Broad-Based Consumer Protection Coalition Forms to Tackle AOB Reform

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Consumer Advocates, Roofing Contractors Call on Lawmakers to End AOB Abuse

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Consumer Advocates, Roofing Contractors
Call on Lawmakers to End AOB Abuse

Nearly 1,000 consumers sign petitions calling for reforms

TALLAHASSEE, Fla. (Feb. 10, 2016) – Consumer advocates and roofing contractors said today that homeowners’ insurance laws must be reformed to stop Assignment of Benefits (AOB) abuse from increasing insurance rates and harming Floridians trying to protect their homes.

The Consumer Federation of the Southeast, a former three-time Florida Insurance Consumer Advocate, and the Florida Roofing and Sheet Metal Contractors Association urged state lawmakers to pass legislation that will keep homeowners in charge of their insurance policies and prevent trial attorneys and unscrupulous home repair firms from taking control of the policies, which can lead to inflated costs and lawsuits.

“Florida can no longer stand by and watch this problem spread into a full-scale consumer crisis across the state,’’ said Jennifer West, executive director of the Consumer Federation of the Southeast. ‘’Homeowners should stay in control of the insurance policies they paid for. They shouldn’t feel pressured to sign away their rights in order to get repairs done.’’

The groups are part of the broad-based Consumer Protection Coalition, which formed in January to pass meaningful AOB reform during the 2016 legislative session. Spearheaded by the Florida Chamber of Commerce, the coalition today delivered nearly 1,000 petitions signed by residents, business owners and other interested parties to Senate President Andy Gardiner and House Speaker Steve Crisafulli asking lawmakers to reform AOB laws before consumers statewide face higher insurance costs.

“These petitions clearly demonstrate that Floridians are starting to understand the scope and severity of the problem,’’ said Steve Burgess, a former three-time Insurance Consumer Advocate for the state of Florida. “They are concerned about the impact to their pocketbook and want protections to keep them in charge of their policies should something happen to their home and they need to file a claim.’’

The state’s largest association of roofing and sheet metal contractors said they support provisions of Sen. Dorothy Hukill’s bill, SB 596, that keeps policyholders in charge of the claim and their insurance policy. The bill requires that an insurance company be informed of a claim in a timely matter and allows an insurer to communicate with a policyholder, regardless of whether an AOB has been signed.

“We’re seeing a lot of companies tell homeowners they need to sign an AOB to do work that doesn’t need to be done. Then they bill the insurance company for needless costs and sue if they don’t get paid. It’s abusive and unethical,’’ said Cam Fentriss, a spokeswoman for the Florida Roofing and Sheet Metal Contractors Association (FRSA). “For the sake of all businesses doing honest work, AOB needs to be reformed.’’

Ralph Davis, owner of Streamline Roofing and Construction in Tallahassee, said bad actors give the entire profession a black eye. To prevent abuse, he supports insurance companies co-writing checks to both the property owner and contractor after the work is done to ensure claims cover actual work performed.

“We pride ourselves in high quality work and strongly oppose any contractor who recommends work that doesn’t need to be done,’’ Davis said. “We need rules in place to ensure the system isn’t abused.’’

The 800-member FRSA is particularly concerned that the high costs of inflated claims and legal fees when a lawsuit is filed are hindering the state’s ability to protect policyholders against future hurricanes. Fentriss cited statistics from Citizens Property Insurance Corp. showing that for every insurance premium dollar collected, only 18 cents goes toward saving for a future hurricane, while 28 cents goes to cover non-weather-related water damage costs.

The call from consumer advocates and roofing contractors follows the release of a report by the Florida Office of Insurance Regulation (OIR) showing that water damage claims and the use of AOB are rising rapidly statewide. The analysis of the top 25 private homeowners’ insurance companies in Florida showed that water claims involving AOB cost, on average, about 50 percent more than claims without an AOB, and that the total number of water claims with an AOB rose from 6 percent in 2010 to 16 percent in 2015.

The OIR report warned that if current trends persist, consumers could face rate increases of 10 percent or more annually, as insurers grapple with rising losses associated with an increase in water claims.

Water remediation companies supporting AOB reform said AOBs aren’t necessary and open the door to abusive business practices.

“We don’t need to obtain AOBs from homeowners to make sure repair work is done properly and we get paid by insurance companies,” said William “Bubba” Ryan, president and CEO of Rytech, a 30-year-old water damage remediation firm that operates in 20 states, including Florida. “In recent years, we’ve seen an explosion in the solicitation of AOBs and questionable practices by some vendors operating in Florida. Assignment of Benefits abuse hurts consumers and the reputation of companies that are trying to do the right thing.”

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The Consumer Protection Coalition is a broad-based group of business leaders, consumer advocates, real estate agents, construction contractors, insurance agents and insurance trade groups pushing for reforms to end Assignment of Benefits (AOB) abuse. Learn more about the Coalition at FightFraud.Today.

Consumer Federation Commends Legislative Approval of AOB Reform

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Consumer Federation Commends Legislative Approval of AOB Reform

~ Says Assignment of Benefits Abuse Targets Consumers ~

TALLAHASSEE, Fla. (Feb. 1, 2016) – The Consumer Federation of the Southeast today commended Florida lawmakers after two legislative panels have advanced legislation designed to reform Florida’s Assignment of Benefits (AOB) law. The Consumer Federation is part of the Consumer Protection Coalition, which was established to push for reforms to end AOB abuse.

“Florida’s current AOB system allows shady contactors to exploit unsuspecting consumers, pocketing homeowners’ right to the insurance benefits they deserve,” said Jennifer West, executive director of the Consumer Federation. “Bill sponsors Senator Dorothy Hukill and Representative Matt Caldwell are true champions for Florida consumers, and insurance ratepayers across Florida appreciate their commitment to erasing fraud from the AOB process. We’re pleased the Legislature is moving to fix a system that allows for easy abuse.”

AOB is a legal tool that allows policyholders to sign over their insurance benefits to a home repair vendor or other third party without having to pay money up front to cover repair work. While AOB can be useful in processing claims promptly, a cottage industry of trial lawyers, unregulated water extraction firms, and other vendors has increasingly used AOB to take complete control of homeowners’ policies, then inflate the costs of repairs and file costly lawsuits against property insurers. These suits are often filed without the knowledge or consent of the homeowner.

Senator Hukill is sponsoring SB 596, which was approved 11-1 by the Senate Banking and Insurance Committee today. The House Insurance and Banking Subcommittee voted 12-0 last week in support of HB 1097, sponsored by Representative Caldwell.

Broad-Based Consumer Protection Coalition Forms to Tackle AOB Reform

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The Consumer Federation of the Southeast is a proud member of the Consumer Protection Coalition, formed to advocate for reforms designed to end abuse of Assignment of Benefits in Florida. This abuse drives up consumers’ rates for homeowner’s insurance. Below is a press release issued by the Coalition, including a quote from Consumer Federation Executive Director Jennifer West. More information on the Coalition is available at


Group Seeks Legislative Fix to AOB Abuse That Threatens Higher Homeowners Insurance Costs

TALLAHASSEE, Fla. (Jan. 12, 2016) — A broad-based group of business leaders, consumer advocates, real estate agents, construction contractors, insurance agents and insurance trade groups announced today they have formed the Consumer Protection Coalition and are pushing for reforms to end Assignment of Benefits (AOB) abuse on its new web platform—FightFraud.Today.

The Consumer Protection Coalition is devoted to protecting consumers by ensuring homeowners maintain control of their insurance policies, rather than relinquish them to scheming vendors seeking to pad their profits using AOB.

Led by the Florida Chamber of Commerce, the coalition is concerned about the impact of AOB abuse on the state’s consumers, insurance costs and overall business climate, and urges state lawmakers to take action during the 2016 legislative session before the problem worsens. Coalition members support AOB legislation filed by state Sen. Dorothy Hukill (SB 596) and Rep. Matt Caldwell (HB 1097).

‘’Assignment of Benefits abuse is a huge threat to Florida’s families and businesses and must be stopped,’’ said Mark Wilson, President and CEO of the Florida Chamber of Commerce. “Billboard trial lawyers and questionable vendors are taking advantage of AOB to essentially steal money from consumers and wreak havoc on our state’s insurance market. For the sake of attracting new businesses and jobs, we can’t let that happen.’’

The coalition has launched a website on the issue, FightFraud.Today, which includes an online petition for consumers to sign urging lawmakers to pass meaningful AOB reform. It also contains consumer-friendly education materials detailing the AOB fraud scheme.

AOB is a legal tool that allows policyholders to sign over their insurance benefits to a third party, such as a home repair vendor, without having to pay money up front to cover repair work. While AOB can be useful in processing claims promptly, a cottage industry of trial lawyers, unregulated water extraction firms and other vendors have increasingly used AOB to take complete control of homeowners’ policies, then inflate the costs of repairs and file costly lawsuits against property insurers. These suits are often filed without the knowledge or consent of the homeowner.

Coalition members advocate that consumers don’t need to sign an Assignment of Benefit to handle insurance claims for emergency repair work. They can simply direct their insurance company to pay vendors and, if they don’t feel like their claim was handled properly, they can take action against their insurer.

“Homeowners should not be asked to sign away their rights simply to get needed home repairs. A practice that depends on consumers skimming quickly over the fine print and unknowingly signing their rights away is a recipe for exploitation, fraud and manipulation. The state of Florida should do everything it can to protect homeowners from Assignment of Benefits abuse,” said Jennifer West, executive director of the Consumer Federation of the Southeast, which is a member of the coalition.

Inflated claims and lawsuits involving AOB have forced premiums to go up for consumers in South Florida and, if left unchecked, could result in a full-scale consumer crisis that increases rates statewide. After a decade without a hurricane, Florida should be benefiting from reduced rates—not higher ones— and focusing on protecting against the next major storm.

“We’re hearing on a daily basis that consumers are being pressured to sign an AOB and now wish they had consulted their insurance company first,’’ said Dulce Suarez-Resnick of the Latin American Association of Insurance Agencies. “Insurers in South Florida have become so concerned about inflated claims and lawsuits that it’s impacting the availability and affordability of property insurance. That’s alarming for everyone, especially consumers.’’

Assignment of Benefits abuse has become widespread in South Florida and is quickly spreading. Statewide, the number of AOB lawsuits has grown from 9,424 in 2005 and 2006 to 92,521 in 2013 and 2014. In fact, state-run Citizens Property Insurance Corp. was recently forced to raise insurance premiums more than 8 percent in areas of South Florida because of the steep rise in lawsuits stemming from non-weather-related water damage claims. Citizens said dubious water damage claims and AOB lawsuits were the single reason why rates went up in Miami-Dade County, where water loss claims now account for more than half of every premium dollar collected. Otherwise, nearly all of the policyholders would have seen a rate decrease.

“Every honest contractor in the state of Florida should be concerned about Assignment of Benefits abuse and its impact on the insurance market,’’ said Cam Fentriss, a representative for the Florida Roofing and Sheet Metal Contractors Association. “Contractors don’t need an AOB to get paid by insurance companies, and anyone who pressures homeowners into signing one gives a black eye to our entire industry of hardworking professionals. We fully support reforming AOB.’’

Consumer Federation of the Southeast Offers Tips for Safe, Smart Holiday Shopping

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Consumer Federation of the Southeast Offers Tips  for Safe, Smart Holiday Shopping

As shoppers make the yearly mad dash to the holiday shopping finish line, the Consumer Federation of the Southeast (CFSE) has timely words of caution to help consumers make sure it’s truly a “season of peace.”

With retailers predicting a 3.7 percent increase in holiday sales this year, Consumer Federation Executive Director Jennifer West says consumers should be careful to keep grinches from stealing their holiday cheer.

“The well-informed consumer can avoid falling prey to overspending, scams and cybercriminals this holiday season,” West said. “By heeding these tips, consumers will be able to spend the holidays enjoying family and loved ones, not worrying about picking up the pieces from looming debt or stolen joy.”

The Consumer Federation of the Southeast is the leading voice for more than 98 million consumers in the nation’s fastest growing region. To get through the last week of the holiday gift-giving season free of crisis, buyer’s remorse and holiday shopping hangovers, the Consumer Federation offers these useful tips:

  • Set a budget and stick to it. Make a list and check it twice; write down who you want to purchase gifts for and how much you plan to spend. Most importantly, budget responsibly – don’t break the bank, and pay your bills first. There is no gift worth going into debt for. Consider using cash, which makes the purchase price more real. Cash is more likely to you keep within budget — and away from credit cards and interest. To shop online, you can use cash to purchase an American Express, Visa or similar gift. This will protect you from fraud and theft while keeping you within your set dollar limit.
  • Shopping around is just a click away. While time may not be your friend at this point of the season, the Internet is. Savvy shopping is easier than ever, with a world full of information right at your fingertips. Even if you’re not looking to make your purchases online, a quick Web search of what you’re looking for will help you quickly identify how to get the most bang for your buck. And remember, many stores are willing to sell an item at their competitor’s price – or even lower. So research store policies on price matching (and coupons) before leaving home for your favorite local retailer.
  • Stay cyber secure. Online shopping is a popular and convenient option, especially if you want to avoid crowds and long lines. If you’re among the two-thirds of Americans who have smartphones, you’re practically carrying the stores right in your pocket. But be careful where you choose to do your online shopping, as making purchases on a public WiFi network is risky – it may be convenient, but it’s not always secure. Stay safe and make your online purchases from home or through a Virtual Private Network installed on your computer or mobile device. Try to buy online only from secure web sites (look for “https” in the web address) and use complex passwords that you change often.
  • Avoid scams. Stay off the fast track to a not-so-happy holiday by taking proactive steps against scams. If social media or email bring you an unsolicited deal that seems too good to be true, it’s probably a scam. Seek out online reviews of dubious websites, deals or retailers and include a keyword such as “scam” in your search. If you come across complaints, you’ll have to weigh whether the risk is worth the investment. Remember that it’s always best to buy from trusted retailers with secure websites and reputable track records for shipping – especially as your shopping deadline draws near. Finally, save copies of order numbers, refund and return policies, and warranties.

“For countless Americans, the holiday season is truly the most wonderful time of the year. By following these simple tips, consumers can keep it that way and avoid the proverbial lump of coal in their stocking,” West said.

Consumer Federation of the Southeast Names Jennifer West Executive Director

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Consumer Federation of the Southeast Names Jennifer West Executive Director

The Consumer Federation of the Southeast (CFSE), the leading voice for more than 98 million consumers in the nation’s fastest growing region, today announced that long-time advocate Jennifer West has been named as the organization’s new executive director.

West, who brings an extensive history of business, nonprofit and campaign work in California, was selected to succeed Walter Dartland, Florida’s foremost consumer champion who founded CFSE in 2003. Dartland transitions into a new role as director emeritus of the not-for-profit consumer advocacy group, which works to establish a vigorous, pro-consumer agenda built on public awareness, consumer education and coalition-building.

“I’m excited that this new opportunity enables me to work to improve the lives of consumers across the Southeast,” West said. “Under the expert leadership of a true consumer legend, the Consumer Federation has built a deserved reputation for fighting for consumers, identifying and solving problems and building public awareness. It’s a privilege to follow in Walt Dartland’s footsteps and continue this important work.”

CFSE advocates on behalf of consumer interests across 11 Southeastern states. It is a member of the Consumer Federation of America, but operates independently and determines its own priorities for advocacy.

West previously served as owner of the California-based J. West Group, an independent marketing, public relations and political campaign consulting firm. Advocating on behalf of clients, West served as a spokesperson to numerous local planning commissions, City Councils, School Boards, County Board of Supervisors, the media and the public. She led award-winning campaigns that led to improved schools, roads and infrastructure. She is also a past chairwoman of the Board of Directors of the Merced (CA) Chamber of Commerce.

“I’m tremendously proud of what we have built at the Consumer Federation, and I am most eager to support Jennifer as she guides it in new ways to best benefit consumers,” Dartland said. “I know her experience, leadership skills and commitment to excellence will carry our vision for years to come.”

West lives in Tallahassee, Florida. She and her husband have two grown sons.

Online sellers beware: Fraudsters faking PayPal emails

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Every day, millions of consumers turn to marketplaces like eBay, Craigslist, and other websites to sell products online. In the vast majority of transactions on such sites, the buying and selling of products happens without a hitch. However, has recently received a significant number of complaints from consumers reporting that they are being scammed when attempting to sell their products online.

The complaints indicate that after the seller and buyer contact each other to arrange payment via PayPal, the seller receives an email, allegedly from PayPal, confirming the payment. Once the confirmation email is received, the seller ships the items to the buyer — who is actually the perpetrator of the scam.

Although it appears to be a normal transaction in the world of online shopping, the twist is that the PayPal confirmation email is a fake. Eventually, the seller realizes the money they should have received through PayPal is not in their account. By the time the victim realizes they have been scammed, the con artist buyer has already walked away with the product.

The story we received from a consumer in West Virginia who lost her iPhone 5S is typical of this scam:

“I received an email notice from eBay that an item I had for sale had sold. I sent an invoice through Ebay to the buyer with the total amount for the purchase including the item and shipping costs. I received an email from PayPal saying that the payment had been received and that I should send the item. … I shipped the item via UPS to the address provided on both the eBay notice and the PayPal notice. After two days, the payment still had not cleared into my PayPal account. … The next day, I received an email from eBay stating that the buyer I had sold my item to was fraudulent and had hacked the user’s account. By then, my item had already been delivered and I was unable to retrieve it.”

Victims of this type of fraud have reported losing iPads, iPhones, Nike Air Jordan shoes, cameras, jewelry, wedding dresses, and even cars. These scammers are incredibly deceptive, and consumers should be on the look out for any signs of this type of scam. Here are some tips on how to spot the scam and avoid becoming a victim:

  • When you receive the confirmation email from PayPal, log in to PayPal directly (not through the link in the confirmation email) to check the account and ensure that the funds arrived. Only ship the item when you have confirmed that the funds are in your PayPal account.
  • Make sure you review the buyer’s profile on eBay. If there are negative or no comments, that may be cause for concern. Think twice before doing business with them.
  • When applicable, finish the deal in the marketplace where you started it. When shopping or selling on eBay, for example, never finish the sale “offline” with a buyer or seller. Many such sites have protections built into them that no longer apply if users complete the transaction elsewhere.
  • If a buyer is requesting that you wire them money for shipping, insurance, or courier fees, it is most likely a scam. DO NOT wire them money.
  • Do not let the buyer pressure you into shipping your item directly after you receive the PayPal confirmation email. They are most likely trying to get you ship the item before checking PayPal for further confirmation.
  • If you suspect that the buyer is attempting to scam you, report them to the eBay Security Center, your local authorities, and

Walter Dartland: Will your next car be a rebuilt wreck?

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Years of lobbying to eliminate a longstanding and critical component of Florida consumer protection may soon pay off for big insurance companies and salvage auto auction corporations.


Today, Florida law requires a total-loss vehicle that has damage of more than 80 percent of its retail value to receive a Certificate of Destruction, deeming it to be destined for dismantling or destruction. Although many of these vehicles cannot be returned to a safe condition, Senate Bill 754/House Bill 7063 would make it much easier to put such vehicles back on the road.


Consumers in all states should expect their title and branding laws to protect their safety and welfare, and their pocketbooks, by requiring these wrecks to be taken off the road. After years of efforts to change this law, the businesses that stand to gain have fashioned a “compromise” that creates two classes of vehicles for purposes of Certificate of Destruction status.


Under this proposed law, severely damaged vehicles seven years old or newer with a retail cost of at least $7,500 will be considered nonrepairable only if the owner or insurance company determines that the estimated costs of repair are 90 percent or more of the cost of the vehicle. To be branded nonrepairable, vehicles more than seven years old must be damaged to the extent that the only value is for parts or scrap, making them essentially immune from nonrepairable branding at the determination of the owner or insurer. With the average age of the vehicle on the road today at almost 11½ years, this subjective definition could exempt most of the vehicles registered in Florida.


Last year, the salvage vehicle auction companies that sell damaged vehicles on behalf of the insurers — and keep a percentage of the sale price — testified in the Florida Senate that a repairable vehicle typically sells for $1,500 to $2,000 more than one with a nonrepairable title. This extra profit for insurers and salvage auctions provides the motivation for insurers pushing to exempt many salvage cars from nonrepairable branding.


There is a well-documented history of such abuses. After Hurricane Katrina, State Farm Insurance admitted to avoiding branding and then reselling as many as 30,000 vehicles damaged in the storm. As a result, new owners were unaware of their vehicles’ histories.


A consumer who purchases a severely damaged salvage vehicle that cannot be made safely operational will have the daunting task of finding a remedy via the courts. As a longtime consumer advocate and a former Florida deputy attorney general who helped draft and get Florida’s Lemon Law passed, I know that for most consumers — especially minority and low-income consumers who would become the victims of the proposed change — this is an insurmountable obstacle. There is no Lemon Law remedy under these circumstances.


Proponents of bills like these claim that they are looking out for consumers who may want to keep or repair their older, lower-value damaged vehicles. In fact, this legislation has no impact on branding when a car is repaired and kept by the consumer. The real issue seems to be an effort by insurers to avoid branding the most catastrophically damaged vehicles as nonrepairable after they pay off a claim and take possession of a total-loss vehicle.


Recently, ABC News followed the sale of a single Hurricane Sandy flood loss vehicle, and traced it to titling and branding issues that originated with both an insurer and its contracted salvage auction company. In its seven-month investigation, ABC found Sandy-damaged cars turning up on used car lots across the country. Furthermore, the insurance company that handled the vehicle identified in the ABC News story finally admitted to handling 174 other New Jersey vehicles in the same manner, but refused to comment on whether any of the remaining 3,698 cars the company insured and declared as total losses as a result of Sandy were also sold with unbranded titles.


The current requirement for a Certificate of Destruction is a very important section of the statute, created through extensive meetings and discussion among consumers, law enforcement, the auto recycling industry, the insurance industry, auctions and other stakeholders. The law has provided substantial protection for consumers. Legislators should keep these protections in place.


Walter Dartland is executive director of the Consumer Federation of the Southeast.


New York Times: Skip the Supplements

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PHILADELPHIA — PARENTS whose children are admitted to our hospital occasionally bring along something extra to help with their care: dietary supplements, like St. John’s wort to ameliorate mild depression or probiotics for better health.
Here’s the problem: The Joint Commission, which is responsible for hospital accreditation in the United States, requires that dietary supplements be treated like drugs. It makes sense: Vitamins, amino acids, herbs, minerals and other botanicals have pharmacological effects. So they are drugs.
But the Food and Drug Administration doesn’t regulate dietary supplements as drugs — they aren’t tested for safety and efficacy before they’re sold. Many aren’t made according to minimal standards of manufacturing (the F.D.A. has even found some of the facilities where supplements are made to be contaminated with rodent feces and urine). And many are mislabeled, accidentally or intentionally. They often aren’t what they say they are. For example:
In 2003, researchers tested “ayurvedic” remedies from health food stores throughout Boston. They found that 20 percent contained potentially harmful levels of lead, mercury or arsenic.
In 2008, two products were pulled off the market because they were found to contain around 200 times more selenium (an element that some believe can help prevent cancer) than their labels said. People who ingested these products developed hair loss, muscle cramps, diarrhea, joint pain, fatigue and blisters.
Last summer, vitamins and minerals made by Purity First Health Products in Farmingdale, N.Y., were found to contain two powerful anabolic steroids. Some of the women who took them developed masculinizing symptoms like lower voices and fewer menstrual periods.
Last month, researchers in Ontario found that popular herbal products like those labeled St. John’s wort and ginkgo biloba often contained completely different herbs or contaminants, some of which could be quite dangerous.
The F.D.A. estimates that approximately 50,000 adverse reactions to dietary supplements occur every year. And yet few consumers know this.
Parents of children admitted to our hospital often request that we continue treating their child with dietary supplements because they believe in them, even if that belief isn’t supported by evidence. More disturbing were the times when children were taking these supplements without our knowledge. Doctors always ask parents if their children are taking any medicines. Unfortunately, because most parents don’t consider dietary supplements to be drugs, we often never knew about their use, let alone whether they might react dangerously with the child’s other treatments.
The F.D.A. has the mandate, but not the manpower, to oversee the labeling and manufacture of these supplements. In the meantime, doctors — and consumers — are on their own.
Our hospital has acted to protect the safety of our patients. No longer will we administer dietary supplements unless the manufacturer provides a third-party written guarantee that the product is made under the F.D.A.’s “good manufacturing practice” (G.M.P.) conditions, as well as a Certificate of Analysis (C.O.A.) assuring that what is written on the label is what’s in the bottle.
The good news is that we’ve been able to find some vitamins, amino acids, minerals and a handful of other supplements that meet this standard. For example, melatonin has been shown to affect sleep cycles and has a record of safety, and we identified a product that met manufacturing and labeling standards.
The bad news is that this was a vanishingly small percentage of the total group. Around 90 percent of the companies we reached out to for verification never responded. They didn’t call us back, or their email or manufacturing addresses changed overnight. Of the remainder, many manufacturers refused to provide us with either a statement of G.M.P. or a C.O.A.; in other words, they refused to guarantee that their products were what they said they were. Others lied; they said they met G.M.P. standards, but a call to the F.D.A. revealed they had been fined for violations multiple times. Perhaps most surprising, some manufacturers willingly furnished information that their product didn’t meet standards — like one company that provided a C.O.A. showing that its product contained 47,000 International Units of beta-carotene, when the label stated 25,000.
Now, when parents in our hospital still want to use products whose quality can’t be assured, we ask them to sign a waiver stating that the supplement may be dangerous, and that most have not been studied for their effectiveness. “Use of an agent for which there are no reliable data on toxicity and drug interactions,” the waiver reads, “makes it impossible to adequately monitor the patient’s acute condition or safely administer medications.”
What can other individuals who are concerned about supplement safety do? They can look for “U.S.P. Verified” on the label — this proves the supplement has been inspected and approved under the United States Pharmacopeial Convention. Unfortunately, fewer than 1 percent of the 55,000 or so supplements on the market bear this label. The real answer is that, until the day comes when medical studies prove that these supplements have legitimate benefits, and until the F.D.A. has the political backing and resources to regulate them like drugs, individuals should simply steer clear.
For too long, too many people have believed that dietary supplements can only help and never hurt. Increasingly, it’s clear that this belief is a false one.
Paul A. Offit is chief of the division of infectious diseases at the Children’s Hospital of Philadelphia, where Sarah Erush is the clinical manager in the pharmacy department.


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But Surveys Reveal That Americans Reject Use of Credit Scores by Auto Insurers

Washington, DC — New research shows that, holding all other factors constant, the two largest auto insurers, State Farm and Allstate, charge moderate-income drivers with poor credit scores much higher prices than drivers with excellent scores. Yet, surveys show that, by a greater than two to one ratio, Americans reject insurer use of credit scores in their pricing of auto insurance policies. These are two key conclusions of the latest Consumer Federation of America (CFA) report on auto insurer treatment of lower income drivers, “The Use of Credit Scores by Auto Insurers: Adverse Impacts on Low- and Moderate-Income Drivers.”

“Americans reject auto insurer use of credit scores because they don’t think someone who’s had difficulty paying debts should automatically be charged higher auto insurance premiums,” said CFA Executive Director Stephen Brobeck. “After all, if drivers don’t pay their insurance premiums, insurers are not obligated to pay claims,” he added.

The CFA report asked three questions: First, do low- and moderate-income drivers tend to have lower auto insurer credit scores? Second, what is the impact of auto insurer use of these scores on actual prices? And third, do Americans approve of auto insurer use of credit scores in their pricing policies?

The report summarizes and references more than a decade’s worth of research by state insurance departments and the Federal Trade Commission that shows, without question, a strong positive relation between income and auto insurer credit scores – in general, the higher one’s income, the higher one’s credit scores. It also notes that in one study by the Florida Insurance Department, insurance agents with offices in low-income areas “unanimously condemned the use of credit scores because of the negative impact on lower-income customers.”

Auto Insurers Charge Higher Prices to Drivers With Lower Credit Scores

FICO estimates that, where permitted, 95 percent of auto insurers use credit scores in their pricing of insurance policies. However, this use is difficult to research because auto insurer websites do not permit consumers to input credit scores. So, CFA purchased price data related to credit scores for the two largest auto insurers, State Farm and Allstate, from Quadrant Information Services, an independent data services company that aggregates insurance premiums. These price data on minimum liability coverage, for a moderate-income, safe driving, single woman from ten major metropolitan areas, distinguished ten levels of credit score, from “excellent” to “worst.” The areas are Hartford, Baltimore, Atlanta, Louisville, Chicago, Houston, Denver, Phoenix, Oakland, and Seattle. The prices were for all State Farm and Allstate companies serving moderate-income ZIP Codes in the ten cities.

Analysis of these price data reveals a strong relationship between credit scores and annual auto insurance premiums, except in Oakland since California (and Massachusetts and Hawaii) prohibit auto insurer use of credit scores in their pricing. The prices charged by the State Farm companies serving the other nine cities were, in all cases, at least 94 percent higher for “poor” than for “excellent” credit scores with an average of 127 percent higher. In the Baltimore ZIP Code, for State Farm Mutual the prices ranged from $2,788 for a poor score to $1,030 for an excellent score. And for the State Farm F&C company, the prices ranged from $3,909 for a poor score to $1,467 for an excellent score.

The Allstate prices, which tended to be higher in the ten cities than the State Farm prices, also revealed large differences between prices for poor and excellent scores, though not as extreme as State Farm’s. In the Baltimore ZIP Code, for Allstate Indemnity the prices ranged from $1399 for a poor score to $1001 for an excellent score. And for the Allstate P&C company, the prices ranged from $2834 for a poor score to $1613 for an excellent score.

“It is simply not fair to ask the poor to pay more for auto insurance just because they’re poor,” said CFA Insurance Director J. Robert Hunter (a former Texas Insurance Commissioner). “Lower-income families tend to have lower credit scores just because they have less discretionary income and more insecure jobs,” he added.

Large Majority of Americans Reject the Auto Insurer Use of Credit Scores in Pricing Policies

In a 2009 survey commissioned by the Iowa Insurance Department that asked state residents whether people with poor credit scores should pay a higher auto insurance rate, only 12 percent agreed while 65 percent disagreed. A 2012 national survey commissioned by the Consumer Federation of America, and conducted by ORC International, had a similar finding. Only 31 percent thought it was fair for insurers to use credit scores in setting auto insurances rates while 67 percent disagreed, with 47 percent of the total sample strongly disagreeing.

“State legislators and insurance commissioners should follow the lead of those in Hawaii, California, and Massachusetts and prohibit auto insurers from using credit scores in their pricing,” said CFA’s Hunter. “That would help ensure equality of opportunity for lower-income drivers who often face more daunting financial challenges than drivers with higher incomes,” he added.

This report is the fifth in a series by CFA that studies the impact of auto insurer practices on low- and moderate-income drivers. Earlier research showed that auto insurers, who use factors such as occupation and education in setting auto insurance rates, discriminate against lower-income drivers. It also revealed that bad (unsafe) drivers from high-income areas often paid less than good (safe) drivers from moderate-income areas. All states but New Hampshire require drivers to carry liability coverage.

The Consumer Federation of America is an association of more than 250 non-profit consumer groups that, since 1968, has sought to advance the consumer interest through research, education, and advocacy. Hidden truth about penny auctions

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Hidden truth about penny auctions

Most consumers are familiar with online auctions – consumers bid up the price of an item until a timer expires. The high bidder at the end of the auction wins the item at the winning bid price. However, another form on online auctions, Internet penny auctions, have expanded at a drastic pace in recent years. While some of these sites are technically legitimate and legal, many of their business practices are questionable, and NCL is warning consumers to avoid them altogether.

How penny auctions work

In some ways, online penny auctions are essentially bidding Web sites not unlike auction sites like eBay. The key difference, however, is that all consumers who bid on penny auctions must make some sort of financial concession, regardless of whether they win or lose the auction. Here’s how penny auctions work:

  1. Generally, consumers must pay a registration fee before gaining access to bidding. This fee, while not required by all penny auction Web sites, is often expensive and undisclosed. An NBC News article discussing online penny auctions reports that one user on was charged $99 as part of the registration process. While this consumer did provide his credit card information, he did not authorize any payment.
  2. A prospective bidder then pays for bid credits. Users must purchase non-refundable bid packs, or bundles of credits, before they can begin bidding. Each credit entitles the user to one bid. The price of each bid pack varies by Web site, but a Business Insider article reports that one popular site,, sells different size bid packs­­ for anywhere between $24 and $480. Each bid costs approximately $0.60 and is non-refundable.
  3. The bidding begins at $0 and then increases by one cent each time someone bids automatically (hence the “penny auction” name). There is a countdown clock that restarts every time someone places a new bid. Some Web sites even allow users to set up automatic rebids if they are out-bid. A penny doesn’t seem like much, right? Wrong! The total price of the item “won” is determined by the number of bids so you could end up paying well over the value of the item you’re bidding on. Generally, if you lose the bid, you have also lost the money spent on the used bids.

Some sites allow users to apply a portion of the money spent on bidding towards buying the product at retail price. However, penny auction sites often misreport the retail price of items, so buyers could be overpaying regardless.

Penny auctions are a bit complicated. Becky Worley, a writer at Yahoo! News, illustrates the process quite simply in her recent piece, “Hidden Dangers of Penny Auctions:”

“I bought $60 in bids and got in on an iPad auction. I bid occasionally, trying to time it when the counter neared zero, but I quickly blew 40 bucks in bids. Someone always jumped in at the last second, usually someone using the automated bid setting. So I signed up for automated bids myself, and I was amazed. My $20-worth of remaining bids flew out in 24 seconds. And I didn’t win. My 60 bucks was goners! In fact, I watched the most aggressive bidder make 30 bids a minute for 2 more hours until the auction ended. 3600 bids, at a minimum 55 cents a bid. That’s $1980 for a device that costs retail $499, and that guy didn’t even win!”

What’s wrong with penny auctions?

Some critics of online penny auctions claim that they should be considered illegal online gambling sites. Others argue that most of the auctions are illegitimate or use illegal sales tactics.

There is some debate over whether penny auctions are actually just a form of an online casino. Generally, something is considered to be illegal gambling if it includes a prize, chance, and some sort of personal consideration (a potential loss). Critics such as Brian Kongszik of the Florida Council on Compulsive Gambling claim that the sites meet the definition of gambling. The prize is the potential low cost of the product, the chance is that the consumer will be outbid and will be unable to continue the bidding process, and the consideration is the money lost on registration and bid packs. Critics also claim it can be addictive like gambling.

Those in the industry, such as spokeswoman Jill Farrand, counter that while the auctions have prizes and consideration, there is no chance involved because people can decide whether or not they want to continue to bid. Farrand also claims that the consideration is not a factor because consumers can apply a portion of the money spent on used credits to buy the product at retail price.

It is very difficult for users to determine which penny auction sites are legitimate. For example, several state attorneys general have found that some penny auction Web site use software “bots” that automatically outbid people as the clock reaches zero, making it virtually impossible to win items at a reasonable price. Some of these “bots” even show a fake username in order to persuade consumers that they are bidding against a real person. This tactic was used by, a site that the Washington State Attorney General sued for using “bots” against consumers. The site had voluntarily shut down before the legal action, but it was still required to pay restitution to affected consumers as a part of a settlement.

In a case in Georgia, the Governor’s Office of Consumer Protection entered a settlement with because the company failed to “send a number of purchased products to consumers in a timely manner and failed to clearly and conspicuously disclose that consumers were purchasing bid credits when they registered.”

Other penny auction fraudsters use “shilling,” a process in which site owners have their friends bid in order to drive up prices and prevent consumers from winning. These sites are often used by scammers to steal the money paid in auctions without shipping the merchandise, sell financial information about users, or to simply place additional charges on credit cards without permission.

There are also reports of fraudsters running Ponzi schemes that convince consumers to invest in online penny auction Web sites. These criminals claim that the investors will receive payouts based on profits earned by the sites. Unfortunately, like all pyramid schemes, the payouts generally stop when the scheme becomes unsustainable. In one such example, people of Lexington, North Carolina were duped by Paul Burks and his $600 million scheme. Burks convinced potential investors that was immensely popular and was growing quickly. Unsuspecting investors (many of whom were families that took out second mortgages to invest) lost thousands of dollars when Burks could not get enough people to invest in the scheme. The Securities and Exchange Committee shut the scam down and is working to recover millions of dollars for the victims.

Avoid penny auctions

While online penny auctions may sound like an attractive deal at first, consumers should be very wary before handing over any money or credit card information. It is very unlikely that consumers will save any money by using the service to purchase goods, and it is difficult to know if you are using a legitimate site. The National Consumers League advises consumers to avoid these sites.

Further reading

  • Penny Auction Watch offers the latest news on online penny auctions. This excellent site was created by Amanda Lee, a consumer who was scammed by a penny auction and vowed to use her experience to inform others.
  • Report any suspicious activity immediately to our Fraud Center at

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