What do you pay to watch television every month?  Are you really getting what you pay for?  How much do fees from set-top boxes add to your costs?

Earlier this month, we asked Red Tape readers to post details of their monthly bills, with a special focus on those tack-on fees. The response was overwhelming. There's a lot of money to be saved in making sure you aren't overpaying for cable or satellite TV -- one Red Tape reader described his annual cable bill at $1,995 per year. After the mortgage payment and auto loan payment, television might be your largest annual budget-eater. With an investment like that, it's really worth spending time to get it right. This piece is designed to help by making it easier to see what your neighbors are paying.

---

While pay TV companies are offering unprecedented levels of service -- hundreds of channels, better HD signals, digital video recorders -- consumers are frustrated about the methods used to charge for them. For many, deciphering the monthly bill is like searching for buried treasure using an old, faded map.  In just about every case, the provider charges one price for the service and then a host of other fees for tools needed to use the service -- fees so high they can double the cost.  Imagine if a rental car company charged extra for the license plate on the car! (Wait, some do just that.)

On a basic level, these fees are annoying. But the damage they do to the marketplace is much more significant. Hidden or tack-on fees obscure the true price of the service, thereby wrecking an essential tool in a free market.  Because it's so hard to determine what your monthly cost will be until that first bill finally comes, it can be nearly impossible to do honest comparison shopping when it comes time to pick a new service.  In the end, it's very hard for consumers to decipher which company provides the best service at the best price.  That leads to all sorts of market distortions.

There's only one way to attack such a problem -- with information.  The more you can learn about the price your neighbors pay for television (the price they really pay, not the monthly rate quoted in an ad), the more intelligent a choice you can make.  Pay TV firms, like all modern corporations, devour extensive research about you and your family in an effort to extract the highest price possible. Why shouldn't you do the same -- devour data to help you get the lowest price? So here's a set of market research provided by Red Tape readers all around the country summarizing what they pay for tack-on fees. Compare your bill to these, to make sure you're not overpaying.

Before we get to specific provider prices, displayed alphabetically by provider, here's some general observations.

1) Many consumers are getting killed in fees for second, third, and fourth set-top boxes.  Consider paying for service only on the family TV, and use rabbit ears to pick up over-the-air HD channels on the other sets in the house.  The savings can easily add up more than $500 per year. If you can't imagine going without cable in the bedroom TV, scale back to basic boxes on your secondary sets and you'll still save a bundle.

2) While we're on the subject of rabbit ears, an increasing number of consumers are cutting pay TV service altogether, and using a combination of over-the-air signals and TV-over-Internet programming -- using Netflix or Hulu.com, for example -- to fill the void. You might still want to pay for service, particularly if you are a sports fan. But you can use the option of over-the-air TV as a bargaining chip to get a lower rate from your provider.

3) When lease rates for set-top boxes go up, many consumers report great success by simply complaining about the increase. Dish Network, for example, is handing out service credits that negate a recent price hike. But watch carefully -- the credits are usually temporary, while the increase is permanent. That's a smart way for firms to ease the blow of price hikes. You'll have to stay on the company to make sure you keep getting the discount as time passes.

4) Different firms charge for different services in different ways.  Take DVR service: Some charge a lease-fee for the DVR box; some charge a service fee. Some charge both. That's why, when comparing services, the only price that matters is the bottom-line, what-number-will-I -write-on-my-check-every-month price.

Now, here's a sample of the fees reported by Red Tape readers.

AT&T U-verse

Readers from Wisconsin and Michigan chipped in to share that they pay $10 extra each month for HD signal, and pay $7 for the 2nd, 3rd, and 4th DVR box.  Peter Fritz of Franklin, Wis., for example, was paying $21 every month for his four DVRs until recently, when he dumped the service for over-the-air TV.

Bresnan Communications

In Montana, Rachel Hofferman said she pays $6.50 per month for a DVR with a remote, and $11.99 for DVR service.  There's also a 25-cent broadcast TV surcharge.

Bright House Networks

From Orlando, Fla., a consumer wrote to say he pays $7.95 per month for his DVR.

Cablevision

Erin F. in Poughkeepsie, N.Y. says she spends $13.50 for two cable boxes ($6.51 for the box and 24 cents for the remote) each month.  She also pays $9.95 for DVR service, and a $1.50 "additional outlet" fee.

Charter Communications

Sean Ferguson of Wenatchee, Wash., says he pays $10 to rent his DVR box, and pays $29 to upgrade to HD signals.  Because he lives in a housing association, he had no choice of provider.

Comcast

Consumers from all corners of the country wrote in about Comcast rates.  They vary slightly.

• In Deerfield, Ill., a consumer said he pays $15.99 each for two dual tuner DVRs.
• In Elk Grove, Calif., a consumer says he pays $8 per month for HD and $1.45 for a mandatory service plan.
• In Denver, a consumer says he pays $15.95 each for two DVRs and $10.45 in additional service fees, for a total of $42.35 per month.
• In Corvallis, a consumer who has two basic boxes reported paying nothing for the first box, and $3.40 for the second box and remote.
• In a Philadelphia suburb, a consumer said he pays $5 for an HD box, and $16.95 for DVR service.
• In Chelmsford, Mass., an HD-DVR costs $14.95 per month, according to a consumer there.
• In Gaithersburg, Md., a consumer named Walter lamented that he pays $496.80 in equipment rental fees every year.  He pays $28.45 to Comcast: $9.25 Comcast for an HD box, $15.95 for an HD-DVR, a $3 "digital additional outlet" fee, a 25 cent "digital remote rental fee," and then $12.95 to TiVo.

Cox Communications

Pam Hall of Las Vegas said she pays $7.50 per month for an HD converter, and $15.99 for a digital TV gateway box.

In Broken Arrow, Okla., Bruce subscribes to the least expensive level of service he can. He pays $5 to rent a basic digital cable box.

DirecTV

A wide range of consumers wrote in explaining their DirecTV box fees, but they were consistent around the country.  The first basic set-top box is free, and each additional box costs $5. The DVR fee is $7, and HD service costs $10 per month.

Dish

Dish consumers also reported consistent rates from around the country. The network recently changed its set-top rental fees. The first box is free. Additional boxes cost $7-$17, depending on capabilities.  For more, see this piece.

Insight Communications

Carl Pahler says he pays $15 monthly for the first HD-DVR box and $15.95 for the second, along with a $7.95 HD service fee.  He also laments that he can't get HD service without also paying for a DVR.

Knology

Brian in Montgomery, Ala. says he pays $12.95 monthly for his TiVo service.

RCN

Jinesh in Queens, NY. says he pays $8.95 per month for his HD converter box.

Time Warner

Customers who wrote in shared a variety of set-top box prices.

• In Austin, Texas, a consumer said she pays $7.99 per month for an HD-DVR and $10 for DVR service,
• In Winston-Salem, N.C., a consumer reported paying nothing for the first digital cable box, and $8.95 per month for the second.
• In Charlotte, N.C., a consumer says he pays $10.95 for DVR service and nothing for the 1 box he uses.
• In Brooklyn, N.Y., Aaron says he pays $10 per month each for a regular HD box, and $20 per month for a DVR box.  "We pay $40 just to keep the boxes...it's ridiculous."
• In Los Angeles, a consumer reports paying $7.99 monthly for their first set-top box, $8.99 for each additional box, $10 for DVR service, but nothing extra for HD service.

Verizon FiOS

Most Verizon customers say they pay the same amount to rent their boxes: $5 per month for a basic box, $10 for an HD box, and $20 for an HD-DVR. But in Rockaway, N.J., Nik said he pays only $5.99 for HD boxes and $14.99 for his DVR.

As mentioned in the recent column on this topic, Congress and the Federal Communications Commission have been trying for more than a decade to change the market dynamics for set-top boxes by encouraging the appearance of third-party alternatives.  There's a new push to create a new kind of gadget, called a gateway, that will make it easier for consumers to combine TV and Internet-based video watching.

While that debate drags on, and the high cost of box rental is still on your mind, here's some parting food for thought: An anonymous comment left by a Red Tape reader who claims to work in the set-top box industry.

"I manage the building of set top boxes every day and it's a crime to charge rent for them," the source writes. "The most expensive cost less than $200 in most cases with some even less than $100. In addition the companies that procure them usually will not even (return) them back to manufacturers if they are defective. They will either return to a service center or simply get tossed. You should be able to easily work your way out of these fees especially after 10 - 12 months because anything beyond that and they are making money."

Become a Red Tape Chronicles Facebook fan and follow RedTapeChron on Twitter.

To paraphrase from words often attributed to Josef Stalin -- a million bank foreclosures is a statistic, but a single family losing its home is a tragedy.

So Richard Zombeck has set out help people tell those stories -- one at a time -- at a Web site named ShameTheBanks.org.

There's Diane Casella from Florida, who says she can pay a considerable amount towards her mortgage, but needs a break because of sinking income and property value.

"I have never asked for mortgage help in my life, but now that I just need a mortgage that is 31 percent of my gross income, the bank acts like I do not even exist," she writes on the site. "It was so easy to reach them five years ago, but now they have turned a deaf ear to my family's plight."

---

 

And there's Mike Dillon from Manchester, New Hampshire:

"No one can live in a situation like this, for this long without breaking down. Because of being in legal limbo for all this time, my fiancée and I have postponed our wedding and been unable to start the family we both want," he says. "This has ruined me financially... I can't even refinance away from them. I go through large bottle of antacid like you wouldn't believe. I am stuck in limbo, I can't sell the house without taking a huge loss, I couldn't buy a new house because they destroyed my credit."

Zombeck's raw Web site, which encourages consumers to name names and be as specific as possible about their mortgage woes, has quickly garnered attention around the ranks of frustrated homeowners.  He's also gotten at least some attention from Congress, and Zombeck is now part of the lobbying effort by consumer groups this week who are advocating for the controversial financial reform legislation currently being considered by the U.S. Senate.

On Tuesday, the Massachusetts resident is meeting with staff from Sen. John Kerry's office to share his own story and stories from ShameTheBanks.org as part of a visit by The Massachusetts Public Interest Research Group (PIRG). He's also trying to personally deliver his package of first-person tales to his state's other senator, newly-elected Republican Scott Brown. But PIRG attorney Elizabeth Weyant, who is arranging the meetings, says Brown's office has yet to reply to requests.

"Richard has done a really good job of making himself an expert on the issue," she said. "It's really personal for him. He gives a face to the need for financial reform."

Weyant said one compelling element of Zombeck's site, in addition to the number of struggling homeowners who tell their tales, is the similarity of their sagas.

"Even if we're talking about different banks, it's the same story, again and again," she said.  Collectively, the tales show how badly the mortgage modification process is working, she said.  "To a bank, a mortgage looks like a pile of money. To a person, that's their home."

Among the sagas with similar storylines is the tale of Angie Burke, of Reading, Penn., who first contacted her bank about a possible mortgage modification in December 2008.

"I was fully unprepared for the duration and insanity this process can bring," she writes in her story. After a year of filling out paperwork and waiting for bank response, she received this dismal proposal concerning one of the two loans on her home:

"The best they could do for us was lower the interest rate from 6.75% fixed to 6% fixed, saving us a whole whopping $90 a month!  How is that going to help?!  Our income is half of what it used to be."

While the site invites complaints from any consumer who is frustrated with any bank lending practices, nearly every story Zombeck has collected so far deals with the paperwork madness that has engulfed participants in the Making Home Affordable program.  When announced last year, the program was designed to help up to 4 million struggling borrowers, but currently only 230,000 mortgages have been permanently modified.

The complains have led to a series of revisions in the program, including sweeping changes announced by the Obama administration last month -- still, another 900,000 foreclosure notices were received in the first three months of 2010, according to RealtyTrac.

MSNBC.com's John Schoen has been chronicling the woes of the Help for Homeowners program (HAMP) for months. In January, I wrote about a woman named Deb Franklin, whose three-month trial modification had turned into a 10 month waiting game that included a foreclosure notice.

But Zombeck's Web site shows that Franklin's Kafka-esque nightmare is hardly an exception.

"Those stories are not unique," he says. "It is depressing and goes further...300,000 foreclosures a month further," he added referring to the estimated number of homes that will receive a foreclosure notice this month.

Virginia W., from Morgan Hill Calif, didn't want to share her last name. She's also at wit's end after being rejected, again, for a modification based on something called a "gross eligibility."

"After calling for the past two weeks to find someone at the bank who knows what 'failed gross eligibility' means and spending hours on the phone I am now being told they are going to review my package again since everyone I have talked to cannot see why we were denied," she says. "Back at square one 8 months later all the while getting no help and slowly racking up credit card bills the whole time just trying to stay afloat and not wanting to walk away."

Zombeck has his own tale of mortgage modification "hell." He bought his house in a Boston suburb at the market's peak in September 2006. It was his first home purchase, and he followed the advice of a realtor and purchased it with no down payment, thanks to two adjustable-rate mortgages that started out at around 8 percent would climb towards 12 percent. He was promised that refinancing would be easy. It wasn't. And when his wife lost her job at Harvard University, their world began crumbling.

Two years later, he's still working on the details of his loan modification with Florida-based Ocwen Financial Corp., which is servicing his loan. During the saga, he began writing an unpaid column about his situation for The Huffington Post called the "Eyes and Ears Mortgage Specialist."  He thinks that column has helped push his mortgage modification process forward.

"I think the banks are intentionally stalling, hoping the market will turn around, so they can then kick everybody out of their homes, sell them, and turn a profit," he said

Paul Koches, Executive vice president and general counsel at Ocwen, said he couldn't talk specifically about Zombeck's loan, citing privacy concerns. While he acknowledged some general frustration with the loan review process among all loan servicers, he said his firm has been aggressively arranging modifications for its customers. Of 400,000 loans it services, Ocwen voluntarily modified 90,000 even before the Help for Homeowners program was announced in March 2009.  Koches did not offer a specific of number of modifications since then, but said the pace had "proceeded at the same pace."

"We're very proud of our leadership not only in HAMP but in loss mitigation in general," he said. "We believe that keeping people in their homes is better for the homeowner and better for the owner of the loan, too."

ShameTheBanks.org is Zombeck's attempt to share the harsh spotlight of social media on banks and motivate them to aid other struggling homeowners.

Zombeck, a free-lance journalist and former help desk technician for software firm Adobe, has used the social media megaphone before with great success. For three years, he has run a popular Web site named SH**HEADERY.com (name intentionally obscured). It chronicles the actions of misbehaving companies and offers social criticisms.  It also gives frustrated readers a place "to rant."  The site also has nearly 10,000 Twitter followers.

Last year, Zombeck was involved in a dispute with AT&T over an $800 deposit the firm insisted on when he and his wife tried to save money by combining their iPhones into a discounted family plan. The deposit was required because Zombeck's  credit score had plummeted, even though he'd been an AT&T customers for more than 10 years. After months of frustrating back-and-forth discussion, Zombeck tweeted about the dispute to his SH**HEADERY followers.

"Wonder if Apple knows that AT&T charges an $800 deposit to merge to a family plan," he wrote in a November 2009 Tweet, and signed the note with a profanity. Only 52 minutes later, a woman representing AT&T wrote to him and offered to help. Within a few days, the issue was resolved.

"It had taken two months, but I bypassed about 15 unreasonable people," Zombeck said.   "She was very nice. Once I got to that level of customer support, (AT&T) was great."

Zombeck is hoping ShameTheBanks.org might offer similar short-cuts to "reasonable people" inside banks who are working on mortgage modifications," he said.

"I've gone from unpaid journalist, to accidental activist, to unintentional lobbyist in a matter of months," he said. Now, he hopes to collect enough tales of frustration that they will spur change in Washington.  "(The) stories will serve as irrefutable evidence that Congress needs to reform the way Wall Street has been doing business."

Become a Red Tape Chronicles Facebook fan and follow RedTapeChron on Twitter.

How can a software company, with one small mistake, cripple computers worldwide?

McAfee security users left the office on Tuesday night with a perfectly good Windows XP computer.  On Wednesday morning, they were staring at a useless pile of plastic and computer chips.  Without so much as the stroke of an enter key or the push of a mouse, their PCs had been changed. The error was simple: McAfee's software erroneously decided that an essential file used by the Windows operating system was really an 18-month old Trojan horse. That sent many PCs into an infinite re-booting loop that couldn't be stopped without skilled, manual intervention.

The root of the problem lies in a critical decision made a decade ago by security professionals. But the result -- perhaps millions of PCs rendered useless, each one requiring manual repair -- is just the latest sign that bad guys seem to be winning in cyberspace.

---

Back before the turn of the new millennium, the computer world was wrestling with a dramatic new concept -- giving large software firms like Microsoft the right to access consumers' computers and update their software automatically.  To many purists, who might be considered technological libertarians, the idea of letting an outside company reach inside their hard drive and change things was pure lunacy.

A five-year-long onslaught of global virus outbreaks quickly changed hearts and minds. Consumer behavior consistently revealed that the vast majority of PC users wouldn't bother manually installing software patches and antivirus protection. That made them easy prey for Code Red, The Love Bug, Nimda, and dozens of other malicious programs. And as the rate of new malicious programs began to grow exponentially, it became physically impossible for even full-time experts to manually update their systems.

Today, most computer users don't think twice about letting Microsoft update their machines, or about downloading patches or new protection files from security firms like McAfee, Symantec, Kaspersky, and others.  The system has worked; it's been 10 years since an outbreak like the Love Bug.  But Thursday's Mcafee disaster – which affected corporate and not consumer users -- brought into focus the downside of giving control to an outside software firm.  Doctors, students, and office workers worldwide were left disconnected from the outside world, feeling very much the way they used to when a virus outbreak crippled their organizations.

"Automatic updates are still kind of a thorny issue, but when you look at threats today and the number of products that can be impacted, automatic updates are really the only viable means to insure someone's system is kept up to date," said Mary Landesman, senior security researcher at ScanSafe. "But they still carry the same risk they always did.  If something is wrong with the update it's going to impact a great number of users."

At the same time, security firms are dealing with the overwhelming capacity of malicious programmers to churn out devious new code.

Ten years ago, according to Symantec Corp, there were 10 to 15 new computer viruses each week.  Today, the firm must find ways to protect customers against up to 20,000 new software threats every day.  While defusing all those bombs, the possibility of accidentally disabling a good file -- a so-called false positive -- is increasingly likely.

McAfee's problem was created by just such a false positive. While the firm has yet to release additional details about the breakdown, it's hard to imagine the breakneck speed didn't play a major factor.

"It is an issue every malware company has to deal with, we have to adjudicate every file on someone's system and decide if it's good or bad," said Gerry Eagan, a security expect at Symantec. "In this game of cat and mouse, as we try to be more aggressive and catching malicious programs...if we fail, something like this can occur."

Eagan said the file that McAfee erroneously identified was a relatively old threat. He believes that McAfee was expanding a virus definition to cover a new variant of that old threat--  a normal practice that helps the software run more efficiently – and that McAfee engineers probably "wrote too generic a definition and caught a good file."

But Landesman said she thinks the flaw was related to McAfee's ability to detect viruses based on how they behave – by observing keylogging activity, for example -- rather than the old-fashioned black-list method of identifying a known piece of computer code inside a malicious program.  Behavioral protection is a bit less scientific, she said, and more prone to false positives.

"As we go to behavioral methods were going to see an increase," she said. "There has to be a certain acceptance that we're going to have them. But there will be some really ugly incidents like this one."

Even those who weren't hit by the McAfee bug might have had other run-ins with automatic updates.  Microsoft's Windows can be very insistent about installing updates -- again, a sound security practice -- but it often leads to unintentional system restarts and lost files. It's not uncommon that third-party software updates cause system instability.  In fact, in 2007, thousands of users of Symantec's Norton antivirus software reported persistent crashes after that company issued an update. 

So is it time to reconsider the practice of surrendering control of your PC to large software company?

"I've been reading forums and there are a number of people chiming in saying, 'This is why I don't use antivirus software,' or 'This is why I don't apply patches,'" Landesman said.  "There are people saying having antivirus software is worse than having none at all. That's just not true...but it is a real risk that people on the fringe about having antivirus software will point to this as a poster child for why they shouldn't. "

Eagan said consumers and companies must make a logical decisions weighing the risks of unprotected surfing with the risks of a software goof.  Simply installing the software but reject installation of updates is not an option, he said.

"If you delay your downloads, then you aren't protected,' he said. The firm added 2.7 million virus detection fingerprints to its software automatic updates last year.

Sometimes those updates come several times a day, Landesman said, and that has overwhelmed even the most heavily staffed corporate security teams. Once upon a time, firms would test all updates in a lab before releasing them to their employees.  In most cases today, Landsman said, there's just no time.

"So they almost have to take a leap of faith that it will work," she said.  "That's the only practical avenue."

McAfee customers who made that leap on Wednesday weren't rewarded. Instead, a bit like a rattled offense facing an overwhelming full-court press in basketball, McAfee goofed. By overwhelming the system with volume, by forcing security firms to rush and implement imperfect technologies, by robbing companies of proper time to test, malicious software writers have gained the advantage.  Even this incident, while ultimately harmless for victims (outside of lost time), created a big opening for the bad guys.  Consumers affected by the bug who went to Google looking for answers last night found fake Web pages offering help that were loaded with booby traps.

"This is already an industry struggling to keep up," she said. For some time, McAfee will struggle to restore lost faith from customers.

Become a Red Tape Chronicles Facebook fan and follow RedTapeChron on Twitter.

Daniel Dauterive recently noticed that his Dish Network bill had increased sharply, but his subscription rate had not.

"I added no new service," the Missoula, Mont., resident said. He hadn't added hardware, either.  So why the price hike?

Simple.  He was paying higher rent.

Most pay TV customers today pay a monthly fee for set-top boxes that interpret signals sent from the TV provider. Given the variety of options now available – HD channels, digital video recorder capabilities, support for multiple TVs -- costs per box can add substantially to the monthly subscription price. It's a frustration the Federal Communications Commission hopes to take on as part of its National Broadband Plan announced last month.

---

In Dauterive's case, Dish raised the monthly fee for his set-top boxes from $5 to $14. Dauterive was frustrated by the increase, which he described as sneaky.

"It is obvious that DISH is trying to avoid admitting to raising prices for programming, so they call it fees," he said.

Dish spokeswoman Francie Bauer said the firm made the price change in February as part of an effort to clarify costs to consumers.   Some Dish prices were lowered or eliminated, she said, such as the per-TV digital video recorder fee.

"We tried to do some things to offset the cost (increase)," she said. "We're trying to standardize our prices."

To its credit, Dish spells out the four-tiered set-top box rental costs clearly on its Web site. The first box is free with a subscription, but for each additional TV, boxes can cost $7, $10, $14, or $17 each per month, depending on capabilities.

With some other TV providers, finding the set-top box rental price on Web sites or marketing materials can require an advanced degree in library science. Some bundle in the cost of DVR services or HD channels; others split those costs out. Some prices are based on local conditions, and vary from market to market.

It all makes coming up with an honest apples-to-apples comparison of pay TV services a nightmare. What might sound like a low monthly price in an ad can become a triple-digit bill in a hurry.

It wasn't supposed to be this way. In 1996, Congress directed the Federal Communications Commission to make it easier for consumers to buy set-top boxes from third-party providers, potentially eliminating monthly lease fees. In fact, the reverse has occurred -- consumers are paying more tack-on, set-top fees than ever. And an FCC ruling in 2007 is blamed for pushing leasing prices higher.  That year, pay TV providers were forced to separate their channel changing and channel security functions in their set-top boxes, a move that was supposed to provide an opening for alternative boxes. Consumers who wanted to buy their own simply had to insert a CableCARD -- similar to PCMCIA cards that were once common to laptops -- provided by the pay TV firm. But the so-called "integration ban," cable industry officials said, simply raised the cost of making boxes, an increase that was passed on to consumers.

In the meantime, there's been plenty of consumer confusion about boxes.  In 2008, DirecTV was sued by consumers who say they were misled when purchasing set-top boxes from electronics retailers like Best Buy. Even though the consumers paid up to $200 at the store, the boxes were still "leased," according to DirecTV, which assessed additional monthly fees on the boxes and required that the boxes be returned when consumers canceled service.

Also that year, Time Warner Cable and Comcast were sued by private plaintiffs who claimed the firms violated antitrust laws by forcing customers to rent their boxes.

In March, the National Cable & Telecommunications Association told the FCC that only 489,000 CableCARDS were being used in third-party boxes -- a tiny fraction of all pay TV customers.

Amid the frustration, confusion and disappointment, the FCC is about to take another run at the problem.

In March, when the agency issued its highly anticipated broadband plan, it unveiled a proposal to reignite the set-top box market, this time with even grander goals. Now that millions of consumers are watching TV using their computer and Internet connections, the agency wants to encourage a marketplace for do-everything boxes that would allow people to consume television through  multiple platforms. The FCC wants to require that all multi-channel video programming distributors (MVPDs) play nice with each other, and with consumers, by Dec. 31, 2012. The newfangled set-top box that would allow this freedom is referred to as a "gateway" device.

"It would allow consumer electronics manufacturers to design to a stable, common open interface and to integrate multiple functions within a retail device," the FCC wrote. "Those functions might include combining MVPD and Internet content and services, providing new user interfaces and integrating with mobile and portable devices such as media players and computers. It could enable the emergence of completely new classes of devices, services and applications involving video and broadband."

The FCC is taking up creation of a market for gateway devices at its regular monthly meeting on Wednesday, when it will also discuss other aspects of the National Broadband Plan.

The pay television industry hasn't signaled precisely how it will respond yet to the FCC proposal – competing interests abound.

For example, in a blog posting, Kyle McSlarrow, CEO of the National Cable & Telecommunications Association, said his group saw promise in the gateway concept, but cautioned against a heavy-handed approach.

"While we are committed to working constructively with the FCC on this and related issues, we still firmly believe that technology mandates should be a last resort," he wrote.

In the meantime, what do you pay to rent set-top boxes in your house? Pull out last month's bill and tap out your costs below. Don't forget to include:

1. Provider
2. Hometown
3. Type of box (basic, DVR, etc)
4. Number of boxes
5. Related fees, such as DVR fee

We'll compile a list for a later story and help you compare services.

Become a Red Tape Chronicles Facebook fan and follow RedTapeChron on Twitter.

In the past month, Red Tape Chronicles readers have taken on a long list of consumer booby traps – laid by phone companies, pay TV companies, banks and others – and WON! The mountain of success stories from the Red Tape Fight Pledge group on Facebook is so high we decided to pick a top 10 list and share them with you here in the hope that you'll be inspired to use some of the same techniques.

But before we get to that, The Red Tape Fight Pledge has been so successful that we’ve decided to keep it going, with only a small change. The group is now being called the Red Tape Fight Club. Already, more than 1,000 super-consumers are signed up, and they will form the backbone of a self-help group designed to be a standing army of consumer advocates, ready to help any victim get economic justice when locked in a battle with a stubborn company. Group members will share tips, tricks, phone numbers and any other technique that can be used to help you get a fair deal.  Anyone can join and post questions, looking for help. Some members will prove themselves to be subject matter experts and volunteer to be captains.

The Red Tape Fight Club is designed to be self-sustaining, run by members.  I will chime in often if I have helpful advice. But 1,000 brains are better than one. Click here to join, or just to see what's going on.

---

Now, on to some individual success stories.

1. DirecTV

Linda Keith is a 55-year-old single mom of five (only one left at home) from Varina, Virginia, looking to keep control of her expenses. When her monthly TV bill with DirecTV hit $70, she took action.

"(I) told them I was going to cancel and they gave me a $50 credit and lowered my bill from $69 a month to $29 for a year. Then it will zoom back up but for now this is a deal," she said. "They also gave me Starz free for 6 months. ... it took me no time at all. All I did was ask."

Keith apparently has money-saving genes.

"My daughter also did the same thing with a different cable company and is saving $70 per month  on telephone, cable and internet," she said.

2. Credit card annual fee

Melissa Triemstra of Dyer, Indiana, is one of millions of consumers who've seen their credit card costs raised through higher interest rates, lower credit card limits or new fees. But she didn't stand for it.

"I noticed the annual fee charge -- $39 -- on my online account balance so I called them up right away," she said, referring to the card issuer, First Financial Bank. "(I) nicely told them that I had other cards and really didn't feel that I needed to pay an annual fee on any of them. They put a note on my account saying not to ever charge me an annual fee. They were real nice and quick about it."

3. No late fees = $2,000 slush fund

Russell Luepnitz of Winfield, Alabama, canceled his cable service and saved $40 per month. But he took an even bigger step – he used technology to help him avoid penalty fees.

"I have already saved $300 over the last year because I have paid on time or switched to electronic withdrawal on small bills like water," he said. The savings add up to $300 over last year. As a reward, he opened a new savings account for all the saved cash. Adding up the cable, late fee savings and his self-imposed restrictions on "ridiculous purchases," he's got $2,000 in that slush fund now.

4. Kept talking to get unlimited minutes deal

Ray of Taylorsville, Utah, 63, ran into typical trouble when upgrading from a "dumb phone" to a "smart phone."  He was spending $70 per month for 1,500 minutes and was about to add pricey Web services to his phone. He didn't want a triple-digit phone bill, but $120 per month was staring him in the face.

"(I had to) continually pester T-Mobile and finally resort to a threat of leaving their customer herd before they began offering me plans with unlimited minutes and unlimited Web access," said Ray, who asked that his last name be withheld. "After discussing the issue with several reps and finally telling them that I'd look elsewhere, they seemed to find that there was a 'long-term customer option' that gave me unlimited minutes for $50-a-month and then the standard unlimited Web access for $25. The bottom line being that for $5 more per month I no longer have to worry about limits on either type of connection. ... I ended up with a better package for close to what I was already paying."

5. Worth it to cancel home phone service

Shana Martin, 30, of Centerville, Indiana, decided to take the plunge and cut her home telephone cord after realizing that she could live with cell phone service only. It wasn't easy, but it will save her more than $200 a year. 

"I called Verizon once or twice a week for two months trying to cancel my land line," she said. "I first tried doing it online, but they said I had to call. But I would be on hold for so long -- 30 minutes or more -- that I would hang up frustrated." She finally had luck by calling at night.

"I asked to cancel the line and they asked why but didn't offer any incentives to keep it. It only took about 3 minutes to get it canceled. I saved about $18 a month by getting rid of the phone. … My advice for others would be to not stop trying. It's hard to find time to stay on hold or call back repeatedly, but in the end the money saved is worth it.

6. From VOIP to Skype to save

Michelle Brinkman Stevens of Austin, Texas dropped one new-fangled phone service for another and and will save $228 in the next 12 months. 

"We dropped cable VOIP phone and went with AT&T basic service," she said.  "Now (we) pay Skype to do calls to domestic land or cell phone." Their $45-a-month bill is now a $20 local phone bill and a $6 monthly Skype bill. "Monthly savings of $19. Works for me."

7. Comcast phone and Internet savings

Stephen Ham of Nashville knocked $10 per month off his phone and Internet service bill with a call to Comcast. He threatened to cancel service if he didn't get a better deal.

"Not as much as I had hoped but worth the effort." he said.

8. Keep the 'promotional price' after trial period ends

Zohar Laor, like most pay TV consumers, signed up when the cable company was offering a discounted trial offer.  But when the trial period ended and his rate went up, he got on the phone.

"I lowered my cable bill by about $20 a month," he said. "I called and they gave me the 'current promotion' price and I put my name on a list to be called if a better promotion is available."

Gregory Yurevitch has a similar experience with Comcast.

"(I) asked Comcast to lower my bill, which they wouldn't do. However, they would extend existing promotional pricing, which is the same thing," he said.  He saved $25 per month, or $300 per year.

9. Don't stand for FIOS rate increases

Timothy Thorn of Wilmington, Delaware, called Verizon after the firm raised his monthly fee $10. He ended up saving money and getting better service.

"I explained I was a good, pay-on-time customer and would have to cancel service unless I got my old rate back," he said.  "The service person hemmed and hawed but I was firm about having to cancel service. Finally she came back with my old rate - $44.99 - and double the current speed. I did have to commit for a year."

10. Discount on set-top boxes

Skip Frank of Flower Mound, Texas, used the threaten-to-cancel tactic with Verizon for his TV and Internet service package.  He had mixed results, but still came out ahead.

"The best I got was a $4.99 credit per month for one of our set-top boxes," he said. "Not what I'd hoped for, but better than a sharp stick in the eye."

Become a Red Tape Chronicles Facebook fan and follow RedTapeChron on Twitter.

What would the Founding Fathers think about Internet-based "cloud" computing?

Would James Madison, for example, agree with some current interpretations of the Fourth Amendment, which hold that old-fashioned letters stored in a dresser drawer enjoy stronger legal protection against search and seizure than an e-mail stored on the Web or a private post left for a friend on Facebook?

---

In a world where every computer is connected, where it doesn't matter whether your e-mail is on the hard drive in your bedroom or a server half a world away, where your critical company documents can be viewed from anywhere, where would the Founding Fathers draw the line for law enforcement? The "cloud," already well formed with Hotmail and Google docs, is a potential treasure trove for police investigators.  But how can we make sure the cloud doesn't rain all over Americans' Fourth Amendment rights to avoid unfair searches?

That's the goal of a new coalition behind the Web site DigitalDueProcess.org. The group includes strange bedfellows, ranging from the right-leaning Americans for Tax Reform and the Competitive Enterprise Institute to the liberal American Civil Liberties Union. Google, Microsoft, Intel and a host of other technology companies are also involved. Their main goal is a rewrite of the outdated Electronic Privacy Communications Act of 1986 for the 21st Century.

"Technology has changed dramatically in the last 20 years, but the law has not," said Jim Dempsey, vice president for public policy at the Center for Democracy and Technology, another member of the coalition. "The traditional standard for the government to search your home or office and read your mail or seize your personal papers is a judicial warrant. The law needs to be clear that the same standard applies to email and documents stored with a service provider while at the same time be flexible enough to meet law enforcement needs."

Descriptions vary, but cloud computing generally refers to storing information or software on computer servers that can be accessed from multiple locations around the world – Gmail is a good example -- as opposed to data that must be accessed by someone who has physical access to a local computer or hard drive.  Today, the rules of evidence gathering apply differently to data in the cloud.

Ryan Radia, a spokesman for the libertarian think tank the Competitive Enterprise Institute, said that there is plenty of judicial confusion about application of search and seizure laws to electronic communication -- in fact, federal courts have issued contradictory rulings.  But in general, many Internet service providers turn over electronic records to investigators in response to a simple subpoena, while old-fashioned paper records require the higher standard of a judge-issued warrant. Just because information travels over a wire and sits on a server doesn't mean it should be less protected by the Constitution, Radia argued.

"If you get a letter from a friend of relative in the mail and leave it in the file cabinet in the basement, if law enforcement wants to read it they have to get a search warrant," he said.  "But with cloud computing … judges have interpreted that the information has been handed over to third parties and is no longer considered to be private. Federal law ought to protect that information in the modern age."

More than theoretical constitutional issues are at stake. There's also real money.  Tech companies like Microsoft and Intel are worried that concerns about privacy could stunt the growth of cloud computing, and recent research by the Pew Internet and American Life Project seems to validate this concern.

The report found that 69 percent of online Americans use at least one cloud service, such as Web-based e-mail, and 64 percent of them said they were concerned that law enforcement agencies could access their files. Only 22 percent said they weren't concerned.

"We run the risk of users lacking trust in cloud computing and in many information services if a user cannot be confident their information will remain secure," Radia said. "If cloud computing is going to realize its full potential, if the industry is going to succeed, we need to be sure there is privacy protection. We can't expect the technology to work around the limitations of federal law."

Among the groups' top goals: members want federal law to be "technologically neutral," meaning that search and seizure requirement would apply uniformly, regardless of the technology involved. That would mean a private communication -- be it handwritten or electronic -- would be governed by the same rules of evidence gathering.  They also want to clear up inconsistencies in the application of federal law. Currently, in some cases, there's a lower legal standard for law enforcement to intercept an e-mail in transit than for that same agencies to read an e-mail stored on a recipient's computer.  In other words, a single e-mail can be governed by various different legal standards during its life-cycle.

"A particular category of information should be afforded the same level of protection whether it is in transit or in storage," the group says in its "guiding principles."

While the group has gone to some pains to avoid sounding as if they are attacking law enforcement agencies, don't expect them to hop on board the effort.  Updates to the Electronics Communications Privacy Act would almost certainly curtail use of some evidence-gathering tools, such as the FBI's much-maligned Carnivore software, which was designed to capture e-mail and Web transmissions going into and out of Internet Service Provider servers.

The group has already received a relatively warm welcome on Capitol Hill. House Judiciary Committee Chairman John Conyers, D-Michigan, has said he would hold hearings this spring on potential updates to the Electronic Communications Privacy Act.

"Many Americans take for granted the protections of the Bill of Rights that prevent the government from coming into people's homes without a valid search warrant.  The rise of cloud computing should not diminish these privacy safeguards," said Mike Hintze, Microsoft's associate general counsel, in a blog post.

Change will not be easy, however, and isn't expected this year.  Americans have a rather tortured relationship with privacy. They often say one thing ("Privacy is important to me") but do another ("Sure, thanks for the coupon, here's my Social Security Number") noted Lee Rainie, head of the Pew Internet and American Life Project.  And when it comes to law enforcement issues, their opinions are even more contradictory, particularly since Sept. 11, 2001.

"Americans are concerned with bad actors doing bad things, and if you ask them if they are comfortable with law enforcement checking (online data) related to people who, for example, are going to hurt children, by and large they are," he said.  On the other hand, they really value privacy, and are not comfortable with government agents having broad access to their data, he said. "The way people think about privacy is very context sensitive," he added.

 

Become a Red Tape Chronicles Facebook fan and follow RedTapeChron on Twitter.

His cell phone sits on the night table while he showers. Her e-mail is left accidentally on the computer screen while she uses the bathroom. To look or not to look?

It's perhaps the strongest new temptation of the 21st century -- the casual glance at a lover's cell phone text messages or e-mail.  This level of snooping once required rather deliberate spy-like behavior, such as rustling through a bedroom   drawer to find stashes of old-fashioned letters. Now it can happen as quickly as an instant glance.  And, according to one new study, it's happening a lot.

---

But is such amateur sleuthing a normal part of life in the digital world, or does it mean couples need professional help?

 

A study commissioned by online gadget review site Retrevo.com found that 38 percent of people under age 25 had stolen a glance at their lover's texts or e-mails - without that person's permission or awareness. Among married adults of any age, the rate was 36 percent.

"We were surprised to see how large the percentage was," said Manish Rathi, co-founder of Retrevo.

California-based couples counselor Jay Slupesky was not.

"It happens all the time," he said. "That has brought people into counseling on many occasions."

Spousal spying can be illegal

There are numerous examples of extreme spousal spying.  Entire Web sites are devoted to buying hidden cameras, special cell phone snooping software, cracking e-mail passwords- and all manner of cyberspying. The newest trick, says Slupesky, is for one partner to secretly enable the GPS location software on a cell phone that's designed to help parents keep track of children. Then, a jealous spouse can virtually follow their lover's every move.

"Snooping on spouses has been taken to the next level.  The next lower level, that is," he wrote in a recent blog entry. "This … is downright creepy."

In some cases, spousal spying is illegal.  In 2005, the Department of Justice indicted the owners of a firm named LoverSpy, which sold electronic greeting cards laced with Trojan horse software designed to track a lover's Internet activity.  Authorities also charged four LoverSpy customers with illegal wiretapping.

While most reasonable adults would agree that going to such lengths to spy on a lover is inappropriate, the issue is not nearly so clear when considering casual glances at cell phones or e-mail inboxes.

Healthy relationship boundaries are constantly under assault from 21st century hyper-connectivity.

"In the past if you looked around after your lover you'd get caught. You had to look at their phone bill or rummage through someone's drawers," said Rathi.  The spying required at least some measure of premeditation.  Today, spying can be completely impulsive. "Now, it's always available, and people don't necessarily see it as spying. It's just so easy to do it. The phone is sitting right there."

Adding fuel to the fire is the rapid growth of smartphones, which put personal e-mail and texts in one handy, easily accessible gadget.  According to The Nielsen Company, only 10 percent of U.S. adults had a smartphone during the second quarter of 2008.  By the end of last year, that number had risen to 21 percent, and by 2011, Nielsen expects half of America to be using smartphones. That's a lot of opportunity for casual spying.

Online relationship forums are jammed with debate about the ethics and mental health impact of such snooping.  In numerous places, lovers say they discovered infidelity by snooping and swear by the tactic. But nearly as often, the spying ends poorly.  In one anonymous thread, a woman admits reading her boyfriend's text messages and says she regrets it because "I found nothing to help me nor did I find anything to make me worry about our relationship." She later admitted the snooping to her boyfriend, who felt violated.

"One of the things you will learn in life, as a girlfriend, or a parent," responds one advice giver, "is NEVER to admit when you spy."

But Slupesky, the therapist, says it's never a good idea to cross that line.

"I am always opposed to spying. If you are in a loving relationship, you just don't spy on your partner," he says. If there is suspicion of infidelity, the relationship needs therapy, not snooping-. "There are better ways to address your concerns."

He did offer a broader perspective on cell phone spying, however.

"I think some people are feeling distance from their spouse for whatever reason, and they think if they see who their spouse is e-mailing they will feel more connected.  That happens a lot," he said. "They are looking for a way to restore the connection...it's a way of asking, 'Are you still close to me? Am I still the most important person in your life? Do you still love me?' "

Of course, there are healthier ways to deal with those profound questions. In therapy, Slupesky always tries to get lovers to stop the spying behavior.

"One thing I do when someone tells me they are doing that is I ask, 'Did you feel better after you looked at his phone?' They usually say, 'No.' And then I ask, 'If it doesn't make you feel better, why do you keep doing it?' "

But often, he said, the compulsion is too strong, and the access too easy, for his patients to stop.

While the Retrevo survey found that men and women utilize casual spying equally, Slupesky said two-thirds  of his spying patients are women.

"Women are more likely to notice something is missing in the emotional connection, and men cheat more," he said.

Rathi said one way to help solve the problem of casual spying is to take away the opportunity.  Smartphone users should password-protect their gadgets to avoid creating an irresistible temptation for their lovers, he said. Logging out of Web sites and e-mail accounts is also a sound, safe computing practice.

Retrevo plans to study the spying issue annually to identify any shifts in social standards on spying.

"The amount of time people spend using these gadgets is increasing, and the amount of data they are consuming through these devices is continuing to increase.  So I think we will see more (spying) as time goes by," he said.

Become a Red Tape Chronicles Facebook fan and follow RedTapeChron on Twitter.

Can you make money just by writing down the license plate numbers of cars in your neighborhood? It might sound like a game your older brother made up to keep you busy -- but two aggressive start-up firms are telling consumers to do just that, and both are spreading the word quickly online. But how does it work?

One of the two, Dallas-based Narc Technologies Inc., offers a simple explanation. They want you to rat on your neighbors. The firm's Web site, NarcThatCar.com, is designed to collect license plate numbers and locations so lenders can more easily repossess cars when the owners default.

In other words, the firm wants consumers to become the repo man's informant.

Its chief competitor, Data Network Affiliates, says it has no intention of getting into the business of repossession. It says it plans to use its database of license plate numbers to help find missing children through Amber Alerts. It also hopes to sell the data to other information-hungry marketing firms, and to turn its user base into a kind of buyer's club.

In each case, members only earn a couple of dollars each month from basic license plate collection.  But they stand to profit significantly if they convince friends and family to join -- a classic multi-level marketing ploy. And in each case, there are volumes of complaints about the companies online.

---

Before we get into the specifics, let's review a few basics.

• Anyone who says you can make a lot of money by staying at home and doing very little work is almost certainly misleading you.
• Multi-level marketing (MLM) is legal. Pyramid schemes are illegal.
• What's the difference? Sale of a real product. Firms cannot design companies where the chief source of income is skimming a cut off of others who are talked into joining -- that's a pyramid scheme. But if company associates sell a real product, and merely enhance their income via "down line" percentages of sales from other hires they have sponsored, that's legitimate MLM.

MLM-like schemes, along with work-at-home scams, are a dime a dozen online, but they have really ramped up during the recession.  Jobless workers with plenty of time on their hands sometimes try dozens of work-at-home ideas, trying to hit on something that will earn them a little cash.

The attraction of Data Network Associates is simple: Unlike most work-at-home jobs, there's nothing to sell, said marketing director Warren Anthony. Members simply write down 20 plates per month for their $2.

"It's so easy, this is something my 80-year-old dad can do. A college kid can do it," he said.  He said they encouraged affiliates to gather plate numbers in parking lots at churches or malls in order to avoid spooking neighbors.

He said the firm has so far signed up 92,000 affiliates in only about three months. Together they have entered 1.3 million plate numbers into their database.  Already, the firm's Web site ranks in the top 8,000 on the entire Internet, he said.

Joining the service is "100 percent free," but members are urged to pay $130 for software that makes it easier to enter the license plate numbers and for a package of travel discounts.  One sales force member interviewed by msnbc .com who reported signing up 92 sales associates said paying for this "upgrade" was the fastest way to earn money.

But Anthony rejected the term upgrade.

"It is a package of products and services they are buying ... a business benefits package," he said.

The company's business is "turning data into cash," he said, and the firm has multiple strategies for raising revenue. Users will soon see ads when they log in to enter plate numbers. They will also receive member-only offers for services like Dish Network and ADT security systems.

"We tell people it's where Walmart meets Google," he said.

The associate msnbc.com interviewed, who spoke on condition of anonymity, said he had yet to receive any money from the company but expected a payout of about $400 in early April.

"This thing could get really crazy," he said. "We get paid down 10 levels deep. ... Think of it as just like Facebook."

NarcThatCar also claims similar success. A Web site that discusses the company said it recently held a conference call attended by 34,000 people

Measured by inquires to the Dallas office of the Better Business Bureau, the firm's popularity is exploding. With 20,000 inquiries since Jan. 1, Narc Technologies is easily the most asked-about company at the Dallas office, says spokeswoman Jeannette Kopko.

"That's very high activity," she said. "They seem to be doing a lot of recruiting, especially in Texas."

Many of those inquiries are "pre-purchase," she said, with prospective associates calling the BBB to check the company's background.  That's a good practice; the Dallas BBB currently gives NarcThatCar an "F," rating, the agency's lowest grade.

"The reason is because we've seen a pattern of complaints," she said, noting that the agency has received nine complaints, with most of them resolved after BBB intervention.  "Also we are concerned whether this is multi level marketing that would be in compliance with the law or ... a pyramid scheme. They say their product is information that's collected. But is there a market for that?"

The Dallas BBB has asked NarcThatCar to prove that the database of license plate numbers it's collecting is indeed a valuable asset. On its Web site, the firm claims to have signed a "six-figure contract" with a lien holder company, but has yet to provide the requested details, Kopko said.

Narc Technologies -- which also uses the name Crowd Sourcing International -- charges associates a $100 sign-up fee and a $25-a-month fee for hosting a Web site about the product.  Members who "sponsor" other new sign-ups earn a percentage of the fee.

A message left with Narc Technologies was not returned. An associate of the firm who requested anonymity said the BBB rating was "undeserved" and stated that the firm has paid its associates several times. He also said the firm has several clients who pay for access to their data.

Kopko said a firm cannot pass the legal test for being an MLM – the requirement of substantial product sales -- simply by requiring new signups to buy a product.

"The question is: Would people be making more money from recruiting others rather than actual sales?" Kopko said.

That's the same question facing Data Network Affiliates.

Anthony, of Data Network Affiliates, bristled at the notion that some consumers might laugh when the suggestion is made that they could earn money just by writing down license plate numbers.

"You wouldn't put it like that," he said. The firm is the business of collecting and selling data, he argued, and plans numerous ways to monetize the information. "As far the plates, that's just a fun way to attract individuals. "

RED TAPE WRESTLING TIPS

It's often hard to tell the difference between a legal multi-level marketing firm and an illegal pyramid scheme -- particularly because firms are so good at skipping along the outside edge of the law. But here are some tips, courtesy of the Texas state attorney general's office.

(Go here for even more tips)

* Ask about average monthly product sales for reps.  If sales are disproportionately low, you're probably talking about a pyramid scheme rather than a multi-level marketing company.

* Ask about product returns policies if you are required to pay upfront for merchandise.  Laws vary, but in Texas, the firm must be willing to refund 90 percent of your inventory cost.

* Be wary of any firm that requires you to pay money to get a job.

* Be wary of high-pressure "business opportunities" in hotel seminars or meetings at a person's home. In Texas, and many other states, "regret laws" allow consumers to cancel contracts signed at such events for up to 72 hours.

Become a Red Tape Chronicles Facebook fan and follow RedTapeChron on Twitter.

April 15 can be a day of fear, loathing or even downright panic – and that can work to great advantage for companies anxious to separate people from their money. While confused consumers are profitable consumers, frightened consumers are a gold mine.

That's why, as tax day approaches, you are hearing seemingly nonstop advertisements for companies that claim magical powers to wipe away tax debt.  The ads bear a striking resemblance to those credit card debt settlement companies I've written about, but there's this extra punch to their offers: While credit card firms can be intimidating, most Americans are terrified of the IRS.

That's why promises to "end the nightmare" and erase debt for "pennies on the dollar" can be quite persuasive.

---

As with many unscrupulous offers, the reason this one is so pervasive is because there is a grain of truth to the claims. Yes, in extreme circumstances, the IRS will settle old debts for a tiny percentage of the outstanding balance. But in most of those cases, the consumer is either near death or completely unemployable and without any valuable assets.

Instead of describing these long odds, many tax debt settlement companies sweet talk clients. Then they take large up-front payments -- prices start at $3,000 and climb fast from there – but do little or nothing to help with the tax problem, according to Illinois Attorney General Lisa Madigan.

"These companies help virtually no one," Madigan said.

Madigan and 17 other state attorneys general  sued tax debt firm J.K. Harris in 2008, accusing it of misleading consumers. The firm -- one of several tax debt firms to be hit with class-action lawsuits -- paid $1.5 million to settle the case but admitted no wrongdoing.

Firms often advertise that they have local offices staffed with former IRS employees, which is usually quite a stretch of truth, she said.

"Maybe they'll have one former IRS person, but most (employees) don't have that experience," she said.  And many of the local offices are really just mailboxes or empty conference rooms.

Firms that advertise tax debt settlement services are selling a legitimate IRS procedure called an "offer in compromise." If IRS debt collectors determine that the federal government has no chance of collecting on a tax debt, the agency will consider settling for a lesser amount. But the process is long, drawn out and relatively painful. No one can quickly obtain a "pennies on the dollar" settlement with the IRS, Madigan warned.

Back in 2004, the IRS issued a warning about such debt relief claims.

"We are increasingly concerned about unscrupulous promoters charging excessive fees to taxpayers who have no chance of meeting the program's requirements," said IRS Commissioner Mark W. Everson in a statement. "We urge taxpayers not to be duped by high-priced promises."

The agency did not respond to requests to be interviewed for this story. But in 2007, it told CNBC that it rejected nearly three-quarters of the 46,000 settlement offers it received.

Larry Lawler is a tax debt expert and executive director of the nonprofit American Society of Tax Problem Solvers, which advocates for tax experts that help consumers with debt. While freely admitting some firms that aggressively advertise are trying to dupe consumers, he says a few bad apples have given his industry "a black eye that is underserved."

Many tax debt agents offer legitimate help to consumers, he said, though that help rarely results in debt forgiveness. He said nine out of 10 of the clients he personally represents must pay their entire tax bill, but he helps them reach an affordable installment plan with the IRS.

Settlement offers are far more lucrative for tax debt solution companies, he said. Even the most complex installment arrangement earns his firm only about $1,700, while tax settlement companies frequently charge $6,000 or more for a settlement that lessens the tax debt, he said. That's often the last few thousand dollars the debtors have.

"So they push for the easy sell and thing they can make a quick buck on," he said. "There are people out there with real, legitimate tax problems ... and there are charlatans out there, raping people, taking their money and not doing the job."

HerbboxIn some cases, tax debt firms don't even bother to fill out the forms correctly. The Internet is awash in complaints from consumers who never talk to the same agent twice or say that settlement firms raided their bank accounts after they signed over a power of attorney.

Many firms also have poor Better Business Bureau ratings.  For example, American Tax Relief – which advertises nationally, currently has an "F" rating from the Los Angeles office of the Better Business Bureau. The firm did not return a phone call requesting comment.

Calling a tax debt assistance company is tempting for many consumers because it is daunting to deal with the IRS, Madigan said.

"While many people have spoken to credit card companies at some point, most people haven't picked up the phone to call the IRS," she said. "And most believe if you are having a problem with taxes, the best thing you can do is engage an expert. That's what these advertisements are promising people, but not delivering."

Lawler said that despite the mine field of tax settlement firms, consumers often do need professional help to address their tax debt -- and ignoring it simply makes things worse. In an attempt to help consumers find honest help, his agency offers a certification program, though so far only about 100 professionals around the country have completed it.

But he said consumers can spot trouble with relative ease.  Any tax debt agent who suggests during an initial 30-minute conversation that a consumer can submit an offer in compromise is probably selling snake oil, he said.

"You can't tell someone they are a good candidate in an initial meeting, he said. "You have got to do an extensive financial analysis."

That's because the IRS requires documentation of every asset and expense, in great detail.  "I always tell people a consumer can't hire someone to do an offer of compromise," Lawler said. "They must hire you for help finding the best solution to their tax problem, whatever that is. ... The vast majority of cases are not good candidates for an offer in compromise."

Jeffrey Rogyom is a tax lawyer in Maryland who recently penned a top 10 list of ways to spot a potential tax debt scam. Among the red flags on his list:

• The agent never asks why you owe the IRS money.
• They advertise so much you know their name.
• Your first payment "strangely reflects how much cash you have."
• The firm uses a "phantom office."  He recommends Googling the address to see if it's a real office complex or something more suspicious.

"These companies promise you the world, that's how they make their money," he said. "For some people (settlement) is a great option, but many people really need to be told they should file for an installment plan."

The tax debt business, however, is a murky  world, Lawler said. Some clients are more interested in evading taxes that paying their debts, while others cite constitutional arguments for not paying federal income taxes.  If they try to do either, Lawler said, he "shows them the door."  And while "99 percent" of consumers never set out to avoid paying taxes, the spectrum of tax relief clients runs from saints to sinners, making his a complicated business.

"I tell people our clients have not paid their taxes, owe the government a bunch of money, but we love them and we want a bunch more of them," he said.

Lawler said consumers with tax trouble would be better off ignoring the radio advertisements and working with someone they can meet face-to-face.

"You really should go to someone who's local, someone where you  can knock on their door and talk to them, who will answer the phone, who's been in the community a long time," he said.

Become a Red Tape Chronicles Facebook fan and follow RedTapeChron on Twitter.