Consumer News

Loyola Consumer Law Review

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Consumer News

Melissa A. Murphy

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Blacklisting

Bad

Drivers

People

with

bad

driving records

will

now

find

it

harder

to

rent

cars.

Car

rental companies,

including

Hertz

Corp., Avis

Inc.,

Budget

Rent

A

Car

Corp.,

and

National

Car

Rental

Sys-

tems

Inc.,

have

started

checking

the

driving

records

of

potential

custom-

ers

by

using

electronic

links

to

gov-

ernment motor-vehicle

records.

The

screening

takes

a

few

seconds

and has

resulted

in

the

rejection

of

six to ten

percent

of

the

people

who

want

to

rent

cars.

The

rental

car

industry

started

screening customers

in

an

effort

to

reduce

both

damage

to

their

cars

and

lawsuits brought

by

people

who

are

injured

by

drivers

of

rented

cars.

Under vicarious

liability

laws

in

New

York

and

other

states,

the

rental

com-

pany

remains

financially responsible

for accidents

that

kill

or

injure

third

parties,

even

if

the

renter

caused

the

accident.

According

to

car

rental

com-

panies,

these

laws have

led

to

tremen-

dous

liability

costs.

For

example,

in

1991

Hertz paid

liability

claims

of

$24

million

in

the

New

York

City

area

alone, said Hertz

spokeswoman

Annalise

McKean-Marcus.

Car

rental

companies

also

point

to

public

safety

concerns

as

a

reason

for

the

computer

checks.

"Not

only

do

we

limit

our

liability

costs,"

said

McKean-Marcus

"but

this

is

a

sound

public

policy

that

reduces

the

number

of

high-risk

drivers

on

the

road."

Hertz began

screening drivers

in

New

York

City

in

1992.

Other

compa-

nies

have

followed suit,

in

part

out

of

Consumer

News

is

prepared

by

the

News

Editor,

Melissa

A.

Murphy.

A

limited

list

of

materials

used

in

preparing

the

stories

appearing

here

is

available

for

a $5

compilation

charge.

Please

be

specific

(include

volume

number,

issue

number,

and

story

title)

when

ordering.

Send

requests

to:

News

Editor,

Loyola

Consumer

Law

Reporter,

One East Pearson

Street, Chicago,

Illinois

60611.

fear

of

renting

to

the people

whom

Hertz

considered

unsafe.

Similar

sys-

tems

are

now

in

use

in

Florida,

Ohio,

and

Maryland,

and are

expected

to

spread

soon

to

California,

Pennsylva-

nia,

and

the

District

of

Columbia.

Within

five

years,

the

rental compa-

nies

will have

instant

access

to

check

the

driving

records

of

nearly

all

the

country's

167

million

drivers.

The

screening

process

begins

when

a

potential

customer

presents

a

driver's

license

at

the

car

rental

counter.

The

rental agent

enters

the

driver's

name,

date

of birth,

and

driver's

license

num-

ber

into

a

computer connected

to

TML

Information

Services, whose

computer

is

linked

with

state

motor-vehicle

de-

partments.

TML

gets

the

driver's

record

from

the

appropriate

state

da-

tabase,

and

analyzes

it

according

to

standards

set

by

the

rental company.

Within

six

seconds, the

rental

agent

gets

a

"rent"

or "do

not

rent"

message.

The agent

does

not receive

any

details

about

the

driver's

record,

and

drivers

who

complain

are

directed

to

the

state

motor

vehicle

department.

Some

of

the

most

common

reasons

why

driv-

ers

are

disqualified

include:

-

having

a

suspended, revoked,

ex-

pired,

or

otherwise invalid

driver's

license;

.

having

been

convicted

of

drunk

driving

in

the

past

72

months;

0 being

at

fault

in

two

or

more

acci-

dents

in

the

past

72

months;

and

.

having

three

or

more

convictions

for

moving

violations

within

the

past

36

months.

Consumer

groups

criticize

the

screening process

for

three

reasons.

First,

they argue that

the

screening

should

take place

when

the

reserva-

tion

is

made, not

when the

customer

arrives

at

the

rental counter

to

pick

up

the

car.

Rental

companies

reply

that

the expense, which

is

between

$2.41

and

$5.00

per screening,

prohibits

them from

doing

the

screening

when

the

reservations

are

made.

In

addi-

tion,

one

in

three

people who

reserve

a

car never

show,

and

companies

can-

not

confirm

if

a

customer

is

providing

a

legitimate

driver's

license

number

over

the

phone.

For

these

reasons,

an

agent

would

have

to

repeat

any

ad-

vance

check

at

the

time

of

rental.

Further,

the

rental companies warn

customers

about

the

screening

pro-

cess

when

they make

reservations.

"One

would assume

they'd

know

whether

they

have

a

clean

driving

record,"

said Michael

Olsen,

a

spokes-

man

for

National.

Consumer

groups

are

also con-

cerned

about

the

potential invasion

of

privacy involved

in

a

records check.

Car rental

companies argue

that

be-

cause

most

state

driving

records

are

public information,

this concern

is

not

valid.

Driving

records

have

long

been

available

to

insurance companies,

which

routinely

check the

driving

record

of

every

new

applicant

seeking

an

automobile policy

and

of

policy-

holders

who

are

renewing

policies

or

are

involved

in

an

accident.

In

addi-

tion, according

to

Olsen, the

partici-

pating

states have

concluded that

mak-

ing

individual

driving records

avail-

able

contributes

to

public

safety.

The

final

concern

of

consumer

groups

is

the

blacklisting

process

used

by

Hertz

and

National.

At

these

com-

panies,

rejected

drivers

are

placed

on

internal

"do-not-rent

lists."

These

lists

prevent

them from

renting

cars

any-

where

in

the

country. Critics

of

the

lists

charge

that

they

can

be

abused

and are

subject

to

error.

Because

the

lists

are

not

automatically updated

as

driving

records

change,

customers

may have

problems getting

their

names

off

a

list

once

their

driving

records

are

cleared.

The

rental

companies

counter

that

they would

be

remiss

to

let

a

driver

rejected

in

one

state

rent

a

car

in

an-

other.

"If

we

don't

want

to

rent

to

someone

in

one

state,

and

we

know

they're

high

risk,

we

cannot

in

good

conscience

rent

to

them

in

another

state,"

a

Hertz

spokesman

says.

34

Loyola Consumer

Law

Reporter

Consumer

News

I

Cosue

New

I

Regardless

of

consumer

concerns,

it

is

unlikely

that the

screening system

will

be

eliminated.

The

rejection

of

one

in

every

13

customers

has

cut

accident

rates

nearly

in

half

in

the

test

states,

and

rental

companies

are

sav-

ing

money

on

damage

repairs.

The

companies expect

to

see

the

biggest

payoff

in

three or four

years,

when

costs

for

lost

or

settled lawsuits

are

reduced.

-.°

FTC

Attacks

False

Weight

Loss

Claims

The

Federal

Trade

Commission

(FTC)

has

launched

an

investigation

of

a

dozen

major

diet organizations

in

an

effort

to

attack

false weight

loss

claims

and

other

misleading advertis-

ing. Some

of

the

companies

under

investigation

include Diet

Center

Inc.,

Nutri-System

Inc.,

Jenny

Craig

Inc.,

Physicians

Weight

Loss

Centers

of

America

Inc.,

and

Weight

Watchers

Inc.

The

FTC

has

alleged

that

the

five

companies

failed

to

provide evidence

in

their advertisements

to

verify

claims

of

dramatic

weight

loss or

that

cus-

tomers

would

be

able

to

keep

off

weight

in

the

long-term.

According

to

the

FTC,

consumer

testimonials

and

program

comparisons

have

been

mis-

leading,

pricing

has

been

deceptive,

and

rates

of

weight

loss have

not

been

monitored.

In

June

1993,

prior

to

the FTC's

announcement, Consumer Reports

magazine

published

the

first

major

survey

of

the

nation's

leading

weight-

loss programs.

In

researching

the

story,

the

non-profit

group

collected

information

from

95,000

readers

who

had followed

weight-loss

programs

in

the

past

three

years.

This

number

included

19,000

who

had

used

com-

mercial

diet

programs.

Most

of

the

respondents

said

they

lost weight

us-

ing

one

of

the

planned programs,

but

the

"great

majority

of

them gain

back

most

of

that

weight within

two

years,"

the

magazine said.

A

goal

of

the

FTC

investigation

is

Volume

6

Number

2 /

Winter

1994

to

set

a

standard

for

evidence

that

would

be

required

to

support

various

weight

maintenance

claims.

For

ex-

ample,

the FTC

would

require claims

of

long-term

weight loss

to be

based

on

dieters

who

have

been

monitored

for

at

least

two years.

In

addition,

the

FTC

may

require

that

maintenance

success

claims

be

accompanied

by

clear disclosures, including

the

state-

ment,

"For

many

dieters, weight

loss

is

temporary."

"The

bottom

line

is

that

losing

weight

is

hard

work,"

said

Christian

White

of

the

FTC's

bureau of

con-

sumer

protection.

The

agency

wants

to make

sure

that weight-loss

promo-

tions

acknowledge

this

fact, White

said.

Three

of

the five

major

programs

under

investigation

have

settled

gov-

ernment

charges

by

signing consent

decrees:

Diet

Center

Inc.,

Physicians

Weight Loss

Centers

Inc.,

and

Nutri-

System

Inc.

The

other

two,

Jenny

Craig

Inc.

and

Weight

Watchers

Inc.,

argue that they

are

already

in

full

compliance

with

FTC

requirements.

"The guilty

have

signed,"

said

Charles

Berger,

chairman

of

Weight

Watch-

ers.

"And

since Weight Watchers

has

never

done anything wrong

we

will

not

sign

a

consent

order." Said Ronald

Gerevas,

president

and

chief

execu-

tive

officer

of

Jenny

Craig,

"We

look

forward

to

debating

this

issue

in

court."

Diet

companies

point

out

that

the

settlements

between

the FTC

and

Nutri-System, Physicians Weight

Loss

Centers,

and

Diet

Center

are

not

ad-

missions

of guilt,

but

instead

are

agree-

ments

to

avoid

certain advertising

claims.

Nutri-System

chairman

and

chief

executive

officer

Michael

Heisley

said

that

his

company

signed

the

settlement

in

order

to

show its

customers that

it

is

committed

to en-

suring

accountability

in

the

weight

control industry.

Essentially,

the

settlements require

companies

to

engage

in

truthful

ad-

vertising.

The

companies

must

also

provide evidence

to

support

any

ad-

vertised

claims. Dramatic

success

sto-

ries

would

have

to

be

accompanied

by

a

statement

of

average

success

rates

or

by

a

statement

that

the

experience

is

not

typical,

said

the

FTC's

White.

.,

Electronic

Insurance

Claim

Filing

Sparks

Privacy

Concerns

Through electronic claim filing,

the

U.S.

health-care

industry

and

insur-

ance

companies

are

joining

the com-

puter

revolution

to

cut

down

on

vast

amounts

of

paperwork.

If

successful,

computerization could

save

as

much

as

$42

billion

a

year

in

administrative

costs -

half

the

cost

of

President

Clinton's

proposed

health-care

re-

form.

Electronic filing could

also

save

millions

of

hours spent

in

filling

out

forms, checking

eligibility,

and

processing

claims for

payment.

By

the

end

of

health-care providers,

and

employers

are

set

to

computerize

and

standardize

nearly all

health-care transactions.

The

computers

of

the

largest

insurers,

providers,

and

firms

will

handle

en-

rollment,

eligibility

claims, bill

pay-

ing,

and

other transactions.

To

achieve

this goal,

the

program

participants

have

decided

to

use

stan-

dard

identifying

numbers:

the Social

Security number for

individuals

and

the

tax

identification

number for

pro-

viders.

A

separate

eleven-digit

num-

ber

would

be

used

to

identify

compa-

nies.

This

prospect

raises

fears

that

un-

authorized

people

may

discover

ways

to

access, read,

and

misuse

private

health

records stored

in

an

electronic

database. Privacy experts

are con-

cerned

about

the

massive

amount

of

personal information

collected

by

in-

surance

companies.

These

experts

say

that electronic

files

are

more

dif-

ficult

to

steal

than

paper

records.

However,

if

an

intruder

breaks

into

the

computer

system,

the

breach

of

confidentiality

could

be

more

serious

because

of

the

increased

volume

of

information

stored

in

computers.

Recognizing

the

problem

of

poten-

tial

theft

and

tampering,

the

employ-

I

CosmrNw

ers,

providers,

and

insurers

that

are

adopting

the

new

industry

standards

are

urging

Congress

to

strengthen

pri-

vacy

laws

in

order

to

preserve

confi-

dentiality

of

electronic health records,

as

well

as

impose

criminal

penalties

on

violators.

The group

recommends

that

the federal

government

preempt

all

state

laws

governing

the

confiden-

tiality

of

private electronic

health-care

records

because

the

state

laws

are

of-

ten

in

conflict.

Privacy

experts contend

that

use

of

Social Security

numbers could

com-

promise health-care

confidentiality.

"It's

not

a

secure

identifier,"

said

Evan

Hendricks,

editor

and

publisher

of

the

Privacy Times,

a

biweekly

newsletter

on

privacy issues.

"If

your

Social

Security number falls

into the

hands

of

an

unscrupulous

person,

it

can

po-

tentially

ruin

you

financially

or

other-

wise."

In

response

to

these concerns,

a

Congressional

committee

is

drafting

legislation

to

protect

the

confidential-

ity

of

medical

records.

"The

sensitiv-

ity

of

health

care

information

can

hardly

be

overstated,"

said

Rep. Gary

Condit,

chairman

of

the

Information

Subcommittee

of

the

Government

Operations Committee,

which

is

draft-

ing

the

legislation.

Congress

will

also

be

asked

to

re-

solve

other

such

as

who

will

receive

access

to

government

health records

and

whether

one's

So-

cial Security

number should

also

serve

as

a

health

identification

number.

"We

think

that

use

of

the

Social

Security

number

is

a

critical

issue,"

said

Marc

Rotenberg, director

of

Com-

puter

Professionals

for

Social

Respon-

sibility,

a

non-profit

organization.

"If

you

use

the

Social Security number

as

the

patient identifier,

you

take

a

major

step

toward

establishing

a

national

identification

system."

*•

Fast-Food

Chain

Bans

Smoking

Non-smokers

won

a

major

victory

in

the

battle over

smoking

in

public

places recently

when

McDonald's

Corp.,

the

world's

largest restaurant

chain,

announced

a

smoking ban

in

its

1,400

company-owned

restaurants.

Until

now,

most

fast-food

restau-

rants

had

continued

to

allow

smoking.

Exceptions

included

Arby's

Inc.

and

Dairy

Queen

Inc.

However, recent threats

of

litiga-

tion

and

governmental

action

may

have

helped

put

pressure

on

fast-food

restaurants.

Last

year,

the

Environ-

mental

Protection

Agency

classified

secondhand

smoke

as

a

serious cancer

threat.

In

addition,

a

coalition

of

16

state

attorneys

general

has

been pres-

suring

the

fast-food industry

to

ban

smoking

because

of

the

large number

of

children

and

teenagers

who eat

and

work

at

the

restaurants.

Earlier

this

year,

the

Texas Attorney

General

filed

lawsuits

against

five

fast-food

chains,

including

McDonald's,

demanding

better protection

for

children

against

secondhand

smoke.

New

900

Number

Rule

Helps

Consumers

Under

a

new

rule

of

the

Federal

Trade

Commission,

900

number

ser-

vices

(pay-per-call

services)

must

pro-

vide

the

following information

to

con-

sumers:

0

Information

in

their