I've Been Mugged Blog

Corinthian Colleges Students Loan Repayment Strike. Is This A Revolt?

In a news article titled, "A Revolt Is Growing As More People Refuse to Pay Back Student Loans," the Washington Post reported about a loan repayment strike by students of Corinthian Colleges:

"Remember those 15 people who refused to repay their federal student loans? Their “debt strike” has picked up 85 more disgruntled borrowers..."

What led up to the strike by students:

"... they would not pay a dime of their student loans because the school broke the law. Corinthian, which runs Everest Institute, Wyotech and Heald College, has become the poster child for the worst practices in the for-profit education sector... Clouded by allegations of deceptive marketing and lying to the government about its graduation rates, Corinthian lost its access to federal funds last year, forcing the company to sell or close its schools."

The California Attorney General's office filed a lawsuit in 2013 against the school, and then stepped up its deceptive marketing allegations in July, 2014.

The students organized into a group called Debt Collective. They already approached the U.S. Department of Education (DOE). The Washington Post reported that some of the striking students met today with the Consumer Financial Protection Bureau (CFPB) seeking cancellation of their student loans:

"Although the CFPB doesn’t have the power to grant that request, the agency’s overture shows that the strike is being taken seriously."

The strike should be taken seriously. Students are future human capital for businesses. They are future leaders and workers. There seem to be four distinct issues, all of which are important and must be addressed:

1. Deceptive advertising by for-profit schools,
2. Holding schools and their executives accountable when they violate deceptive marketing laws without penalizing students who had no role in the violations,
3. The increasing delinquency rate on repayments of student loans (which threatens the economy), and
4. How appropriate it is to treat student loan debt differently than other types of consumer debt.

Last month, Forbes reported about student loan debt:

"... the New York Federal Reserve released its Quarterly Report on Household Debt and Credit for the fourth quarter of 2014... While most forms of household debt saw improvements in borrowers making on-time payments, a big exception was student loan debt. Student loan debt saw delinquencies (debt that has not had a payment made in 90+ days) rise to 11.3% of outstanding debt. The report also shows that student loan debt has the highest amount of delinquent debt compared to all other forms of household debt (mortgages, auto loans, and credit cards)."

Why student loan delinquency rate is increasing:

"While most other forms of household debt can be discharged in bankruptcy, student loan debt cannot – which means that past delinquencies compound onto new delinquencies, and until borrowers as a whole start bringing their loans current, the delinquency rate will continue to rise. What many student loan borrowers forget is that student loan debt is basically a secured debt – it’s secured on the borrowers future earnings... recent graduates who have struggled to make even their first payment on their student loan debt, or who simply don’t know how to go about making their student repayment plan affordable given their current situation."

False and deceptive advertising by for-profit schools is also a problem. It robs students of the educational benefits they are paying for, and expect to use both to land future jobs and pay off their loans. When deceptive marketing happens, taxpayer money (federal and state) is wasted for students and for veterans' education. According to the Center For Investigative Reporting:

"... $600 million dollars in GI bill money had gone to hundreds of for-profit schools in California with low graduation rates and high rates of student loan default."

And, that's just the State of California. The students' frustration is understandable. They rightly feel deceived by the school, and didn't get the education they paid for.

It will be interesting to watch what happens. What are your opinions of the strike? Is it a revolt?

Big Banks Threaten To Withhold Campaign Donations To Politicians

If you think that money has not corrupted the political process in the United States, then read this Raw Story news article. If they don't get their way, several big banks have threatened to withhold campaign contributions:

"Representatives from Citigroup, JPMorgan, Goldman Sachs and Bank of America have met to discuss ways to urge Democrats, including Warren and Ohio Senator Sherrod Brown, to soften their party's tone toward Wall Street... Bank officials said the idea of withholding donations was not discuss at a meeting of the four banks in Washington but it has been raised in one-on-one conversations..."

The threat is not to only to candidates, but to organizations, like the Democratic Senatorial Campaign Committee, that raise funds for candidates. The gesture would be symbolic, since the most a bank can give directly is $15,000 per year. They all probably give more indirectly through super-PACs.

Let's briefly review some of the banks' history:

Bank	Events
Bank of America	August, 2011: Bank Of America To Settle Class-Action Lawsuit With Overdraft Fees December, 2011: Bank Of America Agrees to Pay $335 Million To Settle Discrimatory Lending Lawsuit March, 2012: Bank Of America To Test New Fees September, 2014: The U.S. Justice Department And Bank Of America Agree On Record Settlement Amount March, 2015: Bank of America Raises Prices For Its Checking Customers. What You Need To Know And How To Avoid The New Fees
Citigroup	March, 2010: Citibank Breach Exposes Sensitive Personal Information of 600,000 Consumers June, 2011: Citigroup Increases Number of Breach Victims To 360 Thousand July, 2011: Customer Losses From Citigroup Data Breach At $2.7 Million October, 2011: Citigroup To Pay $285 Million To Settle An SEC Lawsuit About Mortgage Backed Securities July, 2014: Citigroup To Pay $7 Billion Settlement For Misleading Investors About Toxic Mortgage Backed Securities
JP Morgan	September, 2013: JPMorgan Chase To Pay About $1 Billion in Fines To Settle Charges By Regulators October, 2013: JPMorgan Chase and U.S. Justice Department Reach Tentative $13 Billion Settlement About Mortgage-Backed Securities. What Next? December, 2013: Settlement Agreements Require JP Morgan Bank To Pay Record Amount of Fines December, 2013: JPMorgan Chase Bank: Data Breach Affects 500,000 Prepaid Cardholders, And The Bank's Sordid History December, 2013: You Gave JPMorgan Bank A Whale Of A Christmas Gift

Given this history, these banks should be focused instead upon strengthening their data security, eliminating banking deserts, and improving their customers' satisfaction and loyalty. Yes, banks are free to donate money to the candidates of their choice. Similarly, consumers are free to deposit their hard-earned money in the bank (or credit union) of their choice. I'm glad that I moved all of my money out of Bank of America.

What are your opinions of the banks' threats?

California Utility Allegedly Used Safety Funds For Executive Pay. Huge Electric Rate Increase In Massachusetts

The Los Angeles Times reported about an investigation to Pacific Gas & Electric Company:

"Money collected from ratepayers and earmarked for pipeline safety was instead spent on executive pay raises by the state's largest utility, Pacific Gas & Electric Co., in the months before a deadly pipeline explosion in 2010... The new head of the Public Utilities Commission wants to increase financial penalties against Pacific Gas & Electric Co. to a record $1.6 billion for negligence related to the 2010 pipeline explosion that killed eight people and leveled a neighborhood in the Bay Area suburb of San Bruno."

Fines? Jail time seems appropriate instead. People died, and:

"Records released a few days after the explosion showed that PG&E received approval in 2007 to spend $5 million of ratepayer money to replace a high-risk section of the 30-inch pipeline north of the San Bruno blast site. The work on the 1950s-era pipe was never performed. And in 2010, the utility asked for another $5 million to do the same job, according to PG&E documents submitted to the PUC."

Each state's Public Utility Commission (PUC) oversees and the utilities (e.g., water, electricity, gas), including how much they can raise prices to ratepayers. Consumers and businesses are ratepayers. The California PUC's mission:

"The California Public Utilities Commission serves the public interest by protecting consumers and ensuring the provision of safe, reliable utility service and infrastructure at reasonable rates, with a commitment to environmental enhancement and a healthy California economy.  We regulate utility services, stimulate innovation, and promote competitive markets, where possible, in the communications, energy, transportation, and water industries"

Seems like the public interest wasn't served very well, if at all. When scheduled (and paid for) maintenance and safety work isn't performed, one has to question whether the state PUC is doing its oversight job effectively.

This news story deserves monitoring. It makes one wonder where else this type of executive wrongdoing happens. Meanwhile, a Massachusetts state legislator is investigating huge electricity rate increases in Boston:

"... the Bureau of Labor Statistics said electricity prices in Boston were 63 percent higher than the national average in February — well up from last year, when local prices were 29 percent higher. Utilities have blamed insufficient pipeline capacity to supply the region, coupled with high winter demand."

63 percent is a huge rate increase. Huge. Did you pay go up 63 percent? Mine didn't, and I doubt that yours did either. Did your electricity consumption go up 63 percent? Mine didn't, and I doubt that yours did either. The "public good" is a balance between the needs of ratepayers and the utility providers. Things seem lopsided.

Besides the negative impact upon the Boston and metro-area economy, the huge electric rate increase is especially difficult for retirees on fixed incomes. State politicians, the Boston Mayor's office, and the Massachusetts PUC need to explain how they let this huge increase happen.

What are your opinions of the above events in California? Massachusetts residents: what do you think about the recent rate increases in your electric bills?

Survey: Almost Half Of Respondents Are Concerned About Data Breaches At Health Care Providers

There have been several high-profile data breaches recently at health care providers. You've probably heard about them, including the massive breach at Anthem that affected 80 million patients. Earlier this month, Software Advice released the results of an online survey. It found:

"...45 percent of patients surveyed are “very” or “moderately concerned” about a security breach (which we defined as their medical records and/or insurance information being accessed without their consent, and potentially resulting in identity theft). We also asked the 45 percent who are very or moderately concerned to list the reasons behind their level of concern... The highest percentage of respondents (47 percent) say they are concerned about becoming the victim of fraud or identity theft."

When criminals use stolen health care credentials, it is usually to gain access to expensive treatments under the victim's name, and/or to gain access to prescription drugs. The victims are often liable for any co-payments. Experts warn that resolving medical identity fraud can be costly, time, consuming and require plenty of effort and expertise since the victim's medical records have been corrupted with the thief's medical and health information.

The researchers surveyed 243 people. The survey explored how patients' security concerns affect their relationships with their physicians:

"... we asked respondents whether data security concerns lead them to withhold personal health information from their doctors. We defined “personal health information” as including their own (or their family’s) prescription, mental illness and substance abuse history. While the majority of our sample (79 percent) say this “rarely or never” happens, it is significant (and unfortunate) that 21 percent of patients withhold personal information from their physicians specifically because they are concerned about a security breach."

That equals one in every five patients withholding personal information. And, there's more. Many patients fail to read the privacy notices from their physicians or health care providers:

"... we wanted to see how many actually read the Notice of Privacy Practices (NPP) at their doctors’ offices. NPPs are written explanations of how a provider may use and share health information, and how patients can exercise their privacy rights. Patients usually get NPPs (which typically look like this) during their first visit to a health care provider. HIPAA requires NPPs be presented to all patients, but patients do not necessarily have to read or sign the forms. In fact, 44 percent of our sample tell us they “rarely or never” read NPPs all the way through before signing, and 3 percent simply “never sign” them."

The Health Insurance Portability and Accountability Act (HIPAA) and the Health Information Technology for Economic and Clinical Health (HITECH) Act are laws enacted to protect patients' privacy and medical information. The HIPAA law specifies which health care providers and entities (e.g., "covered entities," "business associates," "subcontractors") are required to comply with HIPAA privacy and data security requirements. The U.S. Department of Health & Human Services (HHS) federal agency operates the official HIPAA privacy web site.

So, too many consumers (and especially teenagers) have a bad habit of ignoring privacy policies at health care providers, just as they ignore privacy policies at websites in general. (Granted, the legalese makes most privacy policies difficult to understand. And, many mobile app developers avoided publishing privacy policies, until forced to do so.) That must change because consumers are only hurting themselves.

Another key finding from the survey:

"... 54 percent of respondents say they would be “very” or “moderately likely” to change providers as a result of their personal health information being accessed without their permission. Digging deeper, we asked patients in that 54 percent if there would be anything their provider could do to retain them in spite of a breach... While 28 percent say there is nothing their provider could do that would convince them to stay, the greatest percentage of our respondents (37 percent) would stick with their doctor if they provided specific examples of how the practice’s security policies and procedures had improved after the breach."

Patients were especially likely to switch health care providers if the breach was caused by staff members. Good. It's one way to hold health care providers accountable when they fail to protect patients' sensitive medical information. And, good data security and privacy makes for good health care practices. After a data breach, it is even more important for health care providers to perform explicit actions to regain patients' trust.

Informed consumers know that their medical information is very valuable to criminals. How valuable? The Pittsburgh-Post Gazette reported:

"The value of personal financial and health records is two or three times [the value of financial information alone], because there’s so many more opportunities for fraud... Combine a Social Security number, birth date and some health history, and a thief can open credit accounts plus bill insurers or the government for fictitious medical care... Hackers also can comb through clinical information, looking for material to blackmail wealthy or powerful patients..."

The newspaper described the troubling history and increasing number of data breaches in the health care industry:

"In 2011 and 2012, combined, there were 458 big breaches involving a total of 14.7 million people, according to the federal Department of Health and Human Services. In 2013 and 2014, there were 528 involving 19 million people. Around 10 percent of breaches stem from hacking, while around half are physical thefts of records or computers. The rest are inadvertent losses, unauthorized disclosures or improper disposals of health information."

You can browse details about many of those breaches in this blog. Select "Medical Fraud" or "Health Care/EHR" in the categories tag cloud on the right.

Another privacy threat for consumers is when non-covered entities, like social networking websites and fitness apps, collect medical and health information. Consumers don't realize that they share personal medical information with non-covered entities, they lose HIPAA privacy and data security protections.

Who are these non-covered entities? The Privacy Right Clearinghouse website provides a good description of HIPAA Basics, including:

"Here are just a few examples of those who aren’t covered under HIPAA but may handle health information: life and long-term insurance companies; workers' compensation insurers, administrative agencies, or employers (unless they are otherwise considered covered entities); agencies that deliver Social Security and welfare benefits; automobile insurance plans that include health benefits; search engines and websites that provide health or medical information and are not operated by a covered entity; marketers; gyms and fitness clubs; direct to consumer (DTC) genetic testing companies; many mobile applications (apps) used for health and fitness purposes; those who conduct screenings at pharmacies, shopping centers, health fairs, or other public places for blood pressure, cholesterol, spinal alignment, and other conditions; certain alternative medicine practitioners; most schools and school districts; researchers who obtain health data directly from health care providers; most law enforcement agencies; many state agencies, like child protective services; courts, where health information is material to a case"

So, the next time you hear a corporate apologist claim that breaches at health care providers don't matter, you now know how ridiculous that claim is. Breaches matter to patients. Hence, they matter. Period. No excuses. If health care entities archive data in cloud services, they'd better protect it and commit sufficient resources. Smart health care providers listen to their patients' needs. Woe to those that don't.

What are your opinions of the survey?

Target To Settle Breach Lawsuit With $10 Million Payment. What You Need To Know About Filing Claims

Retail giant Target Corporation has reportedly agreed to a $10 million settlement to resolve a class-action lawsuit from its massive 2013 data breach. About 40 million debit- and credit-card accounts were affected by the data breach.

The class-action lawsuit had been filed in Minneapolis, Minnesota where the retailer's headquarters are located. The maximum payment from the settlement is $10,000.00 per person. NBC News reported:

"In a report last year, the Senate Commerce, Science and Transportation Committee accused Target of having failed to respond to warnings that malware had been installed on its system and of having missed several other opportunities to thwart the hackers. Chief Executive Gregg Steinhafel resigned, and Target hired Brian Cornell, a former PepsiCo and Wal-Mart executive, to steer the retailer on a path to regain customer confidence."

The ABC News affiliate in Minneapolis, KSTP, reported that people affected by the breach:

"... would be eligible for a portion of the settlement fund if they submit "reasonable documentation showing their losses more likely than not arose from the Target data breach (for example, a credit card statement, invoice or receipt)." Victims could also include two hours of "lost time," at $10 per hour, for each type of documented loss they incurred, including for inconveniences such as dealing with unauthorized charges or replacement of a driver's license."

If you were affected by the data breach, read closely any correspondence you receive from Target. If you haven't received any notices, a good place to start is the Press Room at the retailer's website. There, you can sign up for e-mail or SMS alerts. Or, you can contact the retailer's Guest Relations department.

If you were affected by the breach, did you file a claim? If so, what has been your experience? Was it resolved promptly?

Two Graphics About Wage And Wealth Inequality In The USA

Today's blog post includes two factual graphics. The first graphic compares the bonuses (not salaries, but the year-end bonuses in addition to salaries) paid to executives at Wall Street firms to the earnings of all full-time minimum-wage workers nationwide:

The current Federal minimum wage is $7.25 per hour. Given a 40 hour work week, that equals about $15,000 a year. Tough to live on that. Meanwhile, the average bonus for Wall Street executives was about $170,000 per person. Read this detailed discussion about the bonus culture on Wall Street:

"Wall Street bonuses rose 3 percent last year, despite a 4.5 percent decline in industry profits. The size of the bonus pool was 27 perfect higher than in 2009, the last time Congress increased the minimum wage... The bonus pool is so large it would be far more than enough to lift all 2.9 million restaurant servers and bartenders, all 1.5 million home health and personal care aides, or all 2.2 million fast food preparation and serving workers up to $15 per hour."

Yes, the playing field is tilted this badly. This is another reason to move your money from big banks to smaller, regional banks or to credit unions.

The second graphic (see below) compares the actual distribution of wealth (the top bar) to what Americans perceive it to be (the second bar), and to what Americans think it should be (the bottom bar). Former U.S. Labor Secretary and professor Robert Reich presented this graphic on his Facebook page:

Mr. Reich said on March 10:

"If more Americans knew the truth, we'd have a better shot at changing what must be changed -- raising the minimum wage, expanding the EITC, raising the cap on income subject to Social Security taxes, limiting the deductibility of CEO pay, making it easier to form labor unions, and increasing taxes at the top to pay for world-class education for all our kids. So, please, spread the truth."

Now, you know the truth. Tell your friends, family, coworkers, and classmates. Not only is the situation worse than you thought, but it's easier for the wealthy to retain their wealthy since investments are taxed at a lower rates than wages. (Or depending upon your point-of-view, more difficult for wage earners to amass wealth.) And, some politicians want to eliminate the Federal minimum wage supposedly to increase employment, but more likely to facilitate a race to the bottom in some states to lower wages further and increase company profits.

Notice a trend that benefits the people who are already wealthy?

Take a moment to study both graphics. You can select either graphic to view a larger version. Remember this when you vote.

What You Need To Know To Pay With Your Phone And Ditch The Plastic In Your Wallet

Smart phone are popular and versatile devices. About 60 percent of adults in the USA have smart phones. Many consumers want to ditch the plastic in their wallets and pay with their smart phones instead. To do this, the Federal Deposit Insurance Corporations (FDIC) issued several warnings for consumers in the Winter 2015 issue of its quarterly newsletter.

The FDIC is an independent agency created by the U.S. Congress to maintain stability and public confidence in the nation's financial system. The FDIC does this by insuring deposits in banks, and examining and supervising banks for soundness. The FDIC's quarterly newsletter contains valuable tips for consumers. The winter issue of its newsletter contains advice about telephone scams, tips when buying or refinancing a home, how to submit a complaint about a bank, tips to save more of your money, and more.

Here's what you need to know to pay with your phone:

1. Contact-less or NFC-capable phone. The computer chip in your smart phone must support Near Field Communications (NFC). This allows you to swipe your phone near the payment terminal in the retailer's store to make purchases. If you are buying a new phone, ask the sales person if the phone has an NFC chip. If you want to use your current phone, check the Settings menus to see if it has an option to enable NFC.

2. Where you shop matters. The large, national retail chains support contact-less payments with your phone, but many smaller, independent retailers don't -- yet.

3. Digital wallet. You need a digital wallet, the app or software to store payment information on your smart phone. Newer phones may already have this feature. If so, then you can load the payment information onto your phone for your debit- and credit cards.

4. Security matters. You need to protect your phone, both with anti-virus software, and lock your phone with a password. Make sure that your phone re-locks itself when not in use. Back up the list of contacts in your phone. According to the FDIC:

"Many security experts believe that mobile payments are more secure than swiping your magnetic stripe credit card because the mobile service keeps your credit number in encrypted form and does not transmit it to the merchant. But you still should make sure your phone is protected, such as with a password, so it cannot be accessed by a thief. Some of the newest smartphones use fingerprint readers to control access, which can be secure and convenient."

5. Lost or stolen phones. When your phone is lost or stolen, you still need to report your payment information as stolen to your bank or the issuer of your credit card(s). A stolen phone with debit card payment information enabled would give thieves direct access to your checking account. Experts say that consumers get the same protections from the underlying payment type (e.g., debit-, credit) wehn paying with their smart phone.

Mattel Discloses New Internet-Connected Doll With Voice-Recognition Software. Goodbye Privacy?

Recently at a toy fair in New York, Mattel announced the upcoming availability of a new doll product, Hello Barbie. The Internet-connected doll will also contain voice recognition software, allowing it to perform more interactive conversations. The Washington Post reported:

"To revive the sinking sales of its flagship brand, Mattel is bringing Barbie to life with voice-recognition software that will allow the doll to "listen" to children speak and give chatty responses. It will learn over time, remembering your dog's name and adjusting to new topics."

Basically, the doll product leverages technologies already in use in consumer smart phones and other mobile devices:

"Hello Barbie works by recording a child's voice with an embedded microphone that is triggered by pressing a button on the doll. As the doll "listens," audio recordings travel over the Web to a server where the snippets of speech are recognized and processed. That information is used to help form Hello Barbie's responses."

The Washington Post described a demonstration of the doll by a Mattel representative:

"... the Mattel representative chatting with Hello Barbie mentioned that she liked being onstage. Later in the conversation, when the Mattel representative asked Hello Barbie what she should be when she grew up, the doll responded, "Well, you told me you like being onstage. So maybe a dancer? Or a politician? Or how about a dancing politician?" "

The toy manufacturer claims that young girls asked for a doll with better interactive conversations. Besides the line of Barbie^® doll products, Mattel makes Hot Wheels^®, Monster High^®, American Girl^®, Thomas & Friends^® and Fisher-Price^® brands, including Little People^® and Power Wheels^®, MEGA^® Brands, and more. The new doll product will be available in stores in the fall.

Privacy advocates are rightly concerned. To operate as describe, the doll product must record, collect, and transmit to a centralized serve children's conversations. The doll product raises several privacy issues:

• How young is too young for children to create digital footprints?
• The product deceives youth into believing they are talking to a doll, when they are really talking to a corporation recording their conversations. Is this deception something parents want to enable?
• What is the privacy policy with the Hello Barbie doll?
• What privacy options will parents have to opt out of the data collection?
• What companies, partners, affiliates, and government agencies will Mattel share children's recorded conversations with?
• Do the new technologies in the doll actually improve children's play?
• Are the conversations of nearby children, and adults, also recorded?
• What safeguards and software protections will the doll product have against hacking? One must assume that since hackers and spy agencies can remotely control your smart phone, tablet and laptop camera and speaker, they can with a product like Hello Barbie.

I'd love to read Mattel's focus group research that concluded parents viewed Hello Barbie a good product idea for young children, ages four through nine. Children of that age are too young to understand privacy issues. I asked several parents of young children what they thought of Hello Barbie. While this wasn't a scientific study, all of the mothers said "no." None wanted their young children playing with an Internet-connected doll like Hello Barbie.

Mattel's work on Hello Barbie highlights another consideration. When companies experience financial difficulty, they seem to frequently turn to big data (e.g., the collection and resale of consumer information) to develop new revenues. Is that what Mattel is doing? One wonders.

In my opinion, Hello Barbie is another privacy-invasive product to thrown on the pile of bad products, along with Google Glass.

Mattel has a large number of BARBIE® dolls: Careers Scientist, Careers Lifeguard, 2015 Birthday Wishes® Doll - Hispanic, Fashionistas African-American Doll, Style Resort Grace™ Doll, 2015 Ballet Wishes® Doll, Careers Rock Star, Careers Tennis Player, and many more. To encourage girls to pursue careers in law enforcement and surveillance, maybe Mattel should have named the new doll "Barbie Careers N.S.A." or "Barbie Careers F.B.I." instead.

What are your opinions of the upcoming Hello Barbie doll? Do you think that it is a good idea? Parents: would you want your young children playing with Internet-connected dolls? Grandparents: do you think this is a good gift idea?

Update: Bank Of America Price Increase For Its Checking Customers

Earlier today, I visited a Bank of America office to clean out and surrender my safe deposit box. While there, I asked the representative who else received the announcement letter about the price increase for checking customers. The representative explained that letters were sent to checking customers across New England, and the bank plans to extend that later nationwide.

So, there it is. You heard it first on the I've Been Mugged blog.

During the past few days, I have had some interesting discussions about this on social networking sites. One person commented:

"I'm not understanding the controversy here. You can always change banks, right? And small accounts are probably money losers for them. They clearly have decided that they don't want certain business, so why stay with them?"

I am sure that others think the same. Here's why Sunday's blog post was important:

First, consumers can always change banks. That's not the point. Context matters. This isn't the first attempt by the bank to raise prices for checking customers (or develop new revenue streams from its point-of-view). One must look at the price increase in context of that and the bank's history.

Second, a major part of the bank's history included massive settlement payments for wrongdoing. That money has to be replaced, otherwise the bank's profits go down. So, who pays for that wrongdoing? Customers or bank executives? I think that the latter should pay, but the price increase suggests the former are paying.

Third, those massive settlement payments are usually partially tax deductible. That means, the bank can write off the payment to reduce their income taxes. That means, all of us taxpayers are subsidizing or partially paying the settlement payment for the bank's wrongdoing. Do you want to pay for another person's (or corporation's) wrongdoing? I don't, and doubt that you want to either. I find this infuriating, and hope that it infuriates you, too. The whole situation makes one wonder if the price increase for checking customers is to replace the money the bank paid for massive settlement payments. If so, the bank should have said so. Its price increase letter was silent on the topic.

Fourth, as a customer (soon to be ex-customer) of the bank, I want to know that it has done all cost cutting possible before raising prices. The notice I received failed to explain that, too. The bank's $25 monthly fee is a huge price increase; especially for low-wage or minimum wage workers. For a worker making $10 per hour, the $25 monthly fee equals two-and-a-half hours of work; probably three hours of work on an after tax basis. That is expensive banking.

Fifth, I also wrote Sunday's blog post to highlight another little-known fact by consumers: the partnership between BofA and First Data, where they share in the revenues from processing debit transactions. So, BofA makes money at both ends of the transaction... what I call double dipping. That didn't pass the smell test in 2011, nor does it pass today. I wrote about that so more consumers would know how their banks operate, since other big banks do it, too. Shady business practice, in my opinion.

Sixth: my main point is this: I want the bank I do business with to reflect my values. BofA no longer does. And, I don't trust it. I don't trust it to stop with the latest price increase. There probably will be more and higher fees. Hence, I am switching banks and wrote Sunday's blog post to explain why.

Seventh, while this may not be controversial to some people, it is important to BofA checking account customers. And, it was important in 2012 to the hundreds of thousands of people who participated in Bank Transfer Day by switching banks.

What are your opinions?

Bank of America Raises Prices For Its Checking Customers. What You Need To Know And How To Avoid The New Fees

Bank of America (BofA) has decided to move forward with charging large monthly maintenance fees to its checking account customers. Yesterday, I received a notice via postal mail from BofA dated March 6, 2015:

"We're updating our checking products and, as a result, the existing checking account listed above will become an Advantage Regular Checking account...

What's not changing
Your account information, including your account number, checks, and debit card all remain the same. Your account features, such as direct deposit, Online and Mobile banking. Bill Pay, as well as accounts linked for overdraft protection, will also remain the same.

What's Changing
Monthly maintenance fee: You can avoid the monthly fee on this account when you meet any ONE of the requirements shown below during each monthly statement cycle. Otherwise, the $25 monthly fee will be deducted from your account. This change takes effect on your first statement cycle that starts on May 15."

I checked the BofA website for any press releases about its price increase. I saw nothing. Not good.

A $25 monthly maintenance fee equals $300 yearly. That's a big price increase. You may remember Bank Transfer Day in 2012, when many consumers moved their money from the big banks to smaller, regional banks and credit unions. Several banks and BofA had tried to raise prices in 2011 by applying monthly maintenance fees, but then reversed their decisions after considerable push-back by consumers.

BofA tried to justify its 2011 price increase by saying their transaction costs had gone up and the, "economics of debit cards have changed," After some research in 2011 (see image on right), I found that BofA partnered with another company, First Data, to create a separate company that actually processes the bank's debit-card transactions, and both share in those debit-card transaction revenues.

That partnership continues today. The 2015 Hoovers profile states:

"The next time you swipe your card and it clears, you might thank Banc of America Merchant Services. A 2009 joint venture between Bank of America and First Data, it is one of the largest processors of electronic payments in the US. The firm handles more than 7 billion check and credit, debit, stored value, payroll, and electronic benefits transfer card transactions (worth a total of some $250 billion) annually. Its clients are small businesses and large corporations including retailers, restaurants, hotels, supermarkets, utilities, gas stations, convenience stores, and government entities. First Data owns 51% of Banc of America Merchant Services, while Bank of America owns 49%."

I'll bet you didn't know this. Most people don't. Most of the big banks have similar arrangements with First Data. So, the big banks make money off your money by investing it (what you'd expect), but also by both charging customers monthly maintenance fees and from collecting revenues from their debit-transaction processing partnership (not what you'd expect). Some people might call making money at both ends of the transaction double-dipping. I do. That didn't pass the smell test in 2011, nor today.

Fast-forward four years, and the transaction cost reason has been replaced with the "updated our checking products" excuse. It's still lame. A price increase is a price increase. Plus, the notice I received from BofA failed to mention any cost cutting done before passing along a huge price increase to its checking customers. That's just bad.

Moreover, the bank's latest price increase couldn't be more confusing. The bank's notice explained how checking customers can avoid the large monthly maintenance fees:

"Keep an average daily balance of $5,000 or more in your checking account or linked Regular Savings account, or

Keep an average daily combined balance of $10,000 or more in checking with linked savings, money market savings, CDs or IRAs, or

Keep an outstanding balance of $15,000 or more in an eligible linked installment loan or line of credit, or

Have $15,000 in total combined assets in your eligible Merrill Edge and Merrill Lynch investment accounts that are linked to your checking account, or

Have a linked Bank of America first mortgage loan that we service."

This reads like legalese written by lawyers. Why not keep it simple and say: keep $5,000 in an account to avoid the monthly maintenance fees. Simplicity matters.

Let's review some more of BofA's history. In August 2014, the bank agreed to a massive settlement with the U.S. Justice Department and several states' attorney generals. The $16.65 billion settlement agreement resolved both federal and state civil investigations into activities by the bank's former and current subsidiaries, including Countrywide Financial Corporation and Merrill Lynch, related to the packaging, marketing, sale, and issuance of residential mortgage-backed securities (RMBS). The bank acquired Merrill Lynch in 2009, and Countrywide in 2008.

To be fair, other big banks have paid massive settlement amounts during the past few years: Bank of America, $61.1 billion; JPMorgan, $31.4 billion; Citigroup, $10 billion; and Wells Fargo, $5.8 billion. A 2012 survey found that junior bank executives view wrongdoing as necessary to advance their careers. Based upon all of this, there clearly seems to be an ethics problem in banking.

I find BofA's reason (e.g., updated their checking products) for its price increase disingenuous. More likely, the price increase was driven profitability concerns given the massive settlement payments. Why not reduce senior executive compensation and bonuses instead (e.g., especially those executives that committed the wrongdoing that led to the massive settlement payments)? Why put the burden on customers?

That BofA decided to place the burden on its customers speaks volumes. Banks can clearly raise prices if they want. They are free to do that. Customers are free to move their money to a bank (or credit union) with lower or no monthly maintenance fees.

I'll make it easy for BofA checking customers to avoid the price increase: move your money to a small, regional bank or credit union. It's easier than you think, and there are a lot of benefits. Last month, Bankrate compared checking account fees between banks and credit unions:

"You're twice as likely to find free checking at a credit union than a bank, according to a new study by Bankrate.com. Nearly three quarters of credit union checking accounts -- 72 percent -- come with no balance requirements or monthly maintenance fees. That's in sharp contrast to banks, where only 38 percent of checking accounts are free... Most of the time, when you encounter dramatically lower prices for the same product, you assume that the cheaper product is somehow inferior. But that's not the case with credit unions, which typically offer services comparable to similarly sized banks. Instead, it comes down to the way credit unions are organized, says Jon Jeffreys, managing partner at Callahan & Associates, a management consultancy that works with credit unions..."

Thankfully, I had already begun to move my money. BofA's latest price-increase notice just accelerated my schedule. While I have sufficient account balances to avoid BofA's new monthly maintenance fees, I simply dislike the way the bank operates. For me, it goes to values.

If you are looking for a small bank or credit union to move your money to, a good resource is the Move Your Money Project. Some consumers have tried to move their money to prepaid cards instead. I believe that is a poor decision, because there usually are many fees with prepaid cards. Plus, experts have advised consumers to be wary of prepaid card protections.

What are your opinions of Bank of America? Of its latest price increase? Has your bank increased prices?

Meme: Banks Under Assault #2

Read about it here. Related articles:

• No, The Banks Aren't Losing (ProPublica)
• You Gave JPMorgan Bank a Whale of a Christmas Gift

Tax Identity Theft Scams: What They Are And How To Spot Them

It's tax season. Most Americans must file income taxes between now and April 15th. You know it. Identity thieves know it, too.

The California Attorney General's office warned Californians to beware of phishing e-mails. The advice is good for consumers across the United States. Criminals send out official-looking e-mails that appear to be from the federal Internal Revenue Service (IRS) or from your state tax agency. The e-mails are bogus, and an attempt to trick consumers into revealing sensitive personal and financial information. Some criminals make bogus phone calls.

How to protect yourself and spot these scams:

1. Beware of unsolicited phone calls, emails or texts from anyone claiming to be from the IRS or tax agency in your state (example: the California Franchise Tax Board). If you aren't sure, contact the agency to verify the e-mail.
2. Never open an email or a text message that says it is from the IRS or your state's tax agency. They are usually fraudulent. In California, the Franchise Tax Board never initiates contact with taxpayers by email, text message or social media to request personal or financial information. Not does it send e-mail/text messages about audits or refunds.
3. When preparing your tax returns to file online, use strong passwords (e.g., letters, numbers, and special characters). Use a unique password and not the same password you use for e-mail or social networking accounts.
4. For more security than just a username and password, consider using: a) an Identity Protection PIN number (IP PIN) for e-filing returns with the IRS; and/or b) two-step authentication. Two-step authentication is available with many tax agencies and social networking sites. Basically, the process includes a code that is sent via e-mail or text message. You enter that code plus your username and password when signing into your online account.

In some instances, criminals will file fraudulent tax returns using your information. Why? To get and cash a large refund check. If this happens to you, the California Attorney general recommends that victims:

"If you think you have a tax identity theft problem or receive a letter from the IRS or the FTB stating that someone has already filed using your information, contact the agency."

The IRS maintains a list of state agency and tax websites for all states. The California Attorney General's office provided the following tax identity-theft resources:

Agency	Resources
Internal Revenue Service	Identity theft:  www.irs.gov/Individuals/Identity-Protection, www.irs.gov/Individuals/Indications-your-identity-may-have-been-stolen-and-how-to-report-it-to-us. 1-800-908-4490 Tax scams: www.irs.gov/uac/Tax-Scams-Consumer-Alerts  Identity Protection PIN: www.irs.gov/Individuals/Get-An-Identity-Protection-PIN
California Franchise Tax Board	Identity theft: www.ftb.ca.gov/individuals/id_theft.shtml   ID Theft Resolution Coordinator Web information: 916-845-3669
California Attorney General	Identity theft:  www.irs.gov/Individuals/Identity-Protection, www.irs.gov/Individuals/Indications-your-identity-m Identity Theft Protection and First Aid: www.oag.ca.gov/idtheft

Another good resource for consumers is the Identity Theft Resource Center. The site contains state-specific identity-theft information for consumers, and a page with tips for avoiding tax identity theft.

FCC Listens To Consumers And Adopts Strong Rules To Keep the Internet Open

After receiving input from businesses, lobbyists, technology companies, politicians, public-interest groups, corporate broadband providers, public-policy think tanks, and nearly 4 million consumers, the commissioners at the Federal Communications Commission (FCC) voted on Thursday last week for strong rules to keep the Internet open. The FCC went beyond supporting net neutrality, that consumers choose where to go with their Internet service and that Internet Service Providers (ISPs) must treat all content equally. The FCC stated in a press release the situation and threat:

"Absent action by the FCC, Internet openness is at risk, as recognized by the very court that struck down the FCC’s 2010 Open Internet rules last year in Verizon v. FCC. Broadband providers have economic incentives that “represent a threat to Internet openness and could act in ways that would ultimately inhibit the speed and extent of future broadband deployment,” as affirmed by the U.S. Court of Appeals for the District of Columbia. The court upheld the Commission’s finding that Internet openness drives a “virtuous cycle” in which innovations at the edges of the network enhance consumer demand, leading to expanded investments in broadband infrastructure that, in turn, spark new innovations..."

In short, both consumers and businesses use the Internet daily... need the Internet... for a variety of applications. It has become essential to everyday life. The new rules apply to both mobile and "fixed" broadband Internet. Fixed means stationary devices such as desktop computers.The first three rules adopted by the FCC would prohibit practices by ISPs that threaten an Open Internet where consumers decide when and where to go with the high-speed connections they pay monthly for:

1. No Blocking: broadband providers may not block access to legal content, applications, services, or non-harmful devices.
2. No Throttling: broadband providers may not impair or degrade lawful Internet traffic on the basis of content, applications, services, or non-harmful devices.
3. No Paid Prioritization: broadband providers may not favor some lawful Internet traffic over other lawful traffic in exchange for consideration of any kind—in other words, no “fast lanes.”

The FCC explained:

"This rule also bans ISPs from prioritizing content and services of their affiliates. The bright-line rules against blocking and throttling will prohibit harmful practices that target specific applications or classes of applications. And the ban on paid prioritization ensures that there will be no fast lanes."

This is good stuff. Large, corporate conglomerates have amassed a variety of programming content in divisions and subsidiaries. The rule reflects this reality, and helps ensure that when YOU, the consumer, access the Internet you choose where to go (and your ISP doesn't because of their internal bias toward content at owned affiliates, divisions, or business units). The FCC also adopted additional rules consistent with the changing nature of the Internet:

"Standard for Future Conduct: Because the Internet is always growing and changing, there must be a known standard by which to address any concerns that arise with new practices. The Order establishes that ISPs cannot “unreasonably interfere with or unreasonably disadvantage” the ability of consumers to select, access, and use the lawful content, applications, services, or devices of their choosing; or of edge providers to make lawful content, applications, services, or devices available to consumers. Today’s Order ensures that the Commission will have authority to address questionable practices on a case-by-case basis..."

Greater Transparency: The rules described above will restore the tools necessary to address specific conduct by broadband providers that might harm the Open Internet... the Order requires that broadband providers disclose, in a consistent format, promotional rates, fees and surcharges and data caps. Disclosures must also include packet loss as a measure of network performance, and provide notice of network management practices that can affect service. To further consider the concerns of small ISPs, the Order adopts a temporary exemption from the transparency enhancements for fixed and mobile providers with 100,000 or fewer subscribers..."

These rules are important to hold ISPs accountable in the future and to help consumers make informed decisions about the services they choose. I liken this to the nutritional labels you find on packaged foods. Consumers need, and depend upon, similar disclosures for high-speed Internet services.

Previously, high-speed Internet service was classified as an information service. The FCC adopted new rules:

"... the Order reclassifies “broadband Internet access service”—that’s the retail broadband service Americans buy from cable, phone, and wireless providers—as a telecommunications service under Title II. This decision is fundamentally a factual one. It recognizes that today broadband Internet access service is understood by the public as a transmission platform through which consumers can access third-party content, applications, and services of their choosing. Reclassification of broadband Internet access service also addresses any limitations that past classification decisions placed on the ability to adopt strong open Internet rules... the Order’s provisions on mobile broadband also are based on Title III of the Communications Act. The Order finds that mobile broadband access service is best viewed as a commercial mobile service or its functional equivalent."

Reclassification was something the corporate ISPs strongly opposed and will probably contest through the courts. And, the Republican party will continue to promote Senator Thune's proposed legislation through Congress to undo all of the good in the latest FCC rules. I called the proposed legislation a bait-and-switch. After reading this blog post, you'll probably reach the same conclusion.

Reclassification is good for high-speed Internet is more like a utility (e.g., water, electricity). Reclassification will drive both penetration in under-served areas where consumers can't get broadband services, and encourage new businesses and start-ups based upon Internet technologies.

And, for those consumers concerned about paying taxes the FCC said:

"Broadband service will remain exempt from state and local taxation under the Internet Tax Freedom Act. This law, recently renewed by Congress and signed by the President, bans state and local taxation on Internet access regardless of its FCC regulatory classification... Universal Service Contributions: the Order DOES NOT require broadband providers to contribute to the Universal Service Fund under Section 254. The question of how best to fund the nation’s universal service programs is being considered in a separate, unrelated proceeding..."

Also on Thursday, the FCC approved an order to pre-empt local laws in two states that limit municipal broadband Internet services. The two states: North Carolina and Tennessee:

"Tennessee law allows municipal electric systems like EBP to provide telecommunications services anywhere in the state, but limits provision of Internet and cable services to the electrical system footprint. In North Carolina, a 2011 law imposed numerous conditions that effectively precluded Wilson from expanding broadband into neighboring counties, even if requested. One condition, for example, restricted expansion into areas where the private sector delivers service at speeds as slow as 768 kbps in the faster direction – an archaic standard that fails to support modern needs and is a fraction of the FCC’s 25/3 Mbps benchmark."

Local residents want the expansion and can't get broadband services. The restrictions seem arbitrary with the goal to allow the corporate ISPs to provide services at slower speeds, limit competition, and keep prices high. Any corporate ISP should be embarrassed for providing a slow download speed of 768 kbps. That is so 2001.

This action by the FCC is a good start and a framework for removing similar limitations in other states. 19 states have local laws that prevent or restrict citizens from forming competitive high-speed, municipal Internet services. Those states: Alabama, Colorado, Florida, Louisiana, Michigan, Minnesota, Mississippi, Missouri, Nebraska, Nevada, North Carolina, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, Wisconsin, and Wyoming. While 72+ percent of households in the USA have high-speed Internet services, studies have proven that American pay more monthly for high-speed Internet services, and get slower speeds than consumers in other countries.

These local laws hurt consumers. The lack of competition keeps broadband prices high. We'd all like to pay less. How did things get this way? Who lobbied for the limitations in these states? PR Watch reported:

"The ALEC "Municipal Telecommunications Private Industry Safeguards Act" is a "model" bill for states to thwart local efforts to create public broadband access. Promoted under the guise of "fair competition" and "leveling the playing field," this big telecom-supported bill imposes regulations on community-run broadband that they would never tolerate themselves. Iterations of this anti-municipal broadband bill passed in 19 states to stop local governments in communities like Wilson, North Carolina from wiring their communities with fiber... At closed-door ALEC meetings, state legislators sit down with lobbyists for corporations like AT&T, Time Warner Cable, Verizon, Comcast, and News Corp to be handed changes to our laws that further the right wing agenda and directly benefit the corporate bottom line..."

So, the same political party that usually touts less regulation and free-market capitalism with competition have engineered a situation with more laws and less competition. And, the lawmakers in these 19 states went along with this charade to place corporate profits ahead of their constituents' (e.g., consumers') needs for the fastest and affordable high-speed Internet services.

I applaud the FCC's vote and actions to protect consumers' interests. I have blogged a lot about this because the issues are huge, they affects all of us, and we Americans deserve better than what we have received from corporate ISPs. This was a huge win by net-neutrality advocates, of which I am one. Consumer feedback won out over lobbyists and special interests. Left unchecked, ISPs would have created tiers of service making monthly Internet bills and service plans as convoluted as cable television packages, prioritized their own affiliates' content deciding what consumers accessed online, raised prices or kept prices high, and stifled innovation and new business.

Will the corporate ISPs listen to consumers as the FCC did? What are your opinions of the new FCC rules?