Consumer Inq

Responding to the furor over the recalls of tens of millions of toys, and perhaps running scared about their impact on Christmas sales, leading U.S. toymakers have taken a remarkable step, according to a story in today's New York Times: They've asked the government to impose mandatory safety-testing testing standards for all toys sold in the United States. (Read the story here.)

The proposal was approved quietly last week at an association board meeting, the report says. The plan calls for requiring companies "to hire independent laboratories to check a certain portion of their toys, whether made in the United States or overseas," the report says.

Why a mandatory standard, if leading companies already claim to do such testing — and are promising to do more, as Mattel promised recently in the midst of a string of corporate embarrassments?

The answer illustrates an often-overlooked advantage of mandatory safety and health standards for products, which even the best manufacturers, swayed by anti-regulatory ideology, seem to fight: Because mandatory standards help maintain a level playing field.

If all toymakers have to do such testing, the price of toys at Walmart and Toys R Us may rise a few cents. But at least toymakers who monitor the manufacturing process more closely — which they all should have been doing already — won't suffer a competitive disadvantage for being more vigilant.

Meanwhile, the pain for Mattel and other China-dependent toymakers is offering a boon to some other brands. Read here, on The Inquirer's Web site, about how such brands such as Playskool, Brio and GeoMag are benefiting from competitors' recalls.

The Bush administration put the fox in charge of the henhouse. It's tough to see it any other way when you read Sunday's excellent New York Times story detailing how officials with industry ties and anti-regulation ideology have derailed efforts to protect Americans, and especially America's children, from dangerous products.

In one of the sorriest examples, Eric Lipton tells how the head of the CPSC's poison prevention unit resigned after she was unable to require inexpensive child-resistant caps on a hair relaxer that had burned toddlers.

The reason? The White House wanted a cost-benefit analysis — even though poison control is one of the few circumstances where the agency can act without delay.

"We are talking one to two cents per package here for something that we know is toxic," said the former official, Suzanne Barone. "The other option is just to wait for more children to get hurt. It is just kind of sad."

Her conclusion was that the commission's attitude on oversight adds up to "buyer beware" — the every-consumer-for-himself regime that effective regulation is supposed to supplement. Caveat emptor has ancient roots. But it's not always sufficient for a modern marketplace full of complex, technological and often-hazardous products.

The Consumer Product Safety Commission has been a target of Republican administrations since Ronald Reagan was president, and President Bush has plainly been following the same script. But maybe the pendulum is about to swing again.

The recent, massive recalls of Chinese-made toys, pet food and other hazardous products are drawing attention to the special risks posed by imported consumer products. Here's one that may come as a shock: Our federal law's preference for so-called voluntary standards may be part of the problem, because Chinese manufacturers interpret voluntary as exactly that, according to Lipton's article.

"Time and again, through the translators, they made clear they did not understand this concept," according to an engineer who served as an aide to former Commission Chairman Harold D. Stratton. "What they told us was, ‘As far as we are concerned, voluntary means we don’t have to.'"

That's why some rules have to be mandatory — and one more reason that it's high time to fix this system.

If you're shopping around for a new credit card, you might be tempted to think all cards are created equal — equally good or equally bad, depending on your perspective. After all, they all allow you to pay with plastic, charge interest if you carry a balance, and hit you with penalties if you mess up on payments. Card to card, what could be different?

Plenty, according to the latest survey of 36,300 Consumer Reports readers, who collectively hold nearly 62,000 cards and answered questions about problems related to interest rates, billing, and customer service.

The complete results are available online here, though a subscription is required to view details — including the ratings.

The best of the bunch? Topping the list, as it often does, was USAA, available to members of the military, retirees and their families. Scoring almost as well (cardholders were "very satisfied") were cards issued by a group of credit unions, two retailers (Cabela's and Nordstrom), American Express and Discover.

Results were much less inspiring for cards issued by some of the nation's leading credit-card banks.

Consumer Reports put it this way: "The nation's five largest MasterCard and Visa issuers — JPMorgan Chase, Bank of America, Citibank, Capital One, and HSBC, which control almost 80 percent of the Visa and MasterCard market — all had undistinguished scores. More of our readers who used those banks' cards complained that they were assessed unfair late fees or experienced unexpected interest-rate increases than did readers who held cards from the top-rated issuers. And none of them was exceptional at resolving problems."

Overall, the five worst scorers were JP Morgan Chase, MBNA, Capital One, Direct Merchants, and, at the bottom, Providian.

Credit-card trickery remains a problem, despite pressure from advocates and lawmakers. On that subject, Consumer Reports quotes a GAO study and a report from a California advocacy group, Consumer Action:

A September 2006 Government Accountability Office study also noted new hidden fees, such as charges for making payments over the phone, which can range from $5 to $15, even when the payments are on time.

But Consumer Action's survey, issued in May, noted that many cards still employed universal default. "And if you carefully read the change-in-terms section of most disclosure statements, most say that the issuers can change the terms of the cardholder's agreement at any time for any reason, language that amounts to the same thing as universal default," says Ruth Susswein, deputy director of national priorities for Consumer Action. "There is no other contract in the world that can change its terms at any time."

Consume Reports said its survey "found evidence of the damage that universal default can inflict on cardholders. Fully 28 percent of our readers who were paying the highest interest rates (more than 25 percent) reported that their rate had increased due to a universal-default clause."

The bottom line: Pick a card carefully. Read the terms. Then watch your bills like a hawk. If you use the card for convenience, paying charges on time and in full, you're probably OK with most cards. But if you ever carry a balance, you're at risk of paying an extra, unexpected price.

If that happens, all you can do is complain to the issuer (which sometimes will get charges reversed "as a courtesy"), complain to bank regulators, or find a new card. You'd do better to choose a card carefully in the first place.

Memo to wife: Time to talk to 16-year-old. Again.

Just in over the e-mail transome is a new poll done for Symantec, the computer security company, by Harris Interactive. Its major finding: "a significant digital divide between parents and their cyber-savvy children."

No, we don't need to be told this. Nor do our kids. But this poll supposedly tells us what they don't want to, probably because they're too busy playing games, chatting, reading, flirting or whatevering online.

Some of it is so-whattish. So what that the average parent thinks his or her kid is online three hours a week, but kids ages 8 to 17 admit to spending an average of seven hours online a week (which probably means they're actually spending 15 to 20 hours online)?

The part that worries me: Nearly a quarter admit "doing things online that their parents would not condone."

What's going on with kids in cyberspace? Well, one-fifth report encountering "inappropriate material ... that made them feel uncomfortable." Unfortunately, that goes with the territory: The Internet is an incredible window onto our great, big – and often ugly – world. Give a kid a mouse and free rein, and that's one of the first things they'll discover.

But here are some numbers that made me uncomfortable:

* 18 percent of children have had an experience with cyberbullying or cyber-pranks.

* 23 percent have had an encounter with a stranger on the Internet.

* 7 percent reported having met someone in the real world from the Internet.

“I wasn’t aware kids were posting their entire profiles online – including their name, location, photos and contact information,” said one parent, the father of two young boys, who attended a Symantec-sponsored conference on online kid safety last week in New York.

Well, I was. But not my kid – as far as I know from our last chat.

Time to have that talk again.

Symantec has assembled an impressive "Family Resource Web Site," which deals with everything from cyberbullying to Internet addiction. (That last one could help some adults I know.)

If you've been blissfully free from dinnertime interruptions by telemarketers for the last few years, I'll bet you a Florida time-share that I know the reason, and that it's not because the business suddenly vanished.

Your evenings are your own again because the government crackdown on unwelcome telemarketing worked. You added your number to the Pennsylvania Do Not Call list or to its counterpart in another state, or you joined the federal Do Not Call list, and telemarketers knew not to bother you.

Trust me: As sure as Mortgage Rates Have Never Been Lower! (well, surer), they're still calling sombody. I know this firsthand because, alone among my friends and acquaintances, I've never added my phone number to a do-not-call lists. Yes, keeping an ear on this often-smarmy business was a dirty job, but as a consumer writer I figured it was my duty. And thanks to my valiant sacrifice, I can assure you that lenders, vacation-deal peddlers, and home-improvement contractors are standing by, ready to call you first chance they get.

When might that be? Last week, the Pennsylvania Attorney General Tom Corbett began a campaign to renew the no-calls status for the first million phone numbers that were signed up as soon as the state's list became available in mid-2002. If you were one of the first to enroll your number, and you don't renew by Sept. 15th, Corbett said you could start getting calls in November. (To enroll or re-enroll online, click here.)

Do you need to re-up for the Pennsylvania list if you're also on the national Do Not Call list, which was started a year later?

That's not clear. The state and federal lists both should spare you from the same kinds of calls and carry the same kinds of exceptions – such as for companies with whom you have an existing business relationship, nonprofits, and political calls. So I called Corbett's office to ask.

The answer: "The reason to be on both is that you might benefit from enforcement on both," said spokesman Nils Frederiksen. "It’s double the protection, and you get a financial bonus if you file a complaint in Pennsylvania and we’re able to collect a fine from the company."

The AG's office says that since the law was enacted, it has filed 75 legal actions against telemarketers who have made calls violating it, and collected more than $800,000 in civil penalties. Under the law, a consumer whose complaint leads to a successful prosecution is entitled to 10 percent of the fine, up to $100 apiece.

Could I talk to someone who got a check from the state? Frederiksen put me in touch with Joann Brown of South Philadelphia, a restaurant hostess who reported an unwanted call from a company called Vacation Depot.

Violating the telemarketing rules wasn't necessarily the worst thing the company had done. In December, Corbett settled a year-old state lawsuit against the Michigan company behind Vacation Depot, which agreed to pay $15,000 in fines and in restitution to consumers it was accused of misleading.

According to state investigators, the company called consumers and told them they'd won a vacation or a motor vehicle. But to collect, they would first have to listen to a seminar about the Vacation Depot club.

Those who heard the pitch were promised they could save up to 40 percent on vacations, "including cruises, hotel rooms, car rentals and airline tickets," the AG's settlement announcement said. It said club memberships ranged in price from $2,453 to $6,453.

"In reality, many club members complained that the promised discounts just weren't there," Corbett said in the statement. "In one case, the vacation package offered by the defendants was $500 more than a similar package a consumer found on Expedia.com, an online travel service provider. In other cases, the company was unable to arrange the requested trips and services at all. Dissatisfied customers were then told that they could not cancel their memberships and get their money back."

Joanna Brown was one of the club's luckier – OK, smarter – potential victims. She got a call, reported it, and eventually got a $15 check – her share of the part of the penalty not used for direct restitution. Never messed with the company itself.

Clearly, a side-benefit of the Do Not Call laws are that it makes it easier for state and federal officials to nail telemarketers who play so close to the edge that they forget there is one. In Vacation Depot's case, more than 50 consumers complained that they got the company's calls even though they were on the Do Not Call list. Those allegations were a key part of the case against the company, which otherwise could rely heavily on the usual buyer-beware defense.

How have the feds done in comparison?

At the end of December, the federal Do Not Call list had 132 million numbers on it. The federal law allows a penalty of $11,000 per violation, well beyond Pennsylvania's limit of $1,000 per violation. On the other hand, Pennsylvania has already filed more than twice as many cases as the Federal Trade Commission, which enforces the federal law.

As of Sept. 30, 2006, the FTC had filed 28 cases and settled 21 of them. But those 21 cases were clearly on a different scale than Pennsylvania's, generating more than $15 million in court-ordered penalties or redress, roughly half for do-not-call violations and half for other charges. (Want to read about its enforcement? Click here to read the FTC's annual report to Congress on the Do Not Call registry.)

The bottom line? Sign up for both lists, if only to encourage both the state and federal governments to continue enforcing the laws against marketing that crosses the line.

Someday, I just might join you. Maybe after I win the Florida time-share sweepstakes.

For instructions on renewing your Pennsylvania registration, click here.

For informationn and instructions about the federal law, click here.

This just in (though I don't yet know its significance): The Federal Trade Commission announced a streamlined new format for comparing average annual energy consumption when you go shopping for home appliances. See the new one here.

The FTC says the new yellow sticker was the result of a two-year review and was informed by "substantial public comment and consumer research."

Inefficient appliances are big drains on electricity, which means they're costly both to your wallet and the environment. I hope this helps, but at a glance, it's hard to see what's different.

Not that we really needed any, but this week's recall of nearly one million lead-painted kids' toys by Mattel's Fisher-Price subsidiary is more evidence of the risks of commerce in the Wild East, a.k.a. China, and the particular risks it poses to kids.

Today, the California company apologized for the recall.

"We apologize to everyone affected by this recall, especially those who bought the toys in question," Mattel CEO Robert A. Eckert said in a statement. "Our goal is to correct this problem, improve our systems and maintain the trust of the families that have allowed us to be part of their lives by acting responsibly and quickly to address their concerns."

Here's the rub: Mattel had to recall were 83 types of toys, some based on such classic kids characters Big Bird and Elmo. Recalls of consumer items never catch all the tainted product – usually, they're not even close.

So some kids are going to be chewing on Big Bird and getting lead poisoning – just like some of the millions of kids who have undoubtedly been exposed to Chinese-made trinkets, sold in gumball machines, that have been found to be loaded with lead.

According to the nonprofit Kids in Danger, more than 152 million pieces of vending
machine toy jewelry were recalled between 1990 and 2004 because they contained elemental lead – some of them were as much as 30 percent lead. Of the recalled products traceable to their place of manufacture, only one was manufactured in the United States. Over half were made in China.

What have we done? Despite all the evidence of danger, and despite its own staff's recommendation for a ban, the CPSC still hasn't managed to finally outlaw lead in toy jewelry. After all, it gives that 25-cent trinket a weighty, real-jewelry feel.

Now come the lead-painted Fisher-Price toys, hard on the heels of June's recall of 1.5 million lead-painted Thomas & Friends "Wooden Railway Toys" by RC2 Corp. of Oak Brook, Ill., also made in China.

Will it finally sink in? Consumers Union says the Mattel recall is the 26th toy recall of this year, and that all involved toys produced in China.

I don't want to engage in China-bashing, but I want my kids and your kids to be safe. Something's got to give – and the first thing should be China's laissez-faire regulatory system, and our sluggish, largely laissez-faire response to it.

More fuel for the fire over the growing use of credit scoring to price auto insurance: The Federal Trade Commission said today that, as a result, African Americans and Hispanics will pay more for coverage.

The FTC report (read it here) also supports an insurance industry claim: that credit scores are accurate predictors of the claims consumers will file. But in a release accompanying the report, it put an official imprimatur on a common allegation by consumer advocates: that African Americans and Hispanics tend to have lower credit scores, and will suffer financially if scores are used to set insurance premiums.

Advocates were quick to respond.

“It’s not fair that consumers with spotless driving records can be penalized with higher premiums just because of their credit score,” Norma Garcia, a senior staff attorney at Consumers Union, said in an e-mailed statement. “Insurance premiums should be based on the risk of an accident, not a consumer’s bill paying record for other goods and services.

The headline on the letter from Time magazine seemed clear: "Our sweepstakes results are now final: Mr. Jean-Marc Richard has won a cash prize of $833,337.00!"

OK, I know what you're thinking. You're too savvy to fall for that, right? I am, too. Those of us inured to marketers' lies – let's call them what they are – know to look for the fine print, especially when something sounds too good to be true.

And, of course, the catch was there for Richard to find. In tiny type, the promise of riches was preceded by a contingency: "If you have and return the Grand Prize winning entry in time and correctly answer a skill-testing question, we will officially announce that...."

But last week, according to Canada's Globe and Mail, a Quebec judge awarded $100,000 (about $95,500 in U.S. dollars) in damages to Richard for having been unjustly snookered.

The Globe and Mail story said Justice Carol Cohen of Quebec Superior Court based the size of her award in part on Quebec's French Language Charter, saying the wrong was compounded by mailing the English-language pitch to French-speaking Canadians. (Not that language alone explains the problem. Richard uses English at work, and recalls showing the document to an anglophone colleague – who congratulated him on winning.)

An additional problem for Time was that the signature on the letter, "Elizabeth Matthews," was apparently for a nonexistent person – something Richard discovered when he called to complain that his magazine subscription had arrived but his sweepstakes award hadn't.

"It is patently obvious to any reader that the mailing from Time was not only false and incomplete, it was specifically designed to be misleading ... especially to a reader who is not reading in his or her mother tongue," Cohen said, according to the newspaper.

The paper said Time was expected to appeal. If the case were in the United States, I'd expect the magazine to win. Here, we think it's paternalistic to protect consumers from Wild West marketing tactics – even though we know that many people, particularly the elderly, fall for them.

But for the moment, our neighbors to the north have struck a small blow for the more trusting among us. Maybe even for good faith itself.

The Federal Trade Commission's case against Whole Foods Market's plan to acquire a key competitor, Wild Oats Markets, has focused attention on the bizarre Internet postings of Whole Foods CEO John Mackey. It seems that for years, Mackey was trash-talking Wild Oats and talking up Whole Foods on Yahoo message boards, using the alias Rahodeb.

Want to read more? The FTC is obliging. Today, it posted a whole slew of documents in the case. To read more of Rahodeb's gems, click 1, 2 or 3. To peruse the list of exhibits, click here.