If credit cardholders feel worse off since the passage of the law designed to protect them from banks, that's because they are.  An avalanche of new fees, interest rate hikes and other costly changes since the law was signed in May suggest the Credit Card Accountability, Responsibility and Disclosure Act, or the CARD Act, has backfired.

The consumer advocacy group Consumer Action on Monday released a list of such changes since passage of the CARD Act. 

Call them CARD tricks, but most consumers aren't amused.

Consumer Action says since spring, banks have engaged in arbitrary interest rate hikes, increased fees on balance transfers, added annual membership fees and dramatically raised minimum payment requirements.

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"The ink was barely dry on President Obama's signature of the CARD Act when banks started hitting consumers with higher fees and charges," said Travis Plunkett, legislative director of the Consumer Federation of America.  "Congress can't write laws fast enough to keep up with these tricks and traps."

Consumer Action published on its Web site a gallery of what it said were the worst offenders. Here's some that made the list:

• Bank of America's Platinum Plus Visa, which increased interest rates by up to 46 percent.
• Capital One, which increased its penalty interest rate by 6.25 percent.
• Citigroup, which began collecting annual fees ranging from $30 to $90.
• JP Morgan Chase, which increased its balance transfer fee to 5 percent.
• JP Morgan Chase, which increased minimum payments from 2 percent to 5 percent.  When consumers call asking for relief, they are told the only way to reduce their monthly payment is to accept a higher interest rate.
• HSBC, Chase, American Express and Bank of America, all of which have all closed accounts without warning.

Many issuers also have lowered consumers' credit limits without warning. This limits their purchasing power and hurts their credit score.

When it passed the law, Congress gave the banking industry nearly a year to implement the changes mandated by the CARD Act. Some in Congress now feel that was a mistake. Rep. Barney Frank, D.-Mass.,  has introduced legislation that would move up the effective date of the remaining provisions to Dec. 1.

Linda Sherry, a spokeswoman for Consumer Action, said the bank changes have turned the CARD Act on its head.

"Unfortunately, people are in a worse place than they were before because of the time period, the window of opportunity the banks had before the law takes effect," she said.

The consumer group released the research this week to lobby for creation of the Consumer Financial Safety Commission, a new federal regulatory agency that has been proposed by Democrats in Congress.  The proposal gets a hearing in the House Financial Services Committee on Wednesday.

"This is an example of why we need the (new agency)," she said. "Congress felt it was doing a good thing in giving banks time to get their ducks in a row before the changes, and look what happened."  A new agency could step in more quickly than Congress and address allegations of unfair changes in credit card terms, she said.

'Congress knew'
But Nessa Feddis, spokeswoman for the American Bankers Association, said that higher interest rates and new fees were to be expected after passage of the sweeping new credit card law.

"Congress understood that the new law would mean rates would go up across the board for everyone and it would be harder for small businesses to get credit cards, and they made the decision that this was an acceptable trade-off for consumer protection," she said. 

But she added that some criticism of the credit card industry is unfair.  For example, consumer groups are being "hypocritical" when criticizing increased minimum payment rates, she said.

"For years they have complained that minimum payments weren't high enough," she said.  "Banks have been encouraged to do this by consumer groups and regulators, and now they are being criticized for it."

She also said she didn't understand why banks continue to be criticized for raising interest rates in advance of the Feb. 1 CARD Act final implementation date, because Congress required most CARD Act provisions dealing with rate hikes to kick in Aug. 20.  

"Banks have been losing money since late 2008 and are projected to lose money into 2010," she said.  There's no way Congress could have taken away revenue sources -- such as certain kinds of fees and rate hikes -- without anticipating others would appear. "To stay in business, revenue has to exceed expenses. That's basic economics," she said.

Bill Hardekopf, who runs credit card comparison site LowCards.com, also said that banks had warned Congress about higher fees and rates when the CARD Act was under discussion.

"It sounds funny to say, but credit card issuers lived up their word," he said.

He disputed the idea that a consumer protection agency would have made a difference during the past few months.

"If card issuers want to cut back on rewards programs, what could a government agency do? If they want to add membership fees, what could an agency do? All these things the card companies are doing are within the law," he said.

But Sherry said such an agency would be able to act quickly when there are changes in terms and conditions, and stem unfair, unclear or deceptive practices by banks.

"Right now there is nowhere for individual consumers to go and get their complaints addressed," she said. "That's what this agency would be."

 

 

 

 

For the first time ever, U.S. bank account holders would rather visit a Web site than a bank branch, according to an industry survey. Nearly 25 percent of those surveyed said they preferred online banking, compared to about 20 percent who favored walk-in visits, according to the American Bankers Association survey.

Despite horror stories about identity theft, computer viruses, password hassles and other troubles, online banking has enjoyed a steady rise in popularity.

"This marks a watershed change," said Nessa Feddis, ABA senior counsel and a retail banking expert.  "It ... tells us that consumers now have confidence in the accuracy and security of online banking."

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Still, consumers haven't turned away from other banking outlets – 55 percent of customers said they preferred using ATMs, the telephone, old-fashioned mail, a mobile device or had no preference. 

Banks have been nudging consumers toward online banking for years. An online transaction can cost a bank 90 percent less than an in-person transaction.

Greg McBride, a senior financial analyst with Bankrate.com, said the results of the survey are consistent with other research he's seen.

"The way we handle our finances has changed," he said.  "We don't sit at the kitchen table with a stack of envelopes anymore to pay our bills. Now we open up a laptop."

He pointed to the convenience of services like direct deposit of paycheck as one impetus for online banking.

"It sure beats standing in line during your lunch hour on Fridays," he said.

Web banking has also been spurred by new regulations issued by the Federal Financial Institutions Examination Council in 2005. These rules required banks to add layers of security to Web sites beyond requiring user names and passwords.

Consumers know these tools well now. Bank of America customers, for example, see pictures of familiar tea cups or flowers when they log in as reassurance they're not at a phishing site. ING Direct customers are sometimes asked to identify their high school mascots or enter PINs. These changes have enhanced security and reassured consumers, said Eric Skinner, chief technology office of security firm Entrust.  Still, Web users should not become overconfident, he said.

"The appropriate tone is caution," Skinner said. "Banks have come a long way in recent years, thanks in part to regulatory pressure. But the reality is that there are still problems related to fraud."

Some security techniques are mere "feel good" measures, he cautioned.

Meanwhile, the pace of innovation among online criminals is much faster than that of real-world bank robbers, he said.  Real-world thieves still use the same strategies they've used for years, while "in the online world, attacks change monthly," he said.  Phishing attacks have recently given way to sophisticated computer viruses, for example.

"Banks have to step up their game to stay ahead," he said.

Avivah Litan, a bank security expert from analyst firm Gartner, said consumers are right to feel relatively safe when banking online. Federal law protects them against losses, so their risks are minimal.

But there is irony in this week's announcement from the bankers association, she said. Just last month, a banking industry security group named the Financial Services Information Sharing and Analysis Center issued a fairly dire warning to commercial Web banking customers. The alert was first published in the Washington Post.

It recommends that firms employ extreme security measures, such as limiting online banking to ultra-secure computers that have no e-mail or general Web browsing capabilities. The warning came in response to a dramatic rise in online thefts from small and medium-sized businesses. Unlike consumers, businesses are not protected by federal banking regulation and are not entitled to automatic refunds of losses, Litan said.

"Consumers feel safe and they should feel safe. But it's odd that this comes at a time when banks are telling business customers not to feel safe," she said.

Fortunately for corporate customers, or anyone else who still doesn't feel comfortable with online banking, branch banking isn't going anywhere. In fact, McBride said, despite the huge industry push toward online banking, the nation's largest lending institutions have been engaged in massive branch building during recent years. The number of branch offices has more than doubled in the past two decades, according to the FDIC, even as the number of banks has sharply fallen as a result of mergers and failures.

"There has been a building bonanza," he said. "The branch is really the retail floor for banks.  That's where they sell their loans, their other products.  Branches aren't going away."

Related story: Looking for better rates? Visit a virtual bank

It would be the most sweeping change to American consumer protection in decades, perhaps since 1930.  It would wrest power away from major banking regulators and the Federal Trade Commission and place it in the hands of five appointees charged with putting consumers first.

And apparently it scares the heck out of the banking industry and other business interests.  

Debate on proposed Financial Product Safety Commission, brainchild of Harvard bankruptcy expert Elizabeth Warren, is about to heat up in Congress.  The new government office would be the first major new federal consumer protection agency since the creation of the Federal Trade Commission in the 1930s.  As proposed, the new commission would have the authority to subpoena and fine corporations, enforce requirements for clear contracts, provide a single place for consumers to register complaints, collect and share information on misbehaving companies and much more.

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Perhaps the most dramatic provision of the legislation would be the "transfer of functions" from the Federal Reserve, Comptroller of the Currency, Office of Thrift Supervision, FDIC, National Credit Union Administration and Federal Trade Commission to the new agency.

 

"It's a reflection of the degree to which those folks haven't done the job," said Gail Hillebrand, financial services expert with Consumers Union.

Until now, she said, consumer protection efforts have been split among the agencies and, as a result, got short shrift from them all. "Consumer protection is too important to be the orphan in the regulatory system. It has been everybody's last priority," she said.

The concept for a stand-alone financial protection agency -- modeled loosely after the Consumer Product Safety Commission - was first introduced this year by Sen. Dick Durbin, D.-Ill. But the White House has recently thrown its support behind newer legislation introduced by Rep. Barney Frank, D-Mass.  A House committee is expected to debate the measure early next month, while Sen. Christopher Dodd, D-Conn., will soon introduce a companion bill in the Senate.

In addition to pooling all consumer protection efforts into one agency, the law would give the agency broad powers, including the ability to: 

• Review new consumer contracts, such as credit card terms of service, and demand changes for clarity.
• Create new mortgage loan disclosure forms.
• Create model versions of contracts that could be used by banks to make offers of credit.
• Force banks to store and share information on products in standard electronic formats, to encourage the creation of third-party products that help consumers compare terms and conditions.  
• Impose fines ranging from $1,000 to $1 million per day for violations of the agency's rules
• Require so-called "plain vanilla" offerings of products whenever companies sell complex financial instruments to consumers. For example, the provision -- called "standard consumer financial products" -- could force a bank that's offering a negative-amortization loan to also offer a basic, 30-year fixed loan for comparison.
• Require lenders to compile and share detailed data about financial transactions. The data will be used to analyze market trends and to make sure "traditionally underserved consumers and communities have access to financial services."
• Issue subpoenas to review bank records and investigate complaints.
• Restrict the use of binding, mandatory arbitration by banks.
• Preserve the right of individual states to enact tougher consumer protection laws.

Ed Mierzwinski, program director at the Public Interest Research Group, says broad changes are necessary to prevent abusive bank tactics the led to last year's economic collapse.

"In 1929 we had a collapse of the financial system and in 2008 we had a collapse," Mierzwinski said. "In 1929, we had a radical reconstruction that prevented another collapse for 80 years.  Today, Congress hasn't done anything yet except bail out the biggest banks that caused the collapse. We need to start at the bottom and protect consumers."

The proposal faces an uncertain future. President Barack Obama has said creation of the new agency is a top priority for his administration, and the U.S. Treasury Department is behind the plan. But regulators who stand to lose power are much less supportive. And, not surprisingly, industry lobbyists are readying a pitched battle to stop it.

In testimony before Congress earlier this year, the American Bankers Association argued strongly against the creastion of a new agency, arguing that heavily regulated traditional banks were not to blame for the mortgage mess.

"The biggest failures of the current regulatory system, including consumer protection failures, have not been in the regulated banking system, but in the unregulated or weakly regulated sectors," said Edward Yingling, ABA president.  "The most pressing need is to close the regulatory gaps outside of the banking industry through better supervision and regulation," he said.

Aggressive campaign
The U.S. Chamber of Commerce is leading the opposition, paying for a series of TV ads and creating a Web site called "StoptheFPSC.com."

"Maybe instead of a bigger government, we should focus on making government better," says one ad. 

Critics also argue that separating two chief duties of banking watchdogs –"safety and soundness monitoring," which assesses banks' balance sheets and risk, and consumer protection -- is a recipe for confusion and mismanagement.  They envision a situation where the imposition of a consumer protection rule by the new agency, which might decrease bank revenue, could contradict an order by the Federal Reserve to raise capital and lower risk.

"Simply creating another agency isn't going to solve this problem. ...There are already six different entities in the government that deal with consumer protection," said Tom Quaadman, who studies capital markets for the U.S. Chamber of Commerce. "This bill creates a vast new system of government regulation of the economy and sets up competing agencies that will be engaged in turf battles. It's going to make it harder to have a 21st Century regulatory structure for our economy." 

He prefers a proposal floated recently by Rep. Walt Minnick, D-Idaho, which would create a "consumer financial protection council" made up of members of existing regulators.

Protecting consumers is good business
But Assistant Treasury Secretary Neal Wolin recently made the case that arguments against a creation of a new, consumer-focused agency "don't hold water."

"In the first place, we reject the notion that profits based on unfair practices can ever be considered sound," he said in an op-ed piece that appear in The Hill. "In the second place, there are few – if any – realistic examples of a true conflict between consumer protection and safety and soundness.  And there are no conflicts that could not be easily resolved."

Hillebrand, the Consumers Union expert, goes a step further, arguing that tough consumer protection rules -- rules that would have made many exotic mortgages illegal during the past 10 years – actually make banks stronger, too.

"It turns out that consumer protection would have been the ultimate protection for safety and soundness," she said.

Opponents of the idea have other objections to the bill.  Quaadman said the Frank bill goes too far by covering any entity that extends credit, meaning it could apply even to local small businesses that casually allow customers to pay with credit or purchase on layaway, according to the Chamber.

Odysseas Papadimitriou, a former Capital One credit card executive who now publishes CardHub.com, said adding another regulatory agency would still leave the largest flaw of bank oversight intact -- "regulator shopping." Banks can, and do, reorganize under different charters in order to work with more friendly agencies.

"You have a race to the bottom because companies that issue credit cards can choose their regulator," he said. He favors a new structure that organizes regulators by product, so there is a single federal agency that regulates credit cards, another that regulates mortgages, and so on.

"(This bill's supporters) seem to have a very clear understanding of the problem and yet they are choosing the easiest solution. Add one more regulator and problem solved," he said. "That's not how it works."

Then, there's the sheer scope of the restructuring. Not only would the new commission take regulatory duties away from seven other agencies, it would siphon off workers. Hundreds -- if not thousands -- of government consumer protection agency workers would immediately switch hats and work for the new office, an agency transfer that might remind some of the creation of the Department of Homeland Security.

Said one consumer protection agency worker, who spoke on condition of anonymity: "It will take them all two years just to get to know each other. Who will be regulating in the meantime?"

But Hillebrand dismisses such objections, pointing out the severity of the current financial crisis.

"This is a big problem and it's going require a big solution," she said. "There is one thing that is clear here. The mistakes the financial sector made affected real Americans, real neighborhoods. We can't afford to say, 'Let's go back to business  as usual.'"

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Competition for the right to profit from parking tickets is apparently pretty cut-throat.

Last month, one of the nation's largest parking enforcement companies, Dallas-based Affiliated Computer Services Inc., sued competitor Duncan Solutions of Milwaukee, accusing it of extensive corporate cyber-espionage.  Affiliated says Duncan found a way to tap into e-mails from its employees, and had been monitoring incoming and outgoing private messages for two years.

Welcome to the hyper-competitive world of law enforcement privatization. State and local governments around the country are racing to sell off driving-related enforcement duties to the highest bidder, often splitting the profits with companies that take over.  As detailed earlier this week, cash-starved cities are turning up the heat on parking scofflaws, hoping to plug budget gaps by pulling in millions of dollars in what's sometimes called a "curb tax." The result has been rising frustration among some drivers who say they are being treated unfairly. Many may not realize that a sizable portion of their parking, speeding and red light fines goes to a private company's bottom line – and in some cases, enriches foreign owners.

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For example, just outside Washington, D.C., in Montgomery County, Md., a contract with Affiliated signed in 2006 awarded the firm $16.25 for every for every speeding ticket it writes.  A class action lawsuit is challenging the deal's legality.

Well before the current budget crunch, governments had been turning to the private sector to offload the unsavory tasks of enforcement and fine collection. Privatization enthusiasts compare parking enforcement to other functions that cities regularly outsource, like garbage collection. Some of the stories that surround the industry might remind you of garbage collection's ugly past.  Tales of political payoffs, bribery, espionage and rampant unfairness abound.

In the espionage case, Affiliated alleges that Duncan employed a relative simple trick to spy on e-mails from dozens of employees.

The lawsuit, filed Aug. 18 in the Dallas U.S. District Court, reads like a spy novel.

Earlier this year, Affiliated employee Jeff Frank clicked "reply all" on an e-mail sent to him by a Duncan employee and noticed something strange. When he clicked on his own name in the e-mail header, revealing the underlying data behind it through the "properties" feature, the software showed his address to be JFrank@DuncanSolutions.com -- as if he were a Duncan employee.

The lawsuit alleges that Duncan had created a copycat e-mail address, hoping to trick Frank and others into sending internal e-mails out to Duncan-controlled servers.

Subsequent investigation showed another 25 such copycat e-mail addresses, Affiliated alleges  -- one dating back to July 2007. To avoid raising suspicion, Duncan had set up an e-mail tool that automatically rerouted the intercepted messages back to their rightful recipient at Affiliated,  according to the lawsuit.

"Duncan has gained a wholly improper competitive advantage by having the opportunity to review Affiliated's internal emails," the lawsuit alleges. "The stolen emails reveal not only information about specific prospective and existing clients, but also confidential and proprietary information regarding Affiliated's general business strategies and plans."

Affiliated did not respond to requests for comment at press time.

Jeffrey Remsik, a spokesman for Duncan, said his firm denies the allegations in the lawsuit.

"We dispute the facts as alleged and we will aggressively defend ourselves in court, and we expect to win," he said.  He declined to answer additional questions.

How the attack might have worked

Kevin Rowney, head of the data loss prevention division at Symantec Corp. and an expert in espionage, said the alleged e-mail hack is among the most dramatic allegations he's ever heard.

"This ranks up there pretty high," he said. The competitive intelligence gained from reading all those e-mails could have serious implications for a targeted company.  "For any organization, this would be a serious risk. For some organizations, this could be an existential risk. You could rip off enough customers that you could wipe them out."

The spy trick works because it takes advantage of a Microsoft Outlook feature that attempts to "do you a favor," Rowney said.  Generally, Outlook e-mail display only "to" and "from" names, not underlying e-mail addresses, making it easy for an attacker to disguise the true destination. Also, once an e-mail is sent to a recipient, the e-mail address is cached and suggested later, when a user begins to type a name in the "to:" box.  It would be easy for a sender to accidentally pick the copycat e-mail address when sending notes. Doing so would actually spread the "infection" around a company's e-mail, Rowney said.

The lawsuit also alleges that Duncan has an "intense competitive nature."  In it, Affiliated cites a recent competition between the two firms involving parking meters in Dallas -- a competition Affiliated won.

"After losing, Duncan retaliated by sending the City of Dallas a broad FOIA request that included all documents relating to the implementation of the contract. A temporary injunction currently prohibits the City of Dallas from complying with Duncan's request," the lawsuit says.

Other lawsuits, accusations

Affiliated itself is no stranger to controversy. In Canada last year, the firm was accused of trying to bribe Edmonton police officers in an attempt to gain favor for a bid to get the area's red light camera business. The firm was acquitted of wrongdoing.

Another lawsuit filed in July by a driver advocacy organization, The Road Safety Awareness Group, in Canada says the firm "unduly influenced" the photo enforcement contract tendering process, unfairly collected personal information about Canadian citizens and spied on a journalist who wrote an unfavorable story about the company. The group is seeking the return of $177 million in tickets written by Affiliated since 2003. The province of Manitoba, also named in the suit, has asked a judge to dismiss it.

In 2006, two Affiliated executives – including CEO Mark King – resigned after they were the subject of an investigation by the Securities and Exchange Commission for allegedly back-dating stock options, an illegal method for increasing the value of stock options compensation.

There have been performance-related criticisms of Affiliated, too.  In 2007, a report by the Office of the Auditor in Washington D..C. said the company mishandled its seven-year contract with the city for parking meter operation and enforcement. Complaints jumped to 89,840 in 2005, the first year of the contract, from 3,652 the year before, the report found. The office also concluded that the city paid Affiliated $26 million during the life of the contract, but could have operated the system itself for $18 million.

The same year, an Affiliated contact to operate 50 red light cameras in the city expired. The competitor who took over the contract, American Traffic Solutions, claimed 27 of the cameras weren't working.

Only months earlier, the D.C. City Council had renewed the parking meter deal with Affiliated for another five years.

Affiliated apparently had strong ties to the D.C. officials. In 2006, it gave $10,600 to then-Mayor Anthony Williams to help pay for a privately funded trade mission to Africa. It donated another $8,000 to other elected city officials.  At the time, Councilman Phil Mendelson, who got $1,300 from Affiliated, told the D.C. Examiner newspaper that the money did not buy influence.

"(Affiliated) has always had a very good government relations effort," he told the paper. "And regardless of whether they gave contributions or not, they make a point of communicating with members on issues."

Duncan Solutions has also taken an interest in local politics. The company and its employees contributed $3,625 to St. Louis Treasurer Larry Williams in 2008, according to the St. Louis Business Journal.  Early this year, Williams decided to lay off all 73 government parking meter maintenance workers and outsource their work to Duncan.

Enforcement of parking and traffic laws by private companies is controversial; it's also big business.  Australia-based Redflex Traffic Systems, a red light camera firm which operates in hundreds of U.S. cities, estimates the potential nationwide market for speed enforcement at $10 billion annually and red light enforcement at $4 billion, according to a 2005 investors' presentation.

Lockheed-Martin, a government contractor best known for its aircraft division, was among the first to enter the private parking business. The original operator of the controversial Washington, D.C., system, it sold its parking enforcement division to  Affiliated for a cool $800 million in 2001.

The case for privatization

Leonard Gilroy, an advocate for privatization efforts and a researcher at The Reason Institute, says private firms will always find a more efficient way to allocate limited resources than government agencies.

"There's nothing inherently governmental about a city running a parking meter operation," he said.  "Governments … tend to under-price. So they have an asset and they can't maximize the value of that asset."

For example, Gilroy said, government agencies have a difficult time raising prices  because of political pressure. So water treatment plants, toll roads, parking lots and other operations are run at a loss. Eventually, he said, "a death spiral" occurs as the government agency can't pay for upkeep.

Furthermore, "When a government is in the position of being the operator and the regulator, you don't have accountability," he said.

He cheered the city of Chicago's recent lease outsourcing its parking operations for 75 years in exchange for a $1 billion upfront payment. Deals like that allow cities to quickly modernize equipment and better track parking usage, he said.

He disagreed with civil liberties concerns expressed by critics, saying cities can write contracts that retain control over important functions, such a fine setting, adjudication and other law enforcement duties.

He hadn't seen the lawsuit filed against Duncan, and would not comment on it, but he made the point that government-run operations are hardly immune to such scandals.

John Van Horn is editor of Parkingtoday.com, a trade magazine and Web site that follow the private parking industry.  He wouldn't comment on the lawsuit either, but he was dismissive of the negative publicity that companies like Duncan and Affiliated have received, saying it goes with their turf.

"Have you ever seen a positive story about parking?" he said.

There have been plenty of negative stories. The Web site TheNewspaper.com tracks news about private parking and traffic enforcement companies. It lists six U.S. cities where yellow light cycles were shortened after the installation of red light cameras, allegedly to enhance revenue.

Camera appeal

"(Cameras) appeal to cities as the easy way to solve a crime," said Richard Diamond, editor of the site. "But the primary motive is money. When you have private corporations involved, there is no question that for the company there can only be one motive: profit for the shareholders."

Pointing to allegations that companies falsify evidence for adjudication hearings and often hire former police officers to grease the skids for government contracts, he said he was not surprised about allegations of espionage.

"It's a dirty business. You cannot look at the stacks of cases of corruption, fraud, bribery and not conclude that there's something wrong here," he said.

In some areas, consumers are growing frustrated with the automated justice.  In Maryland's Montgomery County, for instance, local radio station WTOP discovered through Freedom of Information Act requests that 27 speeding cameras had been vandalized in recent months -- many spray painted to obstruct the camera lenses.

Barnet Fagle, a motorists' advocate at the National Motorists Association, says voters are expressing their displeasure as well.

"Any time (cameras) have been put up to a referendum they have died," he said.

New laws are impacting the discussion, too, he said. When Georgia passed legislation requiring longer yellow light cycles for intersections where cameras are installed, ticketing and revenue from the cameras plunged.  Within months, cameras in Gwinnett County were disabled, because they no longer issued enough tickets to pay for themselves.

Anyone who's watched an episode of A&E's "Parking Wars," a cop-ride-along TV show based in Philadelphia, knows that drivers often are guilty of the offenses they are accused of.

But Fagle sees the issue as a fundamental argument over constitutional rights.

"I think the cameras are unconstitutional. According to the 6th Amendment, you have the right to face your accuser," he said, arguing that there's no way to face a camera or a computer provided by a private firm.  Also, he said, when tickets are issued, drivers are "presumed guilty unless you prove yourself innocent. ... That's not what I learned in civics class."

Diamond, of TheNewspaper.com, said outsourcing also raises more practical concerns.

"You want a police force to have one goal, to make the community safer," he said. "When you throw in private companies, … you've created a situation where doing what's best for the public is not job No. 1. And there are plenty of cases where this turns into a problem. The slippery slope cases manifest themselves very quickly."

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It's the very definition of a bad day. No quarters in your pocket, the line at the post office is longer than expected or you need to grab lunch and don't have time to circle the block and find parking. You run back out and get to your car just in time to see a parking officer pulling away after leaving a ticket on your windshield.

For want of a quarter, you now owe $50 to some government agency.

There was a time that such calculated risk-taking might have paid off. Odds were against a meter maid spotting your car at just the wrong time. Or perhaps you were good at talking your way out of tickets.  No more.

Parking meters and meter maids have become less forgiving. Around the country, cash-strapped municipalities are turning to what's sometimes called a "curb tax" to shore up weak balance sheets. Cities are raising ticket prices, hiring more citation officers, turning to gimmicky technologies, even selling their parking systems and enforcement to the highest bidder, all in a desperate effort to shrink budget gaps.

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"There's no doubt about it. Virtually every city has hired more ticket agents," said Glen Bolofsky, founder of ticket-beating site parkingticket.com.

Bolofsky said governments' philosophy about parking tickets has radically changed. Where once local officials held onto a pretense that parking tickets were chiefly a deterrent aimed at safety or public convenience, police departments and elected officials now openly discuss citations as revenue stream.

That's obvious by looking at marketing materials from companies that sell parking and ticket collection services to local governments.

"For nearly 30 years, we've been helping cities and towns make money," croons Municipal Management Association Inc., which helps cities collect parking fines. At the bottom of each page is the company slogan: "Municipal Management Associates … Turning Parking Tickets Into Cash."

And right now, cities are doing more of that than ever:

In New York City, the undisputed king of parking tickets, the municipal coffers are stuffed with nearly $600 million in parking ticket revenue annually – about 50 percent more than in 2002.  The financial opportunity is so large that New York hired more than 200 new agents this year, at a time when most city agencies were being cut.

In Chicago, the city leased its entire parking operation to a private company earlier this year. In exchange for the next 75 years of parking revenue, the city received an up-front payment of $1 billion from a group lead by investment bank Morgan Stanley.  The deal is being challenged in court.

Atlanta announced it was outsourcing its parking enforcement to a Milwaukee-based firm named Duncan Solutions Inc. The city had been collecting $2 million in fines each year; now, Duncan has promised to send it a yearly check for $5.5 million. Meanwhile, in St. Louis, all 73 meter maids in the city were laid off this spring when the parking duties were outsourced to Duncan.

In Louisville, Ky., as in many other towns, the city has lowered its threshold for "booting," or immobilizing, cars.  Now, only two outstanding parking tickets are enough to put the dreaded boot on a tire. And, in a major policy shift, cars may be booted even if they are legally parked when spotted by enforcement officials.

Normally, the boot devices are locked and can only be removed by law enforcement officials, which can require hours of waiting. But in Montgomery County, Md., just outside Washington D.C., local officials recently instituted a new system that allows alleged violators to unlock the devices using their cell phones. The cost : $115, plus payment of outstanding fines. The system, provided by New Jersey-based PayLock Systems, is also being used in New Orleans, Baltimore and about a dozen other cities. In some locations, it's married with a camera-equipped car that lets citation officers cruise the city at normal driving speeds, looking for license plates tied to outstanding parking tickets.

In Washington D.C., city officials announced earlier this year that they were stepping up parking enforcement to raise millions in new revenue for the city. The most bizarre tactic: equipping street sweepers with cameras that automatically take pictures of cars parked in their path.  The camera-generated parking tickets are expected to generate $2 million in annual revenue. Parking-crunched D.C. residents also complain that overaggressive ticket agents are suddenly enforcing laws that have been ignored for years, such as no parking within 5 feet of an alley or driveway.

"I recently got a ticket for parking in a space on the street that I have been parking in for three years at least and never had a problem," one resident wrote recently in an Internet group devoted to parking frustrations.   Said another: "We've received the unwanted attention of an overzealous meter maid.  (She) recently began ticketing residents' cars for being too closely parked to our own driveways. Our 3 tickets state we have to park at least 5 feet away from a driveway … our own driveway. "

In Boston, ticket prices have soared.  The price for being caught parked in a crosswalk recently rose from $40 to $85. Parking more than one foot from the curb jumped from $20 to $35.

And changes are hardly limited to huge cities.  Sacramento, Calif. recently added an $8 fee to every parking ticket, hoping to net $1.5 million to help close a $50 million budget gap.

No mercy

Driver's advocates say the higher fines and new technologies are not the worst part of the new world order in parking.  At a time when many drivers can least afford big surprise bills, parking citation officials are showing little mercy -- and in some cases, handing out unfair summons by the bushel, all in the name of making money.

"It's an outrage when cities depend on parking summons for revenue. When they do, they are opening the doors for very serious abuses," said a New York-based citizens' advocate who calls himself Jimmy Justice. He films illegally parked New York City officials and embarrasses them by posting the short films on YouTube.  "When someone gets a bogus ticket, everybody knows this is just part of a giant racket. It's sanctioned mugging."

Angry drivers are filling his inbox him with woeful tales of unfair tickets or overzealous agents, he said.

"Getting a ticket while backing into a parking space. Getting a ticket while sitting there for three seconds before backing into space. The list is endless.  Parking enforcement agents in are trigger happy," he said.

The New York Times did a data-driven analysis of city parking agents recently, and found that one had managed to write 227 tickets during one 5-hour stretch. A typical shift sees agents write about 40 tickets. Meanwhile, letter-of-the-law enforcement ruled the day. The city wrote 276,000 tickets during the year for drivers who were illegally parked for five minutes or less, the paper found.

Frustrations in New York are running so high that City Councilman Peter Vallone Jr. recently said complaints about traffic tickets outnumber all other complaints to his office -- and he's considering legislation that would institute a grace period for drivers.

"The way traffic agents are enforcing the law is absolutely out of control," he told the New York Post.

How aggressive is enforcement? Bolofsky said he's seen New York drivers get tickets for double-parking merely because they are waiting for someone to pull out of a spot on the street - a time-honored practice in the competitive world of city parking.

"They sneak up behind people. They are waiting in the wings, in the shadows," he said. "Then they knock on the window and hand the driver a summons."

The good old days

Things weren't always this way, Jimmy Justice says. Police and traffic enforcement officials used to implement a long-standing policy called "warn and admonish."  Illegally parked drivers were given a chance to move their vehicles before summonses were issued. But when cities began treating parking tickets as a revenue source instead of a public policy tool, that changed, he said.

"Fifteen years ago if someone was stopped in a no-parking zone for a moment, parking agents would wave and say 'you have to move,' and any normal person would move. There would be no problem," he said. "Today they write tickets now and ask questions later. Because today parking violations is big business."

If the system feels cold and unforgiving, that's partly because many cities are using new technology that cuts out human interaction -- and the criminal justice system -- from the process. In Seattle, a pair of lawsuits are contesting the use of cameras to detect and cite speeders. Twenty area municipalities are named in the suit. In the city of Seattle, a new camera system wrote 58,000 tickets valued at $5 million in its first three months of operation.

Because the contracts promise a minimum payment to the cities, and the manufacturer agreed to split citation collections after that, one of the lawsuits contends the system gives "the cities and the vendors an illegal incentive to issue improper tickets and to err on the side of issuing a ticket versus declining to issue the ticket."

Meanwhile, handheld electronic ticket issuing machines are sweeping municipalities, allowing meter maids to write more tickets – and more important, reduce errors that lead to dismissals.  One manufacturer, DXY Solutions Inc., says switching to handhelds increases a single officer's ticket-writing productivity by 30 percent.

Other new technology seems downright mean-spirited. Parking meters invented and sold by the French firm Technolia send texts messages to local police the very instant that a meter clicks down to zero.

While stories of parking citation budget bonanzas through increased enforcement aren't hard to find – Denver's collections soared from $16 million to $20 million in the past year, for example – the long-term impact of increased enforcement might not be so positive, said Jimmy Justice.

"This really creates a rift between the police department and the average citizen," he said, noting that most people make no distinction between citation officers and armed police.  "There used to be more communal respect with police officers. … Now when people see a police officer, they think they're going to mug them, find a reason to write a violation. It's not fair to paint all police with the same brush, but that's what happens. It's not good for anyone."

Justine Gabbard of Long Island had just been charged hundreds of dollars in overdraft fees by Bank of America -- for the second time -- and just couldn't take it anymore.  So she sat down in front of her Web cam and got a few things off her chest.

"I have a bone to pick with Bank of America," she began. "I got $400 in overdraft fees, and I never bounced a check."

Gabbard was talking to herself in her bedroom, in what might be described as a video "message in a bottle."  But instead of throwing her complaint into the sea, she uploaded it to YouTube -- where thousands of viewers soon found it.

"It happened twice to me, so it kind of drove me over the edge," she said.

Consumers like Gabbard have turned what was once a trickle of Internet complaints into an avalanche of revenge against corporate America, a trend that brings both opportunity and peril to American companies.

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Soon after Gabbard posted video, thousands of other angry bank customers loaded their own video rants about overdraft fees, besieging Bank of America and its competitors with bad blood.  Some even include detailed instructions on how to sue banks in small claims court and corresponding success stories.

YouTube is now home to perhaps tens of thousands of video consumer complaints, an uprising and headache for any public relations department.

Twitter also is fast becoming the new home for consumer rants.  A Twitter user named @BoycottFunai recently started enrolling friends, family and followers into a planned action against the maker of Slyvania TVs.  Unhappy with a new flat-screen model that stopped working after a few months, the pair of roommates named Tavie and Gina were even less happy when Funai refused to offer a refund.  They started @BoyCottFunai and, after they gained a decent-sized following, a full refund check arrived via FedEx.

Stories of Internet revenge by angry consumers have become part of Web lore. There's the "Cancel the Account" America Online phone call, the Sleeping Comcast technician and, more recently, the United Breaks Guitars hit song, viewed 5 million times on YouTube.

But beneath the layer of all-time hits and viral videos is a trend that suggests a brand new paradigm in customer service.  Ben Popken, who runs consumer complaint site Consumerist.com, says that thanks to the Internet, large companies can no longer afford to ignore unsatisfied customers.

"Every company wants to be on (online) showing they are hip, cool, engaging in the conversation," he said. "So you can't ignore problems that people bring to your doorstep online."

In a sign that random viral complaints have become a part of established consumer-corporate interactions, Consumerist.com was recently acquired by Consumers Union, the publisher of Consumer Reports.

Twitter users fight back
Online tools give consumers new ways to circumvent traditional customer service channels.  Each new technology seems to open up a new door, Popken said. Recently, he said,  an anonymous consumer who couldn't get through to Hewlett Packard using normal methods created a Twitter account called @HPDoesntCare and started "following" every Twitter user who seemed connected to HP.  Then, he or she would Tweet about every phone call gone bad.

The mass appeal worked. The only tweet left on the account now is "Thanks HP. It is finally over. For real. :)"

Using a blog, a Facebook page, a Twitter account, or even old-fashioned e-mail can break through frustrating company logjams. It's a simple matter of public shame, Popken says.

"It's a basic human instinct to avoid public shame and humiliation. Society is built on shame," he said. Before the Web, companies could mistreat consumers in relative obscurity.  That's harder now, he said. "Using the megaphone power of video blogging or an exposed Twitter conversation is a way to get these companies to wake up to the fact that they are violating social norms.  To say, 'Maybe you are used to behaving this way, but here in the real world, what you just did is pretty messed up."

There's a positive side for companies in all this. Never before has it been so easy to identify unhappy consumers and to make amends.  After a long bout of negative Internet publicity, Comcast appointed Frank Eliason to be its "director of digital care." Eliason -- using the handle @ComcastCares -- goes looking for troubled Comcast users and reaches out to them.

The Web complaint phenomenon represents an opportunity for companies to finally shed the customer-service-as-cost-center model, and instead adopt a new strategy that includes good service as a marketing opportunity, Popken said. 

"Every Twitter management team's secret dream is that what they do will turn into a 'twitter-gasm,' " and be noticed by thousands of users, he said.  With Twitter, Facebook and YouTube now a part of many marketing campaigns, it's natural to have the same employees who design social media ads handle social media complaints.  After all, one viral YouTube video can wipe out the goodwill created by a multi-million dollar ad campaign.

'You have maybe an hour'
Todd Defren runs a public relations firm called Shift Communications that specializes in online campaigns. He says Twitter is particularly troublesome for companies because consumers tend to complain impulsively about even the most trivial missteps (my water isn't cold enough!). But when they do, they can create a permanent online record that irks company executives. Making matters worse is the intense network effects of services like Twitter.

"Before, when there was a nasty blog post, you had perhaps 24 hours to respond before it was a big deal. But in the microblogging world, you have maybe an hour," Defren said.

Ignoring complaints carries obvious risks, but so does addressing them, he said.  Particularly during a recession, companies can't afford to staff up and address every negative Twitter post.

"Big companies we're working with are scared witless and don't know what to expect. They are willing to listen, but they know that as soon as they engage they are opening themselves up," he said.

Popken thinks all these new communications technologies have the potential to create a new golden age for consumer rights, as the balance of power is tilting a bit towards consumers after a prolonged losing streak.

"Every possible inroad is another vector to take advantage of, to get satisfaction," Popken said.

But there is a looming dark side for consumers.  Generally, a small percentage of mistreated consumers follow through with complaints.  "Noisy" consumers serve an important function for the silent majority, calling attention to problems that often results in solution for all. Without these pesky shoppers, firms could more easily abuse the rest.

Thanks to the Web, it's now infinitely easier for companies to find -- and quiet -- the loudest consumers. A divide-and-conquer strategy could ultimately lead to even worse treatment for consumers.

But Defren said he's not worried about that. As complaining gets easier and easier, he expects everyone to jump on the bandwagon.

"The friction of making yourself heard is only getting lower and lower," he said.   

RED TAPE WRESTLING TIPS
Perhaps you don't think of yourself as the rabble-rousing, shoot a video rant and put it on YouTube type. That's OK.  It's easy to find a company bulletin board using a search engine and post your complaint there, like these consumers who were angry at T-Mobile did.

A more effective technique is to scour the Internet for e-mail addresses belonging to corporate executives – as many as you can find – and send them all a well-considered, action-oriented demand letter. Some sample letters can be downloaded here.

The folks at Consumerist.com have boiled this process down to a science they call the Executive E-mail Carpet Bomb.  They've posted detailed instructions here.

For easy access to a list of company leaders who can actually fix your problems, visit ExecutiveBomb.com.

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Rob Connor of Charleston, S.C., watches his bills carefully.  So he's pretty "steamed" that soon he's going to have to pay for the right to do so.

Connor is caught in a debate that could pit environmentalists against consumer rights advocates over the basic monthly task of paying the bills.

Connor's mobile phone provider, T-Mobile, recently sent him a note saying it will now charge customers $1.50 per month to receive paper bills mailed to their homes, or $3.50 per month for detailed bills.  E-mailed bills are free, but Connor says that won't help him. He doesn't have Internet access at home.

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T-Mobile says it's making the change, which takes effect in September, in part to help the environment, but Connor doesn't buy that.

"This thing of having to pay so I can pay is just a little too much," he said. "And I'm certainly not interested in some bogus argument about me contributing to global warming by NOT signing on to making it cheaper for T-Mobile to send me a bill."

Is T-Mobile stiffing consumers like Connor or helping the environment?  Many companies are strongly encouraging consumers to forgo paper bills in favor of electronic versions. Sprint offers a $5 credit to consumers to enroll in online billing. Verizon recently offered consumers who make the switch a chance to win a Toyota Prius.   

But T-Mobile's fee for even summary paper bills marks one of the most aggressive steps by companies trying to push consumers into the paperless world.

"After considering a number of factors, including rising costs for paper, printing, and postage, as well as environmental impacts associated with printing paper bills, T-Mobile has started to charge customers who would like to receive a paper bill," the company said in a statement. It stressed that consumers can access billing information online for free at any time or, in some cases, with their handsets.

The firm is not the first wireless company to charge for paper bills. Verizon Wireless and AT&T charge $2 monthly fees for consumers who want to receive detailed bill statements via U.S. mail.  Basic summary bills are still free, however.

The cost savings for the companies are obvious. Verizon recently said it saves about $600,000 each year for every 100,000 customers who go without paper bills. In 2008, the firm replaced paper bills with electronic versions, saving 4.3 million pounds of paper, or about 52,000 trees, it said.

The PayItGreen Alliance – a banking industry group – says that if 20 percent of U.S. households switched to electronic bills, 1.8 million trees would be saved each year. 

But Connor thinks he has a right to the paper bills for free, and he's not alone. T-Mobile customers have taken their displeasure with the new policy to the Internet, registering complaints on dozens of Web sites.T-Mobile's own consumer message boards are full of angry notes.

"It really pisses me off when companies hide behind the environmental wackos for a reason why not to include services anymore," reads one. 

"E-mails don't receive much weight from me, I respond much quicker and better to a physical bill in the mail than an electronic statement," said another.

Get out of their contracts?
Harvey Rosenfeld, founder of Consumer Watchdog and lead attorney in several lawsuits against the mobile industry, says Conner and other complainers may have legal grounds for their objection.  He recently settled a lawsuit against Nextel Corp. for requiring consumers to pay for detailed billing statements back in 2003. As part of the settlement, Nextel agreed to refund customers.  He says consumers are entitled to bills and invoices that itemize costs.

"There's a lot of policy language in state and federal law that says consumers need to be able to determine the validity of a bill," he said. "You need to know if you're being overcharged, if you've received a promotional discount. You can't figure anything out from a bill if all they give you is a single unitemized bill."

Rosenfeld says he's seen hospital bills where the consumer was charged $2.50 to obtain a copy of the bill.

"To bill you for the price of billing you is an outrage" he said. "It's the cost of doing business."

T-Mobile counters that it is providing a free means for customers to receive their bills – on the Web. 

Nextel also made that case, Rosenfeld said, but at the time, millions of the firm's consumers did not have Internet access.  T-Mobile probably has a stronger case on that point today, but Rosenfeld still thinks consumers who want itemized paper bills shouldn't have to pay for them.

Meanwhile, many T-Mobile consumers are wondering if the new paper bill fee constitutes a change in contract terms which would allow customers to break their contracts without paying an early termination fee.

T-Mobile says no.

"It doesn't qualify for opt out in the contract because customers were given 30 days notices as part of terms and conditions. They have the option to opt out. And they have access to bills for free online," said a company spokesman, speaking on condition he not be identified.

But Rosenfeld said the firm has clearly changed the cost to consumers – a $50 plan now costs $50 plus at least $1.50 to get a paper bill – so consumers should have the right to cancel.

"If a company starts charging for a service that they previously did for free ... that's a material change for sure," he said.  "I think consumers can get out of their contracts."

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