Costco Connection - January 2007

CONSUMERconnection
The downside
Also:
■ Rebate puzzle
■ Web addicts
of creative loans

I REPORTED RECENTLY about the upsurge in a type of mortgage fraud in which eager borrowers inflate their income and net worth to qualify for a home loan. The deception often gets the borrower into trouble when he or she can’t meet the monthly obligation, which can force the lender to foreclose on the loan.

In recent years of “creative” lending, some popular forms of mortgages facilitated, if not actually encouraged, what is known as “liar loans.” They’re a byproduct of stated-income loans and other lim-ited-documentation mortgages aimed at self-employed applicants, allowing these people to bypass standard underwriting requirements.

Such loans often don’t require copies of W- 2 forms or other proof of income, or income-tax records. The borrower only has to assure the loan officer that he or she earns enough to qualify for the mortgage, without documented proof. As a result, application fraud has become an estimated multi-billion-dollar problem each year, with falsified income-tax filings an important factor.

Now the Internal Revenue Service (IRS) is attempting to make it easier for lenders to confirm an applicant’s information and avoid fraud. Lenders will be able to request transcripts from the IRS that summarize an applicant’s income and tax data, as far back as four years. Experts say this should not only uncover but deter liar-loan applications.

for rebates—which keeps profits higher.

The bottom line is that without rebates and their extra profit margin, prices could go up across the board, and more bargains might bite the dust.

Editor’s note: Costco has an established rebate program that offers easy ways for members to submit rebates and track their status. For full details, including products currently offering rebates, go to costco.com and click on “Rebates.”

Losing rebates might raise prices

Shoppers are always looking for “loss leader” bargains or cut-rate prices on a must-have item with a tantalizing rebate. But getting a rebate can require clipping UPC codes from boxes, filling in tiny-print forms, copying receipts and beating a deadline.

In the best case, the rebate check arrives in a few weeks. However, sometimes the rebate is refused because the person sending in the forms overlooks some minor detail. Or, the check simply doesn’t come. So, it’s no surprise that so-called rebate rip-offs have become a major sore spot with both consumers and government regulatory agencies.

In response, many major retailers are fighting back by reducing or eliminating rebate programs. And many companies are dropping rebate programs altogether, and instead are lowering prices.

But even though prices are being lowered, the elimination of rebates could ultimately lead to higher prices, according to consumer advocates. Many manufacturers actually count on some buyers to fail to file

The new couch potatoes

Studies are finding physical and mental maladies stemming from too much time on the Internet.

One study found that more than one in eight U.S. adults are hooked, finding it hard to stay offline for several days at a time. Internet addiction can lead to disregard for health or appearance, sleep deprivation, decreased physical activity and social interaction with others, and repetitive-motion injuries. Another report says that 5 to 10 percent of the population likely will experience Internet addiction and might need psychological help.

Here’s an idea: Keep your Web activities to a reasonable level and make sure the Internet is a good thing, not bad. C

Ask David

Horowitz

IN JANUARY I ordered 2 tons of wood pellets from a company in Tennessee I found on the Internet. I ordered online, making payment through PayPal. The company gave me an invoice number and said they’d deliver in September. It never arrived. The Web site is gone and the phone is no longer in service. PayPal says the deadline has passed to file a complaint, so I am out $398. What would have been a tipoff that this was a scam? Can I get my money back?

Steve Martinsburg, WV

AMY CAN TRELL

David Horowitz is a leading consumer advocate. His “Fight Back!” commentaries are heard daily on the Jones Radio Network. For stations and times, check the radio page at www.fightback.com.

YOUR TIPOFF was
that you never got
a receipt and the
company never
gave you a firm
delivery date.
Unfortunately, by
ordering so far
in advance, you
lost out on the

45-day protection that PayPal offers.

Contact the police department where the company was located. If they can track down the company, then file a complaint. You should also file a complaint with the Tennessee Division of Consumer Affairs. These agencies might be able to investigate, and perhaps file charges. Whether you can get your money back is doubtful.

Do you have a question for David?

Just log on to www.fightback.com and “Ask David.” He will personally respond to your problem if you follow the instructions printed on his Web site. (Costco members receive a rebate off the normal fee.) Questions and answers of the greatest interest to Costco members will be used in this column with the permission of the contributor and will be posted on www.fightback.com.