Author: Bob Sullivan

CHICAGO — Gary Kopycinski teaches religion and ethics in a suburban Chicago Catholic high school, but his effort to practice what he preaches made him the perfect target for a debt settlement company. 

Three years ago, Kopycinski was told by several advisers that he should file for bankruptcy. His finances were a wreck. He held $35,000 in credit card debt and was on the hook for a car loan that he'd co-signed for a family member. On his salary as Catholic high school teacher, it seemed there was no other way but to wave a white flag. But Kopycinski believed that bankruptcy "was a cop-out," so he went searching for an alternative. When he heard an advertisement for Debt Settlement USA, he thought he'd found it. Instead, he had hooked his fortunes to an industry that the attorney general of Illinois, Lisa Madigan, calls "a scam." 

The advertisements are hard to resist, with come-ons like these: "Debts settled for pennies on the dollar," "An open phone line has been established for consumers who need relief," and even, "Don't declare bankruptcy, that should be your last option."

Kopycinski, who  was already treading water in 2007 when the car loan payments landed on him, fell for the pitch.

"I was at the point where I was using Peter to pay Paul,” he said. "Then I just wasn't able to keep up with the payments and I was falling behind. Finally, I was at the point where I was so far behind I didn't know what I was going to do."

Phone calls from creditors were coming fast and furious, and as time passed, they got "nastier and nastier."

"Then I got really worried,” he said. “I was getting to a place I didn't want to be.”

A friend and a financial counselor both advised him to file bankruptcy, but he wanted another option.

"In my mind I understood that bankruptcy was a cop-out and that it meant you weren't fulfilling your responsibilities," he said.

Instead, he took up Debt Settlement USA on its offer. Agents told him they had special relationships with the credit card firms, and had great success at trimming up to 50 percent off customers’  bills. For 14 percent of his total debt, the firm said it would negotiate with creditors on his behalf. And agents told him he wouldn't have to deal with nasty phone calls or legal threats any more.

"Just tell them you are in debt settlement," he was told by one operator.

Instead of continuing to make his payments, Kopycinski said Debt Settlement USA employees told him to set aside $650 each month to build an account that would be used for settlement offers later. But as is typical of debt settlement firms, Debt Settlement USA made sure its bill was paid first. So it collected $442 of each monthly payment toward its total $4,552 fee.  After eight crushing payments, Kopycinski had only built $1,800 toward his debt, but Debt Settlement USA had been credited with $3,566.

Patricia Dose, Debt Settlement USA’s general counsel, said her firm never tells consumers not to pay their bills, adding that by the time consumers come to them they’ve already stopped paying in most cases. She said she could not comment on Kopycinski’s specific situation, citing privacy concerns, but that the firm charges up-front fees that are similar to fees charged by bankruptcy attorneys.

“It’s all disclosed in the contract," she said. "… We’re very up front with our consumers. Everybody wants to be paid for their services.”

Kopycinski tells a different account. He says he started faithfully paying into his settlement savings account, but the phone calls never stopped. Some creditors even tried to talk sense into him.

"I remember one guy from a bank just started screaming at me, yelling, 'This is what's going to happen! This is what’s going to happen!” he said. “When I tried to explain what I was doing, he just yelled louder."

Attorney General Lisa Madigan

When he told his Debt Settlement USA counselor about the exchange, he remembers the operator acting surprised.

"He said, 'Wow, I know him. I deal with him all the time. He must really not like you for some reason,” Kopycinski said.

Then, he was sued by Chase, which was now seeking $17,000 from him.  A notice of the lawsuit was left on his back porch.

Afraid, he called his counselor at Debt Settlement USA, who transferred him to the company's legal department. There, an operator directed him to a website with free legal forms and helped him fill out a motion to dismiss the case for improper service. Kopycinski had to figure out for himself where in downtown Chicago to file the paperwork.  

Dose, however, said her firm might provide some “general information” but it does not offer legal advice. 

In the end, the motion was filed incorrectly and Kopycinski received notice that a default judgment had been entered against him.

With his debt ballooning, his debt settlement strategy blowing up in his face and the legal walls closing in, Kopycinski knew he had run out of options. He went to a legal aid agency and filed for bankruptcy.  But he'd learned more about the process since then, so he filed Chapter 13 — which means that while debtors can no longer harass him, he will be repaying  all his debt — in his case, within five years. Today, he is making $1,190 payments every month, via cashier's check.

"It was very humbling, humiliating, but I did it," he said. "At least I am protected now."

Madigan, the Illinois attorney general whose office has filed seven lawsuits against debt settlement firms, is investigating Kopycinski ‘s complaint.

She said the worst part of his story is that his good nature and sense of responsibility were used against him.

"It just breaks my heart,” she said. “… To me the crime of all of this is you've got good people who, when economy was different, got in over their heads.”

Addressing Kopycinski, she added, "Now, you're trying to do the right thing to pay off your debt, but instead you get completely scammed. You're in a much worse financial circumstance, your credit is destroyed. It makes your life impossible."

VIDEO: Watch Gary Kopycinski on MSNBC-TV

Had Kopycinski began paying his debts through Chapter 13 two years ago, instead of signing up with debt settlement, his monthly payments would today be considerably less. And he would be $3,500 richer. He advises anyone else in the same spot to avoid the promises of debt settlement.

"You're going to end up with some joker on the phone pulling your strings and telling you where to go and giving you incomplete, inaccurate advice. Everything they say isn't true," he said, holding back tears. "They do not have relationships with the credit card companies. … What was $35,000 in debt turned into maybe $60,000."

Madigan also recommends that consumers should steer clear of the debt settlement strategy.

"Consumers should never get involved with debt settlement companies," she said. "Hundreds of Illinois residents have come to our office who have fallen prey to what is essentially an outright scam.  You can do everything yourself.  You can figure out how much you make a month and reach out to creditors."

She said 40 percent of the people who sign up with debt settlement firms end up like Kopycinski, filing for bankruptcy anyway, and two-thirds drop out before even a single debt is settled.

"Folks are finding they are paying an enormous amount of money up front for fees and are getting virtually none of their debt settled," she said. "They are told to not contact creditors.  We see time and again people are told not continue to pay their bills. Well, the credit card companies don't take kindly to that. They sue people."

Dose, the debt settlement firm’s lawyer, objected to characterization of debt settlement as a scam, adding sarcastically, “Then it’s as much of a scam as consumer credit counseling is.” Counseling services are paid in part by banks, she noted, and consumers who enroll in them must pay 100 percent of their debt.  She could provide no statistics on how many consumers complete their debt settlement program with her firm, but said many consumers benefit even from partial completion because Debt Settlement USA is able to obtain settlements on some of their debts.

In Illinois, what happened to Kopycinski will soon be expressly illegal. The state Legislature passed a law earlier this month that will prohibit debt settlement companies from collecting large up-front fees. Aside from a small sign-up fee, the firms will only be able to collect a percentage of the debt after they have earned settlements with debtors.

The ads persist, however, as other states have yet to enact strict regulation of the practice.

Dose said the Illinois law targeting debt settlement firms will harm the state’s consumers.

“They probably won't have a lot of the options consumers in other states have,” she said.  “None of this is easy. … People who come to us understand that none of this is a cakewalk.”

She added said that debt settlement is a better choice than bankruptcy for some consumers because settlement firms take their payments in monthly installments, while many bankruptcy attorneys require full payment before they will begin.

“Debt settlement is just one option out of three that people have,” she said.

It’s hard to find anyone outside of the debt settlement industry who sees its benefits, however.  Consumers who have large debts should visit a nonprofit agency like the National Foundation for Credit Counseling at http://www.nfcc.org/.  And no consumer should agree to pay an up-front fee of more than $100 for help with credit card debt.

 

Follow the Hidden Fee Tour of America by becoming a Red Tape Chronicles Facebook fan or follow me at http://twitter.com/RedTapeChron

PITTSBURGH — You probably swipe a credit or debit card through a magnetic stripe reader dozens of times each month.  It's a simple act, but it's it at the core of a battle between titans with billions of dollars at stake. On one side are big banks, which take a cut every time a card is swiped. On the other are retailers like Mike McArdle, who are tired of paying Visa, MasterCard and their member banks $1 or $2 every time a customer makes a purchase.

McArdle runs McArdle's Pub on Pittsburgh’s South Side, the very definition of a family business. It opened in 1939, and the sign above the front door doesn’t look like it’s been changed since.  It once held a prime spot near two of the Steel City's largest steel plants.  Both of them have long since been converted to shopping malls, but McArdle's plugs away, thanks to its position just off the main entertainment strip in Pittsburgh's hippest neighborhood. 

For years, banks have held the upper hand in the fight with the McArdles of the world, but no more. Last week, the U.S. Senate approved legislation that could drastically change the way banks are compensated for card swipes, and that could impact what happens every time you pull out your wallet. In fact, the legislation could provide incentives — that means money — for Americans to leave the plastic in their wallet and pull out old-fashioned cash instead. 

As part of its omnibus financial reform bill, Congress is taking on what are called interchange fees — the price that merchants pay for banks to process their credit card transactions.  Formulas vary, but generally stores pay a flat 50 cents or $1 per transaction fee, plus 1 to 2 percent of the purchase price.  Retailers have screamed for years that the fees are too high and that the card associations impose anti-competitive restrictions on them – given the limited choices among standards like Visa, MasterCard, American Express, and Discover.

Last week, in a surprisingly bipartisan vote, the Senate agreed to an amendment that would instruct the Federal Reserve Board to limit the fees card processers can charge merchants. It also included two practical changes that would have an immediate impact on shoppers:

*Current contracts between merchants and banks forbid stores from requiring a minimum purchase amount before customers can use cards — a provision that is sometimes ignored. Merchants hate this rule, as a $1.50 card purchase can become almost worthless to a store owner after minimum interchange fees are paid.  The Senate bill would prevent banks from forbidding minimum payment requirements.

*The bill also would make it easier for merchants to encourage consumers to use cash by preventing banks from limiting a store owner’s ability to offers discounts to cash-paying customers, according to its supporters.

As you might imagine, banks and merchants view the bill quite differently.

"Swipe fees have spiraled out of control in recent years, and this amendment is necessary to rein in these excessive fees and ensure that Main Street receives a fair shake," said the Merchants Payment Association, which represents retailers. "These fees are harmful across the board – from large businesses to small retailers to American consumers.”

But Trish Wexler, a spokeswoman for the Electronic Payments Coalition, which represents banks and card companies, said the law would hurt consumers by raising their credit costs and gutting reward programs.

 “Consumers will end up paying in the form of higher rates for their cards, reduced or eliminated debit card rewards programs, or a restriction on the amount of debit cards that are issued," she said. "Call this a win for retail, because that’s what it is."

Bernie Rafferty, behind the bar, thinks minimum charges are a good idea

 At its core, the question is simple:  if stores are paying 1 or 2 percent less in bank fees, who will keep the money — the retailers or the consumers?  Wexler is convinced that big stores like Walmart would simply pocket the extra cash and not pass along savings to shoppers.

There is a third possibility, however: Stores could split the difference.  If the total card fee is 2 percent, they could offer shoppers a 1 percent discount for paying cash.

"OK, so you buy something for $50 and you get a $1. I don't see consumers getting too excited about that," Wexler said.

Back in Pittsburgh, McArdle partly agreed. A 3-cent discount on a $2.50 draft beer (yes, draft beers only cost $2.50 at McArdle’s) probably wouldn't entice many drinkers to pay in cash. On the other hand, the minimum payment provision made sense to bartender Bernie Rafferty.

"Last weekend we had a guy in here who wouldn't keep a tab open,” he said. “He paid six separate times for two beers with his credit card. Those initial 50 cent fees really add up.”

While the legislation would forbid card firms from restricting discounts for cash payments, the Electronic Payments Coalition says that merchant contracts — and Visa and MasterCard policies — already allow that.  Rather, they say, current contracts only forbid the reverse: adding a surcharge for credit card transactions. To consumers, that distinction is semantics, but the banks and retailers, it could mean millions of dollars.

Some gas stations offer cash discounts, but few other retailers do. Most, like McArdle, would have a tough time changing their systems to create an entirely parallel price system.  On the other hand, discounts could encourage more consumers to pay in cash and provide an incentive to avoid hefty credit bills.

Would you pay in cash to save a few nickels or dimes on every transaction? Even if you would, don’t start hoarding bills just yet.  The amendment still must pass the House of Representatives and survive the sausage-making process that will produce the final financial reform legislation.

To read more about the swipe fee battle, see "Retailers, card industry escalate fee fight."

 Follow the Hidden Fee Tour of America by becoming a Red Tape Chronicles Facebook fan or follow me at http://twitter.com/RedTapeChron

  Here's a new Beltway term you should get used to hearing — "bill shock."  You've heard about cell phone users who suddenly find themselves burdened by a $5,000 or $10,000 bill for a single month, rung up by a hyper-texting child or excessive Internet downloads.  This week, the Federal Communications Commission very sensibly recommended that wireless carriers be forced to send a mid-month text message warning to any customer who suddenly rings up enormous charges.

That's one small victory for consumers, but the giant leap is still to come.

Red Tape Chronicles readers know a thing or two about "bill shock." Crazy cable bills, outrageous hotel fees, unfair overdraft charges — American consumers are under siege at historic levels. A nagging recession and high unemployment levels make examination of scams and unfair fees even more critical.

So after four years, 400 blog posts, 2 books, and 120,000 comments, Red Tape is taking to the road.  Starting today, I'll be visiting a dozen cities on a 15-day fee-fighting journey. My dog Lucky will be with me, helping me sniff out scams from Washington D.C. to Seattle. He's already helped — you should see the fees some hotels charge when you are traveling with a dog! (In Pittsburgh, $25 a night extra was standard, but the Shadyside Inn wanted to charge me $90! The Red Roof Inn I'm staying at is charging less than that for both of us).

Sniffing out scams

So ride along on this trip. Along the way, we'll meet a widow who paid $1,500 for the extra security of an extended warranty, only to lose everything when the firm went out of business.  We'll talk with folks who fell for credit card settlement scams and the attorney general who just pushed through the boldest new law in the land to prevent such scams.  We'll meet kids trying to pay for college, adults struggling to pay off oppressive loans, consumers who have fired their banks in favor of credit unions, and plenty of Americans who are just plain fed up with unfair treatment.  We'll talk over coffee, tea, beer and dog walks. We'll visit local NBC stations, book stores, and neighborhoods. Many of the stops have been planned with the help of readers who have generously volunteered their time to help organize town hall-style meetings.

You can follow the day-to-day travels by signing up as a Facebook fan (click here )

 This week, I'll be in Pittsburgh; Wheeling, W.Va.; Columbus, Ohio; Chicago, and Madison, Wis.  If you are along the path, check the Facebook page for updates on where I'll be on any given day.  And of course, we'll be bringing you several stories on msnbc.com through the Red Tape Chronicles. 

Welcome to the Red Tape on the Road Hidden Fee Tour of America. Now, on to Pittsburgh!

   Become a Red Tape Chronicles Facebook fan or follow me at http://twitter.com/RedTapeChron

What do you pay to watch television every month?  Are you really getting what you pay for?  How much do fees from set-top boxes add to your costs?

Earlier this month, we asked Red Tape readers to post details of their monthly bills, with a special focus on those tack-on fees. The response was overwhelming. There's a lot of money to be saved in making sure you aren't overpaying for cable or satellite TV — one Red Tape reader described his annual cable bill at $1,995 per year. After the mortgage payment and auto loan payment, television might be your largest annual budget-eater. With an investment like that, it's really worth spending time to get it right. This piece is designed to help by making it easier to see what your neighbors are paying.

While pay TV companies are offering unprecedented levels of service — hundreds of channels, better HD signals, digital video recorders — consumers are frustrated about the methods used to charge for them. For many, deciphering the monthly bill is like searching for buried treasure using an old, faded map.  In just about every case, the provider charges one price for the service and then a host of other fees for tools needed to use the service — fees so high they can double the cost.  Imagine if a rental car company charged extra for the license plate on the car! (Wait, some do just that.)

Help other consumers

On a basic level, these fees are annoying. But the damage they do to the marketplace is much more significant. Hidden or tack-on fees obscure the true price of the service, thereby wrecking an essential tool in a free market.  Because it's so hard to determine what your monthly cost will be until that first bill finally comes, it can be nearly impossible to do honest comparison shopping when it comes time to pick a new service.  In the end, it's very hard for consumers to decipher which company provides the best service at the best price.  That leads to all sorts of market distortions. 

There's only one way to attack such a problem — with information.  The more you can learn about the price your neighbors pay for television (the price they really pay, not the monthly rate quoted in an ad), the more intelligent a choice you can make.  Pay TV firms, like all modern corporations, devour extensive research about you and your family in an effort to extract the highest price possible. Why shouldn't you do the same — devour data to help you get the lowest price? So here's a set of market research provided by Red Tape readers all around the country summarizing what they pay for tack-on fees. Compare your bill to these, to make sure you're not overpaying.

Before we get to specific provider prices, displayed alphabetically by provider, here’s some general observations.

1) Many consumers are getting killed in fees for second, third, and fourth set-top boxes.  Consider paying for service only on the family TV, and use rabbit ears to pick up over-the-air HD channels on the other sets in the house.  The savings can easily add up more than $500 per year. If you can't imagine going without cable in the bedroom TV, scale back to basic boxes on your secondary sets and you'll still save a bundle.

2) While we're on the subject of rabbit ears, an increasing number of consumers are cutting pay TV service altogether, and using a combination of over-the-air signals and TV-over-Internet programming — using Netflix or Hulu.com, for example — to fill the void. You might still want to pay for service, particularly if you are a sports fan. But you can use the option of over-the-air TV as a bargaining chip to get a lower rate from your provider.

3) When lease rates for set-top boxes go up, many consumers report great success by simply complaining about the increase. Dish Network, for example, is handing out service credits that negate a recent price hike. But watch carefully — the credits are usually temporary, while the increase is permanent. That’s a smart way for firms to ease the blow of price hikes. You'll have to stay on the company to make sure you keep getting the discount as time passes.

4) Different firms charge for different services in different ways.  Take DVR service: Some charge a lease-fee for the DVR box; some charge a service fee. Some charge both. That's why, when comparing services, the only price that matters is the bottom-line, what-number-will-I -write-on-my-check-every-month price.

Now, here's a sample of the fees reported by Red Tape readers.

AT&T Uverse

Readers from Wisconsin and Michigan chipped in to share that they pay $10 extra each month for HD signal, and pay $7 for the 2nd, 3rd, and 4th DVR box.  Peter Fritz of Franklin, Wis., for example, was paying $21 every month for his four DVRs until recently, when he dumped the service for over-the-air TV.

Bresnan Communications

In Montana, Rachel Hofferman said she pays $6.50 per month for a DVR with a remote, and $11.99 for DVR service.  There's also a 25-cent broadcast TV surcharge.

Bright House Networks

From Orlando, Fla., a consumer wrote to say he pays $7.95 per month for his DVR.

Cablevision

Erin F. in Poughkeepsie, N.Y. says she spends $13.50 for two cable boxes ($6.51 for the box and 24 cents for the remote) each month.  She also pays $9.95 for DVR service, and a $1.50 "additional outlet" fee.

Charter Communications

Sean Ferguson of Wenatchee, Wash., says he pays $10 to rent his DVR box, and pays $29 to upgrade to HD signals.  Because he lives in a housing association, he had no choice of provider.

Comcast

Consumers from all corners of the country wrote in about Comcast rates.  They vary slightly. 

*In Deerfield, Ill., a consumer said he pays $15.99 each for two dual tuner DVRs.

*In Elk Grove, Calif., a consumer says he pays $8 per month for HD and $1.45 for a mandatory service plan.

*In Denver, a consumer says he pays $15.95 each for two DVRs and $10.45 in additional service fees, for a total of $42.35 per month.

*In Corvalis, a consumer who has two basic boxes reported paying nothing for the first box, and $3.40 for the second box and remote.

*In a Philadelphia suburb, a consumer said he pays $5 for an HD box, and $16.95 for DVR service.

*In Chelmsford, Mass., an HD-DVR costs $14.95 per month, according to a consumer there.

*In Gaithersburg, Md., a consumer named Walter lamented that he pays $496.80 in equipment rental fees every year.  He pays $28.45 to Comcast: $9.25 Comcast for an HD box, $15.95 for an HD-DVR, a $3 "digital additional outlet" fee, a 25 cent "digital remote rental fee," and then $12.95 to TiVo.

Cox Communications

Pam Hall of Las Vegas said she pays $7.50 per month for an HD converter, and $15.99 for a digital TV gateway box.

In Broken Arrow, Okla., Bruce subscribes to the least expensive level of service he can. He pays $5 to rent a basic digital cable box.

DirecTV

A wide range of consumers wrote in explaining their DirecTV box fees, but they were consistent around the country.  The first basic set-top box is free, and each additional box costs $5. The DVR fee is $7, and HD service costs $10 per month.

Dish

Dish consumers also reported consistent rates from around the country. The network recently changed its set-top rental fees. The first box is free. Additional boxes cost $7-$17, depending on capabilities.  For more, see this piece.

Insight Communications

Carl Pahler says he pays $15 monthly for the first HD-DVR box and $15.95 for the second, along with a $7.95 HD service fee.  He also laments that he can't get HD service without also paying for a DVR.

Knology

Brian in Montgomery, Ala. says he pays $12.95 monthly for his TiVo service.

RCN

Jinesh in Queens, NY. says he pays $8.95 per month for his HD converter box.

Time Warner

Customers who wrote in shared a variety of set-top box prices.

*In Austin, Texas, a consumer said she pays $7.99 per month for an HD-DVR and $10 for DVR service, 

*In Winston-Salem, N.C., a consumer reported paying nothing for the first digital cable box, and $8.95 per month for the second.

*In Charlotte, N.C., a consumer says he pays $10.95 for DVR service and nothing for the 1 box he uses.

*In Brooklyn, N.Y., Aaron says he pays $10 per month each for a regular HD box, and $20 per month for a DVR box.  "We pay $40 just to keep the boxes…it's ridiculous."

*In Los Angeles, a consumer reports paying $7.99 monthly for their first set-top box, $8.99 for each additional box, $10 for DVR service, but nothing extra for HD service.

Verizon FiOS

Most Verizon customers say they pay the same amount to rent their boxes: $5 per month for a basic box, $10 for an HD box, and $20 for an HD-DVR. But in Rockaway, N.J., Nik said he pays only $5.99 for HD boxes and $14.99 for his DVR.

As mentioned in the recent column on this topic, Congress and the Federal Communications Commission have been trying for more than a decade to change the market dynamics for set-top boxes by encouraging the appearance of third-party alternatives.  There’s a new push to create a new kind of gadget, called a gateway, that will make it easier for consumers to combine TV and Internet-based video watching. 

While that debate drags on, and the high cost of box rental is still on your mind, here’s some parting food for thought: An anonymous comment left by a Red Tape reader who claims to work in the set-top box industry.

“I manage the building of set top boxes every day and it's a crime to charge rent for them,” the source writes. “The most expensive cost less than $200 in most cases with some even less than $100. In addition the companies that procure them usually will not even (return) them back to manufacturers if they are defective. They will either return to a service center or simply get tossed. You should be able to easily work your way out of these fees especially after 10 – 12 months because anything beyond that and they are making money.”

  Become a Red Tape Chronicles Facebook fan or follow me at http://twitter.com/RedTapeChron

To paraphrase from words often attributed to Josef Stalin — a million bank foreclosures is a statistic, but a single family losing its home is a tragedy.

So Richard Zombeck has set out help people tell those stories — one at a time — at a Web site named ShameTheBanks.org.

There's Diane Casella from Florida, who says she can pay a considerable amount towards her mortgage, but needs a break because of sinking income and property value.

"I have never asked for mortgage help in my life, but now that I just need a mortgage that is 31 percent of my gross income, the bank acts like I do not even exist," she writes on the site. "It was so easy to reach them five years ago, but now they have turned a deaf ear to my family's plight."

And there’s Mike Dillon from Manchester, New Hampshire

"No one can live in a situation like this, for this long without breaking down. Because of being in legal limbo for all this time, my fiancée and I have postponed our wedding and been unable to start the family we both want," he says. "This has ruined me financially… I can't even refinance away from them. I go through large bottle of antacid like you wouldn't believe. I am stuck in limbo, I can't sell the house without taking a huge loss, I couldn't buy a new house because they destroyed my credit."

Zombeck's raw Web site, which encourages consumers to name names and be as specific as possible about their mortgage woes, has quickly garnered attention around the ranks of frustrated homeowners.  He's also gotten at least some attention from Congress, and Zombeck is now part of the lobbying effort by consumer groups this week who are advocating for the controversial financial reform legislation currently being considered by the U.S. Senate.

Help other consumers

On Tuesday, the Massachusetts resident is meeting with staff from Sen. John Kerry's office to share his own story and stories from ShameTheBanks.com as part of a visit by The Massachusetts Public Interest Research Group (PIRG). He's also trying to personally deliver his package of first-person tales to his state's other senator, newly-elected Republican Scott Brown. But PIRG attorney Elizabeth Weyant, who is arranging the meetings, says Brown's office has yet to reply to requests.

"Richard has done a really good job of making himself an expert on the issue," she said. "It's really personal for him. He gives a face to the need for financial reform."

Weyant said one compelling element of Zombeck's site, in addition to the number of struggling homeowners who tell their tales, is the similarity of their sagas.

"Even if we're talking about different banks, it's the same story, again and again," she said.  Collectively, the tales show how badly the mortgage modification process is working, she said.  "To a bank, a mortgage looks like a pile of money. To a person, that's their home."

Among the sagas with similar storylines is the tale of Angie Burke, of Reading, Penn., who first contacted her bank about a possible mortgage modification in December 2008.

"I was fully unprepared for the duration and insanity this process can bring," she writes in her story. After a year of filling out paperwork and waiting for bank response, she received this dismal proposal concerning one of the two loans on her home:

"The best they could do for us was lower the interest rate from 6.75% fixed to 6% fixed, saving us a whole whopping $90 a month!  How is that going to help?!  Our income is half of what it used to be."

While the site invites complaints from any consumer who is frustrated with any bank lending practices, nearly every story Zombeck has collected so far deals with the paperwork madness that has engulfed participants in the Making Home Affordable program.  When announced last year, the program was designed to help up to 4 million struggling borrowers, but currently only 230,000 mortgages have been permanently modified.

The complains have led to a series of revisions in the program, including sweeping changes announced by the Obama administration last month — still, another 900,000 foreclosure notices were received in the first three months of 2010, according to RealtyTrac.

MSNBC.com's John Schoen has been chronicling the woes of the Help for Homeowners program (HAMP) for months. In January, I wrote about a woman named Deb Franklin, whose three-month trial modification had turned into a 10 month waiting game that included a foreclosure notice.

But Zombeck's Web site shows that Franklin's Kafka-esque nightmare is hardly an exception.

"Those stories are not unique," he says. "It is depressing and goes further…300,000 foreclosures a month further," he added referring to the estimated number of homes that will receive a foreclosure notice this month.

Virginia W., from Morgan Hill Calif, didn't want to share her last name. She's also at wit's end after being rejected, again, for a modification based on something called a "gross eligibility."

"After calling for the past two weeks to find someone at the bank who knows what 'failed gross eligibility' means and spending hours on the phone I am now being told they are going to review my package again since everyone I have talked to cannot see why we were denied,” she says. “Back at square one 8 months later all the while getting no help and slowly racking up credit card bills the whole time just trying to stay afloat and not wanting to walk away."

Zombeck has his own tale of mortgage modification "hell." He bought his house in a Boston suburb at the market's peak in September 2006. It was his first home purchase, and he followed the advice of a realtor and purchased it with no down payment, thanks to two adjustable-rate mortgages that started out at around 8 percent would climb towards 12 percent. He was promised that refinancing would be easy. It wasn't. And when his wife lost her job at Harvard University, their world began crumbling.

Two years later, he's still working on the details of his loan modification with Florida-based Ocwen Financial Corp., which is servicing his loan. During the saga, he began writing an unpaid column about his situation for The Huffington Post called the "Eyes and Ears Mortgage Specialist.”  He thinks that column has helped push his mortgage modification process forward.

"I think the banks are intentionally stalling, hoping the market will turn around, so they can then kick everybody out of their homes, sell them, and turn a profit," he said

Paul Koches, Executive vice president and general counsel at Ocwen, said he couldn’t talk specifically about Zombeck’s loan, citing privacy concerns. While he acknowledged some general frustration with the loan review process among all loan servicers, he said his firm has been aggressively arranging modifications for its customers. Of 400,000 loans it services, Ocwen voluntarily modified 90,000 even before the Help for Homeowners program was announced in March 2009.  Koches did not offer a specific of number of modifications since then, but said the pace had “proceeded at the same pace.”

“We're very proud of our leadership not only in HAMP but in loss mitigation in general,” he said. “We believe that keeping people in their homes is better for the homeowner and better for the owner of the loan, too.”

ShameTheBanks.com is Zombeck’s attempt to share the harsh spotlight of social media on banks and motivate them to aid other struggling homeowners.

Zombeck, a free-lance journalist and former help desk technician for software firm Adobe, has used the social media megaphone before with great success. For three years, he has run a popular Web site named SH**HEADERY.com (name intentionally obscured). It chronicles the actions of misbehaving companies and offers social criticisms.  It also gives frustrated readers a place "to rant."  The site also has nearly 10,000 Twitter followers.

Last year, Zombeck was involved in a dispute with AT&T over an $800 deposit the firm insisted on when he and his wife tried to save money by combining their iPhones into a discounted family plan. The deposit was required because Zombeck's  credit score had plummeted, even though he'd been an AT&T customers for more than 10 years. After months of frustrating back-and-forth discussion, Zombeck tweeted about the dispute to his SH**HEADERY followers.

"Wonder if Apple knows that AT&T charges an $800 deposit to merge to a family plan," he wrote in a November 2009 Tweet, and signed the note with a profanity. Only 52 minutes later, a woman representing AT&T wrote to him and offered to help. Within a few days, the issue was resolved.

"It had taken two months, but I bypassed about 15 unreasonable people," Zombeck said.   "She was very nice. Once I got to that level of customer support, (AT&T) was great."

Zombeck is hoping ShameTheBanks.com might offer similar short-cuts to "reasonable people" inside banks who are working on mortgage modifications," he said.

"I've gone from unpaid journalist, to accidental activist, to unintentional lobbyist in a matter of months," he said. Now, he hopes to collect enough tales of frustration that they will spur change in Washington.  "(The) stories will serve as irrefutable evidence that Congress needs to reform the way Wall Street has been doing business."

   Become a Red Tape Chronicles Facebook fan or follow me at http://twitter.com/RedTapeChron

 

How can a software company, with one small mistake, cripple computers worldwide?

McAfee security users left the office on Tuesday night with a perfectly good Windows XP computer.  On Wednesday morning, they were staring at a useless pile of plastic and computer chips.  Without so much as the stroke of an enter key or the push of a mouse, their PCs had been changed. The error was simple: McAfee’s software erroneously decided that an essential file used by the Windows operating system was really an 18-month old Trojan horse. That sent many PCs into an infinite re-booting loop that couldn’t be stopped without skilled, manual intervention.

The root of the problem lies in a critical decision made a decade ago by security professionals. But the result — perhaps millions of PCs rendered useless, each one requiring manual repair — is just the latest sign that bad guys seem to be winning in cyberspace.

Back before the turn of the new millennium, the computer world was wrestling with a dramatic new concept — giving large software firms like Microsoft the right to access consumers' computers and update their software automatically.  To many purists, who might be considered technological libertarians, the idea of letting an outside company reach inside their hard drive and change things was pure lunacy.

A five-year-long onslaught of global virus outbreaks quickly changed hearts and minds. Consumer behavior consistently revealed that the vast majority of PC users wouldn't bother manually installing software patches and antivirus protection. That made them easy prey for Code Red, The Love Bug, Nimda, and dozens of other malicious programs. And as the rate of new malicious programs began to grow exponentially, it became physically impossible for even full-time experts to manually update their systems.

Today, most computer users don't think twice about letting Microsoft update their machines, or about downloading patches or new protection files from security firms like McAfee, Symantec, Kaspersky, and others.  The system has worked; it's been 10 years since an outbreak like the Love Bug.  But Thursday's Mcafee disaster – which affected corporate and not consumer users — brought into focus the downside of giving control to an outside software firm.  Doctors, students, and office workers worldwide were left disconnected from the outside world, feeling very much the way they used to when a virus outbreak crippled their organizations.

"Automatic updates are still kind of a thorny issue, but when you look at threats today and the number of products that can be impacted, automatic updates are really the only viable means to insure someone's system is kept up to date," said Mary Landesman, senior security researcher at ScanSafe. “But they still carry the same risk they always did.  If something is wrong with the update it's going to impact a great number of users.”

At the same time, security firms are dealing with the overwhelming capacity of malicious programmers to churn out devious new code.

Ten years ago, according to Symantec Corp, there were 10 to 15 new computer viruses each week.  Today, the firm must find ways to protect customers against up to 20,000 new software threats every day.  While defusing all those bombs, the possibility of accidentally disabling a good file — a so-called false positive — is increasingly likely.

McAfee’s problem was created by just such a false positive. While the firm has yet to release additional details about the breakdown, it's hard to imagine the breakneck speed didn't play a major factor.

"It is an issue every malware company has to deal with, we have to adjudicate every file on someone’s system and decide if it’s good or bad," said Gerry Eagan, a security expect at Symantec. "In this game of cat and mouse, as we try to be more aggressive and catching malicious programs…if we fail, something like this can occur."

Eagan said the file that McAfee erroneously identified was a relatively old threat. He believes that McAfee was expanding a virus definition to cover a new variant of that old threat–  a normal practice that helps the software run more efficiently – and that McAfee engineers probably “wrote too generic a definition and caught a good file.”

But Landesman said she thinks the flaw was related to McAfee’s ability to detect viruses based on how they behave – by observing keylogging activity, for example — rather than the old-fashioned black-list method of identifying a known piece of computer code inside a malicious program.  Behavioral protection is a bit less scientific, she said, and more prone to false positives.

“As we go to behavioral methods were going to see an increase,” she said. “There has to be a certain acceptance that we're going to have them. But there will be some really ugly incidents like this one.”

Even those who weren't hit by the McAfee bug might have had other run-ins with automatic updates.  Microsoft's Windows can be very insistent about installing updates — again, a sound security practice — but it often leads to unintentional system restarts and lost files. It's not uncommon that third-party software updates cause system instability.  In fact, in 2007, thousands of users of Symantec's Norton antivirus software reported persistent crashes after that company issued an update. 

So is it time to reconsider the practice of surrendering control of your PC to large software company?

"I've been reading forums and there are a number of people chiming in saying, 'This is why I don't use antivirus software,' or 'This is why I don't apply patches,'" Landesman said.  "There are people saying having antivirus software is worse than having none at all. That's just not true…but it is a real risk that people on the fringe about having antivirus software will point to this as a poster child for why they shouldn't. "

Eagan said consumers and companies must make a logical decisions weighing the risks of unprotected surfing with the risks of a software goof.  Simply installing the software but reject installation of updates is not an option, he said.

"If you delay your downloads, then you aren't protected,' he said. The firm added 2.7 million virus detection fingerprints to its software automatic updates last year.

Sometimes those updates come several times a day, Landesman said, and that has overwhelmed even the most heavily staffed corporate security teams. Once upon a time, firms would test all updates in a lab before releasing them to their employees.  In most cases today, Landsman said, there's just no time.

"So they almost have to take a leap of faith that it will work," she said.  "That's the only practical avenue."

McAfee customers who made that leap on Wednesday weren’t rewarded. Instead, a bit like a rattled offense facing an overwhelming full-court press in basketball, McAfee goofed. By overwhelming the system with volume, by forcing security firms to rush and implement imperfect technologies, by robbing companies of proper time to test, malicious software writers have gained the advantage.  Even this incident, while ultimately harmless for victims (outside of lost time), created a big opening for the bad guys.  Consumers affected by the bug who went to Google looking for answers last night found fake Web pages offering help that were loaded with booby traps.

“This is already an industry struggling to keep up,” she said. For some time, McAfee will struggle to restore lost faith from customers.

   Become a Red Tape Chronicles Facebook fan or follow me at http://twitter.com/RedTapeChron

Daniel Dauterive recently noticed that his Dish Network bill had increased sharply, but his subscription rate had not. 

"I added no new service," the Missoula, Mont., resident said. He hadn't added hardware, either.  So why the price hike?

Simple.  He was paying higher rent.

Most pay TV customers today pay a monthly fee for set-top boxes that interpret signals sent from the TV provider. Given the variety of options now available – HD channels, digital video recorder capabilities, support for multiple TVs — costs per box can add substantially to the monthly subscription price. It’s a frustration the Federal Communications Commission hopes to take on as part of its National Broadband Plan announced last month.

In Dauterive's case, Dish raised the monthly fee for his set-top boxes from $5 to $14. Dauterive was frustrated by the increase, which he described as sneaky.

"It is obvious that DISH is trying to avoid admitting to raising prices for programming, so they call it fees," he said.

How much are you paying to rent the box that sits on top of your TV set?  We'd like to help make direct comparisons easier.  Help us by describing your monthly bill below.

Dish spokeswoman Francie Bauer said the firm made the price change in February as part of an effort to clarify costs to consumers.   Some Dish prices were lowered or eliminated, she said, such as the per-TV digital video recorder fee.

Join the fight
"We tried to do some things to offset the cost (increase)," she said. "We're trying to standardize our prices."

To its credit, Dish spells out the four-tiered set-top box rental costs clearly on its Web site. The first box is free with a subscription, but for each additional TV, boxes can cost $7, $10, $14, or $17 each per month, depending on capabilities.

With some other TV providers, finding the set-top box rental price on Web sites or marketing materials can require an advanced degree in library science. Some bundle in the cost of DVR services or HD channels; others split those costs out. Some prices are based on local conditions, and vary from market to market. 

It all makes coming up with an honest apples-to-apples comparison of pay TV services a nightmare. What might sound like a low monthly price in an ad can become a triple-digit bill in a hurry.

It wasn't supposed to be this way. In 1996, Congress directed the Federal Communications Commission to make it easier for consumers to buy set-top boxes from third-party providers, potentially eliminating monthly lease fees. In fact, the reverse has occurred — consumers are paying more tack-on, set-top fees than ever. And an FCC ruling in 2007 is blamed for pushing leasing prices higher.  That year, pay TV providers were forced to separate their channel changing and channel security functions in their set-top boxes, a move that was supposed to provide an opening for alternative boxes. Consumers who wanted to buy their own simply had to insert a CableCARD — similar to PCMCIA cards that were once common to laptops — provided by the pay TV firm. But the so-called “integration ban,” cable industry officials said, simply raised the cost of making boxes, an increase that was passed on to consumers.

In the meantime, there's been plenty of consumer confusion about boxes.  In 2008, DirecTV was sued by consumers who say they were misled when purchasing set-top boxes from electronics retailers like Best Buy. Even though the consumers paid up to $200 at the store, the boxes were still "leased," according to DirecTV, which assessed additional monthly fees on the boxes and required that the boxes be returned when consumers canceled service.

Also that year, Time Warner Cable and Comcast were sued by private plaintiffs who claimed the firms violated antitrust laws by forcing customers to rent their boxes.

In March, the National Cable & Telecommunications Association told the FCC that only 489,000 CableCARDS were being used in third-party boxes — a tiny fraction of all pay TV customers.

Amid the frustration, confusion and disappointment, the FCC is about to take another run at the problem.

In March, when the agency issued its highly anticipated broadband plan, it unveiled a proposal to reignite the set-top box market, this time with even grander goals. Now that millions of consumers are watching TV using their computer and Internet connections, the agency wants to encourage a marketplace for do-everything boxes that would allow people to consume television through  multiple platforms. The FCC wants to require that all multi-channel video programming distributors (MVPDs) play nice with each other, and with consumers, by Dec. 31, 2012. The newfangled set-top box that would allow this freedom is referred to as a “gateway” device.

"It would allow consumer electronics manufacturers to design to a stable, common open interface and to integrate multiple functions within a retail device," the FCC wrote. "Those functions might include combining MVPD and Internet content and services, providing new user interfaces and integrating with mobile and portable devices such as media players and computers. It could enable the emergence of completely new classes of devices, services and applications involving video and broadband."

The FCC is taking up creation of a market for gateway devices at its regular monthly meeting on Wednesday, when it will also discuss other aspects of the National Broadband Plan.

The pay television industry hasn’t signaled precisely how it will respond yet to the FCC proposal – competing interests abound.

For example, in a blog posting, Kyle McSlarrow, CEO of the National Cable & Telecommunications Association, said his group saw promise in the gateway concept, but cautioned against a heavy-handed approach.

“While we are committed to working constructively with the FCC on this and related issues, we still firmly believe that technology mandates should be a last resort,” he wrote.

In the meantime, what do you pay to rent set-top boxes in your house? Pull out last month’s bill and tap out your costs below. Don’t forget to include:

1. Provider
2. Hometown
3. Type of box (basic, DVR, etc)
4. Number of boxes
5. Related fees, such as DVR fee

We’ll compile a list for a later story and help you compare services.

 Become a Red Tape Chronicles Facebook fan or follow me at http://twitter.com/RedTapeChron

In the past month, Red Tape Chronicles readers have taken on a long list of consumer booby traps – laid by phone companies, pay TV companies, banks and others – and WON! The mountain of success stories from the Red Tape Fight Pledge group on Facebook is so high we decided to pick a top 10 list and share them with you here in the hope that you’ll be inspired to use some of the same techniques.

But before we get to that, The Red Tape Fight Pledge has been so successful that we’ve decided to keep it going, with only a small change. The group is now being called the Red Tape Fight Club. Already, more than 1,000 super-consumers are signed up, and they will form the backbone of a self-help group designed to be a standing army of consumer advocates, ready to help any victim get economic justice when locked in a battle with a stubborn company. Group members will share tips, tricks, phone numbers and any other technique that can be used to help you get a fair deal.  Anyone can join and post questions, looking for help. Some members will prove themselves to be subject matter experts and volunteer to be captains.

The Red Tape Fight Club is designed to be self-sustaining, run by members.  I will chime in often if I have helpful advice. But 1,000 brains are better than one. Click here to join, or just to see what’s going on.

 

Now, on to some individual success stories.

1. DirecTV

Linda Keith is a 55-year-old single mom of five (only one left at home) from Varina, Virginia, looking to keep control of her expenses. When her monthly TV bill with DirecTV hit $70, she took action.

 

“(I) told them I was going to cancel and they gave me a $50 credit and lowered my bill from $69 a month to $29 for a year. Then it will zoom back up but for now this is a deal," she said. “They also gave me Starz free for 6 months. … it took me no time at all. All I did was ask.”

 

Keith apparently has money-saving genes.

 

“My daughter also did the same thing with a different cable company and is saving $70 per month  on telephone, cable and internet,” she said.

 

2. Credit card annual fee

Melissa Triemstra of Dyer, Indiana, is one of millions of consumers who’ve seen their credit card costs raised through higher interest rates, lower credit card limits or new fees. But she didn’t stand for it.

 

“I noticed the annual fee charge — $39 – on my online account balance so I called them up right away,” she said, referring to the card issuer, First Financial Bank. “(I) nicely told them that I had other cards and really didn't feel that I needed to pay an annual fee on any of them. They put a note on my account saying not to ever charge me an annual fee. They were real nice and quick about it.”

 

3. No late fees = $2,000 slush fund

Russell Luepnitz of Winfield, Alabama, canceled his cable service and saved $40 per month. But he took an even bigger step – he used technology to help him avoid penalty fees.

“I have already saved $300 over the last year because I have paid on time or switched to electronic withdrawal on small bills like water,” he said. The savings add up to $300 over last year. As a reward, he opened a new savings account for all the saved cash. Adding up the cable, late fee savings and his self-imposed restrictions on “ridiculous purchases,” he’s got $2,000 in that slush fund now.

 

4. Kept talking to get unlimited minutes deal

Ray of Taylorsville, Utah, 63, ran into typical trouble when upgrading from a “dumb phone” to a “smart phone.”  He was spending $70 per month for 1,500 minutes and was about to add pricey Web services to his phone. He didn’t want a triple-digit phone bill, but $120 per month was staring him in the face.

“(I had to) continually pester T-Mobile and finally resort to a threat of leaving their customer herd before they began offering me plans with unlimited minutes and unlimited Web access,” said Ray, who asked that his last name be withheld. “After discussing the issue with several reps and finally telling them that I'd look elsewhere, they seemed to find that there was a ‘long-term customer option’ that gave me unlimited minutes for $50-a-month and then the standard unlimited Web access for $25. The bottom line being that for $5 more per month I no longer have to worry about limits on either type of connection. … I ended up with a better package for close to what I was already paying.”

 

5. Worth it to cancel home phone service

Shana Martin, 30, of Centerville, Indiana, decided to take the plunge and cut her home telephone cord after realizing that she could live with cell phone service only. It wasn’t easy, but it will save her more than $200 a year. 

 

“I called Verizon once or twice a week for two months trying to cancel my land line,” she said. “I first tried doing it online, but they said I had to call. But I would be on hold for so long — 30 minutes or more — that I would hang up frustrated.” She finally had luck by calling at night.

 

“I asked to cancel the line and they asked why but didn't offer any incentives to keep it. It only took about 3 minutes to get it canceled. I saved about $18 a month by getting rid of the phone. … My advice for others would be to not stop trying. It's hard to find time to stay on hold or call back repeatedly, but in the end the money saved is worth it.

 

6. From VOIP to Skype to save

Michelle Brinkman Stevens of Austin, Texas dropped one new-fangled phone service for another and and will save $228 in the next 12 months. 

 

“We dropped cable VOIP phone and went with AT&T basic service,” she said.  “Now (we) pay Skype to do calls to domestic land or cell phone.” Their $45-a-month bill is now a $20 local phone bill and a $6 monthly Skype bill. “Monthly savings of $19. Works for me.”

 

7. Comcast phone and Internet savings

Stephen Ham of Nashville knocked $10 per month off his phone and Internet service bill with a call to Comcast. He threatened to cancel service if he didn’t get a better deal.

“Not as much as I had hoped but worth the effort.” he said.

 

8. Keep the ‘promotional price’ after trial period ends

Zohar Laor, like most pay TV consumers, signed up when the cable company was offering a discounted trial offer.  But when the trial period ended and his rate went up, he got on the phone.

 

“I lowered my cable bill by about $20 a month,” he said. “I called and they gave me the ‘current promotion’ price and I put my name on a list to be called if a better promotion is available.”

 

Gregory Yurevitch has a similar experience with Comcast.

 

“(I) asked Comcast to lower my bill, which they wouldn't do. However, they would extend existing promotional pricing, which is the same thing,” he said.  He saved $25 per month, or $300 per year.

 

9. Don’t stand for FIOS rate increases

Timothy Thorn of Wilmington, Delaware, called Verizon after the firm raised his monthly fee $10. He ended up saving money and getting better service.

 

“I explained I was a good, pay-on-time customer and would have to cancel service unless I got my old rate back,” he said.  “The service person hemmed and hawed but I was firm about having to cancel service. Finally she came back with my old rate – $44.99 – and double the current speed. I did have to commit for a year.”

 

10. Discount on set-top boxes

Skip Frank of Flower Mound, Texas, used the threaten-to-cancel tactic with Verizon for his TV and Internet service package.  He had mixed results, but still came out ahead.

 

“The best I got was a $4.99 credit per month for one of our set-top boxes,” he said. “Not what I'd hoped for, but better than a sharp stick in the eye.”
 

 Become a Red Tape Chronicles Facebook fan or follow me at http://twitter.com/RedTapeChron

What would the Founding Fathers think about Internet-based “cloud” computing? 

Would James Madison, for example, agree with some current interpretations of the Fourth Amendment, which hold that old-fashioned letters stored in a dresser drawer enjoy stronger legal protection against search and seizure than an e-mail stored on the Web or a private post left for a friend on Facebook? 

In a world where every computer is connected, where it doesn't matter whether your e-mail is on the hard drive in your bedroom or a server half a world away, where your critical company documents can be viewed from anywhere, where would the Founding Fathers draw the line for law enforcement? The "cloud," already well formed with Hotmail and Google docs, is a potential treasure trove for police investigators.  But how can we make sure the cloud doesn't rain all over Americans' Fourth Amendment rights to avoid unfair searches?

That's the goal of a new coalition behind the Web site DigitalDueProcess.org. The group includes strange bedfellows, ranging from the right-leaning Americans for Tax Reform and the Competitive Enterprise Institute to the liberal American Civil Liberties Union. Google, Microsoft, Intel and a host of other technology companies are also involved. Their main goal is a rewrite of the outdated Electronic Privacy Communications Act of 1986 for the 21st Century.

“Technology has changed dramatically in the last 20 years, but the law has not,” said Jim Dempsey, vice president for public policy at the Center for Democracy and Technology, another member of the coalition. “The traditional standard for the government to search your home or office and read your mail or seize your personal papers is a judicial warrant. The law needs to be clear that the same standard applies to email and documents stored with a service provider while at the same time be flexible enough to meet law enforcement needs.”

Descriptions vary, but cloud computing generally refers to storing information or software on computer servers that can be accessed from multiple locations around the world – Gmail is a good example — as opposed to data that must be accessed by someone who has physical access to a local computer or hard drive.  Today, the rules of evidence gathering apply differently to data in the cloud.

Ryan Radia, a spokesman for the libertarian think tank the Competitive Enterprise Institute, said that there is plenty of judicial confusion about application of search and seizure laws to electronic communication — in fact, federal courts have issued contradictory rulings.  But in general, many Internet service providers turn over electronic records to investigators in response to a simple subpoena, while old-fashioned paper records require the higher standard of a judge-issued warrant. Just because information travels over a wire and sits on a server doesn't mean it should be less protected by the Constitution, Radia argued.

"If you get a letter from a friend of relative in the mail and leave it in the file cabinet in the basement, if law enforcement wants to read it they have to get a search warrant," he said.  "But with cloud computing … judges have interpreted that the information has been handed over to third parties and is no longer considered to be private. Federal law ought to protect that information in the modern age."

More than theoretical constitutional issues are at stake. There's also real money.  Tech companies like Microsoft and Intel are worried that concerns about privacy could stunt the growth of cloud computing, and recent research by the Pew Internet and American Life Project seems to validate this concern.

The report found that 69 percent of online Americans use at least one cloud service, such as Web-based e-mail, and 64 percent of them said they were concerned that law enforcement agencies could access their files. Only 22 percent said they weren't concerned.

"We run the risk of users lacking trust in cloud computing and in many information services if a user cannot be confident their information will remain secure," Radia said. "If cloud computing is going to realize its full potential, if the industry is going to succeed, we need to be sure there is privacy protection. We can't expect the technology to work around the limitations of federal law."

Among the groups' top goals: members want federal law to be "technologically neutral," meaning that search and seizure requirement would apply uniformly, regardless of the technology involved. That would mean a private communication — be it handwritten or electronic — would be governed by the same rules of evidence gathering.  They also want to clear up inconsistencies in the application of federal law. Currently, in some cases, there's a lower legal standard for law enforcement to intercept an e-mail in transit than for that same agencies to read an e-mail stored on a recipient's computer.  In other words, a single e-mail can be governed by various different legal standards during its life-cycle.

"A particular category of information should be afforded the same level of protection whether it is in transit or in storage," the group says in its "guiding principles."

While the group has gone to some pains to avoid sounding as if they are attacking law enforcement agencies, don’t expect them to hop on board the effort.  Updates to the Electronics Communications Privacy Act would almost certainly curtail use of some evidence-gathering tools, such as the FBI’s much-maligned Carnivore software, which was designed to capture e-mail and Web transmissions going into and out of Internet Service Provider servers.

The group has already received a relatively warm welcome on Capitol Hill. House Judiciary Committee Chairman John Conyers, D-Michigan, has said he would hold hearings this spring on potential updates to the Electronic Communications Privacy Act.

“Many Americans take for granted the protections of the Bill of Rights that prevent the government from coming into people’s homes without a valid search warrant.  The rise of cloud computing should not diminish these privacy safeguards,” said Mike Hintze, Microsoft’s associate general counsel, in a blog post.

Change will not be easy, however, and isn't expected this year.  Americans have a rather tortured relationship with privacy. They often say one thing ("Privacy is important to me") but do another ("Sure, thanks for the coupon, here's my Social Security Number") noted Lee Rainie, head of the Pew Internet and American Life Project.  And when it comes to law enforcement issues, their opinions are even more contradictory, particularly since Sept. 11, 2001.

"Americans are concerned with bad actors doing bad things, and if you ask them if they are comfortable with law enforcement checking (online data) related to people who, for example, are going to hurt children, by and large they are," he said.  On the other hand, they really value privacy, and are not comfortable with government agents having broad access to their data, he said. "The way people think about privacy is very context sensitive," he added.

 Become a Red Tape Chronicles Facebook fan or follow me at http://twitter.com/RedTapeChron

 

His cell phone sits on the night table while he showers. Her e-mail is left accidentally on the computer screen while she uses the bathroom. To look or not to look?

It's perhaps the strongest new temptation of the 21st century — the casual glance at a lover's cell phone text messages or e-mail.  This level of snooping once required rather deliberate spy-like behavior, such as rustling through a bedroom   drawer to find stashes of old-fashioned letters. Now it can happen as quickly as an instant glance.  And, according to one new study, it's happening a lot.

But is such amateur sleuthing a normal part of life in the digital world, or does it mean couples need professional help?

A study commissioned by online gadget review site Retrevo.com found that 38 percent of people under age 25 had stolen a glance at their lover's texts or e-mails – without that person’s permission or awareness. Among married adults of any age, the rate was 36 percent.

"We were surprised to see how large the percentage was," said Manish Rathi, co-founder of Retrevo.

California-based couples counselor Jay Slupesky was not.

"It happens all the time," he said. "That has brought people into counseling on many occasions."

Spousal spying can be illegal

There are numerous examples of extreme spousal spying.  Entire Web sites are devoted to buying hidden cameras, special cell phone snooping software, cracking e-mail passwords- and all manner of cyberspying. The newest trick, says Slupesky, is for one partner to secretly enable the GPS location software on a cell phone that's designed to help parents keep track of children. Then, a jealous spouse can virtually follow their lover’s every move.

"Snooping on spouses has been taken to the next level.  The next lower level, that is," he wrote in a recent blog entry. “This … is downright creepy."

In some cases, spousal spying is illegal.  In 2005, the Department of Justice indicted the owners of a firm named LoverSpy, which sold electronic greeting cards laced with Trojan horse software designed to track a lover's Internet activity.  Authorities also charged four LoverSpy customers with illegal wiretapping.

While most reasonable adults would agree that going to such lengths to spy on a lover is inappropriate, the issue is not nearly so clear when considering casual glances at cell phones or e-mail inboxes. 

Healthy relationship boundaries are constantly under assault from 21st century hyper-connectivity.

"In the past if you looked around after your lover you'd get caught. You had to look at their phone bill or rummage through someone's drawers," said Rathi.  The spying required at least some measure of premeditation.  Today, spying can be completely impulsive. "Now, it's always available, and people don't necessarily see it as spying. It’s just so easy to do it. The phone is sitting right there."

Adding fuel to the fire is the rapid growth of smartphones, which put personal e-mail and texts in one handy, easily accessible gadget.  According to The Nielsen Company, only 10 percent of U.S. adults had a smartphone during the second quarter of 2008.  By the end of last year, that number had risen to 21 percent, and by 2011, Nielsen expects half of America to be using smartphones. That's a lot of opportunity for casual spying.

Online relationship forums are jammed with debate about the ethics and mental health impact of such snooping.  In numerous places, lovers say they discovered infidelity by snooping and swear by the tactic.  But nearly as often, the spying ends poorly.  In one anonymous thread, a woman admits reading her boyfriend’s  text messages and says she regrets it because “I found nothing to help me nor did I find anything to make me worry about our relationship.”  She later admitted the snooping to her boyfriend, who felt violated.

“One of the things you will learn in life, as a girlfriend, or a parent,” responds one advice giver, “is NEVER to admit when you spy.”

But Slupesky, the therapist, says it's never a good idea to cross that line.

"I am always opposed to spying. If you are in a loving relationship, you just don't spy on your partner," he says. If there is suspicion of infidelity, the relationship needs therapy, not snooping-. "There are better ways to address your concerns."

He did offer a broader perspective on cell phone spying, however.

"I think some people are feeling distance from their spouse for whatever reason, and they think if they see who their spouse is e-mailing they will feel more connected.  That happens a lot," he said. "They are looking for a way to restore the connection…it's a way of asking, ‘Are you still close to me? Am I still the most important person in your life? Do you still love me?’ " 

Of course, there are healthier ways to deal with those profound questions. In therapy, Slupesky always tries to get lovers to stop the spying behavior.

"One thing I do when someone tells me they are doing that is I ask, 'Did you feel better after you looked at his phone?' They usually say, 'No.' And then I ask, 'If it doesn't make you feel better, why do you keep doing it?’ " 

But often, he said, the compulsion is too strong, and the access too easy, for his patients to stop.

While the Retrevo survey found that men and women utilize casual spying equally, Slupesky said two-thirds  of his spying patients are women.

"Women are more likely to notice something is missing in the emotional connection, and men cheat more," he said.

Rathi said one way to help solve the problem of casual spying is to take away the opportunity.  Smartphone users should password-protect their gadgets to avoid creating an irresistible temptation for their lovers, he said. Logging out of Web sites and e-mail accounts is also a sound, safe computing practice.

Retrevo plans to study the spying issue annually to identify any shifts in social standards on spying.

“The amount of time people spend using these gadgets is increasing, and the amount of data they are consuming through these devices is continuing to increase.  So I think we will see more (spying) as time goes by,” he said. 

 Become a Red Tape Chronicles Facebook fan or follow me at http://twitter.com/RedTapeChron

Can you make money just by writing down the license plate numbers of cars in your neighborhood? It might sound like a game your older brother made up to keep you busy — but two aggressive start-up firms are telling consumers to do just that, and both are spreading the word quickly online. But how does it work?

One of the two, Dallas-based Narc Technologies Inc., offers a simple explanation. They want you to rat on your neighbors. The firm's Web site, NarcThatCar.com, is designed to collect license plate numbers and locations so lenders can more easily repossess cars when the owners default.

In other words, the firm wants consumers to become the repo man's informant.

Its chief competitor, Data Network Affiliates, says it has no intention of getting into the business of repossession. It says it plans to use its database of license plate numbers to help find missing children through Amber Alerts. It also hopes to sell the data to other information-hungry marketing firms, and to turn its user base into a kind of buyer's club.

In each case, members only earn a couple of dollars each month from basic license plate collection.  But they stand to profit significantly if they convince friends and family to join — a classic multi-level marketing ploy. And in each case, there are volumes of complaints about the companies online.

Before we get into the specifics, let's review a few basics.

1) Anyone who says you can make a lot of money by staying at home and doing very little work is almost certainly misleading you.

2) Multi-level marketing (MLM) is legal. Pyramid schemes are illegal.

3) What's the difference? Sale of a real product. Firms cannot design companies where the chief source of income is skimming a cut off of others who are talked into joining — that's a pyramid scheme. But if company associates sell a real product, and merely enhance their income via "down line" percentages of sales from other hires they have sponsored, that's legitimate MLM.

MLM-like schemes, along with work-at-home scams, are a dime a dozen online, but they have really ramped up during the recession.  Jobless workers with plenty of time on their hands sometimes try dozens of work-at-home ideas, trying to hit on something that will earn them a little cash.

The attraction of Data Network Associates is simple: Unlike most work-at-home jobs, there's nothing to sell, said marketing director Warren Anthony. Members simply write down 20 plates per month for their $2.

"It's so easy, this is something my 80-year-old dad can do. A college kid can do it," he said.  He said they encouraged affiliates to gather plate numbers in parking lots at churches or malls in order to avoid spooking neighbors.

He said the firm has so far signed up 92,000 affiliates in only about three months. Together they have entered 1.3 million plate numbers into their database.  Already, the firm's Web site ranks in the top 8,000 on the entire Internet, he said.

Joining the service is "100 percent free," but members are urged to pay $130 for software that makes it easier to enter the license plate numbers and for a package of travel discounts.  One sales force member interviewed by msnbc .com who reported signing up 92 sales associates said paying for this "upgrade" was the fastest way to earn money.

But Anthony rejected the term upgrade.

"It is a package of products and services they are buying … a business benefits package," he said.

The company's business is "turning data into cash," he said, and the firm has multiple strategies for raising revenue. Users will soon see ads when they log in to enter plate numbers. They will also receive member-only offers for services like Dish Network and ADT security systems.

"We tell people it's where Walmart meets Google," he said.

The associate msnbc.com interviewed, who spoke on condition of anonymity, said he had yet to receive any money from the company but expected a payout of about $400 in early April.

"This thing could get really crazy," he said. "We get paid down 10 levels deep. … Think of it as just like Facebook."

NarcThatCar also claims similar success. A Web site that discusses the company said it recently held a conference call attended by 34,000 people

Measured by inquires to the Dallas office of the Better Business Bureau, the firm's popularity is exploding. With 20,000 inquiries since Jan. 1, Narc Technologies is easily the most asked-about company at the Dallas office, says spokeswoman Jeannette Kopko.

"That's very high activity," she said. "They seem to be doing a lot of recruiting, especially in Texas."

Many of those inquiries are "pre-purchase," she said, with prospective associates calling the BBB to check the company’s background.  That's a good practice; the Dallas BBB currently gives NarcThatCar an "F," rating, the agency's lowest grade.

"The reason is because we've seen a pattern of complaints," she said, noting that the agency has received nine complaints, with most of them resolved after BBB intervention.  "Also we are concerned whether this is multi level marketing that would be in compliance with the law or … a pyramid scheme. They say their product is information that's collected. But is there a market for that?"

The Dallas BBB has asked NarcThatCar to prove that the database of license plate numbers it's collecting is indeed a valuable asset. On its Web site, the firm claims to have signed a "six-figure contract” with a lien holder company, but has yet to provide the requested details, Kopko said.

Narc Technologies — which also uses the name Crowd Sourcing International — charges associates a $100 sign-up fee and a $25-a-month fee for hosting a Web site about the product.  Members who "sponsor" other new sign-ups earn a percentage of the fee.

A message left with Narc Technologies was not returned. An associate of the firm who requested anonymity said the BBB rating was “undeserved” and stated that the firm has paid its associates several times. He also said the firm has several clients who pay for access to their data.

Kopko said a firm cannot pass the legal test for being an MLM – the requirement of substantial product sales — simply by requiring new signups to buy a product. 

"The question is: Would people be making more money from recruiting others rather than actual sales?" Kopko said. 

That's the same question facing Data Network Affiliates.

Anthony, of Data Network Affiliates, bristled at the notion that some consumers might laugh when the suggestion is made that they could earn money just by writing down license plate numbers.

"You wouldn't put it like that," he said. The firm is the business of collecting and selling data, he argued, and plans numerous ways to monetize the information. "As far the plates, that's just a fun way to attract individuals. “

RED TAPE WRESTLING TIPS

It's often hard to tell the difference between a legal multi-level marketing firm and an illegal pyramid scheme — particularly because firms are so good at skipping along the outside edge of the law. But here are some tips, courtesy of the Texas state attorney general's office.

(Go here for even more tips)

* Ask about average monthly product sales for reps.  If sales are disproportionately low, you’re probably talking about a pyramid scheme rather than a multi-level marketing company.

* Ask about product returns policies if you are required to pay upfront for merchandise.  Laws vary, but in Texas, the firm must be willing to refund 90 percent of your inventory cost.

* Be wary of any firm that requires you to pay money to get a job.

* Be wary of high-pressure “business opportunities” in hotel seminars or meetings at a person's home. In Texas, and many other states, "regret laws" allow consumers to cancel contracts signed at such events for up to 72 hours.

 Become a Red Tape Chronicles Facebook fan or follow me at http://twitter.com/RedTapeChron

April 15 can be a day of fear, loathing or even downright panic – and that can work to great advantage for companies anxious to separate people from their money. While confused consumers are profitable consumers, frightened consumers are a gold mine. 

That's why, as tax day approaches, you are hearing seemingly nonstop advertisements for companies that claim magical powers to wipe away tax debt.  The ads bear a striking resemblance to those credit card debt settlement companies I’ve written about, but there's this extra punch to their offers: While credit card firms can be intimidating, most Americans are terrified of the IRS.

That’s why promises to "end the nightmare" and erase debt for "pennies on the dollar" can be quite persuasive.

As with many unscrupulous offers, the reason this one is so pervasive is because there is a grain of truth to the claims. Yes, in extreme circumstances, the IRS will settle old debts for a tiny percentage of the outstanding balance. But in most of those cases, the consumer is either near death or completely unemployable and without any valuable assets. 

Instead of describing these long odds, many tax debt settlement companies sweet talk clients. Then they take large up-front payments — prices start at $3,000 and climb fast from there – but do little or nothing to help with the tax problem, according to Illinois Attorney General Lisa Madigan. 

"These companies help virtually no one," Madigan said.

Madigan and 17 other state attorneys general  sued tax debt firm J.K. Harris in 2008, accusing it of misleading consumers. The firm – one of several tax debt firms to be hit with class-action lawsuits – paid $1.5 million to settle the case but admitted no wrongdoing. 

Firms often advertise that they have local offices staffed with former IRS employees, which is usually quite a stretch of truth, she said.

"Maybe they'll have one former IRS person, but most (employees) don't have that experience," she said.  And many of the local offices are really just mailboxes or empty conference rooms.

Firms that advertise tax debt settlement services are selling a legitimate IRS procedure called an "offer in compromise." If IRS debt collectors determine that the federal government has no chance of collecting on a tax debt, the agency will consider settling for a lesser amount. But the process is long, drawn out and relatively painful. No one can quickly obtain a "pennies on the dollar" settlement with the IRS, Madigan warned.

Back in 2004, the IRS issued a warning about such debt relief claims.

“We are increasingly concerned about unscrupulous promoters charging excessive fees to taxpayers who have no chance of meeting the program’s requirements,” said IRS Commissioner Mark W. Everson in a statement. “We urge taxpayers not to be duped by high-priced promises.”

The agency did not respond to requests to be interviewed for this story. But in 2007, it told CNBC that it rejected nearly three-quarters of the 46,000 settlement offers it received.

Larry Lawler is a tax debt expert and executive director of the nonprofit American Society of Tax Problem Solvers, which advocates for tax experts that help consumers with debt. While freely admitting some firms that aggressively advertise are trying to dupe consumers, he says a few bad apples have given his industry "a black eye that is underserved."

Many tax debt agents offer legitimate help to consumers, he said, though that help rarely results in debt forgiveness. He said nine out of 10 of the clients he personally represents must pay their entire tax bill, but he helps them reach an affordable installment plan with the IRS.

Settlement offers are far more lucrative for tax debt solution companies, he said. Even the most complex installment arrangement earns his firm only about $1,700, while tax settlement companies frequently charge $6,000 or more for a settlement that lessens the tax debt, he said. That’s often the last few thousand dollars the debtors have.

"So they push for the easy sell and thing they can make a quick buck on," he said. "There are people out there with real, legitimate tax problems … and there are charlatans out there, raping people, taking their money and not doing the job."

In some cases, tax debt firms don't even bother to fill out the forms correctly. The Internet is awash in complaints from consumers who never talk to the same agent twice or say that settlement firms raided their bank accounts after they signed over a power of attorney.

Many firms also have poor Better Business Bureau ratings.  For example, American Tax Relief – which advertises nationally, currently has an "F" rating from the Los Angeles office of the Better Business Bureau. The firm did not return a phone call requesting comment.

Calling a tax debt assistance company is tempting for many consumers because it is daunting to deal with the IRS, Madigan said.

"While many people have spoken to credit card companies at some point, most people haven't picked up the phone to call the IRS,” she said. “And most believe if you are having a problem with taxes, the best thing you can do is engage an expert. That's what these advertisements are promising people, but not delivering.” 

Lawler said that despite the mine field of tax settlement firms, consumers often do need professional help to address their tax debt — and ignoring it simply makes things worse. In an attempt to help consumers find honest help, his agency offers a certification program, though so far only about 100 professionals around the country have completed it.

But he said consumers can spot trouble with relative ease.  Any tax debt agent who suggests during an initial 30-minute conversation that a consumer can submit an offer in compromise is probably selling snake oil, he said.

"You can't tell someone they are a good candidate in an initial meeting, he said. “You have got to do an extensive financial analysis."

That’s because the IRS requires documentation of every asset and expense, in great detail.  "I always tell people a consumer can't hire someone to do an offer of compromise,” Lawler said. “They must hire you for help finding the best solution to their tax problem, whatever that is. … The vast majority of cases are not good candidates for an offer in compromise."

Jeffrey Rogyom is a tax lawyer in Maryland who recently penned a top 10 list of ways to spot a potential tax debt scam. Among the red flags on his list:

* The agent never asks why you owe the IRS money.

* They advertise so much you know their name.

* Your first payment "strangely reflects how much cash you have."

* The firm uses a "phantom office."  He recommends Googling the address to see if it's a real office complex or something more suspicious.

"These companies promise you the world, that's how they make their money," he said. "For some people (settlement) is a great option, but many people really need to be told they should file for an installment plan."

The tax debt business, however, is a murky  world, Lawler said. Some clients are more interested in evading taxes that paying their debts, while others cite constitutional arguments for not paying federal income taxes.  If they try to do either, Lawler said, he "shows them the door."  And while "99 percent" of consumers never set out to avoid paying taxes, the spectrum of tax relief clients runs from saints to sinners, making his a complicated business.

"I tell people our clients have not paid their taxes, owe the government a bunch of money, but we love them and we want a bunch more of them," he said.

Lawler said consumers with tax trouble would be better off ignoring the radio advertisements and working with someone they can meet face-to-face.

"You really should go to someone who's local, someone where you  can knock on their door and talk to them, who will answer the phone, who’s been in the community a long time,” he said.

Become a Red Tape Chronicles Facebook fan or follow me at http://twitter.com/RedTapeChron

Most people think they’ll never fall for a scam. In fact, that frame of mind is precisely what con artists look for. Those who believe that they know better are often the last to raise their defenses when criminals are nearby. Yes, Virginia, people lose money online. A lot of it. They wire cash to London, they can’t help investigating the one-in-a-million chance they really are related to a dead prince from Africa, and they sometimes even travel to Nigeria to find out. Just in case.

Many of the scams you read about are sensational, such as the silly “hit man” scam created by real amateurs (recipients get an e-mail that says send me all your money or I’ll kill you).  And you’ve also seen lists that offer oddly skewed results, such as the recent FBI announcement that scammers pretending to be FBI agents are now the most prevalent Internet crime. You’d figure those numbers are a bit exaggerated because victims of FBI scams are a bit more likely to report those scams to the agency.

Fantastic stories like these only serve to convince many consumers to let their guard down even more, helping to increase the pool of marks for the professional scammers.

I know, because I hear from victims all the time.  My inbox is littered with people whose notes say,”I know I should have known better, but ….” And with that, they beg me for help restoring their ravaged bank accounts. In fact, every single victim I’ve ever interviewed says they had an inkling that something was wrong from the outset, but they ignored that feeling. That’s why the single most important factor in avoiding fraud is this: Learn to trust the feeling in the pit of your stomach.

Usually, I can’t help restore those bank accounts. But I can help you, if your turn hasn’t come up yet.  And even if you are convinced you’d never fall for any online con, someone in your circle of friends or family is vulnerable. Please forward this story to him or her. 

Because I hear from so many victims all year long, I know what people really fall for. Here are the top 5 ways cyberthieves separate people from their money, based on my 12 years of writing about Net cons.

1.)   Online dating scams

Anyone out there never done anything dumb for love?  If you are raising your hand, congratulations. You may now relinquish your credentials as a human being.  The rest of you should read on.

Love-based cons are the easiest to perpetrate. Why? Because love always involves a leap of faith — trusting something you can’t see or touch. Just like Internet scams.  For years, criminals have made haunts out of dating services and lonely-hearts chat rooms.  Broken-hearted folks are rarely in their right minds, so they make easy targets. 

I once knew the FBI agent in charge of investigating cyber-love scams.  He put it this way:  Men could learn a lot from con artist lovers. They send flowers and candy constantly while wooing a mark (purchased with stolen credit cards, of course).  Gifts really do put women in an agreeable state of mind, he assured me.

Some cons spend months grooming their marks, waiting until after several “I love yous” before asking for $800 to be wired to the passport office in London to help clear up a paperwork mess so he can come to America for a visit.

Yes, it all sounds ridiculous. It’s not. It’s so profitable that criminals actually pay monthly fees on some dating services. Generally, the more you pay for a service the fewer criminals you’ll see, and free Craigslist personal ads tend to be a cesspool. But I’ve heard from victims who never joined a dating service but were still conned into fake love from perfectly innocent-sounding places like Facebook groups or chat rooms devoted to hobbies like stitching or horses. It all starts with a simple e-mail, perhaps enhanced by a little Facebook research (“Hey, you love the New York Islanders and the Beatles, too! Wow”)

Since I’ve written about this scam many times, I’ve even heard from concerned family members who beg me to talk the deluded lover down off the cliff when he or she is about to send a bunch of money to a scammer. Usually, I fail. Love is blind; it’s also really, really stubborn.

In the latest flavor of the scam, when a deluded lover actually wises up and confronts the criminal, he or she admits to the crime but then adds this twist: “Yes, at first it was just a con, but while we were talking I’ve really fallen in love with you.”

For a whole lot more on this insidious, more-common-than-you’d-believe crime, visit romancescams.org. The group, founded by former victims, has been fighting back for nearly 10 years. They post blacklisted photos there, e-mail addresses and typical opening lines from scammers , and lots of additional helpful scam-fighting tools. If you fall in love and have any doubts, visit the site.

2.)  Fake or “rogue” anti-virus software

We’ve all seen the pop-ups: “Your computer is infected! Get help now!”

If you’ve ever clicked through such an ad (really, a hijacking), you know that the price for freedom is $20 or $30 a month.  At first, the ads were clunky and the threats idle. But now, many pop-ups are perfect replicas of windows you would see from Windows or an antivirus product. Some sites actually employ so-called ransomware, which disables your PC until you pay up or disinfect it with a strong antivirus product. That’s why consumers forked over hundreds of millions of dollars to fake antivirus distributors in 2009, according to the Federal Trade Commission.

Your best bet?  Make a plan now.  This is the one scam that just about anyone can fall for.  The best protection of all is to back up your important files, so the day your computer is hacked, your digital life won’t be on the line.  It’s also important to have a fire extinguisher nearby.  A second PC or laptop is often your best help when disaster strikes.  Many viruses disable Internet access, so you’ll need a second computer to research your infection and download disinfectant software.  Have a flash drive nearby, too, so you can move the inoculation from one computer to the other.

Meanwhile, if you aren’t paying for antivirus software, at least employ one of the popular free products like AVG or Windows Defender

3.)  Facebook impersonation

Facebook is no longer a Web site — it’s a full-fledged platform, rapidly approaching the scale of the Internet itself. Many young users spend more time on Facebook than on e-mail, and actually use Facebook as their e-mail service.  That means scammers are now crawling all over the service, since they always go where the people go.  There are hundreds of Facebook scams, such as phishing e-mails, Trojan horse infections, misleading advertisements and so on.

But the crime you should most worry about is Facebook impersonation. A criminal who hacks into your Facebook account can learn a staggering amount of information about you. Worse yet, he or she can gain trusted access to friends and family.  We’ve seen plenty of stories that show Facebook friends can easily be tricked into sending money in response to believable pleas for help.

For this reason, it’s time to upgrade your Facebook password. Treat it like an online banking site, because it’s not a stretch to say that a criminal who hacks your Facebook account is only one small step away from stealing your money (“Hello, First National Bank, I’ve lost my password. But my high school mascot is the Owl and my mother’s maiden name is Smith. Oh, and my first girlfriend’s name was Mary. Can you reset the password now?”)

4.) Becoming a bot

You may not know it, but your computer might be a criminal.  Botnets — armies of hijacked home computers that send out spam or commit other crimes — remain the biggest headache for security professionals. The various botnets ebb and flow in size, but at any given time, tens of millions of computers on the Web are under the influence of a criminal. No one thinks it’s their PC, of course, but look at the odds. If one estimate claiming 100 million infections is accurate, then about one out of every 20 computers in the world is infected.  In other words, someone in your extended family is aiding and abetting a spammer.

How can this be? Victims typically don’t notice the criminal activity.  Cyberthieves can easily use your machine without leaving a trace or slowing down your PC performance. They do not deposit e-mails in your sent items folder. Instead of sending 1 million e-mails from your machine, they send one e-mail every hour from 1 million infected machines.

Any honest antivirus company will tell you that there is so much new malicious software created every day that the good guys simply can’t keep up. The Web is jammed full of e-mails and Web sites that can turn your home computer into a bot. Your PC could very easily be safe today but at risk tomorrow. That’s why it’s so important to keep your computer’s security tools up to date. But you shouldn’t assume that this will keep you 100 percent safe. Avoid the Web’s seedier side, and don’t let the kids download illegal music or games, a main source of infections. And always keep on the lookout for strange programs, files or surprising hiccups from your machine.

5) The fakosphere

The Web is now littered with fake blogs, fake ads, fake acai berry products, fake work-at-home jobs and fake Web sites saying how great all these things are. You’ll even see ads for such products on all major media Web sites, as they’ve become the Web’s answer to late-night infomercials. 

The FTC recently issued an opinion clarifying that fake testimonials on Web sites are a violation of federal law, and some of the over-the-top ads have disappeared. But the fakosphere is far from dead.

I know it’s tempting to obey one rule that will make your tummy flat, make your bank account fat or make your cancer disappear.  But you can’t believe everything you read online.  Never purchase a product without searching Google using this search term:  “(Product name) scam” and “(Product Name) complaint.”  Then, spend three minutes familiarizing yourself with the reputation of the item you are about to buy and the price you are about to pay.  One or two complaints might say one thing, but 500 complaints should certainly scream at you that you should put that credit card back in your wallet.

Here are a few other top scam lists worth checking:

* Top 12 scams at BillShrink
* The Times (UK) top scam list
* FBI top scams list

Become a Red Tape Chronicles Facebook fan or follow me at http://twitter.com/RedTapeChron

Dropping from an "A" grade to a "B" in a class might be a bit disappointing, but it's hardly a disaster.

Supporters of a new consumer protection agency publicly offered the same kind of mixed reaction this week when Sen. Chris Dodd, D-Conn., finally unveiled his plans for the new regulator as part of a financial reform package.

Dodd's plan downgrades the proposed Consumer Financial Protection Agency (CFPA) to the Consumer Financial Protection Bureau (CFPB).  In other words, instead of the stand-alone advocate for bank account holders and borrowers approved by the House of Representatives last year, Dodd’s version calls for a bureau that's part of the Federal Reserve.

The new model had been signaled for weeks, with supporters of the concept hoping the change meant little more than a change of address. Elizabeth Warren, the Harvard bankruptcy expert who first proposed the new regulator and is widely expected to be its first chief, said that as long as the regulator enjoyed real independence, she didn't care what logo went on its letterhead.

But there has been great concern that, after a year of intense lobbying, the financial industry would manage to de-fang the new watchdog. And now there is real concern that important reforms will be managed by an agency that failed to safeguard consumers during the housing bubble.

While the legislation includes about a dozen or so hotly contested provisions — such as the possible limiting of states' rights to enforce their financial regulations — the war of words has centered on a debate pitting so-called "safety and soundness" protection against consumer protection. The financial industry and some regulators say that the financial strength of banks is so critical to the economy that it must be paramount in any regulation, and that consumer protection cannot be instituted independent of concerns over a bank's financial health.  Supporters of the new agency counter that consumers can't be effectively protected from mistreatment if the rules defer to the needs of banks' balance sheets. Dodd's new proposal is an attempt to balance these interests.

After spending a week searching for the devil that might be hiding in the 1,000-page legislation, most consumer advocacy groups say they can live with the new arrangement. Warren offered a tepid public approval; other agencies offered positive-sounding statements calling Dodd's bill a "good start." The Center for Responsible Lending's Michael Calhoun called the bill a "step in the right direction." The Consumer Federation of America said it "applauds" Dodd for "moving forward."

And the Oregon State Public Interest Research Group said it was satisfied that, in its current form, the new legislation creates a bureau that would “simply be in, but not under, the Fed, with a firewall against the Fed controlling its actions.” The bureau would be self-funding, for example, and its head would be a presidential appointment.

But those groups also offered a long string of caveats. Chief among them: A council of regulators drawn from existing agencies would have veto power over new rules proposed by the bureau. It would take a two-thirds majority of the nine-member body to overturn them.

"We don't like the veto, even at the high standard it is currently at," said Ed Mierzwinski, consumer program director the Public Interest Research Group. Any veto power given to agencies that are seen as friendly to banking interests would severely dilute the new bureau's ability to carry out its mission, he said.

RELATED STORY

WHAT WOULD THE CONSUMER PROTECTION AGENCY DO?

Even more worrisome, said Mierzwinksi, is the possibility that the veto power will be strengthened as the package goes through the legislative process.

"The bill is just a draft and hasn't gone through the sausage machine yet,” he said. “We expect the industry … to work to lower the standard, a lot, making it easier to trump (the new agency)."

Carmen Balber, Washington’s director of Consumer Watchdog, was not as positive about the proposal as most other advocates.

"An autonomous regulator must have the authority to write rules without fear of rejection by existing regulators, whose refusal to enact consumer protection rules helped cause the financial crisis," she said. "An effective regulator must have the ability to enforce the rules that it writes or be little more than a paper tiger.”

 Another more practical problem is the arrival of spring.  Congress will go on recess in a week, and the highly charged health care debate and fallout from a potential vote will chew up much of that time.  When it returns after the break, concerns about the fall election will begin to monopolize legislators and could trim their desire to pass yet another controversial reform package.

"Dodd is running out of weeks," to move the bill forward, Mierzwinski warned.   Still, he thinks that the U.S. public remains very positive about financial reforms, and that liberals in Congress might welcome the regulation debate after the expected bitter health care vote. 

Of course, Dodd’s bill is just another step in the long process toward creating a new agency designed to protect consumers, and the legislation remains a moving target. What really matters are the details, and the devil that might lurk in them and find their way into the final version.

“The House has passed its version of reform, but we now face a phalanx of bankers seeking to weaken this bill in the Senate,” said Jon Bartholomew, spokesman for the Oregon PIRG. “Will senators vote with Main Street to improve this package or weaken it for Wall Street?”

Become a Red Tape Chronicles Facebook fan or follow me at http://twitter.com/RedTapeChron

It took Mary Schreiber about an hour, and just a little moxie, to save $300. You can do it too.

After reading about the Red Tape Fight Pledge last month, Schreiber took a hard look at the $129-per-month cable and Internet bill that had been nagging at her, and decided it was time to do something about it.

"The Comcast bill was crazy expensive, and I have really just basic TV and Internet," said Schreiber, 58, a technical writer who lives near Denver.

Saving money has become a top priority for her since she was laid off 11 months ago.

Mary Schreiber

Her string of bad luck actually began 10 years ago, when she thought she'd found her niche as a technical writer for a high-flying telecom company named MCI WorldCom.   But by the time MCI WorldCom CEO Bernie Ebbers took the Fifth before Congress about accounting irregularities, Schreiber was unemployed. 

Finding a job at age 50 can be a challenge, but Schreiber landed on her feet, this time with a multinational software firm named Mincom, based in Australia.  As a single woman, the $3,000 in take-home pay, along with decent benefits, provided her with a good living.

Then, the floor fell out from under her again. Last May, Mincom laid her off. Now 57, she knew her prospects were dimmer than last time. The $1,700 in monthly unemployment checks she began to receive would be considered generous by many state standards, but she still needed to learn to live on about half the income she previously had.  And she needed to find health insurance. So she started doing a series of small things to lower her monthly bills.

Still, finding a job "is a full-time job," she said, filling out applications, keeping up with government paperwork, applying for various insurance subsidies, etc.  So while she did some things to cut back on costs, others were neglected.

Click to take the pledge

When she read about the Red Tape Pledge last month, she realized she had let her TV and Internet costs soak up too much of her budget for too long. So she used a technique we've talked about a lot in the Red Tape Chronicles:  She called competitors and got bids for her business. 

First stop — Qwest, which had been mailing her promotional offers for months.  A Qwest operator told her she could get Internet access for only $35 per month. Then, she called the Dish satellite TV network, which offered a comparable television package for about $30 a month.  She knew there would be extra taxes and fees, and that these were promotional offers that would expire. Still, she now had hard evidence that she was overpaying, and she had a backup plan when she began her negotiations with Comcast.

Her intention all along was simply to talk Comcast into giving her a better deal. Switching services can be a hassle — users often need to change e-mail addresses, for example, and sometimes have to wait for installers and so on.  But Schreiber was staring at $50 or more in savings each month.  So she placed the best kind of phone call any consumer can — the no-lose phone call.

"I told Comcast I would rather stay with them, but I had to do something. The bill was just too high," she said. Then, she rattled off the offers she had in hand.  It worked like a charm.  The operator offered her TV and Internet service for $77 per month for six months, and she accepted on the spot.

"I could have saved a little more, but really I'd rather stay where I am," she said.

Comcast spokeswoman Jenni Moyer said the firm’s prices are “competitive,” but added that it will work with customers on an individual basis “to make sure our customers are getting what they want.”

“The key thing is we do offer a range of choices for customers so they can find thepackage and level of service that works for them,” she said. 

Schreiber says her job prospects still aren't good, even though she said she's willing to move for a good job.  In fact, she suspects she won't ever work again as a technical writer, because many firms have learned they can outsource technical writing tasks to low-wage overseas employees. 

"Like any classic unemployed person, you have to force yourself to get up every day and go out, even if it's just to walk around the mall, as long as you don't spend any money, you have to get up and go somewhere," she said.

But she did put that Internet access to good use.  She recently learned about a program that will help pay for her to go back to school, and help pay for her health insurance.  In July 2009, Congress expanded the eligibility for Trade Adjustment Assistance, a program that helps U.S. workers whose jobs are shipped overseas.  Schreiber will start school next week with the intention of earning system administrator certification for Microsoft products.

"You just really need to spend time exploring what's available out there, but you have to put in the time," she said. 

Sounds like the same challenge consumers face who want to save money and beat back hidden fees and unfair charges. There are ways to save money, they just take some time. 

But unemployed or not, can you afford to pass up a chance to make $300 with one hour's work?

You too can make the Red Tape Fight pledge by joining this Facebook group, where you can discuss the progress you are making or the obstacles you are encountering with other members.

You can also become a Red Tape Chronicles Facebook fan or follow me at http://twitter.com/RedTapeChron

We may never know why runaway Toyotas suddenly seem to be everywhere. The scariest possibility, however, is that faulty computers are driving some victims to their deaths with frightening randomness.  Suspicions that an elusive software glitch in computer-controlled throttles is to blame, combined with powerful images and harrowing tales, has tapped into our primal, science-fiction fueled fear of killer computers.

Whatever the ultimate cause of Toyota's troubles, the possibility of a "ghost in the machine" has consumers wondering about the wisdom of trusting their lives to computers — machines they know are apt to hiccup and fail. Old-fashioned mechanical linkage between gas pedal and throttle somehow seems safer than the new "drive-by-wire" technology, and this new understanding of just how much of a car's activity is computer-controlled begs the question of whether we've been too fast to trade mechanical for digital.

Or perhaps the Toyota incidents are a signal that we’ve passed some tipping point in the relationship of man to machine? Some experts are wondering if our cars have become so automated and easy to use that drivers are now too detached, unaware of the inherent risks in motoring down a highway at 70 or 80 mph and unprepared to regain control if something goes wrong.

Computers fail in unpredictable ways. What's worse, they seem to fix themselves unpredictably, too. Anyone who's experienced a surprise computer crash, followed by a reboot that seems to magically resolve the problem, understands this maddening element of 21st Century life. Perhaps an IT worker at your office will ask you to reproduce the problem — but often you can't.  So your helper shrugs and smiles and slinks away, and you go back to your tasks, left to wonder when the ghost in your machine may reappear.

It's one thing to lose a document to such a ghost, but quite another to risk your life with one.

Toyota steadfastly maintains it has no ghosts. Still, millions of Americans are now aware of so-called "drive-by-wire" technology that until now they'd been blissfully ignorant of. And they are becoming aware that more by-wire technologies — brake-by-wire, turn-by-wire, etc. — will soon put only zeros and ones between them and a potentially deadly accident.

"We are talking about this all the time now,” said Jake Fisher, senior automotive engineer for Consumer Reports.  “There is a lot of feeling that having no mechanical linkage sets up a situation where the electronics could go haywire and you couldn't control the car.”

While that may be true, it's a little late for the debate. The first drive-by-wire car was introduced back in 1988, and Toyota began converting all its models to electronic throttles in 2002. The vast majority of new cars sold in the U.S. today uses drive-by-wire.  And when new federal regulations requiring a safety tool called electronic stability control kick in during 2012, all cars will employ it.

Computers as scapegoat?

Bill Visnick, senior editor at Edmunds.com, thinks that computers are right now being used as a scapegoat in the Toyota incidents.

"For people looking for an explanation, it seems like a handy one,” Visnick said. “You know, 'Those darn things! Computers control everything nowadays.' People complain that technology has taken over our lives. Well, I'm not ready to go there just yet."

He thinks electronic throttles — which perform without incident millions of times each day — will ultimately be exonerated by investigators, but public concerns will force the auto industry to take a new look at its digital conversions.

"This will only increase the discussion about what's an appropriate level of electronic control for devices we use in our cars that are tied to our safety," he said.

Industrial design guru Donald Norman, a professor at Northwestern University, a former Apple Inc. designer  and author of “Design of Future Things,” is more skeptical of the throttles and the expanded role of electronics in cars. 

"Every company has software problems," said Norman.

The number of possible interactions is huge in a car with dozens of computers on board, so it's impossible for Toyota to be sure its cars are 100 percent clean of software bugs, he said.

"No professional software person ever says that. They say there are 'no known bugs' in the software," said Norman. 

Furthermore, because unintended acceleration incidents are rare, finding any potential bugs is even harder.  "But just because it can't be reproduced in a lab doesn't make it any less serious," he said. 

Safer in the past?

Concerns about random computer errors are justified, Fisher said, but it's important to know that mechanical linkages also fail at random intervals.

"A cable could get kinked, the springs could get stuck, the springs could break. A stuck-open throttle could happen with a mechanical failure, and did happen," he said.  Meanwhile, he noted, airplane passengers trust their lives to fly-by-wire technology every day, since commercial airliners have long since traded mechanical for digital controls.

That may be, but the idea that a crazed computer could one day send you hurtling madly down a highway at breakneck speed is enough to give one pause about new technologies.  Still, the conversion to digital will be hard to stop, or even slow. Already, designers are well on their way to creating computer-controlled automobiles that will literally drive themselves around town.

But even if electronics aren’t ultimately shown to have been to blame for Toyota's surprise acceleration problem, Norman said, the publicity has brought to light a serious problem with today's heavily-digital cars: We're only half-way to our destination.

"There’s nothing wrong with automation,” he said. “Many automated features are very safe; you never have to think about them, like fuel injection. … The problem with automation is when it's really half-automation."

For example, he said, new features in some luxury cars offer help with staying in lane, with avoiding collisions and with maintaining a constant speed.  But none of them is fool-proof, and some might be actually make driving more dangerous by lulling drivers into a false sense of security.

Take the pledge

 "The automation that's a problem is automation that's not quite there yet, that works fine until it doesn't work,” he said. “….These tools are not really good enough to fully protect you, but they kind of work so you start relying on them, but then they fail and you are dead."

The false sense of security is easily observed during bad weather, each time a four-wheel-drive SUV careens past you down a wet or frozen road at reckless speed.  Even though 4WD offers little help with stopping, many drivers seem to feel invincible when driving in storms. 

"You see them driving without snow tires, they don't have a sense of the road surface, and when it comes time to stop, they are the first ones to spin off the road," Fisher said.

This is a slight variation of what is sometimes called the Peltzman Effect.  In the 1970s, economist Sam Peltzman claimed that car safety devices could be counterproductive because they actually encouraged reckless driving.  While some of his claims have been discredited, it's hard to argue that today's drivers aren’t more detached than ever from the physical act of driving. That, in turn, can contribute to unsafe behaviors. Some cars make it possible to drive 90 mph while feeling as comfortable as sitting in a living room chair.

Ease of operation=hard to control

This detachment may be playing a role in the Toyota unintended acceleration tragedies, Fisher said.  For example, he said, drivers who pilot manual transmission cars are intimately aware of how to disengage their transmissions from the car's drive train by shifting into neutral, something they do dozens of times each day.  But many automatic transmission drivers have never once put their car's gear box into the neutral position and have trouble performing that task in life-threatening crises.

Newer luxury cars have even more automation and ease-of-use features. The car most associated with the acceleration problem, the Lexus ES350, is particularly automated, Fisher said. It boasts push-button starting and a neutral position that's out of the driver's normal operation range.

"It's a very isolating vehicle, he said. “That makes it incredibly easy to operate, but some things, like putting the car in neutral, are not obvious."

Norman disagrees with the detachment premise, and instead blames a lack of standardization in the new feature implementation.

"It's really a design issue," he said. "Every automobile has different ways of handling these things. … We've all experienced a situation where you are in a new car and you want to blow the horn but you can’t find it. It's the same with the on-off switch."

Related coverage

Complex car controls equal confused drivers

Media coverage may fuel spike in Prius reports

How to stop your car when the throttle is stuck

Drivers who are in mortal danger cannot be expected to find and work unfamiliar controls, he said. Industrial designers have the bad habit of building interfaces for ideal conditions, and creating designs that create unnecessary struggle in stressful situations.

"When danger happens, you can't think creatively," he said.

That’s especially true if you have been conditioned to think less and less about driving, Visnick said.  Clearly, automakers are moving toward a world where cars speed up and slow down on their own, maintaining safe distances by communicating with each other.  The fact that so many drivers talk, or even text, while driving shows that many consumers would be happy to surrender control to their cars.

"They are telling you they would prefer to be doing something else," he said.

Visnick thinks the current wave of runaway car stories will ultimately be a blip on the march toward fully automated driving machines. He expects steer-by-wire to appear next (some high-end cars already have a form of electronic-steering assistance) and brake-by-wire soon after.

"I don't think anybody is going to generate evidence that the electronic throttle really is the culprit for unintended acceleration," he said. 

Norman, on the other hand, expects things will get worse as we move toward completely automated cars.  Highways jammed with speed-controlled vehicles will handle traffic more efficiently — moving cars along in synch only a few feet apart – and that will cut down on the volume of accidents, he said. But when accidents occur, they'll be much more serious, involving hundreds of cars. He compares the situation to the interconnected power grid, which is generally more reliable, but fails spectacularly when it fails because of the domino effect.

"The number of deaths per year will diminish, but when there is a crash hundreds of people will die,” he predicted.   

In the meantime, automakers need to do a better job of standardizing their designs when new electronic features are implemented, he said.  Designers should do a better job of taking into account what drivers might do under intense stress, and be slow to change current standard layouts for essential items like gear boxes.  And they should design in safety features, such as “brake overrides,” which instruct the car to let “let the brake win” if a driver – or a ghost — pushes both the brake and the accelerator at the same time.

And how can Toyota restore consumers’ faith in their cars, and in digitized automobiles in general?

“The best way to make people feel better is honesty,” Norman said.  “When the  trouble happens you admit it, make assurances  that the problems are rare and that the world's best people are attacking it. The airline industry does this. The (National Transportation Safety Board) does thorough investigations and makes recommendations, and that reassures people. … The auto industry has to learn to do that as well.”

Become a Red Tape Chronicles Facebook fan or follow me at http://twitter.com/RedTapeChron

You don't hear the words "poodle," "tinfoil hat," and First Amendment in the same sentence often, but they are indeed linked in a classic Facebook melodrama.

Dale Blank runs a Facebook page devoted to accumulating as many fans as possible for a farcical picture of a beloved poodle named Bitsy sporting a tin hat — perhaps a bit like the one you might mentally draw on someone who was espousing tiresome conspiracy theories.

Blank's intentionally clumsy Photoshop job, and his quest for fans, has a specific target — Fox News broadcaster Glenn Beck.  On Feb. 8, Blank created the page with the stated intention of proving that his tin-hatted poodle could accumulate more Facebook fans than Beck, a favorite among conservative talk-show fans. 

Within a week, thanks to several bumps from the blogosphere, the poodle was well on his way, claiming nearly 300,000 fans — and enjoying logarithmic growth. Beck's page stands at about 500,000.

(Full disclosure: both easily dwarf the Bob Sullivan fan page, which sits at a modest 3,400.  Take from that what you will).

But on Feb. 18, the Facebook police arrived and broke up the party. Blank's page wasn't removed, but it was "publish-blocked."  He could no longer post updates or solicit fans in other Facebook ways. The fan-base growth ground to a halt.

That put the tin-hatted poodle at the center of a dispute over First Amendment free speech rights and censorship. There were virtual howls that Facebook was actively siding with Glen Beck over the Poodle, that perhaps someone at Facebook was siding with the conservatives, or at least had developed a hatred for left-wing sarcasm.

In the grand tradition of the Internet, that's overstating things a bit. Facebook, as a private company, has wide latitude in its ability to take down posts and pages that it decides run afoul of its terms of service.  Even Blank said he doesn't want to raise the possibility of a conservative, subversive anti-poodle attack — that's just the kind of knee-jerk reaction he's trying to mock.

"I'm not coming from a place where I think everything is a conspiracy," said Blank, who lives near Milwaukee.  In fact, he didn’t really have his heart set on poking fun of Beck. He simply picked the most popular target, in part to demonstrate how cheap popularity is on the Internet and on Facebook.  “I’m not so much anti-Glenn Beck as I am pro rational thought.”

Still, the conspiracy theories appeared.  It didn't help that Facebook initially failed to give Blank an explanation for taking away his ability to publish. Then, when an explanation finally arrived this week, its vagueness only added fuel to the fire.

"A Facebook administrator looks into each report thoroughly in order to decide the appropriate course of action. If no violation of our Statement of Rights and Responsibilities has occurred, then no warning will be sent," wrote a woman identifying herself as Marissa from Facebook's User Operations department, according to an e-mail provided by Blank. "If a violation has occurred, then a warning or more severe actions are taken. Unfortunately, for technical and security reasons, we are unable to provide details regarding the removed content. We apologize for any inconvenience."

Blank wasn't buying that.

"Technical and security reasons? That's just a cover for the real reason," he said. "I like to think it's not a political thing. When I see some of the pages out there devoted to (criticizing President Obama) that haven't been publish-blocked, you wonder a little.  But I don't want to delve into that.  I just want to know why I was blocked."

Facebook offered a generic explanation to msnbc.com in an e-mail.

“Pages are meant for entities like public figures, musical artists, businesses, and organizations so they can share information, interact with fans, and create a highly engaging presence on Facebook.  They're distinct from groups or personal profiles and designed specifically for these entities’ needs to communicate, distribute content, engage fans, and capture new audiences virally through fans’ recommendations to their friends,” the statement said. “We restrict the publishing rights of Pages that impersonate other entities, represent generic concepts, spam users, or otherwise violate our Pages guidelines.  Unless they also violate our content policies, however, these Pages are left up so that those who are interested in seeing their updates and interacting with them can still do so. These policies are designed to ensure Facebook remains a safe, secure and trusted environment for our users.”

Some might find that explanation vague as well. But before providing some helpful speculation on Facebook's actions, it seems necessary to offer some context for Blank's Poodle-vs.-Beck vote-off.  When creating the page, Blank drew on a Facebook fan-building technique that's been around at least since January.

The "bet this can get more votes than that" format has exploded in popularity in recent weeks. There's even another Facebook page that asks, "Can this dung beetle get more fans than Glenn Beck?"  But Beck is hardly the only target.  The trend appears to have taken off with a page devoted to discerning whether a picture of a pickle — yes, the kind you eat — could amass more fans than the Canadian band Nickelback. The pickle, with 2.6 million sign-ups, has won the battle, at least for now.

Nor are the groups limited to witty liberals or music haters. A group allowing people to vote for a picture of a steak over the animal rights group PETA has amassed hundreds of thousands of sign ups.

 To its credit, Facebook has recently taken a hard stand against the presence of hate groups on its site, and is working much more quickly to remove offensive material.  That, in some cases, includes pages which serve no purpose other than to criticize famous people or organizations. Facebook users have reacted by creating these "this can get more fans than that" as a clever end-around to counter elimination of these "hater" pages. So Blank thinks that Facebook might be putting a halt to these new pages, too.

Blank spent a lot of time reading the Facebook policy for fan pages. They require that a fan page be devoted to some kind of sincere commercial enterprise, and the creator have a real link to that enterprise.  The rules became an issue during the Olympics, when a user created a fan page devoted to the wacky Norwegian Olympic team's curling pants. Facebook temporarily shut the page down, until the creator linked to a Web site selling the pants.

Blank feels he's satisfied the requirement by purchasing the domain BobTheWonderPoodle.com, and linking to that site.

Fast growth might be the problem.

Another possible explanation, according to Blank: Facebook keeps a close eye on groups that experience overnight, logarithmic growth.  In the wake of the Haiti disaster, hundreds of groups sprang up claiming that they'd donate $1 for each new member, or offering some similar crowd-gathering incentive.  The groups enjoyed astronomical growth, but — again, to the firm's credit — they were quickly removed out of concern that spammers might take advantage of members, and that many of the claims were fraudulent.

"There seems to be a crackdown on anything that shows rapid growth," said Blank, a Web developer by trade. "But if they are trying to crack down on that, there is no clear policy."

Also unclear – and a question that might never be answered– just how popular could a photo of a dog wearing tin hat be?

Become a Red Tape Chronicles Facebook fan or follow me at http://twitter.com/RedTapeChron

LifeLock spent millions spreading its CEO’s Social Security Number all across America. Now the firm will spend $12 million settling claims that it engaged in deceptive advertising and failed to protect customers' personal information.

The Federal Trade Commission and 35 state attorneys general announced on Tuesday that Lifelock is changing its business model to address allegations of unfair and deceptive business practices. 

"They developed a market to capitalize on consumers' fear,"  FTC Chairman Jon Leibowitz said at a news conference.  "They were exaggerating the service they offered to consumers. This was a fairly egregious case of deceptive advertising."

Consumers who signed up with the service as early as 2005 — about 1 million customers in all — will be eligible for refunds. The fine is steep for the firm, said Leibowitz.

"We're taking all the money they had on hand," he said.

The firm remains in business, and has agreed to change its advertising practices. Leibowitz said its services do provide some protection against identity theft, but not the level it repeatedly promised consumers in its well-known advertising campaigns.

LifeLock made a name for itself by plastering CEO Todd Davis' Social Security Number across billboards and other advertising. Many of the ads suggested that LifeLock could provide absolute protection against ID theft.

In one ad, the firm said it could make consumers' personal information "useless to a criminal."

"Consumers received far less protection than they were promised," Leibowitz said.  For example, Lifelock was useless against identity theft involving existing credit cards or bank accounts, he said.

The firm also collected extensive personal information from consumers when they registered, and promised to keep that data safe. The FTC says LifeLock failed to do so. In its complaint, the FTC says the firm:

* Did not encrypt data, but stored and transmitted it in clear text.

* Failed to require employees to use hard-to-guess passwords.

* Did not install patches and critical updates.

* Did not plan for common vulnerabilities to their network, including SQL injection attacks.

* Did not install antivirus software on employee computers.

* Allowed faxes with personal information to be available in open office area.

Illinois Attorney General Lisa Madigan said LifeLock engaged in "scare tactics" while advertising to state residents.  She said the firm sent letters to individual consumers implying they were at heightened risk for ID theft — one of which was mailed to her at home.

"Don't be scared into spending your hard-earned money," she said, addressing consumers. 

Lifelock has numerous imitators in the marketplace.  Madigan said her office will continue to monitor their advertising.

"Know that if you are misleading consumers, we will go after you," she said.

LifeLock CEO Todd Davis said his firm has addressed all concerns raised by the FTC and has long since abandoned many of the techniques the agency said were misleading.

"This has has no impact on current practices or products," he said. "We haven't used the (Social Security number) ad in quite some time."  He also said personal data stored by LifeLock is now carefully guarded, and that the FTC complaint refers to vulnerabilites that have been addressed.

He said he welcomed new federal regulation in the competitive field of ID theft protection, comparing the industry to the early years of automobiles.

Related coverage

Court: LifeLock using 'unfair business practice'

Foolproof way to prevent ID theft? Nope

Experian sues LifeLock, alleges fraud

"When cars came out there weren't speed limits," he said.  "We were told we were speeding. We understand and accept responsibility. We don't want in any way for someone to be misled."

LifeLock consumers will soon receive letters explaining how they can apply for refunds.

Madigan added that most of the services provided by paid ID theft prevention firms are available to consumers for free.  They can place fraud alerts on their credit files at the credit bureaus, and get copies of their credit reports at AnnualCreditReport.com.

Become a Red Tape Chronicles Facebook fan or follow me at http://twitter.com/RedTapeChron

Technology was supposed to make our lives simpler and save us time. In many ways, it's done just the opposite. Last month, we took a look at how often our gadgets let us down, and how screen-based devices are literally rewiring our brains and robbing people of focus and social skills.  But we left one of the more obvious techno-fear topics — information overload — for another day. 

A new study from the Pew Internet and American Life Project suggests consumers are coping with the avalanche of information they receive in unexpected and often successful ways.  So today we’ll discuss both that silver lining and the gray cloud inside of it.

Having all the world's information, and very nearly all the world's people, just a click away seems like a fantastic development for humankind. But how much is too much?

The Economist magazine recently reported that the total amount of information in the world is growing 60 percent annually, and that U.S. households digest 34 gigabytes of data per person per day.

That's not information overload; it's practically electrocution.  But the Pew study sheds some light on how U.S. consumers are dealing with the surge — they're getting a little help from their friends.

In a new report called "Understanding the Participatory News Consumer," Pew says that one third of consumers have commented on news stories or shared them through social networking sites, half "rely on people around them to tell them when there is news they need to know," and 8 out of 10 get or share links in e-mail.

"Consumers are using social networks to filter, assess and react to the news," the report concluded. 

In other words, one sure-fire way to build Web traffic is to get a social network user to yell at all their friends, "Hey. Look at that!"

"Yes, there is a lot of that going on," said Lee Rainie, who runs Pew's Internet research. "People are getting their news through recommendations in social spaces."

New participation, new loyalty

Those are just a few of the findings in the Pew study, which suggested that consumers are driving news creation and even story selection like never before.  In a moment, we're going to ask you about the ways you consume news and deal with information overload.  But first, here are more tidbits from the study.

Click to join the fight against Red Tape 

 

While the changing online news user seems loyal to their friends and their recommendations, loyalty to specific online news brands is evolving differently. Only 35 percent say they have a favorite place to visit for news — contrast that with consumers' relatively fierce loyalty toward Coke or Pepsi, Burger King or McDonald’s. 

"There is some level of loyalty but it's striking that people didn't say, 'Oh yeah, all the time, I am always checking out this Web site," said Rainie "We didn’t expect that. We thought people would have a favorite, even if they were just 'grazing' on news. We were betting the percentages would be reversed."

On the other hand, Web users are loyal to a small family of Web sites they trust.  The majority of online news consumers (57 percent) visit only two to five Web sites to stay updated.  Only one in 10 users said they regularly visit more than five news sites.

Rainie cautions people on comparing the loyalty numbers to other media or other consumer products. Many people prefer one news anchor to another, or prefer Coke to Pepsi. But clicking on a Web site or blog represents a different kind of choice.  Picking Coke necessarily means picking against Pepsi, and watching one network means not watching another. But on the Web, people are free to split time among multiple sources. 

"You are not being disloyal if you click on a link from someone to another Web site," he said. There’s no rejection involved. Online, people simply follow a click trail. "On the Web, it's more like an impulse buy."

With consumers trusting a circle of friends to keep them updated, professional journalists are becoming just another member of this intimate circle that serves as filter, Rainie said.

“A notable number of Internet users are beginning to treat news organizations, particular journalists, and other news mavens as nodes in their social networks,” the report found. Fully 57 percent of U.S. adults use a social networking site, and 97 percent call themselves online news consumers.

New platforms

Pew's research makes obvious that consumers are faced with an ever-growing list of choices. Fully 26 percent of U.S. adults, 33 percent of cell phone owners and 88 percent of mobile users are what Pew calls “on the go” users, meaning they use the Web to access news on their phones, the study found.

Meanwhile, "participation" in news is nearly as popular.  Commenting on news stories — as readers do on the Red Tape Chronicles or Newsvine — has become almost a mainstream activity, with one in four respondents saying they'd done so. “On-the-go” news users are even more dedicated, with half saying they had engaged in personal commentary.

On the other hand, despite all the talk about Twitter (which just passed the 10 billion Tweet milestone), only 3 percent of users said they'd Tweeted about news.  Twitter updates – either from professional journalists or friends – were the least commonly used news source among the general population, the study found.  But Twitter users are an intense and devoted bunch. Nearly 100 percent are engaged in sharing news online and in other forms of participation.

Tools vs. overload

This level of active participation is not what you'd expect from a group of consumers cowering under the mountain of data headed their way every morning. This group is not disengaging because they can’t keep up. In fact, the Pew study shows that people who participate in news stories are much more likely to follow that story over time, and to care about the outcome.  It's a mixed bag, Rainie said.

"Information overload is part of the story, but not the whole part," Rainie said.  "Some people are participating because they have so much choice in news and in life. Some people are probably disengaging.  But some people are more engaged. …  Some people do it because they can.  The tools (for participating) are very good now."

Meanwhile, almost half of Web users (44 percent) say they have signed up for nifty technology that lets “the news find them,” Pew said.  They use an alert service, automated Web site updates, e-mail, or social networks to get headlines and stories delivered right to their screens. Slightly more than one quarter of Web users say they receive such passive news delivery at least once a day.

News snackers vs. deep divers

Clearly, some news consumers have changed their habits. Instead of spending 60 minutes reading a newspaper or 30 minutes watching a newscast, they might spend 5 minutes on a Web site or even just 60 seconds scanning headlines posted by friends on Facebook . This group is sometimes referred to as "news snackers." Rainie calls it "drive-by" headline scanning.  There's concern that this group is learning less about their world and will be less able to participate in the political process. But even here, Rainie cautions against generalizations.

"We didn't ask equivalent questions in 1976, like ‘How many of you are done with the newspaper in 3 minutes,’” he said. “Obviously, some people just scanned newspaper headlines, too. Meanwhile, people who care about a subject now have a lot more opportunity to get documents, video clips, and commentary. They have the ability to dive deeply into stories, sometimes for hours."

It's far too optimistic to suggest news consumers are winning the war on information overload, but Rainie thinks the new tools have at least given them a fighting chance.

"People are learning how to arrange the information universe around them, and learning how to be on alert in an environment that has this capacity," he said.  "They are learning to open themselves up to more input from friends, and they can customize their sources to focus on subjects that matter to them.  The technology is quite robust for doing these things."

But not everyone is being taken along for the ride.  Lurking behind this debate about the new news consumers is a potential widening of the digital divide. Will consumers who don't Tweet, use Facebook, leave comments or post cell phone video fall ever further behind? While about one-third of the Internet audience is now fiercely engaged in posting news stories, arguing online or linking to video clips within sophisticated social media sites like Facebook, a host of other Americans don't have high-bandwidth access or the know-how to get involved.

"This is a long-standing concern of political scientists in general," Rainie said. "Even before the Internet there was a lot of evidence and research that people who were not deeply engaged with communication didn't take advantage of media sources, and, how would their voices be heard? … Online news participants are still upper class and well educated.”

This might leave consumers with a stark choice: participate or perish.

"People have to either be engaged, or be left out," he said.  "Many people lack the technology and the tools to take full advantage of this new environment that gives them the capacity to be more involved.  We have to make sure that there is fundamental access to the new tools for participation.” 

What about you? Do you feel more engaged or more overwhelmed? Are you using new tools like Twitter and Facebook as much as Pew thinks you are?  Do you like participating in debates on blogs like the Red Tape Chronicles? Have you personalized news sources? Are there other news and information tools you are craving, or that you imagine would be helpful?  What subjects would you like to hear more about?  Leave your comment here, or if you prefer, discuss on my Facebook fan page, follow me on Twitter, or Tweet about this story to your friends.

 

Visitors to FreeCreditReport.com will soon see this bold disclosure.

Like the song says, he should have seen it coming at him like an atom bomb.

The singer of those FreeCreditReport.com jingles might sound a bit less peppy now that the Federal Trade Commission is making the company behind the ads — credit bureau Experian — face the music. Heavy-handed disclosures aimed at ending years-long confusion over free credit reports will begin to appear in the ads next month. The changes are among new consumer protections enacted by Congress in the 2009 Credit Card Accountability Responsibility and Disclosure Act.

In one disclosure viewed by msnbc.com, the top of the FreeCreditReport.com Web site was covered with a large grey block with type that read:  "You have the right to a free credit report from AnnualCreditReport.com … the only authorized source under federal law,"  with an obvious link to the site.  Consumers who still want to sign up with FreeCreditReport.com would have to scroll down and enroll in the paid service offered by Experian.

"That's what we were aiming for," said Maneesha Mithal, an FTC attorney. "Congress wanted the disclosure to be really prominent."

Many Web sites, including FreeCreditReport.com, claim to offer free credit reports, but do so only as a come-on for costly credit monitoring subscriptions services. 

Click to join the fight against Red Tape 

Market leader Experian, which owns the coveted FreeCreditReport.com Web address, began advertising heavily in 2003 after Congress mandated that U.S. consumers were entitled to a free copy of their credit reports every year. The FTC has been in a legal battle with the site ever since. Experian has been forced to issue refunds and pay more than $1 million in fines, but that didn't quiet the crooning of Eric Violette, the star of the FreeCreditReport.com ads.

In what might be a first in consumer protection history, the protracted FTC-Experian legal fight actually included a foray by the government agency into comedy. Last year, the FTC created a spoof ad, poking fun of the FreeCreditReport jingles while trying to warn consumers that they might end up paying for something they could get for free.

Throughout the legal wrangling, the FTC has fielded numerous complaints from consumers who thought they were getting their congressionally authorized free credit report, only to find they had been signed up for a $14.95 monthly subscriptions they didn't want. Msnbc.com has been inundated with complaints too, and has written several stories about the issue, including a 2007 piece titled "Don't fall for FreeCreditReport.com."

It's hard to imagine the new warnings not putting a dent in the confusion – and that could be bad for Experian’s bottom line.

Experian does not break out its FreeCreditReport.com sales, but in advertising for the site the firm claims to have served 20 million consumers. ComScore MediaMetrix says the site is the No. 1 ranked “financial advice” Web site, with 6 million visitors each month.  Experian invested heavily in the market back in 2002, when it acquired FreeCreditReport.com for $130 million.

In anticipation that the gravy train might end, Experian has been spending about $70 million annually on FreeCreditReport.com ads, according to the New York Times.

The new disclosure law applies to any firm that claims to offer a free credit report, Mithal said. Anticipating the next round of regulatory cat-and-mouse, the rule requires the prominent disclosure to appear on every page where the words "free credit report" appear, she said.

Experian and its competitors must begin adding disclosures to their sites immediately, but the precise warning prescribed by the FTC doesn't have to appear until April 1. That's why some visitors to the FreeCreditReport.com are currently seeing much more humble disclosures, with only a single line of text – in a small font and not hyperlinked — atop the page. The firm said it was testing different disclosures.

 

Television ads also will have new warnings: visual and audio disclosures directing viewers to AnnualCreditReport.com.

The Web site warnings were designed by the FTC’s Web design staff, Mithal said, after receiving input from industry members and consumer groups. It's unusual for a government agency to tell a company precisely what to put on its Web site, but Mithal said the FTC has at times forced firms to include new disclosures through court orders or other rule-making procedures. This new disclosure has a bit more legal heft, however, arising from a direct order by Congress.

It's taken a long time — five years — for the FTC to settle on a way to clear up the confusion over free credit reports. What took so long?

"We've been monitoring the marketplace for a long time,” Mithal said. “We have had a lawsuit against (Experian), we've done (court) orders. But at some point Congress said this isn't working. So it's been a process."

Experian, in a statement, said it was playing by the rules and has always done so.

"Experian has been, and will continue to be, in compliance with the FTC's rules regarding the marketing of free credit reports," the firm said in a statement to msnbc.com.  "We remain committed to clearly and conspicuously disclosing to consumers that the free report we offer is not the free annual credit file disclosure provided by federal law, and plan to comply with the FTC's rules by April 1."

Become a Red Tape Chronicles Facebook fan or follow me at http://twitter.com/RedTapeChron