Consumer AlertA Publication of the South Carolina Department of

Consumer Affairs Public Information Divison

• How to choose the best gym• Explaining the digital switch for TVs• Changes in credit scoring formula

In this Issue:

January 2009 Volume 5, Issue 1

While many New Year’sresolutions may be difficult to keep,one resolution may be practicallyimpossible to abandon.

Your resolution to drop the extrapounds may prompt you to join the

gym, but it couldalso require you tosign a contractthat’s morerestrictive thanyou intended andnearly impossibleto break.

Trouble canceling physical fitnessmemberships is one of the topcomplaints logged with consumerprotection agencies and stateattorneys general.

Before you sign on the dotted line,the South Carolina Department ofConsumer Affairs wants you tounderstand your agreement. Doingso may prevent you from losingmoney faster than you lose thepounds.

Fine Print: Read it. Every word.Some facilities will allow you to takethe contract home overnight, if youask.

Some fine print includes clausesthat require you to attend the fitnessfacility a designated number oftimes in the first month.

Failure to do so may result in amulti-year contract.

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Tip the scales in yourfavor: Don’t sign a fatphysical fitness contract

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The formulaused todetermine aconsumer’scredit score willbe tweaked in2009. Thechange offers afew newadvantages toconsumers, but also some seriousnew risks.

Created by Fair Isaac, the FICOscoring model is the most popularcredit scoring formula in use. Thechanges in the model – commonlyreferred to as FICO 08 – aresupposed to give a more accuraterepresentation of a person’s abilityto wisely use credit.

Fair Isaac says the new score will

Calculating Credit: How changesin the FICO formula will affect your score

When most New Year’sresolutions are already falling bythe wayside, the South CarolinaDepartment of Consumer Affairswould like to see consumersadopt some good consumerpractices for 2009. By keepingthese tips in mind, SouthCarolinians should have fewerhassles and reduce chances of fallingfor a scam.

In 2009 consumers should resolveto…

Always use caution whenconsidering a payday or title loan,

Consumer resolutions for ahealthy, wealthy, fiscally wise 2009

do a better job ofpredicting defaultsthan the classicFICO, which is usedin more than 75% ofmortgage lendingdecisions and by90% of the largestU.S. credit users.

Good news firstFICO 08 is an improvement over

the old formula in several key waysfor consumers.

Collections: FICO 08 ignoressmall collection accounts in whichthe original debt was less than $100.This eliminates the penalty of small,

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and tax refund anticipation loans.Payday and title loans often put youdeeper in debt! Interest rates arehigh and consumers sometimes takeout multiple loans. Worse still, aRefund Anticipation Loan (RAL) onyour tax refund can be dangerous. If

S.C. Department of Consumer Affairs2

Don’t break the bank, breaking a sweat

How to choose the best gym for youChoosing a gym is lot like buying

a new car.You want to avoid getting

involved with a lemon. You don’twant to over pay. You wantamenities you will actually use.

And you know if you changeyour mind, you’re going to have ahard time getting your money back.

That’s why it’s important tochoose a gym that’s right for you.

The main things to consider whenchoosing a gym are these: cost,location, accessibility, equipmentand classes, staff, and atmosphere.

CostMembership to a gym can be very

expensive, so before going anyfurther, ask yourself if you haveroom in your budget for an extraexpense.

Fees may vary widely with somegyms asking for an initial sign upfee followed by monthly feesranging from $20 to $100 dollars.Comparison shop to find the bestdeal and don’t be afraid to negotiate

the terms.Before signing anything

read the fine print. Areamenities, such as showers,access to a swimming pool,or specialized classesincluded in the monthlycost or is it extra? Does yourmembership limit you tocertain hours or days? Areguests allowed?

Physical fitness contractsare notoriously difficult tobreak and can leave you outof hundreds of dollars.Before agreeing to a longterm deal, try the gym for ashorter period. A month-to-month membership may cost morein the short term, but could equalhuge savings if you find out laterthat you don’t use your membershipas often as you thought.

LocationIf your gym is more than a 10-

minute walk or drive from yourhome or office, studies show, youprobably won’t go – no matter hownice or expensive it is. Locationneeds to be one of your primaryconsiderations when joining a gym.

AccessibilityObviously it’s important for the

gym to be open when you’re mostlikely to work out, but it’s equallyimportant that it’s not too crowdedduring those times. If you tend towork out at peak hours, for exampleafter work or early in the morning,it’s important to stop by duringthose times to see gauge whether ornot it’s too busy for you.

Equipment and classesDepending on your desires, a gym

doesn’t necessarily have to bedecked out in the latest, greatestfitness equipment.

However, it should include basiccardio and resistance trainingmachines and equipment that youare familiar with using.

Be sure to check that theequipment is in good condition andwell maintained. Don’t be afraid toask how often they replace theequipment. If you see a number ofout of order signs, it’s a red flag.

Make sure the equipment isappropriate for your size and skilllevel. If you’ve found, as manywomen have, that most weightmachines are too big for you, ask ifthe equipment features smallerweight increments and adjusts to fitsmaller people.

Also, if you’re interested inaerobics or high-intensity workouts,a wooden or suspended floor thatgives will be a lot easier on yourbones and joints.

Make sure, too, that the gym hasthe classes you want, whetherkickboxing, aerobics, or poweryoga. Class times and skill levels arealso important. If you have theoption, sit in on a class before youjoin.

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50% of all new gym members quitwithin the first six months ofsigning up.

20% of gym members use their clubat least twice per week.

In 2001 gym members reported anaverage of 93 days at their gym, which is less than twice a week..

Will you use it?

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3www.scconsumer.gov

Finally make sure it’s clean. Equipment shouldbe regularly wiped off and bathroom and lockerroom areas neat and tidy. Gyms are notorioustransmitters of staph infection.

StaffIf you’re new to the gym scene, you’ll want a

good relationship with the gym staff. They arethere to help you and should be knowledgeableand well trained.

When you are visiting, pay attention to whatthey are doing. Are they actively helpingmembers? Do they seem friendly and helpful?

Besides having a good attitude, the staff at agym should be trained in both first aid and CPR.

They should also be certified by anorganization such as the American Council onExercise, the American College of SportsMedicine, or the YMCA/YWCA.

AtmosphereYou should feel comfortable with the people,

place, and atmosphere of your gym. If you don’t,you won’t go.

Before purchasing a membership, take a tour

Running

It’s still free!

CONTINUED: How to choose the best gym for you

Other fine print items maycontain details about requiredequipment maintenance andlicensinginformation. Askfor a rate sheetand compare theprices of differentprograms beforeyou join.

Terms oftermination: Itmay be hard toget on thetreadmill, but it’seven harder tocancel yourcontract. The SCPhysical Fitness Services Act doesprovide consumers a three-daywindow to cancel their contract.

Cancellations after this timeperiod are only required in one of

CONTINUED: Tip the scales...

It can be a real fight toget out of a physicalfitness contract.

may cause damage to your creditscore over time.

Automatic Renewal: Under thePhysical Fitness Act, an automaticrenewal clause may be included inthe contract.

The automatic renewal clausemust be signed or initialed by themember when finalizing thecontract.

The member must be sent noticeof the automatic renewal 30 daysbefore the end of the originalcontract.

Contract Negotiation: Manyfitness facilities will honor low ratesand payment plans long after theinitial offer.

Make a note of promotions asthey occur and ask for them whenyou renew your contract.

the following situations: death,permanent disability, moving 50miles or more from the facility, or

specific terms inthe writtencontract. Facilitiesare required tostate theseprovisions in yourcontract.

Know whatkind ofdocumentationyour contractrequires beforetrying to cancelyour payments.

Some contractsmay require you

to send cancellation requests bycertified letter, provide proof of anew mailing address, or a doctor’snote before they cancel your bill.

Not following the proper protocol

during the time you think you’ll be working out. That willallow you to see how crowded the gym will be when you’rethere. If the idea of working out among hardcore gymenthusiasts makes you feel shy, you might try your localYMCA, community center, or college athletic center instead.For women who are uncomfortable working out around men,choose a gym that allows only women or one that hasdesignated women-only areas.

punish millions of innocent parties,including spouses and youngborrowers who depend onauthorized-user information.

Bad newsFICO 08 is more punitive when

accessing how much of youravailable credit you’re using. If your

creditcardissuerreducesyourcreditlimit, youwill seeanimpact inyourscore,regardlessof

whether you carry a balance orwhat prompted the reduction incredit. This is one of the biggesthazards for consumers, as issuerscontinue to slash credit limits.Lower limits narrow the gapbetween a consumer’s balance andtheir limit, which is generally badfor their credit score.

The new scoring formula alsomore negatively impacts consumersthat have few open, active accounts.

What you can do toprotect your score

Watch those balances. The less ofyour credit lines that you use, thebetter, even if you pay yourbalances every month.

The credit bureaus and yourcredit scores don’t distinguishbetween balances you pay off andthose you carry month to month;the balance that’s reported to thebureaus is typically the one thatshows on your most recent monthlystatement.

S.C. Department of Consumer Affairs4

negligent debts that are often pettyand overlooked by the consumer.Examples of these types of debt,include overdue library books,traffic tickets, and even smallmedical bills. Previously these smalldebts did serious damage to creditscores.

Credit missteps. FICO 08 is morelenient ofserious, one-time, creditmistakes, suchas a charge-offor repossession,as long as othercredit accountsremain in goodstanding. Thekey, however, isthat all of theother creditaccounts must be in good standingand that’s a rare occurrence.

Authorized users. Authorizeduser accounts are still factored intoa borrower’s credit report.Originally Fair Isaac said the newscore would ignore this information,due to “authorized user” scams, butbacked off and allowed theinformation.

Adding a spouse or child to yourcredit card as an authorized userhas long been a good way toimprove that person’s credit score,because your good history with theaccount typically could be importedto the relative’s credit file. But in2007, credit repair companies beganabusing this feature by “renting”authorized-user slots from goodcredit risks and selling them tostrangers who wanted to boost theirscores. Some of these strangersbought slots on dozens of differentpeople’s cards, boosting their scoresby tens or even hundreds of points.

Not allowing authorized userinformation, however, would

If you’re in the habit of using abig portion of your credit limit —because you travel on business orare chasing credit card rewards —consider asking for a higher limit orusing more than one card. Ideally,use no more than 30% of youravailable limit at any time duringthe month.

Don’t close accounts. Fair Isaachas made it clear that closingaccounts can never help a classicFICO score and may hurt it. FICO08 awards more points for havingopen accounts in good standing,while having a higher proportion ofclosed accounts can hurt you more.

Keep your accounts active. Issuersincreasingly are shutting downunused accounts, which reducesyour available credit and can hurtyour scores. Even if your accountisn’t closed, though, FICO 08doesn’t like to see a bunch ofunused cards. It wants to see youactively and responsibly using avariety of credit accounts.

Consider an installment loan.There are two main types of credit:revolving accounts that allow you tobuild up and pay down balances,and installment loans that typicallyhave fixed payments that requireyou to pay down your balance overtime. Credit cards and lines of creditare examples of revolving accounts,while auto loans and mortgages areconsidered installment loans.

The FICO formula has alwaysrewarded those who successfullymanaged both types, which is whygetting an installment loan wasoften recommended as a way forpeople with troubled credit torehabilitate their scores. The newscoring formula is even moresensitive to the mix of credit typespeople have and use. In the past,people were able to get and keepvery high scores using only creditcards. It’s not clear if that will stillbe true under FICO 08.

CONTINUED: Calculating credit: How changes in the FICO...

5www.scconsumer.gov

At midnight on February 17,2009, analog television sets will fadeto static as all TV signals willbecome digital.

While this may soundapocalyptic, the majority ofAmericans will barely notice. It isestimated that just 10 percent oftelevision owners will need to makeadjustments to continue using theirexisting set.

The first thing you should know isthat you do not need a newtelevision set. Now if you would liketo upgrade your television, by allmeans go ahead, but you do nothave to buy a new set to receive the

digital signal.A converter box (called an

ATSC tuner or ATSC receiver orHDTV tuner) is available toconvert analog signals to digital.Consumers can expect aconverter to cost between $50and $75. They are available atmost major retailers. To help easethe cost for consumers thegovernment is providing a $40coupon for the converter, thoughmoney for the program is runningout.

The following should clear up anyconfusion about the switch fromanalog to digital.

If you own an analog televisionand receive a television signalthrough an antenna, you will needto purchase a converter box. In

It’s time to flip the switch! What you need to knowabout the switch from analog to digital TV

Got cable or satellite? Sit back and relax.

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your refund is garnished for anunpaid debt such as medical billsand you’ve already borrowedagainst the anticipated refund,you’re in double trouble. If you’reshort of cash, avoid all these loansby asking for more time to pay a billor seeking a traditional loan. Even acash advance on your credit cardmay cost less in the long run.

Never do business from atelephone poll.

Look the other way when you seea sign with a toll free numberpromising credit help, foreclosureabatement, work at home schemes,weight loss, talent searches, etc.

Think twice before giving outpersonal information.

Keep your private informationprivate! Guard your Social Security,bank accounts, and credit cardnumbers with your life. Never giveout passwords, pin codes or othersensitive information to anunknown caller or email – no matterwho they claim to be. Any companyor government entity with whom

you do business already has yourinformation. Learn how to protectyourself from identity theft andmake a practice of safely shreddingall documents containing personalinformation.

Do homework before making amajor purchase.

Don’t rush the purchase anddon’t buy under stress. Seniorcitizens, people in crisis, collegestudents, small business owners,minorities, and immigrants areespecially at risk of being victimized.Take the time to do your research.Talk to friends, neighbors, andcoworkers you trust. The more youknow before you head to the store(car dealership, mortgage broker,etc.), the more likely you are to get agood deal.

Not to hire a contractor who justshows up at the door.

They’ll offer you a great dealbecause they’re “in theneighborhood” and have materialsleft over from a previous job.Reputable contractors just don’t

work that way. Also, get allpromises in writing. If it isn’t writtendown, it doesn’t count. Verbalpromises are worthless because ifthere’s a dispute, you have nothingto back up your claim.

Not to be pressured into buying.Good businesses don’t need to rushyou into a decision. The high-pressure buy now approach isdesigned to keep you fromcomparison shopping. Don’t fall forit. If the sales person tells you theprice won’t be good if you walk outthe door, turn around and leave!

Not to assume a transaction canbe undone.Despite popular opinion, everythingis NOT covered by a three-daycooling-off rule. This only applies tosales of $25 or more that take placeat your home or away from thecompany’s normal place of business.

Not to buy a used car without aninspection.

CONTINUED: Consumer resolutions for a healthy, wealthy, fiscally wise 2009

Continued Page Six

The Commission on for SCDCA Consumer Affairs

Brandolyn Thomas Pinkston, AdministratorAlice Brooks, Director of Public InformationCharles Ellison, Editor Consumer Alert

Established by the Consumer Protection Code in 1974, theSouth Carolina Department of Consumer Affairs represents theinterest of South Carolina consumers. Our mission is to protectconsumers from inequities in the marketplace through advocacy,meditation, enforcement, and education. For more information onthe SCDCA,visit www.scconsumer.gov.

Our mission is to protect consumers from inequities in themarketplace through advocacy, mediation, enforcement andeducation.The Department strives to be a CREDIT to our State byholding the following values as essential in our relationships anddecision-making:

Competence R espect E quality D edication I ntegrity T imeliness

The Consumer Alert is published every month. To receive theConsumer Alert or its sister publication Fraud Alert by e-mail orpostal service contact Charles Ellison at ellison@scconsumer.gov orby phone 803.734.4203.

About the South Carolina Department ofConsumer Affairs

Dr. Lonnie Randolph Jr., Chair, ColumbiaThe Honorable Mark Hammond, Secretary of State, ColumbiaBarbara B. League, GreenvilleLouis Mayrant Jr., PinevilleRev. Tony Macomson, CowpensWayne Keith Sims, ColumbiaWayne Powell, GaffneyDavid Campbell, ColumbiaCarole C. Wells, Woodruff

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S.C. Department of Consumer Affairs6

simplest terms, if you enjoy free television andpurchased your TV before 1998, you will need aconverter box to continue watching.

Who has nothing to worry about?If you receive cable (digital or regular) or satellite

service and plan to continue to do so, you have nothingto worry about, even if your television is analog,because the signal is converted for you by your serviceprovider. If you own a digital television – nearly all TVsets produced since 2004 have a digital receiver – youhave nothing to worry about. However, very few TVsets built before 1998 have a digital receiver.

Do I need an HD TV?No, no, no. High definition requires a digital receiver

or converter box, but you can get a digital signalwithout an HD TV.

What do I need to know about the coupon?To receive a coupon call 1-888-388-2009 or

order online at www.dtv2009.gov.Each household is eligible for two $40 coupons.Only one coupon can be used per converter box.Coupons expire 90 days after they’re mailed.

More questions? Complaints?Call (888) 388-2009 or go to www.dtv2009.gov.

CONTINUED: It’s time to flip the switch!

A mechanic can spot structural problems, odometerfraud and flood damage; things that won’t necessarilyshow up on a Car Fax report. Yes, you’ll pay $100 or soto have this done, but it’s worth the money.

Think twice before purchasing ExtendedWarranties and Service Contracts.

They are almost never worth what you pay for them.Often, they don’t cover the parts that are subject tofrequent repairs, or the circumstances covered by thewarranty are very limited.

Remember that “if it sounds too good to be true – itusually is!”

The expression has become cliché, but the advice isrock solid. With most scams the warning signs arethere, we just tend to ignore them. We let greed andgullibility replace common sense. Don’t give your hard-earned money to a con artist.

CONTINUED:

Consumer resolutions...

Legal Limits: Despite the apparent danger of signinga restrictive contract, the Act does provide consumerscertain rights and safeguards.

The Act requires fitness facilities to have a suretybond or letter of credit to cover service contractsexceeding $200 or three months and requires them torefund the remainder of a consumer’s contract, if thebusiness closes.

CONTINUED:

Tip the scales...

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