Long Island Gas Station Owners Accused of Consumer Fraud

Attorney General Andrew Cuomo’s office said a third of Long Island gas stations inspected, or about 43, and about one in five of city stations inspected, or about 30, violated state business practice and consumer fraud laws by using “deceptive practices” and “overcharging” for credit card purchases. And yesterday, he issued a “consumer alert” reminding drivers of the inspections, Newsday reports.

But Long Island gas retailers say they were wronged by accusations from the state attorney general last week that many of them engaged in false advertising, and complain that motorists are showing their anger based on the allegations. Retailer trade groups insist members comply with state laws, discounting for cash purchases but not surcharging for credit card purchases, which is illegal. Gasoline stations are charged fees by credit card companies.

“They portrayed us like crooks,” said Kevin Beyer, president of the Long Island Gasoline Retailers Association. Since stations charge varying prices, Beyer questions how regulators can determine if a station is surcharging for credit or discounting for cash.

Cuomo’s chief of staff, Steven M. Cohen, said yesterday the office based its suspicions about surcharges for credit purchases on average prices in the area. He said letters sent to the stations in question asked them to prove that it was not a surcharge. “We said it would appear that the price you are offering as a discounted price [for cash purchases] is essentially the price everybody else is offering as the market price.”

Particularly grating on the retailers was the statement in Cuomo’s news releases saying the stations “engaged in false advertising by only listing the lower cash prices on their street view signage in order to lure patrons to the pump.” A story last week about the Long Island investigation said “both prices – one for cash and one for credit card payment – must be listed on all signs.”

Yesterday, both Beyer and Cohen said that’s inaccurate. State law allows retailers, if they wish, to post only the lower cash price on their large signs near the street as long as they make clear on the sign that the price is only for cash purchases and that signs on the pumps list both cash and credit prices.

“He [Cuomo] gave out the wrong information to the public and everybody ran with it,” said Beyer, who added that some consumers have reacted angrily. “I had a customer in here yelling, ‘I’m going to call the police.'”

Cohen said, however, that many of the station owners who were sent letters of warning did not make clear on the street signs the price was for cash only. “The law requires that you not deceive consumers,” he said.

FDIC’s Problem List Has 117 Banks

The FDIC’s “problem list” grew to 117 institutions from 90 at the end of the first quarter, Consumer Affairs reports. That is largest number on the list since the middle of 2003. For consumers, these are unsettling numbers as banks have become one of the last refuges for cash, with the collapse of real estate and with Wall Street stuck in a rut. Just how much peace of mind can consumers take from the words “FDIC Insured?”

The agency says consumers with money in FDIC insured institutions should be able “to get a good night’s sleep.” The agency recently issued an “FDIC-Insured Depositor’s Bill of Rights” that spells out the agency’s promise to bank customers, plus information about a new advertising and education campaign to raise awareness about deposit insurance coverage limits. Consumer Affairs points out the following among key points for consumers to remember:

• If someone’s deposits are within the FDIC’s insurance limits, as is the case for most bank customers, those deposits are safe regardless of the financial condition of the bank.

• The FDIC’s guarantee –that it will protect against the loss of insured deposits if an FDIC-insured bank or savings associations fails — is ironclad. As FDIC Chairman Sheila C. Bair said, since the creation of the FDIC 75 years ago, “no one has ever lost so much as a penny of FDIC-insured deposits — not a single penny,” as a result of a bank failure.

• The FDIC protects deposit accounts – including checking and savings accounts, money market deposit accounts and certificates of deposit (CDs) – up to the federal limits. But FDIC insurance doesn’t protect against losses on non-deposit products — such as stocks, bonds and mutual funds — even if they were sold by insured banks.

• The basic insurance coverage is $100,000 per depositor per insured institution, but individuals may qualify for more than $100,000 in coverage at one insured bank if they own deposit accounts in different “ownership categories,” such as single accounts, joint accounts, certain retirement accounts, and trust accounts.

Cuomo confirms probe of Goldman Sachs, Fidelity Investments

New York’s State Attorney General confirmed earlier this week his office is investigating whether Goldman Sachs offered incentives to Fidelity Investments to sell auction-rate securities.

Investors who bought into these auction-rate securities thought they were as good as cash until the credit crisis was finally realized. Many investors who bought these securities are now out of their money.

Cuomo believes Goldman offered incentives to Fidelity to sell these securities. It is looking into how the investment bank sold these securities and how Fidelity pitched them to investors.

Fidelity admits to only 700 to 800 customer accounts held these securities, out of 8 million.

According to an AP report, AG Cuomo is leading the federal investigation as well as his own state’s. He said he’s gotten agreements from some banks to buy back at least $50 billion in these securities. Goldman Sachs will buy back $1.5 billion worth. The bank will also pay a hefty $22.5 million fine.

These controversial securities are akin to corporate debt, and their interest rates are determined at auctions, and can change weekly.

FTC Banning Prerecorded Sales Messages

The Federal Trade Commission (FTC) is banning phone calls of prerecorded sales messages unless consumers agree to receive the calls, the Associated Press reports. The FTC says by December all prerecorded calls must provide an opt-out selection to make it easy for consumers to stop getting those calls. Effective Sept. 1, 2009, sellers and telemarketers may place prerecorded calls only to consumers who have provided signed and written agreements to receive them.

A report by the FTC said there were more than 13,000 consumers comments that objected to the telemarketing industry’s request to gain more flexibility to make recorded sales calls.

Mark Cooper, director of research for the Consumer Federation of America, said Wednesday the rule closes a loophole that was part of the intrusion of unwanted calls. “Callers did not think they were bound by the Do Not Call list, and now they are,” said Cooper. “The FTC finally addressed it.”

The agency says the new rules will protect consumers’ privacy, much like the Do Not Call Registry. The registry, initiated in 2003, has been widely acclaimed for allowing Americans to eat their dinners without being interrupted by telephone sales pitches. More than 150 million people have listed their phones on the registry, which prohibits calls from telemarketers.

Brokers blame banks over auction-rate securities scandal

Retail brokerages, about to face a litany of charges of securities fraud, are pointing the finger of blame at Wall St.’s big investment banks over the fallout from the auction-rate debt scandal.

Brokers are being accused of selling securities to consumers that it knew would be impossible to sell in the future. New York Attorney General Andrew Cuomo has indicated charges will be filed against several well-known securities brokers, including Charles Schwabb and Fidelity for its parts in the scheme.

The market for the $330 billion industry collapsed at the beginning of this year, and left many with securities impossible to sell.

Settlements have been reached in previous cases involving the auction-rate scandal, and have demanded that brokerages buy back the securities it sold.

Experts believe if small brokerages are forced to act similarly to comply with the law, it will cost them their business.

Auction-Rate Securities Buybacks May Not Help Individual Investors

New York State Attorney General Andrew Cuomo’s effort to force buybacks by Wall Street banks and brokers of auction-rate securities may not help some individual investors, Bloomberg News reports.

In the last two weeks, Cuomo reached agreements with Citigroup Inc., UBS AG, Morgan Stanley, JPMorgan Chase & Co. and Wachovia Corp. to begin buying back $42 billion of the debt they sold directly to individuals. The accords don’t extend to investors holding most of the remaining $160 billion bought through mutual fund firms or brokers that didn’t underwrite the debt.

“This is a glaring oversight,” said Jonathan Kahn, an investor in New York who holds auction-rate debt underwritten by Goldman Sachs Group Inc. that he purchased from a different brokerage he declined to identify.

Cuomo said the New York-based investment bank is still negotiating with regulators. “The industry is now taking responsibility for correcting a problem they helped create, and we’ll continue working to make all investors whole,” Cuomo, 50, said in a statement on Aug. 15.

Investors have been stuck in the securities, which are long-term debt that have interest rates typically set every seven, 28 or 35 days through periodic auctions, since the market collapsed in February. Dealers, who for two decades bought debt that went unsold at auctions, suddenly pulled back because of widening credit-market losses.

Investors who were told the debt was as safe and liquid as money-market funds were left with depreciating securities they couldn’t sell as auctions failed. Cuomo says the brokerages continued to market the debt as cash equivalents even though they knew demand was weakening.

JPMorgan, Morgan Stanley to Buy Back Auction Rate Securities

On Thursday, JPMorgan Chase & Co. and Morgan Stanley were added to the list of banks settling with the New York Attorney General and other regulators as part of an investigation into the collapse of the auction-rate securities market, the Associated Press reports.

The two banks will repurchase a combined $7 billion of the troubled securities from investors at face value. Morgan Stanley agreed to pay a fine of $35 million and JPMorgan will pay $25 million. JPMorgan and Morgan Stanley are the third and fourth to reach settlements, following deals by UBS and Citigroup Inc. last week. Regulators continue to investigate other banks as well.

Wachovia Details Auction Rate Securities Probe

Wachovia is in settlement talks with the SEC and various state regulators over its handling of auction-rate securities. The bank boosted its legal reserves for auction-rate securities by $500 million as of the end of June to reflect estimated potential losses associated with a possible settlement, FOXBusiness News reports.

The SEC and New York Attorney General Andrew Cuomo have already reached settlements with Citigroup and UBS over their auction-rate securities businesses, resulting in fines and billions of dollars of refunds.

Wachovia has acknowledged that the SEC is considering civil charges or administrative proceedings related to the bank’s municipal derivatives bid practices.

Attorney General Hits Texas Debt Collection Firm for Harassing Consumers

The Texas attorney general’s office has asked a court to stop Anderson, Crenshaw & Associates, L.L.C., a Dallas-based debt collection firm, from harassing debtors with deceptive letters and unlawful telephone calls, Consumer Affairs reports.

Since 2006, the Office of the Attorney General of Texas has received more than 75 complaints alleging misconduct by the firm, while the Better Business Bureau has received 72 complaints.

“This debt collection firm is charged with unlawfully harassing Texas debtors,” said Attorney General Greg Abbott. “At a time when too many Texans are struggling to protect their homes, the defendant’s unlawful letters are threatening debtors with legal action, homestead liens and wage garnishment in violation of the law.”

According to court documents, the firm mailed deceptive letters to debtors that unlawfully engaged in debt collection efforts during the same 30-day period debtors were given to validate their debts. Federal courts have maintained that debt collection firms may not undermine debtors’ right to dispute the debt during this time period.

The company’s letters also misrepresent that the firm has filed lawsuits against debtors who fail to make timely payments. In many cases, the debts did not meet the defendant’s internal criteria to initiate legal action.

Citigroup Auction Rate Securities Fraud Settlement Reached

Citigroup will be buying back over $7 billion in auction rate securities and paying fines adding up to $100 million as part of settlements with regulators federally and state-wide, after Citigroup allegedly marketed the investments as safe despite liquidity risks.

The Associated Press reports that Citigroup will buy back the securities from tens of thousands of investors nationwide under separate accords announced Thursday with the Securities and Exchange Commission, New York Attorney General Andrew Cuomo and other state regulators. The buybacks from nearly 40,000 individual investors, small businesses and charities are not expected to cause significant losses for Citigroup; they must be completed by November.

New York-based Citigroup agreed to reimburse investors who sold their auction-rate securities at a loss after the market for them collapsed in mid-February. Also under the SEC accord, Citigroup agreed to make its best efforts to liquidate by the end of next year all of the roughly $12 billion of auction-rate securities it sold to retirement plans and other institutional investors. Cuomo said his office will monitor that effort for three months and then decide on a timeframe.

The $330 billion auction-rate securities market involved investors buying and selling instruments that resembled regular corporate debt, except the interest rates were reset at regular auctions — some as frequently as once a week. A number of companies invested in the securities because, thanks to the regular auctions, they could treat their holdings as liquid, almost like cash.

Major issuers included companies that financed student loans and municipal agencies like the Port Authority of New York and New Jersey. In February, when banks such as Citigroup ceased backstopping the auctions with supporting bids because of concerns about credit exposure, the bustling market collapsed. That left some issuers paying double-digit interest rates because of the terms under which they issued the securities.