Consumer Information

Consumer Guide
Health and Life Insurance
Predatory Lending

Consumer Guide 

Mike Ferry and Daniel Claggett. Michael Ferry is executive director of Gateway Legal Services, Inc, .and previously a long time attorney with Legal Services of Eastern Missouri, Inc. Gateway Legal Services, Inc. (314-534-0404), is a not-for-profit legal aid program that represents individuals in Social Security Disability and SSI matters as well as various consumer law matters.

Dan Claggett, Manager of the Consumer Unit at LSEM, reviewed this section for the current 17th edition.

Introduction

Consumers of all ages are vulnerable to the fast pitch and hard sell of professional sales people, whether door-to-door or on television or radio. Even prudent consumers, in the face of attractive product claims, need to remember the old saying: "If it's too good to be true, it probably is."

Even though consumer protection legislation and favorable court decisions help the consumer, your best protection is to be a well-informed, careful buyer. Smart consumers know their legal rights, look carefully at product claims, and demand satisfaction from their purchases.

This section will help make you a more alert consumer. Toward this end, this section describes general information helpful in your consumer purchases, specific facts you should know about particular types of purchases, plus legal and informal remedies that you can use if you are dissatisfied with a purchase.

Contracts and Credit Buying

Almost all major and even routine purchases that you make as a consumer involve a contract between you (the buyer) and a merchant (the seller). If you have ever purchased a car, hired a person to do repair work, or bought a pair of shoes with or without a credit card, you have made a contract with a seller.

Often a consumer contract involves a credit purchase and repayment over a period of time. This arrangement is commonly known as "buying on time" or "buying on credit." In effect, the store, dealer or company from which you are buying lends you the amount needed to purchase the desired item or service. You, in turn, agree to pay back the money, plus a finance charge of some kind.

Note: Some banks, usually those charging a membership fee for charge cards issued by them, will not impose finance charges on credit purchases if you pay your balance in full each month.

Whenever you buy on time, be sure you know how much your total cost will be. Make a budget examining your monthly income and expenses (monthly debt payments greater than 20% of your monthly income may lead to trouble) and future plans (for example, you may need to replace a roof in several months) before you make a credit purchase.

Key Terms to Understand

Following is a glossary of credit buying terms with which you should be familiar:

Cash Price: This tells you what an item or service would cost if you paid for it completely in cash at the time you bought it.

Finance Charge: This is the cost of credit. It is the price you pay for the privilege of paying over time. It is added to the cash price.

Annual Percentage Rate (APR): This is the cost of your credit expressed as a rate. The lower the APR, the cheaper the credit. The higher the APR, the more expensive the credit.

The Federal Truth-in-Lending Act requires persons and businesses that regularly extend credit to tell consumers what that credit will cost in the long run. When you buy on credit, you must be told, among other things, the finance charge and the annual percentage rate on the purchase you wish to make. If you have a credit card or account, these disclosures may be made on or before your first use of the card or account. Otherwise the terms of the credit purchase must be disclosed with each purchase. Lenders that fail to make these disclosures may be sued by their customers for twice the amount of the finance charge, plus court costs and attorney's fees. If a security interest was taken in the customer’s home, the customer may also be able to undo the contract.

Key Questions To Ask Yourself

Before signing any sales contract, ask yourself these questions:

(1) Do I know what I am buying?

(2) Do I really understand the terms of the contract and my obligations under the contract?

(3) Am I making the common mistake of looking only at the size of the monthly payment, or did I also look at the APR?

(4) Can I buy a similar item elsewhere at a lower price?

(5) Am I satisfied with the cost of credit charged on my purchase?

(6) What kind of protection do I have in the way of guarantees and warranties? (Buying something "as is" means no warranties.)

Basic Contract Do's and Don'ts

DO insist that the salesperson let you take home a copy of the contract before you sign it.

DO NOT deal with a salesperson who refuses to let you take home, prior to signing, a contract with the sales price, cost of credit, etc., filled in.

DO NOT pay 100% for items or services you have not yet received.

DO show the contract to a friend or a lawyer if you have any questions about its provisions.

DO NOT sign anything unless you have had time to read it carefully (or have it read to you) and you fully understand what it says.

DO insist that all promises (guarantees and warranties) be put in writing.

DO NOT sign a contract with blank spaces that are to be filled in later by a salesperson.

DO keep copies of all contracts, payment records, and complaint letters in a safe place.

Watch Out for Predatory Loans

• Loans that are unreasonably expensive, charge overly high or unnecessary fees, or are otherwise unfair or fraudulent in some way, are often called “predatory” loans.
• Perhaps the worst predatory loans are those associated with refinancing of your house. This is because the consequences – loss of your equity, perhaps loss of the house itself – can be so extreme.
• Predatory practices come in many forms, but some of the more common include:
• Multiple refinancings, each one with more fees added on.
• Very high interest rates.
• Very high fees.
• Fees for charges supposedly paid to third parties that were actually never paid.
• Padded fees for charges paid to third parties.
• Kickbacks paid by lenders to mortgage brokers for getting you to agree to an interest rate that is higher than the rate the lender would have been willing to give you.
• Requiring credit insurance.
• Falsifying loan applications.
• Knowingly making loans on terms the borrower cannot afford.
• Presenting different terms at closing from those the borrower had been led to expect.
• Creating a payment schedule with a “balloon” payment (a larger-than-normal payment) at the end, without the borrower being aware of it.

Before you refinance your house, there are many questions you should ask the person arranging the loan. The Bar Association of Metropolitan St. Louis has a “Before You Make the Loan” checklist that you may find very useful. You can get a copy of the checklist by going to the Association’s web site at www.bamsl.org (go to the “For the Public” section), or by calling the association at (314) 421-4134.

Other high-cost loans include “payday” loans, “title” loans, and “tax refund anticipation” loans. It is not unusual for such loans to have annual percentage rates of more than 100%, and sometimes 300% or higher. Such loans can be very profitable for the lender, and very expensive for you.

Door-to-Door Sales

Even the most strong-willed consumer occasionally buys an unwanted item from an enterprising door-to-door salesperson. If you change your mind after he or she leaves with your money or a sales contract, however, you can do something about it.

Both a Missouri law and a Federal Trade Commission (FTC) rule allow you a three-day "cooling off" period during which you can decide whether to cancel the sale or rescind the contract. You must do so by sending written notice to the company or business before midnight of the third business day after the date of the transaction. Keep a copy for your records.

Missouri law does not require you to follow any particular format in sending your notice to cancel, but the FTC rule involves a Notice of Cancellation form which you should receive from the salesperson along with copies of the sales contract or receipt of sale. You merely sign and date one copy of the Notice of Cancellation and send or deliver it to the company or business within three business days from the date of the transaction. If possible, send this notice or a written letter of cancellation by certified mail with a return receipt request.

Once the merchant receives the notice or letter of cancellation, he or she has 10 days to refund any money received, return any documents that you have signed, return any goods or property that you've traded in, and inform you whether they will pick up or let you keep any items that were left with you. If anything was left with you, you must return it in its original condition. It is not your responsibility to ship the items; the seller must pay postage. Otherwise, the seller must pick up the items.

Note: The FTC rule and Missouri law does not cover purchases under $25.

Consumers and Home Repairs

Whenever you hire someone to make repairs on your home, use caution and shop around. Get two or three estimates to see who is offering the best bargain. Also, check references before you hire. There are a lot of "fly-by-night" operators. Also, check with the Better Business Bureau to see if the contractor has unresolved complaints outstanding.

After you decide upon a contractor, ask that your agreement be written down. This can avoid a lot of trouble later on. Items such as price and guarantees should be in writing to avoid arguments after the work is completed.

If you are going to pay for the work in installments and the contractor or loan company takes a deed of trust on your home as collateral, remember three things: (1) the contractor must inform you that your house is collateral for the work and that you have a right to cancel the contract within a specified period; (2) you usually have no more than three business days after you agree to the work in which to cancel the contract, provided the work has not begun during that time; (3) if you get behind on your payments, you may lose your home to the contractor or loan company.

Mechanic's Liens

A contractor (the person with whom you, the homeowner, have contracted to perform home repairs) may file a mechanic’s lien against your house if you fail to pay for materials and/or labor for home repairs.

However, subcontractors and suppliers must have your written consent before they can file mechanic’s liens against your house. They will usually ask the homeowner to give written consent before they do any work or supply any materials.

The written consent must be printed in 10-point bold type, must be signed by you, and must say:

CONSENT OF OWNER

CONSENT IS HEREBY GIVEN FOR FILING OF MECHANIC'S LIENS BY ANY PERSON WHO SUPPLIES MATERIALS OR SERVICES FOR THE WORK DESCRIBED IN THIS CONTRACT ON THE PROPERTY ON WHICH IT IS LOCATED IF HE IS NOT PAID.

Be very careful about signing a form like this.

In order to collect any money from you on those liens, the contractor, subcontractors, or suppliers who have not been paid must file a lawsuit against you.

In the court action the contractor has to prove it is entitled to the money. Once the lawsuit is filed, you will receive a summons that usually tells you to appear in court on a certain date and at a set time. DO NOT ignore the summons. If you or your attorney do not appear in court at the appropriate time, a default judgment could be taken against you. If you have paid the general contractor in full and you have not given your written consent for a subcontractor and/or supplier to file a lien, then you are not liable to the subcontractors and suppliers – but you still need to appear in court if you are sued.

Collection Activities and Garnishment

If you are paying for a product or service over time and you fall behind on the payments, the loan company or bank may turn the debt over to a collection agency. Remember that a collection agency cannot use harassment to get the money. If you are called by an agency late at night or if your friends are being bothered, report the company to the Missouri Department of Finance (573-751-3242) and call an attorney. Federal law protects consumers against some abusive tactics by debt collectors.

When loan companies, banks or collection agencies obtain court judgments on debts you owe, they may garnish up to 25% (10% if you are head of the household) of your wages after taxes. Furthermore, these creditors may attempt to take away your house, car, or household furnishings. Some of this property is exempt, but you should contact an attorney immediately if you face garnishment of your property. You should also quickly file your request for any exemptions to which you may be entitled with the sheriff who served the garnishment. Social Security benefits and most pension benefits cannot usually be garnished.

Consumer Remedies

When something goes wrong with a product you have purchased, or if a repair job that you contracted to have completed (for example, on your car or house) was poorly done, you can seek satisfaction in a number of ways short of a lawsuit. A thoughtfully prepared complaint made either in person or in writing can be an extremely effective way of getting a consumer problem solved, especially when that complaint is made to the proper authority. A consumer can file a complaint with Attorney General’s office by phone (800-392-8222) or online (www.ago.mo.gov). Many problems can be handled successfully through the use of this method. The use of laws that give consumers the ability to cancel certain types of sales contracts is another remedy you have at your disposal. Small claims court is also available to consumers who believe that they have been treated unfairly; the amount in dispute must be $3,000 or less. Better Business Bureau arbitration can also be helpful (see below).

Complaints

Complaints are most effective when they are accompanied by receipts and other documents that help explain your case. If you contact the store or business by mail, send your complaint letter by registered mail and keep a copy for your records. Never send originals of any receipt, contract or document. If you are making your complaint in person, try to remain calm, but firm. Make sure that what you are told makes sense to you.

If taking your complaint directly to the store or business does not produce the satisfaction that you are seeking, then bring the matter to the attention of the Better Business Bureau in your community or contact the Missouri Attorney General's Office.

Consumer Arbitration

The Better Business Bureau (314-645-3300) offers a free service, called arbitration, to settle disputes between consumers and businesses. When all informal attempts to settle a dispute fail, you or the business may enlist the aid of an arbitrator to resolve your differences. Both you and the business must agree to this process, and any decision of the arbitrator is legally binding upon the parties. Because the arbitration hearing is informal, you don't need the services of an attorney, but you may have one represent you. Contact the Better Business Bureau in your area for more details about consumer arbitration.

Beware of contracts that let the creditor force you to take any disputes to arbitration. Such contracts can cost you the right to jury trial and many important procedural rights. Arbitration can also be more expensive than court. Arbitrators are not required to follow the law, and your right to appeal an arbitrator’s decision is very limited.

Small Claims Court

Missouri consumers who have not received satisfactory responses to their inquiries and complaints about defective products and poor service may seek relief in small claims court when their dispute involves $3,000 or less. The small claims court is a valuable tool to the consumer because: (1) the court costs are minimal; (2) the procedure is informal; and (3) you do not need an attorney to represent you (though you or the opposing party may have one).

Before you decide to use the small claims court (or any court for that matter), make certain there is no other way of settling your dispute, short of a lawsuit. You may save yourself a lot of time, effort and potential difficulties in litigation if you can solve your grievance satisfactorily out of court. However, if you feel that you have tried all other available avenues in your attempt to resolve your differences and $3,000 or less is in dispute, take advantage of the small claims court.

To file a lawsuit, go to the Associate Circuit Court clerk in the county where you live. If the person or business you are suing resides in another county or if the purchase of the product or service was made in another county, you should file your lawsuit in that county.

The clerk will give you a form to fill out and file, and will assist you if you need help. The clerk will also answer any questions that you may have about court procedures. However, it is not the clerk's duty to help you decide the amount for which you are going to sue.

You (the plaintiff) should have with you the exact name and address of the person or business you are suing (the defendant) when you fill out the form to file your case. You pay a filing fee and you also pay the cost of mailing the summons by registered mail or of service on the defendant by the sheriff.

When you leave the courthouse, check to see that you know the docket number of your case, the time and date that your case is to be heard, and the location of the courtroom where you are to appear.

Here are some important points to remember when preparing your lawsuit:

(1) Organize important materials (bills, receipts, letters, etc.) so that you can make a complete and orderly presentation of your case at the hearing.

(2) Think over and make some notes on what you want to say so that you can make a full but brief statement of the facts in your case.

(3) Decide what witnesses, if any, you want to appear at the hearing. Witnesses may be subpoenaed (compelled) if they are reluctant to appear voluntarily and if they are important to the case.

(4) Check with the court before the hearing to find out whether the defendant has been served with the summons. If service has not been made, the clerk can tell you about your options.

(5) It is very important that you appear in court at the scheduled time and place for your hearing. Failure to do so may result in your lawsuit being dismissed by the court.

When you appear in court, do not be disturbed if the business or person you are suing is represented by an attorney. The judge has a responsibility to ensure that the proceedings remain informal, so your lack of legal knowledge will not work against you.

Either side in a small claims case may request a new trial in response to an unfavorable ruling. If you are dissatisfied with the decision and want a new trial you must act promptly. Requests for new trials must be filed in 10 days. You may need the help of an attorney.

If you win damages, you face the task of getting the defendant to pay. The defendant may voluntarily agree to pay you in a certain way — all at once or in installments. Occasionally, a defendant who has lost in court will not pay the judgment. When this happens, the court clerk can help you complete the forms to garnish the wages or bank account of the defendant. Other court procedures may be available to collect a judgment, but they are difficult to pursue without the help of an attorney.

If you have a chance to settle the suit before the court hearing, try to do so. Inform the court if this occurs and be ready to have the case heard in the event the settlement negotiations fall through.

When all other remedies fail or if small claims court is not available to you because the amount in controversy is over $3,000, you may want to pursue your case in a more formal court setting. If you decide to do that, you should discuss the situation with an attorney. For legal assistance information, see the reference section in the back of this book.

Time Share Property

Senior citizens are frequently contacted by real estate developers and resort communities offering time share plans for sale. In a "time share plan," you buy an ownership interest in, or the right to use, real estate or property for a certain period of time, usually for vacations or other short periods of time, up to one year in length for any given year. The real estate or property typically consists of condominiums, apartments, lodges, cabins or hotel rooms.

Missouri has a statute protecting the rights of buyers of time share plans. First, the buyer has five days after the purchase of a time share arrangement to cancel the purchase. The cancellation should be given in writing on a form that the seller must provide at the time of the time share purchase.

Secondly, when the seller uses free offers, gifts, drawings or other promotions as a method of soliciting you to buy a time share plan, the seller must deliver any promised gifts or an acceptable substitute gift or cash in an amount equal to the retail value of the gift offered within ten days of when promised. The seller must also maintain a list of the names and addresses of all winners, which must be made available to the public.

If the seller fails to provide the buyer with the promised gift or cash, the buyer can sue and collect up to five times the value of the most expensive gift offered, not to exceed $1,000 in addition to other actual damages.

If the time share plan involves an exchange program in which time share buyers may assign or exchange their property with other time share owners, the seller must notify the buyer in writing of all information relevant to the exchange program, including whether the exchange program is voluntary or mandatory, the procedures for qualifying and doing exchanges, and the names and addresses of all other time share programs participating in the exchange program.

If you have questions about any time share program or feel you have been cheated by a time share seller, contact the Consumer Protection Division of the Missouri Attorney General's Office.

Summary

If you are dissatisfied with a service, a product or work done for you, the first thing you should do is to notify the company, in writing, of your complaints. If they do not satisfy your complaint, you may want to contact a lawyer. Do not assume you can stop paying just because you are dissatisfied. Get the advice of a lawyer first. A lawyer may be able to help you overcome the effects of a bad bargain.

Missouri No Call Law
 Michael Ferry is executive director of Gateway Legal Services, Inc., and previously a long time attorney with Legal Services of Eastern Missouri, Inc. Gateway Legal Services, Inc. (314-534-0404) is a not-for-profit legal aid program that represents individuals in Social Security Disability and SSI matters as well as various consumer law matters.

Introduction

As one approaches retirement, insurance needs change. Additional health insurance coverage may be needed or life insurance needs may decrease. Choosing new insurance or deciding whether to continue a current policy is an important decision. The best protection is to be well informed so that insurance coverage is neither excessive nor inadequate.

Life Insurance

For most people, life insurance assures the financial security of dependents. It may also act as an investment. For someone who already owns insurance and is wondering whether to continue the coverage or for someone who wants to purchase a new policy, it is essential to know the basic elements of life insurance.

Term insurance refers to a policy under which one receives a certain amount of life insurance coverage for a specified period of time — or term. There is no cash value for the policy and the coverage ends at the end of the specified term. For example, if someone has a term life insurance policy that covers the policyholder until he/she reaches age 65, once that age is reached the policy terminates and the policyholder will no longer have coverage under that policy.

Whole-life insurance (also called straight-life or ordinary life) provides life insurance coverage for the entire life of the policyholder. These types of policies have a cash value that the policyholder may receive if he/she decides to terminate the policy. The cash value will increase the longer one holds the policy. Typically, whole-life policies are more expensive than term insurance.

Some questions that one should ask when determining life insurance needs include:

1. Do others depend on me for their financial support? If so, for how long will this dependence be true?
2. In the case of my death, will there be expenses that someone will need to pay? If so, are there more economical arrangements that could be made rather than purchasing a life insurance policy?
3. Is my primary objective for obtaining a life insurance policy to leave money to someone? If so, would my money be better spent by placing it in a bank account or investments rather than used toward payment of insurance premiums?

It should be kept in mind that the need for life insurance decreases over time as children become independent. In addition, the cash value of the insurance policy is usually quite low when compared to the amount of premiums paid.

Face value refers to the amount of coverage one has under a policy. For example, if a policy has a face value of $5,000, the policy’s beneficiary will be paid $5,000 if the policyholder dies while the policy is still in force. Under some policies, additional coverage, often double the face value, may be provided if the policyholder dies as a result of an accident. The benefits of the policy will be reduced by the amount of any loans outstanding against the policy.

Cash value refers to the amount of money one may receive by terminating or borrowing against a whole-life insurance policy. Typically, unless the policy is fairly old, the cash value of a policy will be less than its face value. Each of the two methods of obtaining a policy’s face value — terminating or borrowing against it — has its own advantages.

Terminating the policy allows one to receive the cash value, but ends the coverage of the policy. If a policyholder chooses to terminate coverage, the insurance company should be notified immediately. Otherwise, if a policyholder simply stops paying premiums, the insurance company will continue the coverage and deduct the premiums from the remaining cash value and not actually terminate coverage until the cash value is depleted.

Borrowing against a policy will continue the coverage, but allow the policyholder to obtain a loan, usually at a low interest rate. It should be noted that any outstanding loans at the time of death of the policyholder will reduce the amount of insurance payment to the beneficiary.

Health Insurance

The proper choice of health insurance involves careful consideration of the costs and benefits. If you are currently receiving or are eligible for Medicaid, you may not need to purchase additional health insurance. Similarly, if you have insurance through a group plan from a former employer, you may have all the coverage you need. Most people who are covered by Medicare, at most need supplemental health coverage to help pay for costs that Medicare does not cover, such as deductibles and co-insurance amounts. Many private insurance companies offer supplemental (Medigap) policies, but such plans can be confusing and also vary widely in value.

Most supplemental policies are designed to only cover Medicare deductibles and co-insurance costs. They exclude the same types of coverage that are excluded by Medicare. Terms or phrases in a health insurance policy such as “medically necessary” or “customary charge” mean that the policy does not pay the actual difference between what Medicare pays and you are charged, but only the deductibles and co-insurance based on what Medicare determines it will pay. This is most important for Part B, doctor and outpatient costs, because hospitals generally cannot charge the patient more than what Medicare pays. Also keep in mind that a physician who accepts “assignment” has agreed not to charge patients more than what Medicare determines should be charged, but the patient is still responsible for 20% of the charge.

Example: A doctor’s bill is received for $600. The Medicare-approved charges for the physician’s services are $450. Medicare Part B will pay 80% of the Medicare approved charge (80% of $450 = $360). A supplemental insurance policy will pay the balance (or 20%) of the Medicare approved charge. Therefore, the supplemental insurance would cover $90 (20% of $450), but the patient would have to pay $150, the difference between the actual charge and the Medicare-approved charge (unless the doctor accepts assignment).

These questions may be helpful when comparing available supplemental policies:

1. Does the supplemental policy cover the deductible (currently $992) that must be met before Medicare will kick in for the first 60 days of a hospital stay?
2. Does the policy cover the amount per day (currently $248) that Medicare will not cover if the hospital stay lasts between 61 and 90 days?
3. Does the policy pay the amount per day (currently $496) that Medicare will not pay if a hospital stay is more than 90 days, which requires the policyholder to use some of the lifetime reserve days?
4. Does the policy cover medical and hospital costs if the policyholder is hospitalized more than 150 days, under which circumstance the policyholder can no longer receive Medicare?
5. Does the policy pay the amount per day (currently $124.00) that Medicare will not pay for a stay in a skilled nursing facility that is between 21 and 100 days?
6. Does the policy cover the costs of staying in a skilled nursing facility for more than 100 days, under which circumstance a Medicare recipient can no longer receive Medicare?
7. Does the policy pay the annual deductible (currently $131.00) that must be met under Medicare Part B?
8. Does the policy cover the full 20% of reasonable (or covered or necessary) charges that are not covered under Medicare Part B?
9. Does the policy cover costs that Medicare may not consider to be reasonable and necessary?
10. Does the policy cover costs that are not currently covered under Medicare, such as prescription drugs and medicines, hearing aids, dental care, routine exams, or custodial care in a nursing home?

Remember, it is Medicare Part B costs that need to be supplemented. Policies that offer amounts up to $50,000 (or more) in hospital protection are often not advantageous. In most cases, one would have to be hospitalized for “medically necessary” services for more than six months in order to actually benefit from the stated offer in the policy.

Medicare Advantage refers to private managed care health plans for Medicare recipients that have been available since 1997. Medicare Advantage plans provide all the same benefits as Medicare, but are also similar to Medigap policies in that they offer a range of supplemental benefits to cover out-of-pocket costs, such as deductibles and co-insurance, as well as coverage for those Medicare beneficiaries who exhaust their hospital inpatient benefits. Some plans also offer coverage for other benefits not covered by Medicare, such as prescription drugs, routine eye exams, annual physicals, hearing exams, eyeglasses, or hearing aids. It should be noted that most Medicare Advantage plans have reduced these supplemental benefits in the past year. In addition, many companies are withdrawing from the Medicare Advantage program, which means that many members will have to return to regular Medicare and may need a Medigap policy.

Qualified Medicare Beneficiary (QMB) is a program under which Medicaid acts as a supplemental (Medigap) policy for Medicare recipients whose income is higher than that allowed for Medicaid eligibility, but below the federal poverty level plus $20. In Missouri, the QMB program is handled through the Missouri Department of Social Services, Family Support Division (FSD) and the state pays the Part A and Part B Medicare premiums, deductibles, and co-insurance charges for eligible recipients. Those currently receiving Medicaid may also be eligible for QMB benefits; inquiries should be made to the local FSD office.

Predatory Lending