Help, I’m being gouged for spam text messages

Check your cellphone bills for pricey text message charges. Short-code messages, as they’re called, usually have a string of numbers followed by a name like Premium Text Trivia.

I did a column last week and asked readers to send stories. You’ll find a bunch below.

The CBC has done a few television news items lately, here.

You get lured in by doing an online contest, which asks you for your cellphone number. You then receive — by text — a PIN number. Once you enter that PIN number on the website, you’ve subscribed.

Here’s a link to the $12.3 million (U.S.) settlement of a class action by m-Qube Inc., one of the biggest offenders. The lawsuit alleged there were not adequate safeguards in place to ensure that customers were only billed for services they agreed to purchase.

In Canada, the wireless companies insist that it’s not their problem. They blame customers for giving away cellphone numbers without reading the fine print.

But when reading these comments, watch for a pattern. Those who make noise often get refunds or freebies to compensate for the unauthorized text messages.

Does your water heater need to be replaced?

You have a rented water heater and you pay monthly fees on your gas bill. But Ontario’s gas utilities are no longer in the water heater rental business. Enbridge sold its portfolio to Direct Energy and Union Gas sold to Reliance Home Comfort.

Recently, new competitors are trying to grab the business away. The two legacy firms are losing market share and they’re not happy.

Direct Energy, in particular, has a strong motive to cover its assets. In 2002, it set up the Consumers’ Waterheater Income Fund, which gives investors 65 per cent of the rental revenues, while Direct Energy gets the remaining 35 per cent for life-cycle support.

“The Fund generates very stable cash flow, making it ideally suited to the income trust structure,” it says. But the share price has slipped to $3.66 from a 52-week high of $10.30.

In its latest quarterly report, the fund explains what went wrong:

The attrition rate of 3.5% increased significantly from 0.9% in the prior year due to intense competition.

The Fund and Direct Energy Marketing Limited (“DE”) have initiated a range of marketing programs aimed at informing our customer base and reducing future attrition levels.

Direct Energy has a new website, warning customers about misrepresentation by rival water heater sellers .

It uses the same slogan I use (“straight talk”) and has bought the rights to use several of my columns there.

Reliance Home Comfort has set up a new consumer website as well, and posted my latest column there.

I’m not thrilled to be a poster child for these campaigns, but I do hate the way that some rivals misrepresent themselves to make a sale and lock customers into long-term contracts with stiff exit fees. The tactic of installing new water heaters during the 10-day cooling off period also makes me crazy.

As usual, readers happily shared their views about the water heater wars and other issues involving Direct Energy, Reliance and Enbridge. Some comments appear below.

Several people asked me to explain the pros and cons of renting vs. buying your own water heater. I’m a renter (just lazy, I guess) and I’d like to hear from those who have bought their own tanks. As for tankless (another question asked by a few readers), my thumb’s down for now.

Another milestone for this blog

Thanks to everyone who has been posting comments here. Today, the number has just surpassed 5,000.

Some comments, of course, come from my own email. I post ones I think you will enjoy reading in full, without the cuts needed when writing in a newspaper.

Here’s a complaint about Summitt Energy, which targets new homeowners and misleads them about what it’s selling. The reader seems to have taken down every word of the sleazy sales pitch.

Another is about Sears, which promised a $50 gift card to a customer who had problems with a new refrigerator. Now the gift card has gone AWOL.

Finally, there’s an epidemic of extortion with low-price movers in Toronto, who add on charges after the fact and make you pay to get your belongings back. One reader has found a way to foil the fraud.

Investing for beginners, part three

I just finished teaching an eight-week investing course at University of Toronto’s continuing studies. About 40 people attended, including some who had no previous investment experience and others who had been using professional money managers.

They agreed with me that salespeople have many hidden conflicts that taint their advice. They liked the idea of using passively managed index funds and exchange-traded funds to bring down their costs dramatically. They already had discount brokerage accounts or planned to open them imminently.

But here’s the problem. Many people don’t want to do their own investing. They want an adviser to help them create a low-cost index fund portfolio and rebalance it every year.

Do such financial advisers exist? That’s a question my students asked and I couldn’t answer.

Mutual funds are profitable for sellers because of up-front commissions and annual trailer fees. But where’s the money in selling passive portfolios to smaller investors?

I know of a few firms that have their own proprietary index funds, such as Dimensional Fund Advisors and the Croft Group’s Portfolio Index Evolution Solution. They get an income stream from manufacturing and managing funds, not just selling them.

But are there advisers who help you choose the right mix of iShares, SPDRs and Vanguard ETFs? That’s what I’m looking for. Please let me know if you find any.

Meanwhile, you can pay for do-it-yourself coaching to manage your own investments. This is something offered by Weigh House (formerly Second Opinion Investor Services). But it doesn’t recommend individual securities or make buy/sell recommendations. It just helps you make your own decisions.

This week, I met with a class member who wanted advice about her investments. At age 45, she had a “know your client form” with a 90 per cent stock allocation. Her equity funds (mostly foreign) were poor performers. Her only fixed-income investment was a high-yield bond fund. And her $200 monthly contributions went into a cash account, which paid a grand total of 25 cents in interest last month.

In my view, her portfolio was too risky and should have been rejigged after the crash. But her adviser had left the firm and she inherited another one who called her only once a year. She should have been putting new money into the stock market to take advantage of dollar cost averaging. And she didn’t need a few thousand dollars sitting in cash, rather than money market funds.

I’d love to see her take charge of her investments, but she doesn’t have the experience or confidence to do that. And with a full-time job, she probably has better things to do in her spare time.

Canada needs financial advisers to help investors succeed without costly mutual funds that can’t match the market indexes. Is there a business model for such a practice? Until that exists, I’m afraid that passive investment strategies won’t take off in a big way.

Big companies behaving badly

In my job, I hear terrible stories all day long. Luckily, I have an optimistic nature and often do get results, as in the case of an Enbridge Gas customer who was disconnected in error last week. See his story below.

But in some cases, companies are stubborn and won’t budge. Another story below is about a homeowner who wants a rotting telephone pole removed from his property. Bell Canada says its hands are tied.

Finally, there’s the tale of a new Sears washing machine that leaked all over the owner’s basement. The machine was replaced, but the dispute about damages has gone on and on. Meanwhile, Chase Card Services is gunning her for payments.

Once in a while, I do get some heart-warming stories. I posted a couple below about Moen, the faucet maker, and a local bicycle store. If you have any, please pass them along.

The trend to use verbal contracts

In today’s column, I focused on what I think is an unethical tactic — binding customers to verbal contracts for telecom services.

Customers are often unaware of a contract because it’s verbal and disguised as a discount. They say yes to the deal without realizing they have to pay back the incentives if they switch to a rival before the term is up.

I don’t mind a verbal contract if the telephone conversation is recorded and the customer’s approval can be brought forward as evidence. I also believe that a verbal contract must be followed up with paperwork.

How hard is it to send a letter in the mail? Or why can’t companies put information in each monthly bill, including the date the contract starts and ends? Yet telecom companies don’t like to do that.

They’re in the communications business, but they’re either too cheap or too lazy to document their agreements. They seem to think a quick verbal assent to a lower rate is enough to show a customer’s approval of a multi-year commitment.

The new Commissioner for Complaints for Telecommunications Services thought it was a big enough issue that he devoted several pages in his latest annual report to these verbal contracts. (See pages 25 to 28.)

While he doesn’t think he has the power to stop this practice (being funded by the industry, after all), he did suggest that companies take pains to ensure the customer knows of the penalties involved in switching.

The issue of contracts agreed to by phone and not reinforced with paperwork also comes up with furnace and air conditioning service plans, lawn care plans and fixed-price energy plans. The original agreement may be documented, but the renewals are not.

I think we need new laws to protect customers from such abuses. I often hear that when customers ask for proof they agreed to something on the phone, they can’t get a recording that shows they did.