tag:blogs.phillynews.com,2007:/inquirer/consumerinq//50 2007-09-07T13:56:15Z Surviving the modern marketplace Movable Type 3.35 tag:blogs.phillynews.com,2007:/inquirer/consumerinq//50.3158 2007-09-07T13:18:18Z 2007-09-07T13:56:15Z

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:...

Jeff Gelles 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. ]]> tag:blogs.phillynews.com,2007:/inquirer/consumerinq//50.3091 2007-09-02T03:26:53Z 2007-09-02T04:40:46Z

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...

Jeff Gelles 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. ]]> tag:blogs.phillynews.com,2007:/inquirer/consumerinq//50.3075 2007-08-31T15:30:19Z 2007-08-31T22:02:13Z

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,...

Jeff Gelles 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. In addition, many lenders play tricks when calculating what you owe. Some will keep the interest clock ticking from the time they calculate and mail your bill until they receive your payment. If you've been carrying a balance and try to pay the bill in full, you'll find you still owe interest for that additional period. Then there's the old trap called double-cycle billing, which lets you avoid interest charges only if you have paid your two previous balances in full. When Citibank announced earlier this year that it would eliminate a nasty practice called universal default, there was some hope among consumer groups that other issuers would follow suit. Universal default allows the issuer to boost your interest rate if you make late payments on other accounts, such as car loans, mortgages, or other credit cards, even if you have a spotless repayment history on that particular card. 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. ]]> tag:blogs.phillynews.com,2007:/inquirer/consumerinq//50.2823 2007-08-10T12:00:22Z 2007-08-10T15:03:42Z

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...

Jeff Gelles 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.) ]]> tag:blogs.phillynews.com,2007:/inquirer/consumerinq//50.2803 2007-08-08T15:35:34Z 2007-08-08T20:16:57Z

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...

Jeff Gelles 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. ]]> tag:blogs.phillynews.com,2007:/inquirer/consumerinq//50.2781 2007-08-07T15:56:49Z 2007-08-07T16:06:58Z

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...

Jeff Gelles 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. ]]> tag:blogs.phillynews.com,2007:/inquirer/consumerinq//50.2747 2007-08-02T22:13:14Z 2007-08-03T00:00:57Z

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...

Jeff Gelles 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. ]]> tag:blogs.phillynews.com,2007:/inquirer/consumerinq//50.2625 2007-07-24T20:11:38Z 2007-07-24T20:29:55Z

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...

Jeff Gelles 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. ]]> tag:blogs.phillynews.com,2007:/inquirer/consumerinq//50.2610 2007-07-23T14:53:29Z 2007-07-23T21:34:53Z

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?...

Jeff Gelles 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. ]]> tag:blogs.phillynews.com,2007:/inquirer/consumerinq//50.2549 2007-07-19T15:50:23Z 2007-07-19T16:19:05Z

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...

Jeff Gelles 1, 2 or 3. To peruse the list of exhibits, click here.]]> tag:blogs.phillynews.com,2007:/inquirer/consumerinq//50.2525 2007-07-18T16:37:35Z 2007-07-18T19:58:46Z

When something goes wrong with a long-term-care policy, who are you going to call? Usually, it's the folks at your state insurance department. Sadly, at that point they may not be able to do much to help. Just ask the...

Jeff Gelles they happen, by helping consumers choose insurers and policies judiciously at the outset. There may be no kind of insurance where this matters more, because policyholders signing up today may not need care until the 2030s or 2040s. Sandy Praeger, Kansas insurance commissioner and president-elect of the National Association of Insurance Commissioners (NAIC), says the question of whether to buy a long-term-care policy is "a highly individualized decision that requires people to look closely at multiple factors including their family health history, dependent relationships and personal financial situation.” She says the policies make most sense for people trying to protect their assets, minimize dependence on family members, and control up-front how they will receive nursing or home care. Here are 10 tips from the NAIC regarding long-term care policies: 1. Investigate long-term care coverage if you don’t want to rely on others to support you, and you want flexibility in choosing the type of long-term care services. 2. Long-term care insurance isn’t for everyone. If you are currently receiving Social Security or expect to have minimal or no retirement savings, you will likely qualify for state aid and should not purchase long-term care insurance. 3. Research individual insurance companies to see whether they have a history of raising rates for long-term care coverage. Check with your state insurance department to learn how your state regulates rate increases. 4. Check with your financial advisor or accountant for guidance on whether long-term care insurance is appropriate for your specific financial situation. If long-term care insurance is for you, shop around for the most appropriate coverage at the best price. 5. Make sure you understand what a long-term care insurance policy covers and just as importantly, what it doesn’t. Ask questions and make sure the company is reputable and licensed to sell insurance in your state. If you have concerns about a company, contact your state insurance department. 6. Pre-existing conditions, conditions that you have before you apply for the insurance coverage, may be excluded from coverage. In addition, for some policies, age 60 is a trigger for a rate increase. Thus, it may be beneficial to purchase your policy before your late 50’s. 7. Don’t rely on Medicare or Medicaid to cover your long-term care needs. Medicare will usually pay for a small percentage of nursing home costs. Medicaid pays for long-term care services, but only if you meet federal poverty guidelines, and the choice of care facilities can be very limited. 8. Keep in mind that tax breaks are available for qualified long-term care insurance policy premiums. The benefit payments received under such policies are tax-free. 9. Do not divulge personal financial or medical information over the phone, such as your social security number, your health status, your Medicare status or your private insurance coverage. Don’t be fooled by mailings about long-term care insurance that appear to be from an official government source. If you are concerned that someone is trying to trick you, contact your state insurance department. 10. Be wary of advertising that suggests Medicare is associated with a long-term care policy. Medicare does not endorse nor sell long-term care insurance. That NAIC has a free consumer guide, “A Shopper’s Guide to Long-Term Care Insurance." To order, click here. For information on long-term care policies in Pennsylvania, click here. For information from the New Jersey Department of Banking and Insurance, click here.]]> Want more specifics right now? Here are six items that the NAIC advises consumers to make sure are included in their long-term care policies: 1) An “outline of coverage” that clearly describes the policy’s benefits, terms and limitations in detail. It is important to understand how much money the policy would pay, and how much the policyholder would be responsible for out-of-pocket. 2) A clear description of the elimination period. Some policies have a set number of days that must be spent in a nursing home or in claims status before the long-term care insurance coverage kicks in. 3) At least one year of nursing home or home healthcare coverage or both, including intermediate and custodial care. 4) The right to cancel the policy for any reason within 30 days of purchase and receive a full premium refund. 5) A guarantee that the policy cannot be canceled or terminated because of the policyholder’s age or physical or mental health condition. 6) Consider an inflation protection option that periodically increases the benefit level without the need for the policyholder to provide evidence of insurability. tag:blogs.phillynews.com,2007:/inquirer/consumerinq//50.2428 2007-07-13T14:29:58Z 2007-07-13T20:05:42Z

Every time I hear a radio ad for a bogus "free credit report," I get angry. If you listen to commercial radio much, you'll know that means I get angry a lot. I've warned Inquirer readers about this problem before....

Jeff Gelles Read his study here.) Robert N. Mayer looked at 24 sites that touted "free" reports – many with the word free conspicuously embedded in their sound-alike Web addresses. Typically, they offered that "free" report in return for monitoring or other pricey add-ons, such as a credit score from each of the three national credit bureaus. (Here's a tip: Generally, one credit score will tell you all you need to know. If your credit is clean, you may not even need that.) One of Mayer's key findings: While there may seem to be lots of competition in the market, with so many different sites, there's much less than meets the eye. Instead, Mayer found the market largely dominated by two of the three national credit reporting agencies – the same folks that are required by law to provide consumers with a genuinely free annual report. He said either TransUnion or Experian owned or was closely associated with 17 of the 24 sites. This won't surprise anyone who's gone to one of the credit bureaus' own sites to find a genuinely free report. The general rule is: They don't make it easy. On the TransUnion site, for instance, there are several come-ons luring you to pay for a package deal that includes your "free" credit report, and one modest link that refers vaguely to the "FACT ACT and other free credit report disclosures." (The FACT Act is the 2003 law that mandates the genuinely free annual reports.) Follow that TransUnion link, to be sure, and you'll learn about your rights, including the right to get a free report more than annually if you fit other criteria, such as believing you're the victim of fraud. But if you just want your genuinely free report, it's less confusing to go directly to the "central source" the bureaus were required to establish by the 2003 law. You can request your free reports from the central source in three different ways: 1) On the Internet, at www.annualcreditreport.com 2) By phone, at 1-877-322-8228 3) By letter, mailing your request to: Annual Credit Report Request Service P.O. Box 105281 Atlanta, GA 30348-5281 By any method, you'll have to provide sensitive, personal information, of course. If you want to do it by mail, you can get a printable form by clicking here. Otherwise, be sure to include your full name, including your middle initial and generational designations such as "Jr.," as well as your current mailing address, your Social Security number, and your date of birth. Remember, too, to specify whether you want all three reports or something less. You're entitled to a free report every 12 months from each of the three agencies: Experian, TransUnion and Equifax. If you have any special reason for concern, such as plans to apply soon for a mortgage or real worries about identity theft, you'll want all three. If not, you might want to space out your requests. Isn't it funny how the Web address for the genuinely free credit report doesn't include the word free at all? It's enough to make me angry even with the radio off. (For instructions for invoking a security freeze, a cheaper and more-reliable alternative to credit monitoring, click here.) ]]> tag:blogs.phillynews.com,2007:/inquirer/consumerinq//50.2420 2007-07-12T21:16:08Z 2007-07-13T20:06:56Z

(*Or, "On the Internet, nobody knows you're a CEO") As a sometime customer at Whole Paycheck Markets — whoops, I mean Whole Foods — I have to say that I welcome anything that draws extra scrutiny to the pricey high...

Jeff Gelles (*Or, "On the Internet, nobody knows you're a CEO") As a sometime customer at Whole Paycheck Markets — whoops, I mean Whole Foods — I have to say that I welcome anything that draws extra scrutiny to the pricey high end of the natural and organic grocery business, or that at least makes me laugh about it. Usually, I just get to laugh at myself for shopping there. (How much did I pay for those organic cherries?) Today's news fits the bill on both counts: Turns out that John Mackey, Whole Foods' colorful CEO, has been secretly trash-talking the competitor he's trying to buy, Wild Oats Markets, on Internet message boards. Using an alias, "Rahodeb," he would post things like, "The writing is on the wall. The end game is now underway for OATS. ... Whole Foods is systematically destroying their viability as a business — market by market, city by city." How do we know this? Because the Federal Trade Commission, guardian of the marketplace, is trying to block Whole Foods' $670 million acquisition of Wild Oats, its chief rival for the amazingly lucrative grandchild of the old organics-and-granola bars of my youth. Mackey's "the Empire strikes back" warnings, and a footnote explaining his unusual MO, are part of a memorandum that the FTC recently filed in support of its case. (Read a redacted "Public Version" of the memo here.) The funniest part of this story? There's lots of competition for that honor. Maybe it's the e-mail statement, quoted by Bloomberg News, in which Whole Foods said Mackey had posted “under an alias to avoid having his comments associated with the company and to avoid others placing too much emphasis on his remarks.” Or maybe it's the Rahodeb quote, reported in the Wall Street Journal, in which Mackey stepped forward to defend a picture of — who else? — Mackey that appeared in a Whole Foods annual report: "I like Mackey's haircut," Rahodeb wrote. "I think he looks cute!" But the competition that matters isn't for funniest line from Rahodeb — apparently chosen as an anagram for his wife's name, Deborah. It's the competition that the FTC says Mackey hoped to shut down. It's hard to prove that any maneuver poses antitrust problems in such a fiercely competitive sector as food retailing. But the FTC is apparently willing to take Mackey at his word, and it says Mackey has argued persuasively that the Whole Foods/Wild Oats niche is essentially a separate market. For instance, the FTC quotes Mackey as saying: "Safeway and other conventional retailers will keep doing their thing — trying to be all things to all people. ... They really can't effectively focus on Whole Foods Core Customers without abandoning 90% of their own customers." In his alter-ego commentary, Mackey spent a lot of time addressing the "shorts" — investors who bet on the likelihood that a stock will decline. At times, he seemed mostly to be trying to argue up his stock's price: "As you know I'm not a 'trader,' he told one fellow poster in June 2005. "The day-in-day-out movement of the stock doesn't concern me. The fundamentals are fantastic and are only getting stronger. Whole Foods will continue to grow very rapidly for at least another 10 to 15 years. With that growth, we will also see growth in the stock price. If the stock trades down then it only becomes a more compelling value for long-term investors." Other times, as in this February 2005 post on the Wild Oats message board, he seems to be pre-arguing against the FTC's case: "For those of you on this Board who believe that there is always room for a #2 chain in the natural foods industry to compete with Whole Foods — you are right — there is. It's called Trader Joe's. TJs is #2 and OATS is a distant third place and falling further behind with each passing day." Mackey may eventually have trouble with regulators over Rahodeb's postings, if they're seen as attempts to manipulate the stock market. Nearly a year ago, Rahodeb posted his last message, titled "Congratulations to hubris and goodbye," in which he said he'd lost a bet about stock prices with hubris — not with the fatal flaw, but with a poster named "hubris12000" — and been correctly identified by two other posters. (Want to read his voluminous postings? Click here.) But right now, his battle is with the FTC, which says that “if Whole Foods is allowed to devour Wild Oats, it will mean higher prices, reduced quality, and fewer choices for consumers.” I live in a city graced with independent natural grocers (Essene Market on Fourth Street is still going strong) and with institutions such as Mount Airy's Weavers Way coop, which offer many of the same kinds of products as Whole Foods and Wild Oats. I don't live near a Trader Joe's, but I have friends and relatives who swear by it. So I don't see the problem in my little corner of the world. But that doesn't mean competition isn't threatened — or that John Mackey's Internet wildings aren't a fascinating tale, whatever the competition. ]]> tag:blogs.phillynews.com,2007:/inquirer/consumerinq//50.2401 2007-07-11T16:18:07Z 2007-07-11T19:44:06Z

Ever use your debit card for a latte at Starbucks or a burger at McDonalds? Chances are, you're much more likely to do so today than you were even a couple years ago. Guess what's also more likely: If you...

Jeff Gelles new study by the Center for Responsible Lending says that U.S. banks and credit charged $17.5 billion in overdraft fees last year, up 70 percent from $10.3 billion just two years earlier. Why the dramatic climb? The center, which made its name targeting predatory mortgage lending, blames bank practices designed to generate more fees under the guise of helping bank customers. Eric Halperin, who directs the center's Washington office, says that as recently as three years ago, "the vast majority of banks didn't allow you to overdraft on a debit card" or at an ATM. But paying such overdrafts is increasingly common practice — the center says they now account for nearly half of all overdraft fees. Only about 1 in 4 come from the traditional source of overdrafts: writing a check for more money than you have in your account. If you think something is wrong with this picture, you're not alone. Financial advisers, many of them employed by banks, have long touted debit cards as better for money management than credit cards because you can't spend money you don't have. But now you can — you can essentially "borrow" the $3 for the latte, and pay an average of $34 in overdraft fees for the privilege. You can even overdraft at the bank machine without being warned. Some banks will allow you turn this feature off, but it's important to know that you could be at risk: Otherwise, if you withdraw $200 when your balance is just $190, the ATM may well fork over all the dough you requested, only to trigger a $30 or $35 overdraft fee for the privilege of getting what you asked. And that may not be the worst of it. Depending on how your bank prioritizes checks and debit withdrawals as it clears each day's transactions, some consumers complain of being hit with multiple overdraft charges when a single one would have sufficed. Banks have always insisted that they clear the highest-dollar-value check first, because that's typically the most important one to a customer, most likely the rent or mortgage payment. But as Halperin points out, that logic fails in a world where the bank plans to pay every overdraft, and charge you for each one. If that's the plan, why not clear them in an order more favorable to your customer? Is it a good thing to pay overdrafts? Absolutely — this is one place I agree with bankers' traditional spin. If I write a check to my mortgage company, or for that matter to anyone else, I want my bank to cover it, either as a courtesy or through some established mechanism. I wouldn't have written it unless I believed I had the funds available — which, by the way, is the legal standard for writing a legitimate check versus committing a crime. That's why I've had overdraft protection nearly all my adult life, though from banks and credit unions that offer more reasonably designed programs. My favorite versions trigger transfers from a separate savings account. But I'm happy with the one I now have from my credit union, which is essentially a small line of credit that charges me for the time value of my money at an agreed-upon interest rate. But even paying a $5 or $10 transfer fee, as some banks charge, beats paying a full-fledged overdraft charge. Those programs offer a valuable service: insurance, at a reasonable price, if I'm not paying close enough attention to my check register or bank balance. The new-fangled versions, whether they're called "overdraft protection," "bounce protection" or "overdraft loans," seem more aimed at milking the unwitting customer. In a larger study released in January, Debit Card Danger, the Center for Responsible Lending found that the median cost of an "overdraft loan" triggered by point-of-sale use of a debit card was $2.17 per dollar borrowed. What's the answer to this problem? The Center for Responsible Lending supports a proposal by U.S. Rep. Carolyn Maloney (D., N.Y.), which she says would lend "fairness and transparency" to the overdraft-loan process. You'd have to consent in writing to accept overdraft loans. You'd see how costly they can be when the flat fee is rendered in traditional "annual percentage rate" terms — for the median point-of-sale loan, a shocking 20,000 percent, the center says. And you'd receive a warning before an overdraft is processed electronically. That last protection is most important of all, as far as I'm concerned. My bank's computer system knows exactly how much money I have available when I hit the "Withdraw" button or swipe my debit card at Wawa or CVS. Maybe I want to borrow the extra money and pay the bank's fee. But it should at least have the decency to ask. ]]>