Like Nancy Donley, 41, a Chicago real estate broker, you may think that tough consumer protection laws and vigilant regulatory agencies are watching out for you.
In 1993, Donley tragically discovered just how misplaced her trust was. Her 6-year-old son, Alex, died after eating a home-cooked frozen hamburger patty contaminated with E. coli 0157:H7, a highly toxic strain of bacteria that the U.S. Department of Agriculture’s outmoded food-inspection practices don’t test for.
“As a parent I always erred on the side of being protective,” Donley says. “Imagine realizing I put his life in danger by feeding him something that’s USDA-approved.”
Gaps in the consumer protection safety net like the one young Alex Donley fell through are widening every day, according to a three-month Money Magazine investigation. The study revealed that protections that Americans have long taken for granted are under attack. Here are four examples of the kinds of problems that American consumers are, or may soon be, facing.
– Eroding bank laws. Congress started to pare banking safeguards last year when it amended the Truth in Lending Act. For one thing, it weakened the rules that allow consumers to back out of a loan if they are overcharged, such as through excessive mortgage-closing costs. The new standards limit that right to cases where the lender’s errors or overcharges exceed 1 percent of the loan’s value. So on a $100,000 home mortgage, a lender could theoretically overcharge the borrower as much as $1,000 with impunity.
In addition, a House bill (H.R. 2520) would kill the requirement that banks report their interest rates in a standardized fashion known as the annual percentage yield, which makes it easier for customers to comparison shop.
Bankers complain that the current rule is both costly and unnecessary. But a 1995 study by Consumers Union claimed that savers could lose more than $300 million a year if the law is repealed. The American Bankers Association disputes that estimate.
Both the House bill and a companion Senate measure (S. 650) would bar savers from suing banks that make errors that cheat consumers, even if the consumer can prove that the error was intentional.
– The return of nursing-home horrors. Although nightmarish nursing homes haven’t vanished, experts say a 1987 federal law’s high standards and stiff penalties have dramatically improved the quality of life for many residents.
Despite that success, the federal rules would have been drastically weakened by Medicaid reform legislation passed in 1995 had not President Clinton vetoed it. Among other things, the law would have scrapped training requirements for nurses’ aides, reduced inspections and dropped maximum penalties for facilities that fail to meet federal standards by 50 percent, to $5,000 a day from the current $10,000. Rules that protect patients and their families from financial ruin would also have been eliminated.
The effort to roll back the protections is expected to continue. Nursing-home operators say relaxing the federal standards makes sense in light of the government’s plan to cut spending on Medicaid, which covers roughly two-thirds of nursing-home residents. However, nursing-home researchers fear that scandals would once again become commonplace.
Protections for nursing-home residents are also under attack in separate federal legislation that could eliminate as much as 80 percent of funding for the ombudsman programs in many states. That program coordinates a nationwide network of about 7,600 people, largely volunteers, who act as consumer advocates for nursing-home residents.
– Dangerously lax food standards. Food poisoning is far more common and far more dangerous than most people know. Food-related illnesses kill at least 10,000 Americans each year and sicken another 80 million, according to the federal Centers for Disease Control.
Although it’s impossible to guarantee the absolute safety of the food supply, our current inspection system fails to provide even the basic safeguards many consumers assume are in place, says Caroline Smith DeWaal, director of food safety for the Center for Science in the Public Interest.
Introduced in 1906, the system relies on inspectors who use sight, touch and smell to detect trichinosis, anthrax and other diseases that infect animals and in some cases spread to humans. But while those diseases have largely been eradicated, the current system is ill-equipped to detect invisible bacterial threats such as E. coli 0157:H7 and salmonella.
However, microbiological spot testing, which can catch E. coli, has been voluntarily employed for the past two years by some large food producers, and other producers will soon be following that example. And the Department of Agriculture is expected to issue new rules that will require the meat and poultry industries to test for bacterial contamination and alter their production processes to improve food safety.
– Virtually no regulation of managed care. Whether by choice or simply because their companies give them no other option, more than 70 percent of the people covered by employer-sponsored health plans now participate in managed-care arrangements such as HMOs. But as consumers have rushed into managed care, lawmakers have been in no rush to create consumer safeguards.
“It’s very hard to get good information on services, the qualifications of doctors and the financial incentives those doctors have to skimp on services,” says Columbia University professor Stephen Isaacs, author of “The Consumers’ Legal Guide to Today’s Health Care.”
Once consumers have chosen a managed-care plan, they may find that they have little recourse if they are denied treatment or reimbursement for care. Many plans also require members to agree to binding arbitration, blocking them from taking their HMO to court if they’re harmed physically or financially.
