Wear a wristband, get a discount on life insurance. But at what cost?  (John Hancock image)

Wear a wristband, get a discount on life insurance. But at what cost? (John Hancock image)

Was talking to a very smart friend recently about the latest expensive solution looking a problem, the Apple Watch.  He convinced me that there actually is a problem, it’s just *your* problem.  It’s every company’s problem.

The real market for the $400-$17,000 watch is the industrial market. Human intelligence.  Stop, for a moment, and imagine what a company could do with a constant stream of data about where you are, what you are doing, how you are sleeping, even what your heart rate is. Give a connected watch to all your employees, and the little pieces of big data you’ll collect are mind-boggling. You would know when employees are engaged.  Heck, you’d probably know when they are upset.   That would sure be handy in salary negotiations, wouldn’t it?

This isn’t an Apple Watch issue, of course. Plenty of other wrist-based gadgets can (almost certainly, will) do the same things.  They can gather a constant stream of data on human behavior, and use big data concepts to search for savings. I know, it sounds ridiculous, but some of these things are already happening.  Insurance is the inevitable driver of big data collection.  John Hancock recently revealed it would give life insurance discounts for consumers who don a wearable and share their vitals with the firm.  Users get “points” for walking, playing golf, etc. Hip health insurer Oscar doesn’t give discounts, but offers monthly Amazon gift cards to customers who do much the same. They even get free tracker wristbands.

It’s a very small leap for a company to hand out Apple Watches…or Android watches….or who knows what?…and require their use as a condition of employment.    They won’t even have to require it. They’ll just have to give people an extra day’s vacation, or a bonus, or….a discount on monthly health insurance co-pays.

Maybe this doesn’t bother you. Of course, it’s a good idea to create incentives for people to be healthier.  But as usual, we are rushing headlong into a brave new world with little thought to unintended consequences, and with antiquated laws that aren’t ready to handle the changes.  What will become of this data? Who owns the rights to it? How long can it be retained? To whom can it be transferred? And most important, how far is too far?  Could employees be terminated if their health is seen as a long-term risk? Could that information be used in hiring decisions? Obviously, health data collection companies have one over-arching goal in mind: Keeping down employee health care costs. Figuring out who “expensive” employees are and getting them off the books — or keeping them off the books in the first place — is too profitable a possibility to be ignored.

Seattle-based Healthnetic is one of an exploding group of health data firms saying they can predict health and productivity costs of groups.

“Not only do you end up with a stronger workforce, but you could also save money,” the firm’s website says.   A recent press release says that less than one percent of large companies’ work forces account for 41 percent of their health care costs. “On average, employers paid $113,379 in medical and pharmacy expenses for each individual high-cost member, compared to just $2,751 for everyone else,” the release says.

“The fact that employers can save more than $110,000 by preventing just one high-cost member is pretty eye-opening and shows why it’s so important for organizations to understand their population’s health and how it impacts their bottom line,” said Sean Gallivan, Chief Operating Officer of Healthentic, in the release.

Again: Early intervention programs and health programs can be a fantastic thing. If wristband gadgets help inspire people to take better care of themselves, that’s a godsend (though the data is mixed on their effectiveness).  Human resources departments around the country could indeed play a vital role in helping restore America’s vitality.

But do you trust them to do that? Or are these programs destined to become another cost-cutting measure designed to shove costs and risks back onto individuals and away from corporations?  After all, the idea of insurance is to pool risk, so individuals aren’t wiped out by calamities, and everyone gets to enjoy the freedom that a large safety net brings.  Using technology to eliminate the risk from the risk pool is an awfully profitable concept, but it’s also another tear in the fabric that gives meaning to an organized society.

It also sounds great until you find yourself on the outside of the risk pool, looking in.

Now is the time to think about these privacy and social issues, not after we’re all wearing wristbands us because it seemed like everybody was doing it.  We can save what could be a very powerful and compelling new technology by controlling its use from the outset, and ensuring that it benefits people, not profits.  Don’t kid yourself. That’s going to be really hard to do.

Healthnetic's "Population Health Dashboard."

Healthnetic’s “Population Health Dashboard.”

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Chris Roberts' bio

Chris Roberts’ bio

Yes, airplanes can be hacked, just as power plants can be hacked. No, it’s not a widespread problem right now.  Yes, we should talk about it  before it becomes a widespread (and quite deadly) problem. No, we shouldn’t be harassing and detaining people who research these problems for a living.  But we are.  And that makes us all less safe.  A lot less safe.

I was selected for extra screen on my last flight…and was told almost immediately that the reason was a mis-calibrated explosives trace detection machine. The kind, apologetic screener knew this. So did her colleagues who stood around watching. So did the man who ran the back of his hand all around my private parts, once they track him down. By the time we were done, four employees were involved and we all wasted 10-15 minutes. It was no trouble for me; I had arrived nice and early.  It is trouble for you.  It made you less safe.  We all often forget that security professionals only have so many minutes in the day to look for bad guys.  Time they spend wasting on known good guys is time they can’t get back.  It makes us all less safe.

I tell this story because no doubt, you have a similar story.   And you’ve thought these same things. And that’s why you will understand the importance of Chris Roberts’ faux arrest last week.  Only mere hours after Congress’ General Accountability Office released a report ringing the alarm bell about airplane hacking, Roberts was arrested over his research about airplane hacking. Roberts has been working on the problem of hackable avionics, quite publicly, for years. He is  founder and Chief Technology Officer of One World Labs, a security research firm. And as he boarded a plane last week on his way to make a presentation, he announced to the world that he was concerned the aircraft was hackable. When he landed, FBI agents and local cops took him into custody, took the equipment he had for the conference, and questioned him for a few hours.

And the story doesn’t end there. This weekend, Roberts was on his way to the big RSA security conference in San Francisco. After he had made his way through security and to the gate. United Airlines employees confronted him and told him he wasn’t welcome on their aircraft, according to the Electronic Frontier Foundation. He was able to take another airline to the conference.

Maybe the end result of this incident will be more focus on avionics hacking, which would only be a good thing. But I’ve seen this movie before, and so have you. Authority figures focused on the wrong thing. Instead of fixing the problem, they harass the messenger.  It makes our world more dangerous. And it plays right into the hands of those who would hurt us.

This is no isolated incident. In fact, this very problem is being debated at the highest levels of government right now. The White House’s recent proposal to enhance penalties for certain cybercrimes has been universally criticized in the hacker community for its potentially chilling effects on research.  By now, you should know that hackers break things in order to see how they work. Some hackers do this for fun, some for profit, some for the public good. It’s not always clear who is who. But rules that put hackers in jail long-term for tinkering will of course mean fewer good guys do this research, and leave all the breaking and entering to the criminals. We don’t want that.  We want Roberts working for our side.

Now, as for that GAO report. I wrote about it last week for Credit.com.  It’s always hard to right-size the scariness of such studies.  You have a lot more to fear right now than airplanes falling out of the sky because of hackers, which to date is not realistic.  But as I’ve already said, the time to talk about it is now, not later.

Below is my piece on the report. You can read it at Credit.com, too.

There are two ways to describe an important report issued by Congress’ General Accountability Office this week about airplanes and computers. Here’s how the GAO titled its paper: “FAA Needs a More Comprehensive Approach to Address Cybersecurity As Agency Transitions to NextGen.”

And here’s how many observers described the report: “Airplanes can be hacked through passenger WiFi!”

As always, the truth is somewhere in the middle. The world’s air transportation systems are going through the same changes as all industrial control systems, and these changes bring both opportunities and peril. Once upon a time, it was nearly impossible to remotely hack into a power plant because the plant used old-fashioned proprietary systems that required hands-on users for operation. Slowly, critical infrastructure systems like power plants are transitioning to off-the-shelf software, and at the same time, they’re being connected to the Internet. This allows remote access, which is both a good and a bad thing. It’s good to be able to manage power plants from a long distance. It’s bad because it creates an avenue by which, at least theoretically, hackers can also break in.

So it is with airplanes. The Federal Aviation Administration is transitioning to its “Next Generation Air Transportation System,” known as NexTGen. Modernizing is a necessity. But as air traffic control systems and in-flight avionics systems are increasingly networked, the risk of unauthorized access increases. Any time you connect a computer to the world, the world can connect to that computer.

It makes sense to ring the alarm bell about these possibilities before they actually occur, and that’s what this week’s GAO report does. Auditors asked 15 cyber experts to conjure up worst-case scenarios, and they did a fine job of it. The report does not say that airplanes are currently being hacked. But it does raise a series of possibilities that frankly sound straight out of a horror movie — such as a computer virus causing a flight disaster.

“One cybersecurity expert noted that a virus or malware planted in websites visited by passengers could provide an opportunity for a malicious attacker to access the IP-connected onboard information system through their infected machines,” the report noted.

You would think that in-flight WiFi could never be used to connect to pilot controls — after all, the systems are quite different — but several experts said it could be possible.

“Firewalls protect avionics systems located in the cockpit from intrusion by cabin system users, such as passengers who use in-flight entertainment services onboard. Four cybersecurity experts with whom we spoke discussed firewall vulnerabilities, and all four said that because firewalls are software components, they could be hacked like any other software and circumvented,” the report said. “The experts said that if the cabin systems connect to the cockpit avionics systems (e.g., share the same physical wiring harness or router) and use the same networking platform, in this case IP, a user could subvert the firewall and access the cockpit avionics system from the cabin.”

The report also talks about the added risk of an insider threat from connected systems — a malicious airline employee or FAA worker might be able to remotely cause havoc with specialized knowledge of Internet-connected planes. There’s also the contractor problem. The FAA and airlines must not only certify the security of all the systems they build, but of systems built for them by third parties. Imagine a back-door being inserted into a critical airplane system that a malicious programmer could use later.

It’s important to notice the presence of the word “if” in all these disaster scenarios, as in “if the cabin systems connect to the cockpit avionics systems.” They shouldn’t be physically connected, of course. It’s easy to imagine that happening, however, in the pressure-packed, cost-sensitive world of airline operations.

That’s why the GAO report urges the FAA to “develop a holistic threat model” towards airline hacking, and criticizes the agency for failing to do so. The report does praise the FAA for other cyber security initiatives it has already undertaken.

The FAA says it has already addressed many of the concerns the GAO report raises.

“We take this risk seriously,” said Keith Washington, acting assistant secretary for administration for the FAA, in a response to the report. He noted that the FAA recently established a cyber test center so it could more closely examine potential threats.

But the GAO report, while not suggesting that air travel is unsafe today because of hackers, pulls no punches about possibilities in the future.

“Significant security control weaknesses remain that threaten the agency’s ability to ensure the safe and uninterrupted operation of the national airspace system,” the report concludes.

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Click to watch the clever Freeze It commercial

Click to watch the clever Freeze It commercial

Now here’s a good idea.  Discover Card consumers who lose track of the credit cards, but aren’t sure the cards are really lost yet, can temporarily “freeze” the cards with a new feature called “Freeze It.”  New charges will be declined, which automated payments will continue, while the consumer continues to search for the card. Everybody wins here.

For consumers: While card replacement is relatively easy, it’s still a pain. Automated payments need to be updated, account numbers need to be changed, and so on. Sometimes, all that work is unnecessary, and the card turns up in a pants pocket within a few days.

For banks: Replacing cards cost money..even more money, now that the cards have embedded security chips.  We’ve trained consumers for years to call immediately after a card disappears.  Now, at least some of those cards won’t need to be replaced.

The freezes can be activated and deactivated via a mobile app, website or a toll-free phone call. They also trigger alerts if a transaction on  a frozen, missing card is attempted.

“We’re giving our cardmembers a fast and simple security feature that gives them more control over their accounts and more peace of mind if a card goes missing,” said Julie Loeger, senior vice president of marketing. “The Freeze It feature adds another layer of protection to Discover’s continued efforts to increase cardmember security and help prevent fraud.”

Discover says it’s the only major card issuer with the feature. Expect others to follow suit if Freeze It is as popular with consumers as I suspect it will be.

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Click for the full report from Intralinks

Click for the full report from Intralinks

It’s great that more folks are backing up their files using cloud-based services like DropBox.  While hacker and virus writers get all the headlines, I think hardware failure is really the biggest risk most consumers face.Cloud services have become such a part of the way we live, however, that we’ve gotten a little too casual about it.  That’s how tax returns end up lying around in public places for all to see. You’ve set your computer to back things up automagically, and you’ve also shared some cute cat photos with friends, and all that gets conflated so anyone can Google your tax returns.

So today’s short story is this: Stop right now and think — Where are the digital copies of your tax returns?  And by that, I mean all the copies.  Have they been vacuumed up by some cloud service? If they have, are they at least password protected? Are you sure about that?  Maybe you’d be better off printing copies and putting them in a strongbox. While there’s merit to having copies on your computer, don’t forget that any hacker who breaks into your machine from now until the end of time will almost certainly search for “1040” a moment later; it’s easy to find old tax returns on a computer. Store them there at your own risk.

This is not a drill.   Graham Cluley at his excellent blog, points out that file-sharing service Intralinks was able to find a tax return on the DropBox service this week using a trick that had been revealed more than one year ago. You could certainly call it user error.  Someone had used DropBox to share files and  then placed a tax return in their cloud space, which could be found using search engines. There’s a few more details about how it works, which you can slog through if you like.  NOTE:  Intralinks makes clear that this kind of vulnerability could apply to any file sharing service.

What should you do?  Cluley says it’s important to use the privacy settings that cloud services provide. Unfortunately, free DropBox users have fewer options that consumers who pay for the upgraded product.

“If you use the free version of Dropbox, you should not use the Share Link facility as it could be leaked to a third party,” Cluley warns.

Intralinks also recommends getting into the habit of deleting old data you don’t need any more from cloud services. And here’s the best piece of advice:

“Don’t mix work and pleasure. Mixing work and personal files in a single account is, quite simply, a bad idea. Losing your personal data is serious enough, but losing company data can have severe consequences: lost reputation, reprimands and other professional consequences, regulatory and legal issues and even fines,” the firm says.

And remember ,”work” includes critical information like your tax returns.  The cloud is great, but like all technology, it has a dark side, and must be used thoughtfully.  Particularly at tax time.

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Click to read the report

Click to read the report

There was recently a very public debate about how awful airline travel is…vs. how whiney airline passengers are.  In the New Yorker, Tim Wu argued that airlines actually create “calculated misery,” in order to trick you into paying more.  Criminy, people pay extra now just to board the airplane early,theoretically so they can ensure their carry-on bags will fit, and they can avoid bag fees.  Any sane person would recognize this as madness, and Megan McArdle over at Bloomberg concedes this, but she goes for the economist-friendly, “the fault lies not in our stars but in ourselves” argument. People are so darned insistent on finding the lowest price that this race to the bottom is inevitable. “The problem isn’t greedy airlines. It’s us,” she writes.

Regular readers of this column, or of my book Gotcha Capitalism, should see the problem here – I call it “death of the price tag.”  Because price tags no longer include the true costs of things — from cell phones, to cable TV, to airplanes — price has become a mere diversionary tactic. Sure, people sort flights on Expedia using “lowest price,” but it’s unclear what folks are getting for what they are paying. Could they pay $27 more and get two more inches of legroom? Or pleasant flight attendants instead of angry ones? Or a 2x chance the flight will be on time?  Or a 3x chance their bag will be lost?  Or a 4x chance the price of the ticket could double if any kind of life surprise occurs that requires changing a ticket?

These are big data questions that can only be answered by corporations who own the data and the big computers. No consumer can rationally decide how to buy an airline ticket today. So of course, they make the next best choice, and pick on price. It’s terribly unfair to blame them for this.

Capitalism has become information warfare, and consumers are at a massive disadvantage in this war, thanks to analytics. 

What’s happening here is simple: Without any minimum standards for service, there is an inevitable race to the bottom. Airline pricing is trickery, a bait and switch designed to lure you in with a come-on price and then load you up with fees to make you profitable. It’s no way to run a business, or a country for that matter. This is why I say America is not a free market economy, but rather a Gotcha economy.

Congrats, airlines!  The race to the bottom is almost complete.  You know this based on nearly every conversation you’ve had with a friend who’s been on an airplane recently.  But there’s even data to support this, as you’ll see below.  

Before I get there, I must concede this point: Airline travel is cheap.  Transportation expert Joe Sulmona, who helped me with my Ubernomincs story recently, cautioned me about going to far with my woe-is-travelers argument,and he’s right to point out that since de-regulation, prices have gone down.  A race to the bottom that impacts safety is a big deal, and there is no evidence that’s happened in U.S. airlines. A race to the bottom of inconvenience? Well, not everyone believes regulators should worry about that.  To his point, I’ve flown regularly between Seattle and New York for almost 20 years. My first flight cost about $400.  I often pay less than that now.  But I also arrive with more leg cramps, and I have a lot more options for flight times.  And in the past, I sure never had to pay a $200 fee because I got sick and had to change my ticket.

Prices don’t reflect true costs. Airlines get away with it because they enjoy virtual monopolies or duopolies on many American routes. That’s what has to change. Because you should really ask yourself: How bad does airlines service have to get before someone does something? If you think market forces will correct this problem on its own, I have an ivory tower to sell you.

Now, as for the data supporting your miserable feelings…

(The story below first appeared on Credit.com. Read it there.)

If you feel like airline service is slipping, that’s because it is. In fact, it has slipped back to levels not seen since the recession, according to a new “Airline Quality Rating” report out this week. The rating considers four factors most important to travelers: on-time performance, involuntary bumping, mishandled baggage and complaints. Only Virgin America, Alaska and Hawaiian upped their game last year, according to the study, while all other major airlines offered worse service.

University professors Brent Bowen (Embry-Riddle) and Dean Headley (Wichita State) have conducted the research using Department of Transportation data for 25 years, and found that performance levels have sunk back to where they were in 2009, during the Great Recession.

“The Airline Quality Rating industry score for 2014 shows an industry that declined in overall performance quality over the previous year. As an industry, performance in 2014 was worse than the previous four years,” the authors say. “Of the 11,364 complaints registered with DOT regarding all U.S. domestic carriers, 62.7% were for either flight problems, customer service problems, or baggage problems.” Overall, complaints skyrocketed 22% in 2014.

So which airline attracted the most complaints? To adjust for airline size, the authors published a rate of complaints per 100,000 passengers. The industry average was 1.38 for 2014. At the “top” of the list is Frontier and United. Alaska and Southwest attracted the fewest complaints. These stats aren’t a fluke: Alaska also had the fewest complaints per 100,000 in 2013, while Frontier and United had the most last year, too.

The Most Complaints per 100,000 Passengers

  1. Frontier 3.91
  2. United 2.71
  3. American 2.12
  4. Envoy 1.59
  5. JetBlue 1.17
  6. Virgin America 1.14
  7. ExpressJet 1.01
  8. Hawaiian 0.89
  9. SkyWest 0.84
  10. Delta 0.72
  11. Southwest 0.53
  12. Alaska 0.42

Frontier didn’t immediately respond to a request for comment.

“I’m not surprised by the latest results,” said consumer travel advocate Chris Elliott, who operates Elliott.org. “Airline passengers are fond of referring to the industry’s customer service record as a race to the bottom. These numbers leave little doubt that the race is far from over.”

The results also reveal a backslide from improvements that airlines had made since the recession, Elliot said.

“These numbers suggest that the uptick in customer service was only temporary,” Elliot said. “The study is a big disappointment, both for airline passengers, and also for me personally. I had really hoped the industry had begun to turn a corner.”

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Learn more about Lytx in-car cameras

Click to learn more about Lytx in-car cameras

It’s obvious that smartphones and driving are a dangerous combination.  At this point, it should be obvious that ever-more-drastic laws banning cell phone use while driving have been ineffective, other than as another revenue-producing tool for law enforcement. A new study of teen drivers offers some insight into why.

Experts examined in-car video of 1,700 crashes involving teen-age drivers and found that distraction was a factor in 6 out of 10 moderate to serious crashes. What kind of distraction? Here’s the breakdown:

  • Interacting with one or more passengers: 15 percent
  • Cell phone use: 12 percent
  • Looking at something in the vehicle: 10 percent
  • Looking at something outside the vehicle: 9 percent
  • Singing/moving to music: 8 percent
  • Grooming: 6 percent
  • Reaching for an object: 6 percent

(The study was conducted by AAA using videos provided by Lytx, which provides in-car camera technology. Click to see more on the study.)

Distracted driving is the problem. It’s haunting to think that a majority of bad accidents could have been prevented by better focus. But the numbers here don’t lie: Cell phone use is only a part of the problem, and it’s not the bulk of it, at least among teen crashes. Singing along to music was almost as common a cause of the crashes studied. Looking around was a more common cause.  Reaching for something and putting on makeup, together, caused more crashes than cell phone use.  And of course, the distraction of other passengers was the most serious problem (which is why some states don’t let young drivers transport others).

One critical element of this study: The cameras were quite out in the open. The drivers all knew they were being watched. Still, they engaged in all these risky behaviors. That just shows how irresistible and powerful the lure of distractions are.

Sadly, it’s fairly impossible to legislate attention.  So most states have, with good intention, tried to help by passing all manner of cell phone use bans.  Here’s the problem. In some states, it’s now strictly speaking illegal to use GPS devices. In other states, judges have ruled that smartphone use is legal while talking on a cell phone is not. The laws are incredibly hard to enforce, which means they are ineffective.

I use my smartphone as a radio often. While I can pick the station before I put the car in gear and drive, I worry that doing so might be illegal in some jurisdictions.  Yet, stand on any street corner in America, watch cars pass by, and I’ll bet you see up to one quarter of drivers playing with their phones.  And, as I’ve mentioned, there’s no shortage of studies showing cell phone bans don’t actually reduce accidents.

So what should be done?  Most important: We all need to recognize distraction is the problem. I’ve written a lot about the seduction of multi-tasking in The Restless Project, and how most people wildly overestimate their skills at doing two things at once.  The vast majority of people, doing the vast majority of tasks, can only focus on one thing at a time. Today’s kids are assaulted by multi-tasking temptations as they grow up. We can’t expect them to suddenly master the art of focus at 16 if they’ve been talking to people while playing video games and texting through their early years.

We shouldn’t be picking on kids, of course.  Distraction is a problem for all of us, menaced as we are by the 45 different ways any of us can be interrupted during the day.

I’d like to see police use a wide, wide berth of discretion while enforcing cell phone laws. My suspicion is that only those who are dumb about it get caught – folks who plant their smartphone on top of the steering wheel while sitting at a traffic light next to a cop.  “Sneaky” cell phone users are actually a bigger risk, as they keep their phones down low, where a cop can’t spot it, and where they have to look far down and away from the windshield. I wouldn’t want any of these bans repealed, but I would like to know that tickets are given out only in episodes of real distracted driving.  (Of course, I’d be all for some stern warnings).  Americans often don’t like to hear this, but one-size-fits-all laws end up being tyrannical.  There is a difference between typing out an email while driving down on a busy city street and setting a GPS destination on an empty highway.

The real solution to the smartphone problem will come from technology. Apple, Google, and the rest of you — you got us into this mess, you’re going to have to get us out of this.  Car-safe user interfaces will be essential, allowing drivers to respond with quick “running late” texts without taking their hands off the wheel or their eyes off the road, and perhaps limiting use of more complex functions while driving.

My main concern is that we have become distracted and we’re focusing on the wrong problem. Consider the chart above again.  Cell phone use is only 20 percent of the distracted driving problem.  Like so many problems of our time, the issue is attention. Let’s focus on that.

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Click to read the lawsuit

Click to read the lawsuit

A Georgia firm called millions of consumers attempting to collect on “phantom” debts, and tricked consumers by citing personal information purchased from payday loan lead generators, federal investigators allege.

A lawsuit against Universal Debt and Payment solutions and a host of related companies was revealed Wednesday, alleging the firm’s tactics included purchasing personal information from data brokers that operators could use to convince victims to pay debt they didn’t owe. Agents would use names like “LRS Litigation Group,” “Worldwide Requisitions,” and “Arbitration Resolution,” and tell consumers they risked jail time if they didn’t pay immediately. The claims were bolstered by operators’ citing personal information, including bank account numbers, the CFPB alleges, that had originally been obtained by payday loanlead generation websites and sold to data brokers.

(This story first appeared on Credit.com. Read it there.)

“Our lawsuit asserts that consumers were harassed, threatened, and deceived as part of a reprehensible scheme to collect debt that was not even owed,” said CFPB Director Richard Cordray. “We are taking action against the many parties that allegedly contributed to this phantom debt collection operation. The ringleaders of the scheme, the telemarketing company that broadcast millions of robo-calls, and the companies that processed the payments should all be held accountable for taking advantage of vulnerable consumers.”

In one example cited in the lawsuit, a consumer complained that he received a threatening call while he was asleep.

“The caller stated that he had a ‘restraining order against (the consumer) to appear in court if I didn’t settle with them.’ The caller said the consumer had 24 hours to pay $500 on a $1,600 debt to Bank of America, or the collector would ‘contact (the consumer’s) employer to levy (his) wage, and they were also contacting the local police to serve papers,’” the lawsuit alleges. “According to the complaint, because he was scared, the consumer provided his bank card information. After making the payment, the consumer’s wife informed him that they had never done business with Bank of America.”

A phone call to the number listed for Universal Debt was answered by a man who said he was sick and was unable to answer questions about the lawsuit. Asked if he had a lawyer, he said he couldn’t afford one.

The CFPB lawsuit also names several service providers, including Global Payments, which processed the debt collector’s credit card payments.

“Payment processors provided substantial assistance … enabling the Debt Collectors to accept payment by consumers’ bank cards when the Payment Processors knew, or should have known, that the Debt Collectors were engaged in unlawful conduct,” the CFPB alleges.

The firm did not immediately respond to requests for interview.

The CFPB also named Global Connect, LLC in the lawsuit for enabling the debt collectors to initiate millions of calls.

“(It) provided this service when it knew, or should have known, that the messages it broadcast for the Debt Collectors were unfair or deceptive, and materially contributed to the Debt Collectors’ scheme,” the lawsuit says.

Global Connect did not immediately respond to a request for comment.

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Click for story

Click for story

There’s a huge blind-men-and-the-elephant problem when talking about the economy.  Writers can’t help but talk about it like’s it a single thing, that’s either doing well or poorly. Basically, if you’ve lost your job, the economy stinks. If you have a good job, it’s hard to understand what everybody is complaining about. In reality, all economics, like all politics, is local. Home prices are up a stunning 18 percent near Seattle, Washington.  That doesn’t mean the housing market is “fixed.”  And even if you are in Seattle, if you are a first-time home buyer, you sure don’t think it’s fixed.

People (like me) who want to comment on the economy intelligently are forced to try to examine more narrow slices of it, and make their judgments a little more nuanced.  That why data that segments the population into finer groups is a gold mine. Fine data can help explain why some people think the economy is like a pillar and others thing it’s like a tree branch.

A gold mine arrived recently. The Labor Department released new data from its Consumer Expenditures Survey, formed by panel of consumers who keep detailed diaries about all the money they spend.  The group is broken up into income groups of 10 — so the top 10 percent of Americans spend like this, Americans in the 81-90 percent income group spend like this, and so on.  Dividing into these 10 slices also helps get away from the bland upper-middle-lower class descriptions that are really too coarse to form the basis of an intelligent discussion. (What does middle class mean, anyway).

Thankfully, the Wall Street Street Journal’s excellent Real-Time Economics blog distilled the data down into an easy-to-understand chart.  It is above, but you should really go read the WSJ story.

The Journal piece focuses on the interesting accounting of the differences between how the rich and poor spend their money. But I found something else fascinating about the chart.  Fully five of the 10 groups — from the lowest 10 percent to the fifth 10 percent — spend more than half their money on food and housing.  More than half! Remember, this doesn’t include gas, or health insurance, or school, or….anything other than food and housing.  Until you earn above the median income in America, you can expect to devote half your spending to the most basic of basic life costs. That’s crazy.  And if you think about the fragile nature of our consumer-driven economy, it’s even more crazy. It’s a fair assumption that if you are spending half your money on subsistence, you don’t have a lot left over for cars or new clothes.  I’ve noted this repeatedly in The Restless Project: It’s not about jobs, it’s about wages. So long as Americans aren’t making enough money, the economy will continue to sputter. Even for you 1 percenters out there, stagnant wages are a recipe for trouble.    Meanwhile, this chart should help make obvious why so many Americans don’t have emergency or retirement savings.

Of course, as you go up the income chain, the percent of your income you spend on the basic is less important. If you take home $100,000 a year, you can drop $50,000 on mortgage payments and food and have plenty of cash left over for vacations and your 401(k). Still, it’s astonishing what people in the middle-income tiers of America spend just to get by every day, and how much of their budget is devoured by fixed costs. We have a lot of work to do to fix America.

Click to learn about The Restless Project

Click to learn about The Restless Project

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Click for report (PDF)

Click for report (PDF)

Victims of tax-refund identity theft have a nightmare on their hands — a long-term nightmare.  A government audit found that it takes an average of 278 days for the IRS to resolve ID theft complaints and issue tax refunds.  And that’s an improvement over the 312 days it took the last time an audit was performed.

Perhaps more maddening, auditors from the Treasury Inspector General for Tax Administration found that ID theft cases are shuttled around to an average of seven different case workers. And during 254 of the 278 days that taxpayers wait for their refunds, nothing happens to their cases.  That’s down from 277 days of “inactivity,” the auditors found.

Tax-related ID theft is a fast-growing crime. The IRS says it has stopped 19 million suspicious returns and protected more than $63 billion in fraudulent refunds; several states are also scrambling to deal with the issue.

“Refund fraud adversely affects the ability of innocent taxpayers to file their tax returns and timely receive their tax refunds, often imposing significant financial hardship,” said J. Russell George, Treasury Inspector General for Tax Administration. “While the IRS is making some progress in assisting victims of identity theft, those who have been affected by this devastating crime deserve better.”

The audit covered ID theft complaints from fiscal year 2013.

When taxpayers finally do get their refunds, the ordeal isn’t always over.  Of the sampling the auditors examined, 10 percent got the wrong refund or their case was otherwise incorrectly resolved.  The auditors estimate that means 25,565 cases were resolved with errors.

Some cases drag on far longer than 278 days. Roughly five percent of the cases were stuck in extreme limbo, averaging 390 days — longer than one year — before resolution.

“(We) believe that further actions are needed to improve its tracking of these timeframes. Until this is corrected, the IRS will continue to provide an inaccurate account resolution timeframe to taxpayers due a refund,” the agency said.

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Click to learn more about Starbucks' free college offer

Click to learn more about Starbucks’ free college offer

Starbucks said this week it is “doubling down” on its free college offer, expanding from two years to four years the ambitious tuition reimbursement program it announced in 2014.  The announcement also deals with criticism the program has received because student/employees had been required to shell out considerable sums and wait until they received 21 credits before reimbursement.  Now, students can be repaid for tuition costs at the end of each semester.

Earlier, the program only covered junior and senior year at Arizona State University through its online offerings. Now, it will cover all four years.

Perhaps in part because of the upfront cost, uptake of the Starbucks program might have been a bit slower than you’d imagine, In a letter to employees on Monday, CEO Howard Schultz disclosed that 2,000 workers had signed up, but “tens of thousands” are “actively” interested.

“By doubling down on our investment in our partners’ education, we are helping at least 25,000 Starbucks partners graduate by the year 2025 and giving access to higher education to all of our eligible U.S. partners,” Schultz wrote. “I am proud that we remain committed to creating opportunities for our people as well as for thousands of Americans, be it by offering life-changing benefits for our partners.”

Robery Kelhum, who studies higher education at Seton Hall University and had been critical of Starbucks’ earlier offer, gave praise to the firm for the enhancement in an email to InsideHigherEd.com

“However, if the pool of employees enrolling at A.S.U. Online is mostly students closer to completing a bachelor’s degree, extending the full benefit to more students may not be as impactful,” he said. “(K)udos to Starbucks for making the program more generous,” but added that “I look forward to seeing an evaluation of its effectiveness.”

I wrote about some of the problems with Starbucks’ initial offer for Credit.com, here.  The changes address many of them, but one remains: Starbucks employees, to obtain the benefit, must attend Arizona State online.  Not necessarily a bad thing, but it is a limitation.

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