The ringleader is alleged to be 33-year old Charles Head of Southern California, the base of the operation. Co-conspirators were based in Phoenix, Arizona; Colorado Spring, Colorado; and Johnstown, Pa.

FTC Reports on Debt Collection Fraud and Abuse for 2007

According to the Federal Trade Commission Annual Report 2008: Fair Debt Collection Practices Act, the number of complaints about debt collectors went up “in absolute terms and as a percentage of all complaints” compared to the year before. Last year, the FTC received 70,951 complaints about third-party debt collectors, compared to 69,249 in 2006. Not a substantially higher number, true, but it’s still not a good sign, particularly since a good amount of complaints were for debt collectors going after debts consumers claim they didn’t owe.

The FDCPA also prohibits debt collectors from collecting any amount unless it is “expressly authorized by the agreement creating the debt or permitted by law.” In 2007, 2.3% of the FDCPA complaints, or 1,637 consumers, alleged that collectors demanded
interest, fees, or expenses that were not owed (such as collection fees, late fees, and court costs).

Over a third of the consumer complaints alleged collectors demanded bigger debt payments than the laws allowed. Perhaps most disturbingly though were the number of consumers still complaining that debt collectors repeatedly harass them with abusive language, even in cases where debts were discharged in bankruptcy. 13,989 consumers complained of harassment, while 6,536 of the complaints involved obscene, profane or otherwise abusive language. And these are only the cases that get reported to the FTC!

Another State Passes Mortgage Fraud Laws

The Washington Post reports Maryland’s House of Delegates has passed bills creating a criminal statute allowing authorities to prosecute mortgage fraud and prohibiting “foreclosure rescue transactions”.

Foreclosure rescue transactions occur when homeowners are tricked into signing over residencies to third parties. The bill to prohibit them passed the Maryland House 135-1. The mortgage fraud bill, a separate piece of legislation, passed 116-19.

The bills are part of Democrat Governor Martin O’Malley’s campaign to stem the rising rate of of home foreclosures in The Old Line State.