Credit Problems Top N.Y. Consumer Complaints

In observance of National Consumer Protection Week, New York Attorney General Eliot Spitzer has issued his annual “top 10” list of consumer complaints to his office.

According to an analysis of nearly 55,000 written consumer complaints in 2004, credit and banking complaints – including credit cards, identity theft, debt collection and credit reporting – eclipsed auto-related complaints. Internet concerns continued to receive the third most complaints to the Attorney General’s office.

The Attorney General’s office – through its Consumer Frauds and Protection Bureau, Internet Bureau and Telecommunications and Energy Bureau – investigates and prosecutes businesses and individuals engaging in fraudulent, misleading, deceptive and illegal trade practices. It also mediates thousands of complaints from individual consumers.

Last year, these three public advocacy bureaus, joined by the Attorney General’s 13 regional offices, were responsible for nearly 120 enforcement actions – including lawsuits and settlements – to protect consumers.

Based these efforts alone, in 2004, Spitzer’s office obtained more than $18 million in restitution through settlements, court judgments and mediation of consumer-oriented cases. An additional $13 million was recovered by consumers through the New and Used Car Lemon Law Arbitration Programs administered by the Attorney General’s office. The office also collected nearly $4.8 million in civil penalties and costs. The foregoing figures do not include recoveries by the Attorney General’s office in cases brought by other public advocacy bureaus.

The following is a list of top statewide consumer complaints by industry in 2004:

Industry Complaint Numbers

1. Credit 6,724
2. Automobiles 6,255
3. Internet 6,013
4. Telecommunications 5,091
5. Mail Order 2,757
6. Home Repair/Construction 2,610
7. Services (non-auto) 2,512
8. Retail Sales 2,274
9. Landlord/Tenant 2,064
10. Travel 1,639

This list does not include cases and complaints handled by the Attorney General’s Health Care helpline, which each year handles nearly 7,800 calls. A separate report analyzing health care complaints and providing consumer tips is available at the Attorney General’s website at http://www.oag.state.ny.us/health/health_care.html.

A few of the Office’s significant consumer-related cases in 2004 include:

• Two favorable resolutions combating payday lending scams. In a settlement with Cashback Payday Loans, Inc. – a Las Vegas-based Internet lender that issued loans at annual interest rates exceeding 400 percent – the company is now barred from business in New York State, has released $11,000 worth of loan obligations and has agreed to provide $14,000 in refunds to customers. In a case against N.Y. Catalog Sales, a state court affirmed Spitzer’s allegation that this company’s operations – which required its customers to purchase gift certificates or catalog merchandise in order to obtain cash advances on paychecks – was, in fact, an attempt to disguise its illegal payday lending operations;

• A successful lawsuit against National Collector’s Mint, a Westchester-based company that was engaged in a nationwide advertising campaign to sell the “2004 Freedom Tower Silver Dollar.” The ads represented falsely that the coins were pure silver and were government-issued legal tender. The court halted the company’s deceptive advertising campaign and ordered it to offer refunds to all consumers who purchased the coin;

• Groundbreaking settlements with GlaxoSmithKline (GSK) and Forest Laboratories related to the “off-label” marketing of the drugs, Paxil, Lexapro and Celexa. These settlements prompted the pharmaceutical industry’s decision to post complete disclosure of clinical trial data. In June, Spitzer filed a lawsuit against GSK alleging that the pharmaceutical giant concealed and failed to disclose to physicians information about Paxil, a drug used to treat depression. The lawsuit alleged that the company engaged in a concerted effort to withhold negative information concerning Paxil and misrepresent data concerning Paxil’s safety and efficacy when prescribed for depression in children and adolescents;

• A settlement with Bally Total Fitness Corporation after hundreds of consumers complained that deceptive ads and high pressure sales tactics tricked them into signing long-term contracts and misrepresented the total price of the memberships. In resolving the matter, Spitzer’s office obtained nearly $138,000 in restitution for Bally’s customers. Bally’s also agreed to substantial reforms in its sales, training and advertising practices and paid $200,000 in costs to the state; and

• A state court ruling that affirmed Spitzer’s lawsuit against Cross Country Bank. Spitzer alleged that this predatory credit card issuer used deceptive sales pitches to target low-income individuals and consumers with tarnished credit records. The company claimed that the targeted consumers could use the credit card it was marketing to repair damaged credit ratings, when, in reality, the cards carried exorbitant fees and other hidden costs that worsened consumers’ financial problems.