Consumer Protection
A guide to your rights and choices

AARP
January 2005

Contents
Introduction
Consumer Protection
Home Loans and Predatory Lending
Home Improvments
Reverse Mortgages
Power Plays
When You Have A Complaint or Need Help

introduction

Every moment of our day is filled with consumer goods and services. From the first cup of coffee in the morning until we turn off the last light each night, Americans spend millions of dollars on consumer goods. Consumers of all ages have a rich banquet of products from which to choose. Of course, with choices come challenges: Is this a legitimate offer, or a scam? Which is the best product or service for me? What can I do if something goes wrong?

In this booklet, AARP helps you answer some of those questions. The information here is based on AARP's consumer protection principles, which include:

• Fair play and fair practices that do not confuse or mislead.
• Clear, complete and accurate disclosure of information.
• A right to personal privacy and the ability to limit the use of personal information.
• Appropriate and adequate redress if consumers are wronged.

As consumers, we all want to find the best results with the fewest headaches. We hope this booklet and the resources it offers help you become a wiser consumer.

consumer protection

Trust in our fellow citizens is an important personal value, and trust in the market place is an economic necessity, but all too often our trust is violated. "Con" men and women want to gain our confidence and have us rely on their sincerity and expertise. They want us to act quickly and not check out the facts. We're deceived, swindled, scammed, or just plain ripped off. It can happen over the phone, at the front door, in the mail, on television, via the Internet, or at the store.

Although we've all heard the stories about fraud, it can be hard to spot fraud when it's happening. Protect yourself and your money. Take your time and get the facts before you open your wallet.

Before you...
...talk to telemarketers, remember that Congress estimates that U.S. consumers lose more than $40 billion annually to telemarketing fraud. Many legitimate companies and agencies do business by telephone, but as many as one in ten callers may be fraudulent. Consumers need a plan for how to end unwanted telemarketing calls quickly. Some say, "I don't do business over the phone," others say "Send me your material in writing." If you didn't make the call, don't give out any personal information.

There is a national Do Not Call registry that restricts telemarketing. You can add your phone number to that list by calling 1-888-382-1222, or by going to www.donotcall.gov. Once your number is on the registry for 31 days, most telemarketers should stop calling you. Unfortunately, fraudulent telemarketers won't obey the law and will continue to call you.

...enter that sweepstakes, know that buying a product will not improve your chance of winning, but it does improve your chances of getting on many more mailing lists. To reduce the number of promotions you receive, write to the Mail Preference Service. Contact individual mailers to say you want your name off their list and don't want your name sold or traded to other companies. Send copies of outrageous promotions to your state attorney general and to the U.S. Postal Inspection Service, and be wary of entering a contest with anyone you don't know or trust.

...lose your identity, guard your personal information. Identity thieves will pretend to be you and use your personal financial information to apply for loans, credit cards, or leases. The thief takes your good credit record and leaves bad credit in your name. According to the Federal Trade Commission, identity theft is the fastest-growing, white-collar crime in the United States. More than 700,000 people are estimated to become victims each year. The number of older victims grew more than 200% between 2000 and 2001. Consumers lose money and hundreds of hours clearing up their credit reports.

Criminals will go to great lengths to get your information. They may sound very convincing and try to confuse you by suggesting they're from a legitimate organization that you recognize. Consumers have told AARP about callers who said they are "from the bank" and "need to confirm your bank account number," or offer "credit card protection" and "need to know all your credit card numbers."

The approach also comes by e-mail. You might get an official-looking message from a business, claiming that their system crashed or that your account is expiring. They'll ask you to "re-enter" or "validate" your personal information. This is a scam called "phishing". To protect yourself:

• Don't give out credit card or bank account numbers over the phone unless you placed the call to a business you trust.
• Before giving out any personal information, be sure you know who's requesting the information. Hang up and call your bank or credit card company yourself to check on a caller.
• Carefully dispose of all papers that include your personal information. Shred charge receipts and credit card offers.
• Give out your Social Security number only when truly required.
• Reduce the number of credit cards you carry.
• Check your credit report for errors at least once a year.
• See who is watching you when you enter your PIN into bank machines.

The Federal Trade Commission has identity theft information at www.ftc.gov/idtheft, including where to report and how to get help if your identity is stolen.

Before you...
...give to a charity, be an informed donor. We all want to be generous, and we want our charitable donations to actually reach worthwhile causes. Some fundraisers are not what they seem. They may keep more of your donation than they turn over to the charity, or they may not represent a charity at all. Often after natural disasters, instant "charities" spring up, but their sole purpose is to make money for the fundraiser, not the victims. Before you donate:

• Get the charity's full name, address and telephone number. Beware of similar sounding names; don't assume you know this group because the name sounds familiar.
• Ask how much of your donation will go to the charity, and how much goes to fundraising costs.
• Check with your state attorney general or secretary of state to see if the charity is registered.
• Check a charity's rating by the Better Business Bureau's Wise Giving Alliance at www.give.org.

...earn money working from home, know that many of these heavily advertised business opportunities may cost you money, not help you earn it. Often promotions offer work servicing vending machines, stuffing envelopes, doing medical billing, or selling crafts. Watch for phrases like "easy work," "no risk," and "no experience." Before you send money, talk with other participants and get clear and complete written answers to these questions:

• What specific tasks will I be expected to perform?
• What quality standards must I meet for the products I produce?
• Do I have to purchase anything?
• How much work must I produce before I am paid?
• Do I have to sell anything, or market the product?

If you pay more than $500 to enter a business opportunity, the Federal Franchise Rule protects your rights. Learn more about your rights and where to report fraudulent offers at: www.ftc.gov/bcp/conline/pubs/invest/vending.htm.

...attend an estate planning or investment seminar, realize that you may not get a balanced presentation or good advice for your circumstances. Living trusts, annuities, promissory notes, and viatical settlements are hot topics for seminars. Often, the presentation is just a sales pitch for a particular investment product, or a way to get your address so a high-pressure salesperson can come to your home. One group claims it trained over 7,000 agents on "special" techniques to sell annuities to the senior market. Agents were told to play on fear, anger, and greed and gloss over the technicalities of the investment. According to a Wall Street Journal reporter who attended one of the training sessions, trainees were told that by sponsoring senior seminars, "you're creating problems and you tease them with the solutions" to encourage a follow-up meeting with a salesman. "Show them their finances are all screwed up so they think they have done it all wrong. This will make you money." Other promoters fraudulently claim they're affiliated with AARP, or got your name from AARP.

AARP does not sell or endorse any living trust product and does not work cooperatively with any company that promotes or sells such documents. AARP does not give its membership lists to such companies. You should be suspicious of mail that uses AARP to promote living trusts, reverse mortgages, and various insurance products. They're likely to be bogus.

Before you choose any of these products, explore the risks and ask how much commission the salesperson will earn.

• Living trusts. The greatest growth in sales of living trusts is to people who are least likely to need one, according to AARP research. A properly created living trust can be helpful if you must manage assets during a disability when a power of attorney won't work, or have children or grandchildren with special needs, or own real estate in more than one state. Frequently, living trusts are sold as the only way to avoid probate. However, there may be easier, cheaper ways to avoid probate than a living trust, and most people don't need to worry about probate or estate taxes. Find out about the probate process in your area. For more information, go to www.aarp.org and enter "living trusts" in the Search box.
• Annuities. This form of insurance product can be an appropriate part of your financial plan, but can have serious disadvantages for older investors. Annuities can be fixed or variable, immediate or deferred. They may come with different payout options, steep surrender charges, unexpected tax consequences, and hefty sales commissions. You should carefully investigate whether an annuity is the right investment for you. For more information, see: Special Report: Annuities and Older Adults, www.help4srs.org/annuitytruth.htm.
• Promissory notes. Newly formed or expanding companies sometimes promise to pay high interest rates to investors willing to lend them money. These promises to pay are promissory notes. Most legitimate companies do not sell promissory notes to the general public. Don't be fooled by the high interest rates or guaranteed return. They can be very risky investments. The insurance agents who sell them may not be fully aware of the risk or may not be licensed to sell securities.
• Viatical settlements. When you buy a viatical you purchase the life insurance policy of a terminally ill person at a discounted price. Usually the purchase is made through a broker. The ill person gets needed cash; the investor gets the full value of the insurance policy when the ill person dies; and the broker gets a commission. As beneficial and worthwhile as this investment scheme sounds, many things can go wrong. The insured person may live longer than expected or may not really be ill at all, and the investor may have to pay the premiums for many years to protect the investment. The viatical broker may go out of business along with your investment. "Guaranteed" returns may not materialize. Some brokers may sell the same policy to many investors. For more information, go to www.aarp.org and enter "viatical" in the Search box.
  
  

Purchasing funeral or burial goods and services. A traditional funeral and burial can be one of the most expensive purchases an older American makes. Estimates of the average cost, nationwide, of a traditional funeral range from $5,200 to almost $10,000. Making arrangements for yourself or a loved one will challenge your consumer savvy and your emotions. Knowing your options before the time of need will make matters easier. Comparing prices between at least two providers is a useful way to find the best options.

A funeral is a combination of merchandise and services. Under Federal law (the Funeral Rule), all funeral homes are required to provide consumers with three price lists showing the price of their services, caskets, and burial containers. They must also tell you prices over the phone, and some will mail a list. Services include the funeral director's fee, transportation and care of the deceased, viewing facilities and other items. Caskets are made from cardboard, metal or wood; and some can be rented. Outer burial containers are placed around a casket, and cemeteries usually require them to prevent the ground from sinking as the casket deteriorates. You must use all three lists to calculate the total cost of a funeral.

A burial is also a combination of merchandise and services. However, the Funeral Rule does not cover merchants who sell cemetery goods and services, so those merchants are not required to give price lists to consumers. Cemetery goods and services include the gravesite, maintenance costs for the gravesite, a marker, and cost to install the marker. There'll be options such as which area of the cemetery you prefer or whether you want a stone or bronze marker. Take time to gather the details and compare prices in at least two cemeteries. AARP found that some cemeteries did not readily give price information to older shoppers.

What are the options if you don't want a traditional funeral and burial? You may prefer cremation, either with or without a funeral beforehand, or an immediate burial, or even a body donation for medical research. Cremation is an increasingly popular alternative to in-ground burial; in 2000, 26% of all final dispositions were cremations. You can arrange for cremation with or without the help of a funeral director. You can find a local provider in your phone book. Immediate burial is a simple, low-cost funeral without a ceremony. To find out more about donations for medical research, contact one of the universities listed at www.med.ufl.edu/anatbd/usprograms.html.

You can choose all your arrangements and make your wishes known without having to pay in advance. AARP encourages consumers to pre-arrange, but not necessarily to pre-pay. You can face complications later if you pre-pay then change your wishes, move out of the area, or if the provider has financial troubles. If you want to fund your funeral in advance, think about a special bank account or other investments. There are several ways to set aside money for your funeral that do not require giving money to a funeral provider. For example, you can deposit money in a special bank account, called a Totten trust, or pay-on-death account. Immediately after your death, the funds will pass to the person you selected. Talk with your attorney or financial planner to learn more.

If you have a complaint against a funeral home, contact: Federal Trade Commission, Consumer Response Center, Washington, DC 20580, 877¬FTC-HELP (877-382-4357) TDD/TTY: 866-653-4261, www.ftc.gov.

Before you...
...purchase a hearing aid, find a professional who'll assess your needs and make a recommendation to fit your circumstances. An expert should sort through the many hearing aid makers, styles, sizes and options to find the product that's best for you.

Over the years, some manufacturers have made inflated claims about their products' ability to screen out certain noises, or restore hearing ability. Ask an expert about the real improvements a product can make. A "hearing aid dispenser" is a professional who gives hearing health care and sells hearing aids. Your hearing aid dispenser could be an audiologist, a hearing aid specialist, or a hearing aid dealer. Interview several dispensers to learn about their education, experience, the follow-up care provided, and the range of products they offer. Ask whether you can have a trial period with the aid you select. There may be a fee for this arrangement.

Both states and federal laws govern hearing aid sales. Contact your attorney general or the FTC to learn more.

home loans and predatory lending

Get the facts before a bad loan gets you. Don't be the next person to say, "They didn't tell me I could lose my home."

Before you...
...borrow money on your home's equity - think twice! People borrow on their homes for many reasons: to make repairs or improvements, consolidate debts, pay off medical bills, or for other reasons. Sometimes there may be benefits to using your home equity when you borrow. But if the loan costs too much, the benefits disappear ... and so could your home.

Be sure to talk with an attorney, financial advisor, housing counselor, or someone else you trust before taking out any sort of home loan. This is especially important for high-cost home loans, because you can lose your home if you can't make the monthly payments.

There are a growing number of aggressive, dishonest lenders who advertise their services to homeowners just like you. These lenders use smooth-talking salespeople to trick you into taking out a loan that's good for them, but bad for you. Before you know it, you may have a you can't afford, with high interest rates and outrageous fees.

Be cautious of offers that come by telephone, mail, e-mail, and even to your door. Beware of offers that seem too good to pass up or that are good "for only a limited time." Most reputable mortgage lenders don't solicit business over the phone or at your front door. Be suspicious of anyone who contacts you first.

Is a loan against your home the right thing to do now? Depending on your age and your needs, a reverse mortgage might be a better option for you (see Reverse Mortgages). If you have problems with your credit history, it can be hard to find a good deal on a loan. You may need to work on repairing your credit before taking a loan. If you want to consolidate credit card debt, think hard before using your home to get the funds. A credit card company can't foreclose on your home if you don't pay your credit card bills, but a mortgage lender can.

If you're considering borrowing against your home:

• Shop around for lenders and loans. Start by contacting local banks and credit unions. Get several different offers and pick the loan that is best for you-not for the person making the loan. Don't rely on the salesperson for all of your information. Remember, the salesperson will make money if you take the loan. Talk to an attorney, a housing counselor, trusted friend, or family member before you sign anything. Contact your local consumer protection office and state attorney general to see if there have been complaints against the company you're considering.
• Slow down. A lender who pressures you, offers next-day approval, or wants to take your application over the phone may be trying to rush you into a bad deal.
• Check the details. Before you borrow, know exactly what the loan includes. You have a legal right to know the total cost of your loan. Lenders know that lower monthly payments are attractive, but don't be distracted by a low monthly payment. It could be part of a loan with a huge balloon payment that comes due at the end of the loan. Watch for hidden fees and unexpected charges. Tell the lender they need to explain each charge and fee.
• Read carefully. Whenever you borrow money, sign only if you're confident you fully understand your obligations. Never sign a document with blank spaces. Insist on all spaces being filled in before you sign.
• Know when to walk away. You can back out of a loan transaction any time before you sign the contract. If there are surprises, you should stop the process. If you've signed a contract that uses your home as security, the Truth in Lending Act allows you to change your mind, for any reason, within three business days of signing the contract. If you take a high-cost loan, understand your rights and legal protections. The Home Ownership and Equity Protection Act (HOEPA) provides specific rights and protections for loans with a high interest rate, and high points and fees. These are known as HOEPA loans. With a HOEPA loan:
• The lender must give you certain disclosures at least three business days before closing the loan.
• The lender cannot make a direct payment to a home improvement contractor.
• Your loan can't have a balloon payment due in less than five years.

If you think you have a problem loan, get help. Consult a housing counselor or attorney to review your loan documents. Contact your county or state office of consumer affairs, or your state attorney general's office. You can find their numbers in the government pages of your phone book.

Report fraud to the Federal Trade Commission at www.ftc.gov or 877-FTC-HELP (877-382-4357).

A broker does not lend you money; a broker charges you a fee to find a lender for you. Some brokers get paid by a lender, and the lender will charge you a higher rate or a fee to cover its costs. If you use a broker, you will pay for the broker one way or another.

Beware the home improvement salesperson who says, "I was just in the neighborhood." This kind of sales approach is standard practice for scam artists who'll most likely take your money and disappear, or do such a poor job that you wish they had disappeared.

home improvements

Before you...
...improve your home, take time to find the right contractor and the right financing. Your home is worth a lot to you, but dishonest home contractors see the value in it, too. Americans spend billions of dollars every year for home improvements. Usually the work is done well, but each year many homeowners are victims of poor, over-priced, or never-completed work. Some people posing as home repair specialists are simply con artists looking for easy money. Others are "front men" for predatory lenders.

As you consider home improvements,

• Know exactly what work you want done and how much you can afford to pay. Make a list of these details and use them when you interview contractors.
• Choose a reliable home improvement contractor. You can get recommendations from friends or neighbors who had similar jobs done. Deal only with contractors who can prove they're licensed, bonded, and have insurance. Get two or three detailed, written estimates from different contractors. Check with the local consumer protection office and the agency that licenses contractors to see if there are any complaints against the contractors.
• Get several estimates for financing and don't be pressured to get your financing through a particular company. Be very cautious if the contractor offers to help you get financing.
• Be sure you understand the terms of the financing agreement, and don't be pressured into signing quickly.
• Put everything in writing and keep a copy. You want a well-written and detailed contract to make sure that you get the job you expected for the price you agreed upon. It's a good idea to state clearly in the contract that you'll pay in installments as the work progresses, so you have more control over job performance.

Remember: You have legal rights. If the contract was signed somewhere other than the contractor's permanent place of business, you can cancel the home repair contract by sending a letter within three business days. You can also cancel the financing by sending a letter within three business days-and maybe even later, if your home is used as security for the loan.

reverse mortgages

Before you...
...get a reverse mortgage, find out how it works, who's eligible, what you'll get, and whether it's right for you. A reverse mortgage is a home loan that you don't have to pay back for as long as you live in your home. The loan and interest are repaid only when you die, sell your home, or permanently move away. Only homeowners who are at least 62 years old are eligible.

A reverse mortgage can be paid to you in one lump sum, as regular monthly income, or at different times and amounts. You don't make a monthly payment, and the amount you owe grows larger over time, but by law, you can never owe more than your home's value at the time the loan is repaid. When you have a reverse mortgage, you continue to own your home, so you must continue to pay for property taxes, insurance and repairs.

Help is available to pay for energy and telephone service. Many states have programs like Florida's Lifeline Assistance and Linkup that provide telephone saving programs for low-income homes.

power plays

We all need power - electricity, natural gas, and gasoline - and we all have the power to shop for the best deals. Every household spends money on utilities. In fact, on average, families spend a greater share of their income on utility costs than on health care or property taxes. Today, almost every U.S. household has phone service too.

Before you...
...choose between new utility suppliers, understand what your choice means. It used to be that consumers had no choice: you got electricity from the power company and natural gas from the gas company. Now, in most states, you can shop among suppliers and may get better rates. Your local utility company will probably continue to deliver your electricity or gas over the same transmission systems. In choosing among suppliers, look at more than price. See whether you must pay deposits, taxes, and fees to switch services or to get out of the contract. See if there's a budget plan so you can spread your utility costs evenly each month. Always get a written contract with all terms included.

... pick a new phone or phone service, look over your choices. Today you can pick among dozens of local and long distance service providers. Phone cards can be used for long distance, but may not be a good deal for local calls. If you have a wireless phone, you may not even need a hard-wired phone or a long distance carrier. To get the right phone service, your first step is to accurately estimate the kind of calls you make to where and when. Do you make most of your calls during the day around town, or do you like to call your family long distance on the weekends? Choosing can be confusing because prices are often based the provider's definition of "local" versus "long distance," and when you make calls. Signing a contract for wireless phone service requires you to know about roaming charges and service maps.

When you shop, get details for several offers, and see if there's a special plan that would work best for you. All companies must post the rates for their various plans on their websites.

when you have a complaint or need help

If you have a problem with a consumer product or service, the first place to go is back to the merchant or service provider. Collect your documents (receipts, warranties, contracts, etc.) and be ready to describe the problem and the solution you desire. If you're not satisfied with the result, you may need to contact someone higher up in the company, go to the manufacturer, or work through a consumer protection agency or private attorney. Many resources are listed in this booklet, and you can find more in the government pages of your phone book, or on the Internet. Most states have agencies that handle consumer complaints.

If you think you've been defrauded or are dealing with a criminal, contact a law enforcement agency. Your local police, sheriff, or district attorney may assist you or refer you to other agencies. Federal agencies typically don't handle individual complaints, but it's important to report the problem so they can take action against a company.

If you want to talk to a private attorney, you can get referrals from a local bar association. Depending on your age and income, you may be eligible for help from legal aid.

Visit: www.aarp.org

Write: AARP, 601 E Street, NW, Washington, DC 20049

Call: 888-OUR-AARP (888-687-2277) TTY 877-434-7598

AARP is a nonprofit, nonpartisan membership organization that helps people 50+ have independence, choice and control in ways that are beneficial and affordable to them and society as a whole. We produce AARP The Magazine, published bimonthly; AARP Bulletin, our monthly newspaper; AARP Segunda Juventud, our bimonthly magazine in Spanish and English; NRTA Live & Learn, our quarterly newsletter for 50+ educators; and our website, www.aarp.org. AARP Foundation is our affiliated charity that provides security, protection, and empowerment to older persons in need with support from thousands of volunteers, donors, and sponsors. We have staffed offices in all 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands.