Get a second opinion when your furnace is shut off

For years, I’ve heard that Direct Energy technicians are quick to shut off furnaces during an inspection. The verdict is a cracked heat exchanger, a piece of metal that separates the furnace’s fire from the home’s air stream.

The company says it has to act speedily because of the danger of carbon monoxide leaking into the home. Critics says it’s because of the pressure to increase furnace sales.

Direct Energy is aware of the problem, as I said in my column. It is telling owners of shut-off furnaces that they can get a free second opinions to confirm the diagnosis.

Many people already go to other contractors to get a second opinion. And if they find the furnace really does need to be scrapped, they give their business to someone else.

Direct Energy hopes to win back furnace sales by offering second opinions. And if another inspection shows that a furnace works well, it hopes to gain customer loyalty.

Many heating contractors sell annual maintenance plans. Some aren’t as quick on the trigger as DE technicians are. So, I suggest that you look elsewhere for a second opinion, rather than rewarding bad behaviour.

Posted below are stories from readers about their own furnace inspections and re-inspections.

Dial F for frustration when calling Rogers

From the moment my column hit the Star’s website last night, I started getting emails from readers. Most agreed that Rogers didn’t care about excellent customer service and frustrated them when they called for help.

Some people said I didn’t go far enough. Others insisted that Bell was worse. A few talked about great experiences with Rogers, but many more told stories of indifference or rudeness.

One commenter at Moneyville pointed to corporate cost cuts, imploring customers to demand better working conditions for overworked staff.

I want to post a few emails here, just to get a conversation started. I was surprised by the number of people who felt so powerless they just gave up, either paying amounts they thought were wrong or not fighting for what they thought was right.

To fee or not to fee? That is the question

After the financial crisis of 2008-09, governments around the world started looking at ways to make the investment business more ethical and transparent to consumers.

Some countries are changing the compensation system for financial intermediaries. Instead of allowing product providers to pay commissions to product sellers, they want consumers to pay sellers directly for their services.

Embedded commissions are hidden from consumers and represent a conflict of interest that makes financial advice less reliable.

Suppose you’re buying mutual funds and don’t know which ones to choose. Your advisers may urge you to buy funds that pay them better commissions. Stock funds, for example, are more lucrative than bond funds.

Mutual fund sellers may push their own house-brand funds at the expense of other equally good funds. Or they may push you to borrow money to invest, thus increasing the assets they manage and their commissions.

Life insurance sellers also earn commissions from product sellers. They can make more money on cash-value and universal life policies than on term life policies. So, guess which ones they prefer to sell?

The compensation structure for financial advisers is not yet an issue in Canada. But it’s a high-profile trend elsewhere. Britain and Australia are both moving to ban commissions in the next couple of years.

I recently moderated a panel discussion on fees versus commissions, which included British and Australian industry representatives. They both said that financial advice would be more objective if consumers paid for it out of their own pockets. See story here.

What about better disclosure of conflicts? That’s the Canadian approach. Right now, securities regulators are planning to make a short document available by law to all mutual fund buyers at the point of sale.

Disclosure doesn’t work, the two foreign reps agreed. People just don’t read the documents they’re handed and often don’t understand them anyway.

Canada should start talking about fees and commissions, since the issue is not going away. Consumers will want to follow other countries’ examples.

Financial advisers can’t call themselves professionals and accept payments from product providers — without betraying the trust of clients who rely on them for unbiased advice.

P.S. There’s something wrong with the comment link in the post below this one (“Looking for your Responses”). So, please post your comments here.

Looking for your reponses

My new blog at Moneyville doesn’t allow comments yet. And I miss getting comments. It’s not the same if I’m not hearing from readers.

So, here are some things I know will provoke some reaction. Let’s get started.

— TD Bank changing its mortgages to make it harder for customers to switch.
Steve Garganis, a mortgage broker, told me about his blog post that TD is planning to start registering all mortgages as collateral charges on Oct. 18. He calls it putting handcuffs on the client.

A collateral mortgage is NOT portable, meaning you cannot transfer to another institution. You will lose some leverage to negotiate the rate when your mortgage matures.

You can read more in the Canadian Mortgage Trends blog, which says there’s some appeal for consumers who want to refinance.

Effectively, collateral charges allow lenders to change the interest rate and/or loan more money to qualified borrowers after closing, without involving a lawyer. That saves the borrower legal costs if he/she needs to withdraw equity from their home.

But the downside comes at maturity, since TD customers will now have to pay legal fees to switch lenders.

For now, it’s difficult to assess the impact of this change. Everyone needs to renew, but not everyone needs to refinance. So TD’s move will benefit some while hurting others.

James Daw of the Toronto Star writes about TD’s mortgage move here.

— Deferred sales charges on mutual funds can hurt customers.
I believe that many mutual fund buyers don’t like paying sales charges up front. But they don’t understand the severe financial consequences arising from redemptions in the early years.

Even the Mutual Fund Dealers Association of Canada, the industry regulator, knows there’s a problem. It’s proposing new disclosure rules because many consumers complain about nasty surprises when they redeem.

The current rule requires that clients get trade confirmations only AFTER the transaction is executed, the MFDA says.

There is currently no express requirement under MFDA Rules to inform clients at the time of a transaction of fees and charges that will be incurred by the client and deducted from client funds as a result of the transaction.

To make informed decisions, clients require information in respect of transaction fees and charges prior to the acceptance of their order.

Gary B. Gorr, a licensed mutual fund broker, didn’t like my advice to buy only funds with no loads or a front load option. He wrote a rebuttal at his blog.

His argument involves a number-crunching exercise, where he finds a big difference in favour of the deferred sales charge over 20 years.

Having done the math of upfront versus DSC it is never better for long-term investors to pay an upfront sales charge.

Maybe so, but I don’t know many investors who hold the same fund — or stay with the same fund family — for 20 years. Many don’t even stay for the six or seven years needed to eliminate the DSC.

I think deferred sales charges create more problems than they resolve. Too many people are trapped in bad funds or poorly diversified fund families becuase of restrictive exit fees.

And if fund buyers really understood the financial harm they could be incurring by taking on such restrictions, they would willingly choose the no-load or front-load option.

Welcome to Moneyville

The Toronto Star’s new personal finance website, called Moneyville, launched this week. I hope you visit our new gathering place soon and stay awhile.

I’ll be doing a new blog there a few times a week.

Check out the information I posted about my new financial literacy workshop at Ryerson University on Wed., Oct. 20, from 5.30 to 9.30 pm. It’s at the Rogers Communication Centre, 80 Gould St., Toronto, Room 204, second floor.

An article I wrote for Moneyville, 10 things you need to know about credit cards, is the best-read piece today. And I wrote another article, called 10 things you need to know about borrowing.

My existing blog at has an active community of readers. with more than 400,000 hits a month and 7,300 comments. I’ll still be maintaining and moderating it, but most of my new posts will show up at Moneyville.

Ignore the door

I try to resist door-to-door sellers, but I know how irresistible they can be in sneaking past your defenses and into your wallet.

The latest scam is the person who comes to inspect your rented water heater and give you an upgrade, disguised as a gas fitter working for your local utility. See my column here.

You’re thrilled to get a newer, better, safer, less wasteful water heater and you fail to see that you’re switching to another rental company and agreeing to stay for up to 15 years.

Later, you may face higher fees, improper installation and double-billing from your previous supplier (if the old tank wasn’t returned). You may also get telemarketing calls from your new supplier, anxious to replace your furnace as well.

Check out the Ignore the Door campaign from the Consumers’ Waterheater Income Fund. This is an affiliate of Direct Energy, which also employs door knockers to sell fixed-price energy plans.

Do you think DE is promising never to use unethical tactics again? One can only hope.

Summitt Energy is also now replacing water heaters, using this as a foot in the door to sell other products, including its Evergreen carbon offset program. See comments below about this company’s practices and my Star column.

Correcting your credit report

Should be easy, right? You tell the credit bureau about a mistake on your birth date or the spelling of your first name, causing you to be turned down for a loan. Then, you wait to get things cleared up.

Not so fast. Some people go through exquisite torture trying to get minor correctons on their credit reports.

Take Alison, who was turned down for a new CIBC credit card. The reason? She said her birth date was Oct. 18, but her Equifax credit check showed it as Oct. 16.

Here’s how her husband describes their attempts to make things right.

Alison was unable to reach anyone by telephone at Equifax’s general number, so ordered a copy of the credit file by telephone on June 30th. She then attempted to resolve the issue online, but was told that the error could not simply be updated by Equifax. She needed to discuss it with the Dispute department.

After receiving the credit report on July 8, she made the call as requested. Unfortunately, the computerized system was not working and it did not recognize her inquiry number.

She made a number of futile attempts to speak to a human being before trying to call yet another number in the credit report, for National Consumer Relations, and spoke to a customer service representative.

She was told that the birth date shown on the Equifax’s computerized records was now Oct. 18, the correct date. But she was refused when she asked for a copy of the computerized record,.

Alison had three options – she could wait 14 days and reapply online for a new copy, pay an additional charge to get it right away, or travel to the Toronto office and obtain a copy personally.

None of those options was acceptable. She was not going to spend one more minute of time on this matter without compensation from Equifax.

Not only had Equifax’s error interfered with her credit, but it had caused her to spend more than five hours trying to fix an error that she had no part in creating.

Equifax called to apologize and promise to send a corrected report once I forwarded the complaint.

Meanwhile, Alison has been thinking about why the system works badly for borrowers.

The easy answer is that the front line staff is incompetent and the computer system stinks.

However, I think that the root of the problem is that Equifax has enormous power over debtors because of the reliance that lenders place on the credit reports, but debtors have absolutely no power over Equifax.

Equifax knows this. It is easier and cheaper for them to deal with disgruntled debtors on a case to case basis, as here, than it is to design appropriate systems and train appropriate staff.

The banks and creditors, who pay Equifax for the credit information, have some control because they can choose to use one reporting agency over another and so their opinions matter to Equifax. Hence the policies are designed to keep them happy.

The debtors, on the other hand, can’t pull their business from Equifax; they can’t refuse to deal with Equifax. Debtors have no leverage with which to make Equifax behave.

They can’t refuse to undergo credit checks. They have no choice in how their information is gathered; they have no choice in how the information is used; they have no choice in the procedures that are imposed on them.

The legislation governing credit agencies is inadequate and does not recognize commercial realities and enormous imbalance of power between the agencies and the debtor.

Now let’s look at a story about TransUnion and a man named Rajesh, who also applied for a credit card.

I was encouraged to apply for a Walmart Mastercard, but my request was declined. I feel I should have a strong credit rating, but Walmart said there was a problem asked me to call TransUnion.

The representative said my first name has been incorrectly spelled as RJESH instead of RAJESH. He said I should send them a letter, asking to correct the name.

I both faxed and mailed a letter, with copies of my driver’s license and credit card. However, it’s been four months. They sent me a letter asking for the documents again and have not corrected the error.

The TransUnion rep also mentioned a problem with Honda Finance and end-of-lease charges. I succeeded in getting Honda to waive the charges, but they went on my credit record anyway.

During this time, two other credit card companies wrote to me, saying they had significantly reduced my credit limit since they felt I was a high risk customer.

It’s very tiresome to talk to TransUnion. Every time, they ask me a lot of questions and ask me to send a lot of documents. They don’t acknowledge any receipt of documents, as the phone reps seem to have no way of knowing if my faxed or mailed documents have reached them or not.

Here’s a final TransUnion story, involving an incorrect birth date for Paul’s wife.

My wife and I tried to open a joint account with Ally Bank. and sent in all the paperwork (birth certificate, passport, S.I.N etc.). Ally called and said no, my wife’s birthday was incorrect, according to TransUnion’s credit report.

We tried to get an online credit report from TransUnion, but the birth date was wrong and this was one of the items you needed for online access. So we sent in the paperwork for a free credit report, including a copy of my wife’s birth certificate.

They sent back the credit report with the wrong birth date. So much for checking to make sure they were sending out the right report.

I called them and suggested they review the info on file and correct the date, as we had sent in the birth certificate.

Nope, they couldn’t talk to us as we did not have the correct info to access the file. The birth date was wrong.

It took two months to sort this out and we resubmitted all the info.

You are right we need some legislation to make these companies correct wrong information and not force the consumer to jump through hoops.

We found out the date was right with Equifax, but nobody compares the data.

In my column last week, I suggested penalizing credit granters and credit bureaus that pass along incorrect information. Are the politicians listening? I’m sure they could gather many stories like these if only they started listening.