CONSUMER PROTECTION

Tennessee Citizen Action is the only organization the state fighting exclusively for consumer rights. We passed the first legislation regulating the predatory lending practices of mortgage lenders, and we are working the limit the harmful activities associated with title and payday loans, check cashing companies, and tax advances. We work for environmental protections, food safety and ethical business standards.

The Subprime Loan Fiasco

The Los Angeles Times is reporting yet another chapter in the widening “credit crunch” sweeping the nation and placing the subprime mortgage “industry” in danger. The focus in this particular story is on the collapse of companies specializing in these ill-advised loans, the loss of jobs held by people who facilitated them, and the attempt of Bank of America to acquire a major stake in one of the nation’s subprime lenders.

Frankly, financial institutions and reporters who specialize in business would do better to focus on the millions of Americans who have been sold a bill of goods by predatory mortgage lenders who, in a consumer-be-damned, reckless and unethical pursuit of massive profits, awarded long-term home loans to individuals and families who had little hope of being able to repay them. Not only have they been irresponsible in granting the loans, they have utilized every trick in the book to sock it to the borrowers: balloon notes; no-down-payment loans; prepayment and refinancing penalties; interest-only loans; negative amortization; excessive closing costs, which are themselves financed and refinanced; “flipping” loans to strip equity out of homes; and a bewildering array of fees, penalties, “points” and other hidden costs.

Sadly, rather than keeping their distance from these predatory lenders, the nation’s banks have far too often been enablers of the companies which are responsible for this fiasco and of the practices which have placed so many people at risk. Now, one of the nation’s largest banks is seeing the credit crunch and the imminent collapse of one of the largest subprime lenders as an “opportunity” rather than as a lesson in anti-consumer activity that should be avoided and condemned.

Tennessee Citizen Action was a major force in passing this state’s first ever anti-predatory lending law in 2006. While that was an historic accomplishment, the law would have been even stronger had it not been for the aggressive opposition of very well-financed special interests. They even blocked a provision requiring mandatory counseling for potential borrowers because of the minimal cost to the lenders and because of the possibility that, were consumers fully aware of the fine print in their contracts, that might decide against a predatory loan.

We intend to work toward an even stronger law that will protect families, senior citizens and working Tennesseans. With your continued support, we can succeed in that effort.

Bill Mason

Executive Director

Tennessee Citizen Action

1808 West End Avenue, Suite 1206

Nashville, TN 37203

615-321-2106

615-321-2109 (FAX)

bmasontnca@bellsouth.net

BofA throws Countrywide $2-billion lifeline

The Calabasas-based lender is back on firm footing, but others caught in the sub-prime crash shed 4,000 jobs.

By E. Scott Reckard, Elizabeth Douglass and Tom Petruno
Los Angeles Times Staff Writers

August 23, 2007

Bank of America Corp. threw home-loan colossus Countrywide Financial Corp. a $2-billion lifeline Wednesday in a vote of confidence that could stabilize the reeling mortgage company. The deal came as cash-starved sub-prime mortgage lenders across Southern California announced more than 4,000 layoffs nationwide.

Bank of America, which has the largest retail banking operation in the country, for some time has wanted to expand its mortgage business and has been seen as interested in acquiring all of Calabasas-based Countrywide. Wednesday's deal puts BofA, based in Charlotte, N.C., in a strong position to accomplish both goals.

The transaction, which was announced after the stock market closed, also gives BofA a chunk of the country's largest mortgage lender at what some might consider a bargain price. For its $2 billion, Bank of America received preferred stock that pays a 7.5% annual dividend and can be converted into Countrywide common stock at $18 a share. If the stock is converted, BofA would own 16% of the mortgage company.

Countrywide has been badly squeezed by the credit crunch ravaging the mortgage industry, as Wall Street lenders have cut off funding and investors around the world who once eagerly gobbled up mortgage-backed bonds have turned up their noses at anything but securities issued by government-sponsored mortgage buyers Fannie Mae and Freddie Mac.

Countrywide had been reeling since reporting Aug. 9 that credit-market disruptions could hurt its financial condition.

The widening credit crunch has stemmed from a wave of defaults on sub-prime mortgages -- loans made to people with poor credit. And there was little good news Wednesday in the sub-prime business, where the layoff tide became a tsunami.

Since the start of the year, more than 40,000 workers have lost their jobs at mortgage lending institutions, according to outplacement firm Challenger, Gray & Christmas Inc.

***For the entire article, click this link:

http://www.latimes.com/business/la-fi-mortgage23aug23,0,2495205,print.story?coll=la-home-center

CITIZEN ACTION WANTS REVIEW OF MALPRACTICE INSURER

Tennessee Citizen Action has asked Tennessee Commerce and Insurance Commissioner Leslie Newman to consider whether the state's largest medical malpractice insurer - State Volunteer Mutual Insurance Co. - may still be over-charging Tennessee's physicians for liability coverage.

SVMIC, which supplies liability coverage to the vast majority of physicians in the state, recently filed a rate request with Commissioner Newman's office to lower its malpractice rates by 4.2 percent overall. The filing indicates that some high-insurance-cost medical specialties - including OB-GYNs - will see reductions of as much as 15 percent.

"This lower price is great news for Tennessee doctors, and for everyone who worries about the high cost of health care,'' said Bill Mason, executive director of Tennessee Citizen Action. "But this filing clearly indicates that Tennessee physicians have been over-charged - and even gouged - by SVMIC. And you have to wonder whether these rates couldn't come down even more."

For years, the medical industry and SVMIC have argued that high medical malpractice premiums were the result of a "crisis" in huge jury awards and frivolous malpractice lawsuits. But the facts have never borne that out: a report by the Department of Commerce and Insurance shows that in 2005, there were only five jury malpractice awards, averaging $410,000. Now, SVMIC's filing shows that it is prepared to reduce its premium prices significantly, again showing that there is no lawsuit-driven crisis in medical malpractice.

Tennessee Citizen Action, which represents the interests of consumers in such areas as health care, patients' rights, and consumer safety, has asked Commissioner Newman to examine SVMIC's substantial reserves and cash flow to determine whether SVMIC's premium rates have been excessive. Further, in a May 29 letter to Commissioner Newman, Mason asks whether SVMIC's premium rates should be reduced even further than the level requested by the company in its filing.

"This is a company that insures close to 90 percent of the physicians in this state," said Mason. "For them to have such high rates for so long, and then come along and admit they're way too high - just cries out for a closer look. Our doctors have been over-charged for their insurance, we just can't tell by how much."

"As a mutual insurance company, SVMIC does pay a dividend to its doctor-members, but that's hardly a justification for over-charging in the first place,'' said Mason.

ATTACHMENTS: TNCA Letter to Commissioner Newman

Airline takeover is no deal for consumer protection

US Airways' unwelcome attempt to take over Delta Air Lines is making waves in the media these days for good reason.

The airline's unsolicited offer not only raises serious concerns for consumers, airline employees, and small communities, it also raises big questions about how airline consolidations could create an anticompetitive environment in the industry. That is why it is essential for our regulators and congressional leaders to pay close attention to the economic and consumer impact of these deals and work to prevent bad mergers.

Based on all I've read and heard, US Airways' bid for Delta is the definition of a bad deal — for Tennessee and the nation. The crux of the problem is the fact that US Airways' proposal downright ignores all of the harmful effects the consolidation would unleash. Because US Airways' and Delta's hubs and networks have a nearly 50 percent overlap, a takeover would mean significant reductions in competition in hundreds of markets, as well as downsizing that would cut key routes and trigger job loss. On top of this, limited choices in airline carriers, particularly in small markets, would likely lead to widespread fare increases.

A merger of US Airways and Delta would lead to one airline taking on monopoly status in many areas and becoming the largest carrier in the South, the East Coast, and the Mountain West. In Tennessee, the combined airline would become the dominant carrier at the Chattanooga, Bristol (Tri-Cities), and Knoxville airports. For example, the Tri-Cities airport, which serves eastern Tennessee, southwest Virginia, and western North Carolina, would see competition shrink from three airlines to two. And with this scant competition, consumers could expect price increases to follow.

My organization is very concerned by the consumer and economic impact this takeover would cause in Tennessee. Tennessee Citizen Action focuses its efforts on issues of economic justice, consumer protection, better choices and fairness. We fear all of these would be negatively impacted by this hostile takeover.

As I understand it, Delta has poured billions into improvements that will allow the company to move beyond bankruptcy in 2007. The company was rated among the top network carriers in every category in 2006, while US Airways foundered in the bottom of J.D. Power and Associates' ratings scale. What would happen then if these companies converged? Service quality would likely suffer, and Delta would lose the opportunity it has earned to re-enter the marketplace as a strong, stand-alone competitor offering an attractive choice to consumers.

I am happy to see that key lawmakers are already condemning a US Airways' hostile takeover of Delta Air Lines. I encourage Tennessee's lawmakers to be vigilant about protecting airline competition and consumer choices in our state by saying "no" to US Airways' takeover attempt.

THE MERGER OF AT&T and BELLSOUTH:
Bad for Consumers, Bad for Free Information, Bad for America

If approved, the merger of AT&T and BellSouth will mean higher prices for local, long distance and cell phone services for individuals and small businesses alike.
This merger in reality will unite three companies - BellSouth, AT&T and Cingular Wireless, which is already a joint venture between the other two.
Any existing competition between the companies will come to an end, and a major step toward the re-establishment of the "Ma Bell" monopoly - a monopoly which was broken up under anti-trust laws in 1984 - will occur.
But things are different now than they were in 1984. This super-company will not just be controlling telephone services and the rates charged for them.
They will control, as powerful gate-keepers, all digital media - telephone, television and the internet - and charge the highest possible prices, putting some of this technology out of reach for many Americans.
BellSouth already enjoys a near-monopoly on telephone and DSL services in the Southeast. With this merger, there will be nothing to stand in the way of major price hikes coupled with service reductions.
Average consumers are the big losers in this merger deal.
Fewer choices and stifling competition inevitably lead to fewer choices in the marketplace and higher prices for consumers.
More power in fewer hands leaves individual consumers with less control over their communications options, and small business owners are facing changes in services and pricing that may be adverse to their internal network systems and their plans for the future.
And all communities cannot expect access to digital communications services under this kind of system. Those who cannot pay more can be expected to do without.
Even worse, as far as the free flow of information is concerned, are the on-the-record intentions of top AT&T and BellSouth executives. They are planning an assault on any on-line content and internet services that they do not already control.
Ed Whitacre of AT&T wants not only to charge consumers to pay for the use of his network - he also want to charge Google and Yahoo and other content providers to pay for access to those consumers.
Meanwhile, William Smith of BellSouth wants to make the internet what he calls a "pay for performance marketplace." This means, for instance, that his company wants to charge content providers for the ability to have their services load faster than those who might not be able to pay.
When this merger takes effect, this kind of anti-consumer, anti-competitive, anti-freedom to information attitude will drive the most powerful, monopolistic communications company in America.
Mega-companies, one of which will be this AT&T-BellSouth-Cingular conglomerate, will give preferential treatment to their own high-cost services and block or slow access to those of everyone else.
They will make ever bigger profits, while the consumers will suffer.
AT&T and BellSouth are trying to make the case that local cable companies can provide enough competition.
However, cable companies have been going through their own orgy of consolidation and merger.
With this deal, consumers in the Southeast and throughout much of the rest of the nation will have only two choices for a full-service broadband network: telephone services and cable television.
Two mega-companies, both unregulated, both committed far more to profits than to service, is not enough for true competition and not enough to ensure that consumers are getting the best deal for the best price.
Hopefully, the Department of Justice will reject this merger. It violates the spirit, the intent and the letter of the anti-trust statutes and of the 1984 agreement to break apart the monopolistic Bell system.
Even if the merger is allowed, this company should be required to sell off its Cingular Wireless subsidiary. This would at least maintain more opportunity for competition between land-line and wireless telephone services.
Clearly, the inclination of the current Administration, the Federal Communications Commission, the Federal Trade Commission and the current leadership in Congress seems to be to rubber-stamp whatever any corporate entity wants to do, without regard to consumer needs.
Only career Justice Department anti-trust officials - those who recognized the inherent dangers of monopoly control of our communications systems decades ago - are likely to even take a second look at this very bad merger proposal

Foes say raw milk sales would harm dairy consumers
Bill's safety measures aren't enough, they argue

By ERIK SCHELZIG
Associated Press

Published: Sunday, 04/02/06
FRANKLIN - A proposal to allow raw milk sales in Tennessee could put dairy
consumers at risk, opponents of a measure moving through the Legislature
said Friday.

Supporters say pasteurization's scalding heat destroys the taste and
nutrients. But Bill Mason, executive director of consumer watchdog group
Tennessee Citizen Action, calls those claims "anecdotal."
"There's just no scientific connection between drinking raw milk and any
benefits," Mason said.

Yet interest in raw, unpasteurized milk has been on the rise nationwide,
part of a growing natural foods movement. And similar measures have been
approved in more than 20 other states, said the bill's sponsor, Rep. Glen
Casada.

The Franklin Republican's bill would require producers to take a
state-approved raw milk safety course. The raw milk also would have to be
collected in a sanitary manner, filtered and chilled to below 40 degrees
within an hour.

The measure would require warning labels that the raw milk can contain
disease-causing microorganisms.

Mason responded that a warning label isn't good enough to keep consumers
from drinking milk potentially laced with listeria, E. coli or salmonella.
"There are health problems associated with unpasteurized milk, that's why
we've had laws about it for the last half-century," he said.

Casada said the bill would be "buyer beware" for consumers of raw milk.
"You're going to know it's unpasteurized," he said. "Like all foods, you
have the chance to get sick."

Casada has also written a provision into the bill to prohibit the state from
suing farmers who are found to have sold tainted milk.
Citizen Action also takes issue with a provision that would exempt farmers
producing less than 100 gallons of milk a year from inspections and other
regulations. "That can certainly be manipulated and certainly isn't in the
best interest of public health," Mason said.

The measure also would forbid state officials from discussing with the
public any farm suspected of causing a regional outbreak.
Casada said that aspect of the bill is to prevent unproven allegations from
being spread in the media. Once two independent labs "incontrovertibly" link
a farm to the outbreak, the farm could be identified.

"If it's confirmed, we want the public to know which farmer it was," he
said.

The agriculture committees of both the House and Senate are scheduled to
hear the bill Tuesday. *

Links:
http://www.tennessean.com/apps/pbcs.dll/article?AID=2006604020371
http://www.whnt.com/Global/story.asp?S=4712220
http://www.wkrn.com/news/ap-opponents-say-raw-milk-proposal-health-risk
http://www.knoxnews.com/kns/state/article/0,1406,KNS_348_4588793,00.html