It's Official: The New Credit Card Rules Suck Wind

Back in August I wrote an article for Parade on the perils of credit cards, and I looked ahead to legislation that was moving ahead to enactment, as well as a Federal Reserve rulemaking.

Well, all that has come to pass and it's official: consumers are as prone to abuse by credit card companies, most of them beneficiaries of TARP largesse, as ever before.

Gretchen Morgenson's column in the New York Times today describes how banks are figuring out new ways of rooking customers, and regulators are doing nothing about it. One back is charging for statements, which

certainly seems to flout the spirit of both the Fed’s regulations and the Credit Card Accountability Responsibility and Disclosure Act of 2009. But because it is labeled a statement fee, it does not appear to violate the letter of the law, which barred credit card issuers from levying separate fees when a consumer submitted a payment, whether “by mail, electronic transfer, telephone authorization, or other means, unless such payment involves an expedited service by a service representative of the creditor.”

The Washington Post points out that the new rules don't cover rebate cards.

Expiration dates on those cards typically range from two weeks to three months, said Brian Riley, an analyst with the research firm Tower Group. In addition, the programs are often designed to discourage consumers from redeeming the offer, he said. Riley estimated about 20 percent of $4 billion in annual rebate offers are left on the table.

Here's a laundry list (PDF file) of other methods card issuers have used to circumvent the new credit card rules, compiled by a confederation of consumer groups.

There's a lot that Congress and the Fed are totally neglecting, such as unfair collection methods that include sewer service. I'm glad that the media is focusing on the deficiencies of the credit card legislation, but there needs to be more coverage of the general sleaze involved, and the need to rebuild consumer protection laws.

© 2010 Gary Weiss. All rights reserved.

Return of Sewer Service

Lots of lawsuit papers are "served" here

Some years ago, a friend of mine got his annual credit report--the free one, not the one you get through bogus "freecreditreport" websites or the outfit Ben Stein shills for. Something odd stood out on the report. It seems that he was being sued! This was the first time he'd heard about it.

My friend was the victim of a foul practice known as "sewer service," based on the ancient practice of sheriffs tossing lawsuit papers in the sewer rather than serving them on the defendants, and filing false affidavits that they have been served.

My friend wasn't served in the suit at all by an unscrupulous process server, and the debt he was claimed to have owed was entirely bogus. He showed up in court and the suit was dismissed.

Sewer service is a great scam, and a very old one. The courts accept affidavits of service at face value, and enter judgments against people who often do not owe the money at at all, are victims of identity theft, or have a valid defense. Even if they don't, they are entitled to their day in court.

The New York Times today reports that a class action suit has been filed in federal court against alleged perpetrators of sewer service. I'm glad that something is being done about this, but a suit is not enough. People who perpetrate sewer service should be put in jail. It is fraud and also perjury, as it involves process servers

New York attorney general Andrew Cuomo has started taking criminal action against sewer-service scam artists, and that's great. These people belong in jail, not just back in the civil courts that they have abused.

The court system, judges and clerks, need to be proactive about this abuse. Judges and clerks are public officials, and they should blow the whistle on sewer service when they see it happening.

One thing I wonder is whether the sewer-servers alone are culpable, and whether the companies for which they work -- the big banks, utilities, and their slimy collection agencies -- aren't perfectly aware that sewer service is being utilized. As has become evident in suits involving defaulted mortgages, often collection agencies and factors who buy debts do not have sufficient paperwork to prove their case.

I'll bet that the collection agencies know that these outfits carry out sewer service, thereby letting them get an easy victory without proving their case against people who owe them money -- and those who don't.

© 2009 Gary Weiss. All rights reserved.

Beware of AAA Road Service Scams

I write about corporate fraud a lot, and it's sort of refreshing to write occasionally about small-time fraud, though not in this instance.

It's been pretty cold in New York, and recently I had to call AAA road service to get a jump start for my car.

So the guy arrives and hooks up my car to the jumper cables. Lets it charge for a while, or so it appears. I try cranking it up. Nothing happens. No cranking. "It's your starter," he says. OK, I say, tow me to my mechanic. No, he says, I'll tow it back to my garage and give you a new starter with a guarantee! No, I say, I"ll have it towed to my mechanic, and it so happens I have "gold" AAA so I can be towed anywhere within 75 miles for free.

He then calls somebody and grumbles, OK, I'll tap on your starter. So he hooks up the cables again, and while I'm cranking he's under the hood tapping something. Car starts.

I should point out that while he's doing this, the guy is cursing. "I appreciate it," I say. "Screw your appreciation" or words to that effect, he says. He tells me that if the car stalls I'm going to be stuck. Bad starter.

I drove straight to my mechanic, praying it wouldn't stall. He checked out the battery. Weak. The starter: fine. What about him having to "tap" my starter to get it going? My mechanic points out that the starter is buried under the car adjacent to the manifold, whatever that is, and totally inaccessible from under the hood. The tow guy would have to have had to crawl under the car to "tap" it. He was probably "tapping" the side of the engine while giving me a real jump start.

So here's what I surmised happened: The AAA tow operator could see that, well, this is not the newest car in the world, so it is not under warranty. He immediately saw me as a mark, so he didn't hook up my car my battery properly and didn't actually give it a jump start at all.

When I insisted on a tow to my mechanic, which for some reason another tow operator would have to do, he figured the new tow operator would have tried to give me a jump before hooking up the car, and it would have started right up, proving that the starter was OK.

The car did need a new battery, but the starter was, and is, fine. In fact, it was starting up my car with a weak battery, which proved it was in good shape. Had I fallen for this scam, I probably would have been sold a piece of junk that really would have failed at some point.

I've gotten in touch with AAA, and I'll be curious to see how they handle this situation. I've withheld the tow operator's name because AAA may want to investigate. I'd wager all of the people he serviced on that day were sold starters they didn't need. If they really do care about ridding themselves of a crook, they'll try a "sting" operation to prove it to their own satisfaction. Frankly, I have my doubts that they do, but we shall see.

The reason I have my doubts is that this is not some tiny, fly-by-night outfit. It is a big auto body shop on west side of Manhattan that has a website and includes AAA in its corporate logo, and says it is "endorsed" by AAA. This outfit pays AAA big bucks, I am sure. I doubt very much that something as minor as their members being ripped off will cause AAA to sever its connections with these mutts, but perhaps I am being too cynical.

Meanwhile I'd urge my fellow motorists to be careful, and watch out for this particular scam, which is really a pretty smart one, I have to admit -- taking advantage of cold, frightened, stranded motorists.

Don't let yourself be talked into repairs by tow operators. They're notorious for scams, and having AAA affiliation doesn't matter one bit.

And speaking of AAA -- insurance companies offer towing coverage that is much cheaper. I've belonged to AAA for years out of habit. I think the time may have arrived to break this habit.

© 2009 Gary Weiss. All rights reserved.