Tips on Avoiding Five (More) Consumer Problems

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Note: If you didn’t see my first story on the Federal Trade Commission’s top five sources of consumer complaints, be sure to check it out. This story is part two, showcasing complaints 6 – 10 from the FTC list.

Every year the FTC puts out a list of the top sources of consumer complaints. As you go through the list, you’ll understand how you might fall for some of these problems. Others you’ll wonder how anyone can be so dumb. But keep something in mind: Nobody is immune to being ripped off. Nobody. In addition, while you may not be vulnerable, you may know someone who could be, like an elderly aunt or a friend desperate for cash. So even if you don’t need protection, try to reach out and protect those who do.

Watch the following news story we recently did on complaints ranking in popularity from six through ten, then meet me on other side for more.

Here’s a closer look at the list, with more detail on potential problems and what you can do to avoid them.

Problem: Banks and Lenders

Complaints in 2009: 32,443

FTC description: Deceptive or predatory mortgage lending practices; problems with modification of mortgage terms; miscellaneous customer service and account issues with bank products, including fees and overdraft charges; etc.

How to avoid it: Today’s mortgage landscape is littered with victims who fell prey to deceptive and/or predatory lending. I’ve done lots of stories on this over the years. One example? Mortgage Help: Talk is Cheap. In that story I interviewed a person who said they were unaware their mortgage payment was going to adjust upward, to the extent their payments would become completely unaffordable. In another recent story I met someone who literally signed her house over to a scam artist masquerading as a foreclosure rescue specialist.

Fortunately, there’s an exceedingly simple two-part process for avoiding mortgage fraud and predatory lending. The first step is to shop around, then assume that if any single deal is much better than the others, it’s suspect. Step two is simply to read and understand things before you sign them. Obvious? Ask an escrow agent how many home buyers actually read mortgage notes prior to signing them. Answer: almost none. If you’re not going to read or understand this stuff, at least bring someone along that will.

For this story, we interviewed an F.B.I. agent who gave us tons of advice. Here’s the raw footage of our interview with her:

As for the other type of complaint in this category, issues with bank products and fees, if you hate banks, don’t use one. Credit unions and smaller local banks generally offer lower rates on loans, higher rates on savings, lower fees, and a better overall consumer experience. Check out Hate Your Bank? Three Steps to Ditch ‘em.

Problem: Advance-Fee Loans and Credit Protection/Repair

Complaints in 2009: 41,448

FTC description: The promise of a loan or credit card that requires you to pay a fee first; worthless credit card loss protection and insurance programs; the promise that accurate negative information can be removed from your credit file for a fee; etc.

How to avoid it: Don’t ever borrow from Payday (advance-fee) lenders. If you need a source of emergency cash, open a savings account with a credit union and start building your credit gradually by borrowing against your savings and repaying your loans. As for credit cards, you can find secured cards that don’t charge an upfront fee at search sites like the one I own, InterestMatters.com. I recently did a story called Are Credit Card Protection Plans Worth the Money? (hint: not often) that you should also take a look at.

As for paying someone to clean up your credit history: balderdash. I’ve done this story many times, as well as written about it in my latest book, Life or Debt 2010. Bottom line? There’s nothing that can be done to improve your credit history that you can’t do yourself for free. Check out this recent comment I made on that industry.

Problem: Prizes, Sweepstakes and Lotteries

Complaints in 2009: 41,763

FTC description: Promotions for “free” prizes for a fee; foreign lotteries and sweepstakes offered through the phone, fax, e-mail or mail; etc.

How to avoid it: Simple: don’t ever pay anything to win. Not gas money so Publisher’s Clearing House can deliver your check. Not income taxes. Not shipping. Nothing. Ever. Winning something means getting money, not paying money.

Here is raw footage of the interview we did with a Postal Inspector who explained how scammers attempt to keep you on the hook:

Problem: Credit Cards

Complaints in 2009: 45,203

FTC description: Account or billing issues, including interest rate changes, late fees, credit disputes, and overcharges; fraudulent credit card offers/phishing attempts; etc.

How to avoid it: Pass a law called the Credit Accountability, Responsibility and Disclosure Act to protect consumers from banking shenanigans like unfair rate changes and fees. Oh wait! Congress did that.Now let’s hope that this category of consumer complaint falls off the radar this time next year. As for fraudulent card offers and phishing: Don’t ever give your social security number out via email to anyone or any company at any time, period. If in doubt, use the phone and verify who you’re dealing with.

Problem: Internet Auctions

Complaints in 2009: 57,821

FTC description: Non-delivery or late delivery of goods; delivery of goods that are less valuable than advertised; failure to disclose all the relevant information about the product or terms of the sale; etc.

How to avoid it: Verify a seller’s identity to the best of your ability by talking to them. If you’re on eBay, avoid sellers who don’t have a long track history and/or a high rating. And always use a third party payment system, like PayPal or a credit card. If the merchandise is expensive (cars come to mind) have them inspected by a local expert of your choice, and try to use a third party escrow service. Here’s some info from eBay about escrow services.

Spread the Word!
Well, there you have it. Combine this with my first story and you’ve got 10 of the most complained about consumer issues in the country. Just think, if everyone simply followed these simple tips, the vast majority of consumer losses and complaints would be history… At least until the jerks too stupid or lazy to work for a living think of some other way to separate you from your money.

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