It’s no wonder that Bob Sullivan’s new book, Gotcha Capitalism, is on the New York Times Bestsellers list this weekend. (See my Jan. 31 Yahoo!Finance column for a full review and interview with Sullivan). Columnist for MSNBC’s Red Tape Chronicles, Sullivan has touched a nerve among consumers suffering from “small-print rage,” as he calls it. 

Americans are bombarded with sneaky fees and meaningless disclosure notices (Wells Fargo’s fee schedule runs 55 pages). The banking industry, for example, made $17 billion in fees in 2006, Sullivan reports. The latest egregious charge: Bank of America is charging a record $3 fee to non-customers who make withdrawals from its ATMs.  

Sullivan discusses a mailer sent to 60 million customers by AT&T that was intentionally designed to be discarded. It notified customers that they had waived their rights to sue the company, and agreed to use mandatory binding arbitration. AT&T’s attorneys used a “negative option” strategy in the mailer: If you didn’t respond to the notice, you were assumed to be in agreement. 

The notion that “the customer is always right” is meaningless babble in today’s cut-throat, fee-slapping marketplace. “Now companies are only loyal to the right customers,” says Sullivan. In the credit card industry, “that’s the people just above the poorest – who can afford to pay something, but not everything, on their credit cards.” See the film Maxed Out for more stomach-turning rip-off tales.

Sullivan predicts that one day, that grocery store loyalty card will be used against you by your health plan (“we see you’re a regular buyer of Ben & Jerry’s ice cream; that will be an extra $100 a month for your coverage.”) They are already being subpoenaed by attorneys in divorce cases (to prove an unfit parent has been buying junk food).

Part of the problem is the Federal Trade Commission budget has been gutted over the years, so hidden fees, deceptive practices, privacy concerns and false advertising have become norms in the U.S. economy. (One of my personal pet-peeves is all the “free credit report” sites that sprang up after Congress passed the Fair and Accurate Credit Transactions Act in 2003, which required consumers to receive one free report a year. Here’s a study by Consumer Reports Webwatch on two dozen fakers, which are simply lures to sell other products. The real site is www.annualcreditreport.com.) 

“You need government to build roads and make sure bridges don’t fall down, and set up a marketplace that’s fair and trustworthy,” says Sullivan. “We’ve stopped pursuing that in favor of deregulated economy. But it doesn’t only hurt consumers, it hurts honest businesses too.” Here are a few of Sullivan’s pointers: 

-Avoid private student loans like the plague: Private student loans are “radioactive,” says Sullivan, even when offered by the same bank that’s giving you a government-backed loan. Never use student loan debt to finance other purchases or pay down credit card debt because of the way bankruptcy law works. 

-Avoid “auto loan packing” by invoking “regret laws” or “free look” laws: The biggest auto dealership hazard is tacked-on fees packed into monthly payments, like extended warranties or rust-proofing. Sometimes dealers will tell naïve buyers that they are required. In one case, it added $2,000 to the $13,000 purchase of a car. 

-Get out of early termination fees: Many cell phone firms will let you out of a contract if you move to an area where they don’t offer coverage. You can also use a pre-paid phone; trade your phone at a site such as CellTradeUSA; or use Verizon, which pro-rates termination fees. 

-Avoid excessive mortgage fees: Get Good Faith estimates from banks and brokers using the exact same rates and terms (i.e, 30-year fixed) and have the papers reviewed for $45 by the National Mortgage Complaint Center. Get at least two bids for title insurance. Also check out www.feedisclosure.com; see this story in the New York Times for more info.

Gotcha Capitalism is a great resource, and you’ll likely cover the cost of the book by following just one or two of the dozens of great tips.

• The Latest on Overdraft Fees
• Avoiding Overdraft Fees with Account Alerts
• Asterisks and Marketing Tricks
• Many don’t understand their credit scores
• Credit Cardholders’ Bill of Rights Act

This entry was posted on Saturday, January 26th, 2008 at 4:03 pm and is filed under Money & Happiness, banking fees, deceptive practices, scams. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.