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Consumer complaints rise as protection resources dwindle

By Michelle Singletary
Sunday, August 1, 2010; G01

State and local consumer-protection agencies across the country should pool their limited resources and start an advertising campaign called "Gotcha."

It could be much like the popular "Got Milk?" campaign. Only instead of milk-mustachioed celebrities pushing the benefits of that dairy product, everyday people could warn their fellow consumers about the shady, predatory and illegal schemes used to rip them off.

We need to put a face on fraud.

Such a media blitz is needed in this troubled economy as more people are scammed -- often because they are trying to make quick money. But it could also be a way to get the word out at a time when state consumer-protection agencies are experiencing budget cuts that make it more difficult for them to catch the lowlifes who prey on consumers.

"At many agencies, complaints went up in 2009 and the resources to help consumers went down," concludes a new report issued jointly by the Consumer Federation of America, the National Association of Consumer Agency Administrators and the North American Consumer Protection Investigators. "These are challenging times for consumers and the agencies that serve them. State and local consumer agencies need and deserve public support to protect consumers and the integrity of the marketplace."

In addition to highlighting the top consumer complaints in 2009, the report detailed some of the challenges facing consumer-protection agencies.

Agencies reported that staff reductions and furloughs meant less time conducting educational outreach and investigating, mediating and prosecuting complaints. For example, the report said that in the Office of Consumer Protection for Montgomery County, a hiring freeze meant departing staff members were not replaced even though the agency was given additional responsibilities.

The Nevada Consumer Affairs Division was shut down because of budget cuts. The Consumer Affairs Program in Virginia Beach is down to one investigator.

As they face budget cuts, the agencies are experiencing big increases in the number of consumer complaints. The average increase last year was 23 percent, although some agencies had even more significant jumps. Hawaii's Department of Commerce and Consumer Affairs said complaints there increased 62 percent.

Sham offers to help consumers save homes from foreclosure were the fastest-growing complaints last year. Others related to the recession included aggressive debt-collection practices, bogus business opportunities, job scams and investment schemes.

"At the same time that consumer vulnerability to fraud has increased due to the economic recession, the abilities of those entrusted with protecting consumers from scam artists have been severely curtailed," Sally Greenberg, executive director of the National Consumers League, told a Senate subcommittee during a hearing on the economy and fraud. "Much of the day-to-day consumer protection work in the United States is performed at the state and local level. State and local consumer-protection agencies, never a darling of appropriators even before the economic crisis, are now seeing their budgets cut to the bone or worse."

Most important, when agencies lay off workers, the exiting staff members take crucial expertise with them.

"Staff members often develop specialized knowledge over time -- for instance, about home construction, jewelry grading, auto repairs or mortgage agreements -- and it is difficult for others to fill their shoes," according to the joint report.

It's especially troubling that educational outreach is getting the ax in many local areas. The more people know about fraud, the better equipped they are to fight it.

U.S. agencies such as the Federal Trade Commission are charged with helping consumers, but there's an important distinction between what most federal agencies can do for individual consumers and what state and local consumer-protection agencies can accomplish in mediating individual complaints.

What these agencies do is vital. The joint report noted that among those agencies responding to the survey, more than 300,000 individual complaints had been investigated and almost $110 million in restitution or savings for consumers had been provided. Other programs that save consumers money weren't even included in the $110 million figure. For one, the Summit County Office of Consumer Affairs in Ohio created a foreclosure assistance program, which saved homeowners nearly $87,000 through loan modifications and corrections to their escrow accounts in 2009.

Just think how much more money could be recovered if consumer-protection agencies had adequate budgets and staffing. But as is often the case, the people in power were shortsighted, and they waited too long to put in budget restraints elsewhere to preserve these agencies. As a result, the desperate budget-slashing hurts the most vulnerable consumers.

Readers can write to Michelle Singletary at The Washington Post, 1150 15th St. NW, Washington, D.C. 20071.

Comments and questions are welcome, but because of the volume of mail, personal responses are not always possible. Please note that comments or questions might be used in a future column, with the writer's name, unless a specific request to do otherwise is indicated.

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