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President Obama's Promises, Health Care Reform Expensive Inaction, New Credit Card Rules, Toyota Recall, Post-Transaction Marketing Scheme

Aired January 30, 2010 - 09:30   ET


GERRI WILLIS, CNN NEWS ANCHOR: Good morning. I'm Gerri Willis and this is YOUR BOTTOM LINE. Coming up, a critical look at President Obama's first State of the Union address, what his plans could mean for your wallet. Credit card reform is coming and coming soon, everything you need to know before it happens. And online shopping scams, how one click could cost you. The show that saves you money starts right now.

In his first State of the Union address, President Obama unveiled his plans to help you, from jobs to small businesses, taxes in the middle class, the president made a lot of promises. Can he keep them and what does it all mean for your bottom line? Let's get some answers from Eamon Javers, he's a financial correspondent from "Politico" and he's joining us now from Washington.

Eamon, I want you to grade the president, first of all, on his performance this week. Did he hit it out of the park?

EAMON JAVERS, "POLITICO": You know, he really did not hit it out of the park. I mean, I hesitate to give him the letter grade on this. But, this wasn't really the speech that he needed. It was flat in parts and he lost the attention of some of the folks in the room. And if he lost their attention he probably lost the attention of viewers on television, as well and that's the audience he really needed to reach to convince Americans that Barack Obama is the guy who can really bring this economy back to some kind of growth here in 2010. It's just a very brutal economic situation. And the president had very little luck last year getting any of his major initiatives through Congress.

WILLIS: Well, and he gave us a lot this week, a lot of new ones, in fact. And I want to start with the small business initiatives, because let me tell you, if it goes through it will be a great year to start a new business. First of all, he wants to give $30 billion in tax credits to small business financed by big banks. Also, payroll tax holidays for small businesses that hire. Now, what do you make of this, Eamon? Is this a good idea? Is it doable? Is there support in Congress?

JAVERS: Well, it's definitely doable. It's possibly a good idea and there's definitely support in Congress. I mean, there is one of those things where members of Congress can agree on very few things in Washington, but small businesses is one of those that has support on both Democratic and Republican sides of the aisle. So, Obama, by shaping this mostly as a tax credit is doing the smart political thing here and proposing an initiative that can actually get through this very, very gridlock Congress that we have.

And what's astonishing is he has a huge majority in the House of Representatives. He had until recently 60 senators in the United States Senate. They weren't able to get anything really done with that majority with a lower number this year and possibly even lower next year, your window of opportunity for Obama to get these things done is really closing fast.

WILLIS: I want to show and talk just a little bit more about some of these bennis (ph) for small business including eliminating capital gains taxes for small business investors. This means if you put money into a small business you don't have to pay capital gains on that when you sell it. It's a very big deal for folks, out there.

Also, tax incentives for buying equipment. You can write it off earlier. Also, slashing tax breaks for companies that hire overseas, which is really interesting stuff. Now, of course, the reason you give small businesses big tax breaks is because they are the hiring engine of the economy. Right, Eamon?

JAVERS: Right, yeah, absolutely.

WILLIS: An d so that's the thinking behind this. Tell me, you know, in your view, let's go to those middle class tax cuts for a second because there's a lot of tax credits in that. Is there as much support for that as there would be for the small business stuff?

JAVERS: There's definitely support for middle class tax cuts. You know, one of the ways that the president can sort of shift the rhetoric is framing some of these initiatives as tax cuts rather than new spending. If they're done as tax cuts you can probably pull some Republican votes over. So, that's the way he's going to have to really frame a lot of what he has to do here in 2010 in order to get those moderates and independent voters that he really lost last year with some of the big spending initiatives.

So, now, by doing it this way, he might be able to get some of this stuff through. But it's an election year and so there's no guarantee that any Republican is going to want to work with this administration. And give them any kind of victory.

WILLIS: Right. Of course, this was the political speech, right? I mean, the real stuff comes on Monday when the budget comes out, so we're all going to be watching that. But, my text pros say the really important thing is going to be what happens to the Bush tax cuts. What's your opinion on that -- Eamon.

JAVERS: Well, you know, Democrats -- the president campaigned on slashing and rolling back some of the Bush tax cuts, particularly for the wealthy and Obama is really target that group of over $250,000 a year in income. But, you know, what you've heard in recent weeks is a little bit of skittishness among Democrats about going along with that. I think that one's sort of in play and we'll have to wait and see where it comes out. And of course, when the president releases his budget we'll see what happens with this spending freeze that he's proposed. That is targeted really at bondholders, people who buy U.S. treasuries. He wants them to have confidence that the United States government is going to be responsibility about its debt and is not going to default at any point ever in the future and we're going to trim some of the spending, here. It's a small cut, but it is a cut.

WILLIS: And we still have that AAA credit rating. We're not that bad off. OK, well thanks for your help today, Eamon, really appreciate it.

JAVERS: Thank you.

WILLIS: Turning now to the cost footed by the American consumer, that's you and me, when it comes to health care reform or the lack thereof. You thought the cost of reform was going to be expensive, well, my next guest says the cost of doing nothing will impact our bottom lines even more.

Andrew Rubin is the vice president For Medical Center Clinical Affairs and Affiliates at NYU Langone Medical Center. He's lost also the host of "Health Care Connect" on Sirius XM Doctor Radio. What in introduction.


Thanks for helping us out today.


WILLIS: You know the president did really talk to Congress about we've got to get on health care, we can't completely put it aside. But, the public certainly is not supporting this at this time. You say there are consequences to that, though. What are they?

RUBIN: Well, there are big consequences, Gerri. Health care costs keep going up in this country. And whether you like the health care reform bills or not, there were some provision there to start taking cost out of the system and the point of taking the costs out of the system are to lower the dollars that are spent by your viewers. And you know, big businesses, the higher the health care costs go up, the more they're going to have to spend on health care insurance, the more they're going to pass their costs on to employees.

WILLIS: Well, I think a lot of people out there would say well, if we don't pass the health care bill we don't have to pay for the health care bill. But you say those benefits go to a different group of people.

RUBIN: Sure. I mean, the health care bills, both the House and the Senate versions, tax the wealthy Americans. Let's face it. That's a small percentage of people in this country. And as premiums continue to rise, and individuals have to pay more for their health care, either their insurance or their co-payments and their deductibles or businesses and big businesses and small businesses have to pay for more for their health care costs, that's going to be, in my opinion, a lot more expensive than the cost to taxing the wealthy that we're going to be paying for this health care.

WILLIS: So, small business obviously, if they don't get help it's difficult for them to give insurance to their employees, but what about me as an individual? What do you think that I'm going to be missing next year, the year after that, down the road because this bill didn't pass?

RUBIN: Sure. Well listen, again, as costs go up it becomes harder for Americans to pay for health insurance. You'll see a lot more uninsured Americans and that's not good for the economy. And for those who still can afford insurance their premiums are going to go up and they're going to have fewer choices in terms of health care plans that they can buy and assuming they can buy health care plans they're going to have less money for discretionary spending and that's not good for the economy, either.

WILLIS: Obviously there would be people who are low income, can't afford to have coverage, who may not get it now. That's obviously a problem for them. Do you think it's possible that Congress will pass any part of this, is there anything that will cherry pick out of the president's bill?

RUBIN: You know, listen, health care is very complicated. I say it all the time and it's an unsatisfying answer. And I recently read a article where they called it the three-legged stool. You know, you take one leg out of the stool, the whole thing falls apart. So, it's very difficult to pass small pieces of health care reform. On the other hand, I'd like to see them pass something to help the average American rather than do nothing. I think the president said it right.

WILLIS: All right, well Andrew Rubin, thanks for your help today. You're always great on this topic and we love to have you here.

RUBIN: Happy to be here.

WILLIS: There's a huge recall out there affecting millions of cars. Why you need to pay attention to this one and what it means to the future of this particular automaker.

And sweeping changes to your credit cards. We're going to tell you all about all the changes and when they do into effect.


WILLIS: Come February 22 your credit card is getting a makeover. With new rules set to take effect we want to answer your questions when it comes to your plastic. John Ulzheimer is the president of consumer education at

John, welcome back to the show, great to see you.

JOHN ULZHEIMER, CREDIT.COM: Thanks for having me.

All right, some new iteration on this. Of course, you know, we had the credit card legislation pass, it was debated, we talked about it a lot on this show. But now the Federal Reserve comes in and says OK here's where the pedal meets the metal, these are the rules as we putting them in place. So, let's go over the big changes, what credit card issuers can do and what they can't do.

ULZHEIMER: Absolutely. This is the interpretation of the CARD Act, not just the CARD Act. One of the big ones is the opting in to allow the card holder to charge and therefore take themselves into an over- limit position and therefore get incur with the fee. The credit card industry was going to auto enroll a large number of card holders into the opt in position, which the Federal Reserve said, no, no, no, can't do that. The card holder has to proactively and consciously choose to be opted in and therefore accept the over-limit fee if need be.

WILLIS: And they can't set minimum interest rates.

ULZHEIMER: No, and that's a big problem. A lot of credit card issuers are converting from fixed rate to variable rate. This is a variable rate play. The variable rate can go up, but what the issuers were doing is they were setting a minimum floor interest rate, if you will. So, hypothetically, 15 percent or 20 percent, so if the prime rate or index that the rate was tied to came down it actually would not go below that floor of a rate.

WILLIS: All right and so we know that there are lots of problems with credit cards, people having to pay all kinds of fees. What can they do now? How are the rules changing to benefit us?

ULZHEIMER: Well, the good news is if your interest rate is going to go up you have the ability to opt out and therefore avoid that interest rate increase. The over limit fee is pretty much going to go away across the board. In fact, many of the credit card issuers are already saying we're not going to charge you an over limit fee. The problem with that, Gerri, this is that this going to be like fee whack-a-mole.

Yes, they're going to get rid of the over limit fee, but I fwarn tee you it's going to pop up somewhere else in some other form. So, consumers are going to have to always be diligent and look out for that other $2 or $3 fee meant to subsidize the loss of the over limit.

WILLIS: You've got to read the fine print when it comes to these contracts. Now, you said there's something very interesting about free credit reports. This is important.

ULZHEIMER: Absolutely. This is great because this has absolutely nothing to do with credit cards yet it's in the CARD Act. The free credit reports that are used to entice consumers to sign up for these subscription services, now have to overtly and clearly disclose to the consumer that the credit report that you're about to claim is not the free one that you have the right to as mandated under federal law. So, now if you get duped into it, it's kind of your own fault.

WILLIS: OK, one question for me. I'm hearing more and more about charge cards, a lot of new charge cards coming into play. These are cards, of course, you have to pay off each month, you can't carry a balance. Sounds like a great deal for consumers. Are you convinced?

ULZHEIMER: I am almost there. I'm still a little bit on the fence. The charge card is great because, you're right, it is a pay in full product, you cannot carry a balance. The problem is that the credit limit is missing because it doesn't have a preset limit. And there are some issues with some of the older credit scoring model where's having a lack of a credit limit could hurt your credit score. But by and large, charge cards are absolutely fine to use to establish credit and to stay out of debt.

WILLIS: Very interesting. John, thanks for your help today.

ULZHEIMER: My pleasure.

WILLIS: Still ahead, we're watching your money online, revealing all the latest scams. And major recall affecting millions of Americans. Chances are, you or somebody you know has a car that's being recalled. The all important details, next.


WILLIS: You hear about recalls all the time, but rarely does one recall affect millions of people. That's just what happened this week when Toyota announced the recall of millions, millions of its cars. Let's get straight to CNN money autos writer Peter Valdes-Dapena.

Peter, this was really shocking, I have to say and especially because it was Toyota. I know so many people who own those cars. Do these people have to be worried? Are they going to get injured? Are they going to get killed in these cars?

PETER VALDES-DAPENA, CNNMONEY.COM: Well, the first thing we have to say is that even in these cars that are going to get recalled, the incidence of unintended acceleration, which is what this is all about, is extremely rare. And one thing I credit Toyota for in this case was even before they had a fix for this problem, put in the recall out there to let people know. Because in unintended acceleration cases, rare as they are, the thing that's dangerous is panic. And now people can at least know this might happen and talk about what to do. And they'll know if they're on the lookout for that fix when it's announced.

WILLIS: All right, what do I do if I'm in one of these cars and this acceleration happens? What are the direct actions I take that will save my life and save my family?

VALDES-DAPENA: In any case, whether it's Toyota or any other car, your car begins to accelerate uncontrollably after your foot is off the gas, the first thing you want to do is shift that car into neutral, OK, which disconnects the engine from driving the wheels, or if stick shift, push down the clutch, and press the brake, don't pump it, but press down firmly on the brake to slow the car down and guide it over to the side of the road. The next thing, in this case, call your dealer and have them come get that car.

WILLIS: Absolutely, and they do a fix and it probably doesn't take that long to fix that car. Let's go over some of the makes and models involved, here. We've got the Highlanders, Corolla, Venza, Matrix, and shocking, the Pontiac Vibe. Why is that on this list?

VALDES-DAPENA: Kind of weird, right? The Pontiac Vibe and Toyota Matrix are essentially the same car. They were made in partnership between Toyota and GM, so they're basically the same car with a different nose and taillight.

WILLIS: All right, we talked about what you do. You know, let's talk about how often this happens and if this is something we need to be worried about with other makes and models, other kinds of cars, other automakers.

VALDES-DAPENA: What is called unintended acceleration is, as I said, a rare occurrence and it does happen in pretty much every manufacture of cars will have some of these incidents on record for a variety of reasons, it does happen. But it is extremely rare.

WILLIS: So, I don't know what you drive, but would you drive a Toyota now? Does this change your view of the company's products or do you think that, hey, they did a great job of disclosing this, they're taking care of the problem that really makes me trust them more?

VALDES-DAPENA: Every auto company out there has had safety-related recalls. Every major auto company has. They solve the problem and they move on. Toyota has got a reputation for making quality vehicles and for being concerned about safety that goes back a long time.

Look, they'll get through this. They'll figure out how to fix this problem. They'll get it fixed. They'll start their factories back up, get the cars back out there on the lots. No, I would not be concerned about my family's safety in a Toyota product. If you get the recall notice, get your vehicle fixed.

WILLIS: All right, well great advice. Peter, thanks for your help today, we really appreciate it.

And for more on this story or any of the day's news as it affects your wallet, you can always logon to Still ahead, we're protecting your money online. We'll reveal all the latest web retail scams. You won't want to miss this.


WILLIS: Online shopper, beware. Whether you're placing an order for the latest gadget, sending someone flowers or even buying movie tickets, you've probably seen those cash-back offers. They pop up on the screen after you've entered your credit card number and finalized your purchase. You think you're getting a good deal, but New York state attorney general Andrew Cuomo is calling it post-transaction marketing, an on sideline scheme that has cost consumers millions of dollars.


(voice-over): Millions of American who is shop online are unsuspecting members of online discount clubs.

UNIDENTIFIED MALE: I feel tricked.


WILLIS: Eileen Gibson bought a book online and an offer popped up.

GIBSON: I feel like, wow, I'm going to get money for spending money? And of course I clicked on it.

WILLIS: After Sean Painter bought movie tickets on "Fandango," a mysterious recurring charge appeared on his credit card statement.

SEAN PAINTER, ONLINE SHOPPER: I didn't see any check boxes or anything that would make me aware of anything I was enrolling in other than buying two movie tickets.

WILLIS: One click and he was directed to another company's Web site and enrolled in its rewards program. He says without his authorization the company, Web Loyalty, charged monthly fees to the credit card he used to buy the tickets.

(on camera): Isn't this illegal?

BEN EDELMAN, HARVARD BUSINESS SCHOOL: The companies that make these services claim that they've told you everything they need to tell you in the fine print.

WILLIS (voice-over): But everywhere else...

EDELMAN: It says 10, 10, 10, 10, 10, 10, 10 off, but in this one place they do mention that they'll charge you $12.

WILLIS: Three Internet companies -- Web Loyalty, Affinion and Vertrue were blasted in a Congressional report last November for engaging in aggressive sales tactics and charging consumers millions of dollars for unwanted services.

Under scrutiny now by the New York state attorney general's office, subpoenas have gone out to the Web companies and to 20 retailers that investigators say pass along its customers' account information in exchange for lucrative contracts.

(on camera): Are these retailers, are they complicit in this? Are they part of the scam?

EDELMAN: Right. The retailers are absolutely part of this. The retailers have decided to let their customers get cheated in exchange for a cut of the profits.

WILLIS (voice-over): Some retailers have ended their contracts with these companies, and all three -- Web Loyalty, Affinion, and Vertrue, tell CNN they're changing the way they do business. Still, Chuck Bell of Consumers Union says even with heightened enforcement consumers need to be ever vigilant. CHUCK BELL, CONSUMERS UNION: The Internet is sort of the equivalent of the Wild West, and it takes the sheriff a while to get there. New scams are constantly being developed partly because technology advances very rapidly and there's a huge financial incentive.


WILLIS: Fandango says it can't discuss the matter while a Senate Committee review is going on, but the three Web companies tell CNN they've made significant changes. Customer who want to sign up for their services are now prompted to enter their 16-digit account number, this will alert consumers they're making a separate purchase. But, it didn't go far enough for New York attorney general Andrew Cuomo, who announced agreements for further changes earlier this week.

Here this toll us how to make your online shopping experience better and it doesn't turn into a financial nightmare is Mario Armstrong, technology contributor to NPR and the founder of

Mario, when I did this story, I was so angry about this because I've used so many of these retailers. I want to show our viewers out there just what this looks like so they can understand how easy it is to make a mistake.

Talk about this for just a second. This is the coupon that you see, the $10 off coupon, and it looks like any other coupon, frankly.

MARIO ARMSTRONG, TECHTECHBOOM.COM: That's right. You're absolutely right, Gerri. This is why it's work sod well for these marketing firms. So the idea is you go online, you make a transaction, you purchase the item you're looking for but after that transaction, which is why they're being referred to as post-transaction marketing, you get this coupon. And in that case for that particular coupon it was $10 off of your next purchase. And all they were asking for, Gerri...

WILLIS: You think that's a great idea, right, when you're looking at that, why wouldn't I do that? And it's common on the web to see things like that.

ARMSTRONG: Absolutely. And you know, when you look at how they designed it, it's designed in a way that we're used to clicking on these types of offers that have been, for the most part, legitimate so we don't really pay attention to some of the fine print and they aren't asking for an additional set of credit card information, so we really think that we're getting a decent offer.

WILLIS: No, no, no the credit card info is coming from the retailer you just bought something from.

ARMSTRONG: Can you believe it?

WILLIS: I want you to talk about who these retailers are and how much money they were making off of these contracts.

ARMSTRONG: Yeah, a lot of money was being made, over $700 million. If you look at 88 companies the government found in their report were making over a million dollars by having these relationships with these online retailers. About 19 of those companies were making over $10 million. One in particular,, raked in $70 million.

WILLIS: Wow, that's an entire, like, you know, business model right there. Right?

ARMSTRONG: In and of itself. You don't have to do anything else.

WILLIS: Right. So, again, this was, you know,, this was a lot of Web retailers you're used to seeing.

ARMSTRONG: That's right.

WILLIS: Now, you say if you're on sideline and you want to make sure you're safe, watch out for the prechecked boxes.

ARMSTRONG: Yeah, you have to watch out for these prechecked boxes because they find themselves buried somewhere in the fine print where you are already opting into something that you may not agree to and that could also be sending your credit card or other types of personal information on to that marketer.


ARMSTRONG: But, you know, also, Gerri, also, we have to do our due diligence. If it looks too good to be true, it probably is.

WILLIS: Right, right, right. Mario, I need more tips for shopping online and especially this thing you have about teching being the next frontier.

ARMSTRONG: Yes. Text is the new wave. I mean, you're looking at 2013 we're going to do more Web browsing on these devices than we will on our desktop computers. We're seeing more text messaging, mobile campaigns that are starting to have some of these types of tricks embedded in them, so we have to pay attention now because we're doing more shopping and more donating on our mobile devices than ever before. Now we have to be more diligent about exactly what we're adhering to and what we're opting in for so that we can make sure that the purchases we're making are actually going to the intended party.

WILLIS: Mario, thanks for helping keep us safe online. We appreciate it.

ARMSTRONG: Thanks so much for having me, Gerri. Appreciate it.

WILLIS: As always, we thank you for spending part of your Saturday with us. We'll see you back here next week. And you can hear much more about the impact of this week's news on your money on YOUR MONEY with Christine Romans and Ali Velshi, today at 1:00 p.m. Eastern and tomorrow at 3:00, right here on CNN. Don't go anywhere, your top stories are next in the CNN NEWSROOM. Have a great weekend.