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Gotcha Capitalism: How Hidden Fees Rip You Off Every Day-and What You Can Do About It Paperback – December 26, 2007

ISBN-13: 978-0345496133 ISBN-10: 0345496132 Edition: First Edition

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Product Details

  • Paperback: 368 pages
  • Publisher: Ballantine Books; First Edition edition (December 26, 2007)
  • Language: English
  • ISBN-10: 0345496132
  • ISBN-13: 978-0345496133
  • Product Dimensions: 8.3 x 5.5 x 0.8 inches
  • Shipping Weight: 8.8 ounces (View shipping rates and policies)
  • Average Customer Review: 4.1 out of 5 stars  See all reviews (45 customer reviews)
  • Amazon Best Sellers Rank: #809,046 in Books (See Top 100 in Books)

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Excerpt. © Reprinted by permission. All rights reserved.

Chapter 1

Shrouding, Reverse Competition, and Other Corporate Tricks That Attack the American Way of Life

Some will rob you with a six-gun. Some with a fountain pen.

Woodie Guthrie



I. Paranoia?

Let me make a confession. I hate getting cheated. I mean, really, really, really hate getting cheated. I mean veins-pop-out-of-my- forehead, glad-I'm-not-getting-my-blood-pressure-checked-today hate getting cheated.

And yet, I feel like I'm getting cheated all the time.

I often open the mail with dread. It makes the hairs on the back of my neck stand up, as if I were some primal creature readying for a fight. I walk into a cell-phone store, check my online statements, or just turn on my television, and I feel like everyone is out to get me. I suffer from what a therapist might call low-level, background anxiety. I think someone is always trying to steal something from me.

Am I crazy?

When I was a child growing up just outside New York City during the 1970s, I learned to be afraid of getting mugged. But this is not that. The criminals I'm talking about don't bop anyone over the head and steal hundreds of dollars. These criminals slowly take $5, $10, and $20 from me, often with a smile. They pop a surcharge onto my monthly phone bill. They pad my TV bill with services I didn't ask for. They drain my bank account-drip, drip, drip-when I'm not watching. These hidden fees keep me up at night like the sound of a leaky faucet. I feel like I have to watch everything all the time because it's so easy to miss some statement on some form with some asterisk that means the company can take even more money from me. And when that happens, I suffer from what I call small-print rage.

Am I crazy? Or am I just paying attention? One thing I know for sure: I'm not alone.

I'm not a therapist, or a sociologist, but I feel on firm ground saying that small-print rage is a close second only to road rage as a source of stress in America today. As author of The Red Tape Chronicles on MSNBC.com, a twice-weekly column that exposes small print, corporate sneakiness, and other twenty-first-century headaches, I invite readers to share their woes with me. Tens of thousands have e-mailed and left comments on my blog as a desperate last attempt to get justice. I can see the exasperation in the amount of CAPITAL LETTERS that show up in their notes.

So I know: You suffer from small-print rage, too.

Sneaky fees peck away at us like a swarm of mosquitoes that ruin an otherwise beautiful summer evening. And like mosquitoes, an individual bite might seem trivial, barely more than a nuisance, but repeated bites can actually change the way you live. They chase you inside, make you build a screened porch, and in extreme cases make you sick.

As a too-sticky summer night breeds mosquitoes, today's business environment breeds sneakiness. Companies under pressure to keep advertised prices low have seized on trickery to pump profits up. The most successful firms are now the ones that hide their prices best: under asterisks, deep inside terms and conditions, in fees they call taxes, bills that come months after the fact, even around dark corners in auto dealerships where the manager's office is. Then, right when you think you just got a good deal, an unexpected bill comes, or a car salesman jumps out from behind the corner and yells:

Gotcha!

One Gotcha might be irritating. A few might make you angry. But Gotchas are everywhere you turn now. They are a way of life for consumers. They are our new economic system, replacing our former system, the free-market economy. In Gotcha Capitalism, your personal finances are under siege. Mosquitoes might threaten your life with death by a thousand bites; Gotcha Capitalism threatens your finances with death by a thousand fees.

"C'mon, Bob," you might be thinking. "We're talking about nickel and diming. It's not that bad."

Yes, it is. I've got research to prove it.

During November 2006, I asked independent researcher Larry Ponemon of the Ponemon Institute to conduct a nationwide survey of fees and surcharges. Together, we asked consumers around the country how much they believed they'd lost to sneaky fees in the past twelve months. To be fair, we didn't allow much speculation; instead we asked consumers to identify the amount of hidden fees they'd later discovered in ten important product lines one at a time, such as cell phones, groceries, and travel.

The result? Those $5 and $10 charges really add up. Even with these limitations, Americans told us they lose $946 to sneaky fees every year, enough to stock a sizable retirement fund. And when you add up all sneaky-fee revenue, the total is simply massive. According to the survey, corporate America's take in the ten industries surveyed was $45 billion. To put that number in context, $45 billion is about equal to the amount of money stolen through the fastest-growing crime in the country, identity theft. ID theft is such an epidemic that presidential task forces have been formed to fight it. There are entire divisions of law-enforcement officials being trained to stop it. There is an entire industry of companies that has grown up to prevent it. However, I know of no single agency or company devoted to stopping the explosion of hidden fees, which cost our society just as much as identity theft.

Of course, the crime of hidden fees is not so dramatic. There are no spectacular million-dollar diamond heists accomplished in the name of deceased CEOs. Instead, hidden fees are a slow drip-drip-dripping out of Americans' hard-earned salaries. Cell-phone users, for example, reported to us that they pay about $5 to $10 more a month-on average- than they expect to, thanks to sneaky fees. That doesn't sound like much, until you consider there are more than two hundred million cell- phones user in the United States alone.

Now perhaps you'll think like I do, that the proliferation of hidden fees-and not identity theft-is the fastest-growing white-collar crime in America.

For consumers making $45,000 or less a year, that $946 in hidden fees can mean one less vacation per year, or no evening classes for additional job training. It can take a huge bite out of a family's retirement savings.

And that number is conservative. For starters, to make the study manageable, we limited the survey to ten likely culprits: cellular phones, credit cards, banks, airline travel, hotels, cable TV/ satellite, home Internet access, retirement services, insurance, and groceries. Detailed industry-by-industry discussion of these fees can be found in the Toolkit Section, Chapter 4.

Remember, this $946 total is an average. So for every consumer who manages to exert Herculean effort and minimizes hidden-fee expenses to a tidy $200 or $300, there's another who pays nearly $2,000 a year. It also only represents the sneaky-fee take among those ten industries-obviously, other kinds of companies stick their customers with fees, too.

Finally, this $45 billion total-that's just the sneaky fees consumers know about. Others are surely lurking out there underneath mountainous monthly bills that busy consumers miss, and couldn't reveal to us when asked.

It's easy to calculate sneaky-fee estimates that are much higher. Simply adding up analysts' estimates of total fee income from credit- card late fees, homeowners' title insurance, wacky hotel-resort fees and the like, consumers lose well more than $100 billion a year to hidden surcharges.

But the real total is probably even more than that-in 2004, Consumer Reports guessed it was around $216 billion annually. Your family's portion of that would average closer to $4,000 each year.

Gotcha! Perhaps those mosquito bites are starting to itch. But I have yet to describe the biggest bite of all.

That $4,000 annual drain is nothing compared to what Gotcha Capitalism is doing to your retirement. In the biggest fee swindle ever invented, hidden fees-siphoned off in total silence by Wall Street-will force you to work four, five, even six years longer than you should. They're stealing roughly one-third of the money the average American has set aside for old age. And get this: the better the investor, the greater the penalty. Later in this book, I'll show you how Wall Street fees can suck up fully 80 percent of the money a twenty-year-old invests for retirement. Eighty percent!

Hidden fees are so drastic now that they may even be screwing with the national inflation rate. Companies often don't supply surcharges and fee data to the Bureau of Labor Statistics, so when it computes inflation rates, fees aren't reflected. As a result, our national inflation rate is held artificially low.

Yes, hidden fees are a big deal.

These numbers might surprise you, but I'll bet you've had a sixth sense that something was amiss for a while. You wondered why the government keeps saying inflation is the lowest it's ever been, yet you feel squeezed tighter and tighter by monthly bills. And I'll bet you feel small-print rage once or twice a month. You know the feeling well. There you are, lying in bed at night, trying to convince yourself to forget how irritated you are at that $39 "courtesy overdraft fee" you just paid to your bank for buying a $3 hamburger with your cash card one day before your paycheck cleared.

But you don't have to take all this lying down. In my paranoia to avoid getting cheated, I've discovered something, and I want to let you in on the secret. We don't have to pay sneaky fees. And if you've already paid, don't worry: There are ways to get your money back. Gotcha Capitalism will tell you how.

Companies have spent years and billions of dollars conducting extensive research, learning just how to confuse you and take away your rights to a fair deal. This book will show you how they do it, and then show you how to reclaim both your money and your rights. With any luck, we can all start a movement to reclaim our economy from hucksters with huge market capitalizat...

More About the Author

Bob Sullivan covers Internet scams and consumer fraud for MSNBC.com. He is the winner of multiple journalism awards for his coverage of online crime and author of Gotcha Capitalism: How Hidden Fees Rip You Off Every Day and What You Can Do About It. and Your Evil Twin: Behind the Identity Theft Epidemic.
He is the winner of numerous journalism awards, including the 2002 Society of Professional Journalists Public Service award.

Customer Reviews

I really feel like he's on the people's side when reading the book.
youtoo
This book is a must read for anyone who has a bank account, credit card, cell phone, etc.
Estella
I can't get specfic with the content but this book has good information for consumers.
highinthesky

Most Helpful Customer Reviews

120 of 122 people found the following review helpful By Kerry Walters VINE VOICE on January 7, 2008
Format: Paperback
Bob Sullivan has written an extraordinary and frightening book on what happens when technology makes it increasingly easy for corporations to rip consumers off, when the government fails to do a decent job of regulating those corporations, and when consumers aren't educated enough to make rational marketplace decisions.

Technology today gives us automatic teller machines, internet, wireless phones, cell phones, satellite and cable television, electronic bill payments, etc. etc. These gadgets and services are marketed as life simplifiers, and in many ways they are. But there are also hidden costs to using them that gouge the consumer. Sullivan's claim is that unless these hidden costs are recognized, consumers are prey rather than free agents. Hence the "gotcha."

ATM fees, for example, are almost never fully disclosed on the ATM screen. They average about $5 per pop--that is, you pay a good chunk of money to access your money. How bizarre is that? But bizarre as it is from the consumer's perspective, it's good business for the banks because service fees are major revenue sources for banks. These days, according to Sullivan, about one-third of all bank revenues come from fees. In fact, many banks now make more income from fees--checking account fees, bounced check fees, ATM fees, and so on--than from interest on loans and investments.

Or take credit cards. A credit card company can legally raise your interest rates simply by sending you a finely printed and obscurely written announcement informing you of the increase and stating that unless you formally object in writing, you accept it. The companies know that most consumers won't even bother to read the announcement before tossing it. In fact, they bank on it.

Or take hotels.
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49 of 49 people found the following review helpful By DJ Joe Sixpack HALL OF FAMETOP 500 REVIEWER on January 8, 2008
Format: Paperback
Technology writer Bob Sullivan has compiled a powerful accounting of the various ways that American consumers are routinely being screwed by companies large and small. The driving force behind this explosion of unfair business practices is computer technology and the shift to an online/database economy: economic transactions are essentially invisible now, and it is much easier for profit-driven companies to simply make up a bunch of fees or "service charges" when no actual services are being provided, and tack them onto our already-expensive bills. Even that tiny fraction of consumers who figure out the scams will find it hard to get the bogus fees refunded, and the vast majority of consumers will either be unaware of how they're being ripped off, or will be too tired or busy to object.

Sullivan explains and documents with great clarity how companies have scientifically researched the most effective methods for hiding bogus fees, and what the tipping point are, so that they steal tiny amounts from millions of customers, but in ways that these customers either won't detect, or understand. And it doesn't matter if you catch one company ripping you off: they all do it, so there's really nowhere for consumers to turn. Don't like your cell phone company? Of course not, but is it worth it to drop them and go to another? Probably not, since they're all total crooks.

While this book does a great job cataloging these injustices, it leaves open the question of what we can actually do about it. The book promises readers that they can save $1000.00 if they know how to guard against various unfair business practices. What is really needed, however, is legal protection against these fraudulent and deceptive practices.
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21 of 23 people found the following review helpful By P. Williams on January 8, 2008
Format: Paperback
I found Gotcha Capitalism to be really helpful, particularly the real-world anecdotes used to show how these fees happen to us every day. For example, after reading about the credit cards from department/furniture stores and the possibility of it appearing as though you don't have to pay interest, unless you read the mouse type. I immediately checked my statements, now that I know for what to look.

The information is very practical and useful in everyday situations.
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12 of 12 people found the following review helpful By Mary102696 on January 22, 2008
Format: Paperback
Besides informing us of the sneaky way companies try to get extra dollars out of us, there are also other eyeopening things we should know. One thing that got my attention was companies sending new contracts marketing them as "junk mail" so people couldn't call the company and say no thank you I do not accept this. Silence was golden. When challenged all the way up the Supreme Court, they found this contractually binding! Do not throw away your junk mail and read this book!!!!!!!!!!! there are soo many other things in here that you just have to read it.
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32 of 39 people found the following review helpful By Judith C. Kinney on September 17, 2008
Format: Paperback
I'm always surprised by what little attention people pay to their money and where it's going. This book is for those people.

Cell phones. I know people who pay $85 a month for their cell phones. My husband and I pay $6.66 a month. You buy a $20 cell phone. Then every three months you buy a "top-up" card for $20. This $20 is a deposit from which you draw to pay for your cell-phone calls as you make them. When the $20 is used up or at the end of three months, whichever comes first, you buy another $20 "top-up" card. Simple, no? Sullivan doesn't mention this type of cell phone.

401(K). I have all my 401(K) money in a fund called "stable value." I have wondered why I'm getting a return of only 2.6 percent when I'm getting 3.5 to 5 percent on CDs at several banks. Sullivan tells me the program administrator is skimming a good chunk of what I could be earning. So don't listen to people who say you should contribute the maximum possible (10 percent where I work) to your 401(K). Contribute only as much as you must to get the company match.

Landline phone. It used to be that if I made a long-distance call, the charge would show up on my next bill, and I would pay it. Once or twice a year I might call my sister, talk for an hour or so, and pay $25 to $30. That was fine with me. Along came a month when I had made no ld calls, and a $5 ld charge shows up on the bill. I called the company. The $5 would be applied to any ld calls I made during the month, but for ten or eleven months out of the year, I was making no ld calls. That was $50 a year I was paying for NOTHING! I hate paying for nothing. I could have had a new pair of shoes or a decent handbag. So I cancelled my ld service and bought an ld calling card. I am much happier.

Grocery stores.
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