What payday lenders really fear

Since a federal-law loophole already allows payday lenders to do business openly in Pennsylvania, why are leading purveyors of these ultra-high-rate loans pushing the state legislature to enact a payday-lending law?

Why, in other words, would they want this small measure of added legitimacy, especially if the price is more regulation and oversight by the state Department of Banking?

State Rep. Kathy Manderino has been asking herself that same question.

“When’s the last time an industry came to government and said regulate me, regulate me? They just don’t do it,” Manderino says.

Manderino is pretty sure she knows the answer. The key, she says, lies in growing resistance among federal regulators to so-called “rent-a-bank” arrangements — the kind that enable Cash Today in Philadelphia to claim that it isn’t making one- or two-week loans to the borrowers who visit its stores. Some bank in Delaware is.

Of all the federal banking regulators, only the Federal Deposit Insurance Corp. still allows rent-a-bank arrangements. And the FDIC has recently done some clamping down of its own.

The FDIC recently warned County Bank of Rehoboth Beach, the lender behind Cash Today, that it may put its depositors at risk by allowing out-of-state payday lenders to make loans without adequate bank oversight.

The FDIC also issued guidelines that impose new limits on payday loans — stricter limits than those in the legislation being pushed in Pennsylvania. (To see the FDIC guidelines on payday lending, click here.)

Payday lenders are plainly worried that the new rules will cut into their profits. But their ultimate fear is that the FDIC will join other regulators and just say no to rent-a-bank payday loans. That would drive them out of states that have declined to give their business a safe harbor, or underground — back, some would say, to their loanshark origins.

Manderino answers her own question: “Why do payday lenders want the state of Pennsylvania to regulate them? Because they’re afraid that the FDIC will put a stop to their business.”

Web is great place for health info, but no substitute for medical care

Today’s Consumer Watch column about new ratings of the top 20 health-information Web sites drew a quick response – and a word of caution – from Kathy Dibling, of Williamstown, N.J., who says she once turned to the Web whenever she had medical concerns but doesn't anymore.

“I thought I could diagnose myself,” Dibling says. “I always ended up doing it incorrectly and increasing my anxiety level. So I stopped. Now, I just call the doctor.”

“These sites are very useful if you know what the problem is or are fairly sure,” Dibling adds. But she argues, as some doctors do, that in the wrong patient’s hands, a little knowledge can be a dangerous thing.

I had that point in mind when I wrote that consumers use these sites, for better or worse, to guide critical choices. But Dibling's e-mail makes me realize that I should have addressed it head-on. So let me emphasize it here:

A smart patient should never substitute his or her own research – online or at the library – for a visit to the doctor.

But two other points are also worth emphasis:

One is that by becoming an informed and knowledgeable consumer of health services, you can sometimes help your doctor reach the right diagnosis; occasionally, some patients may find good reason to seek another opinion, or even a more trustworthy doctor.

The other point is that, no matter how you use the health information you find on the Web, the best-rated sites are likely to leave you better-informed. That's why these new Consumer Health WebWatch ratings are valuable. (To see them, click here.)

But don’t fall into the trap that Dibling did, of using the Internet instead of seeing a doctor.

And remember: No matter how well-informed you are, the doctor is the one with the medical education and training, and the experience in knowing how to apply them.

The mattress problem, and other consumer woes

In the early days of e-commerce, oh so many years ago, there was much talk about the Internet's ability to foster what’s sometimes called “perfect pricing.”

The idea was that the Internet could approach the ideal of a perfectly functioning market, where everybody has complete information, the invisible hand works its magic, and profit is reduced to the barest minimum – just enough, presumably, to provide incentive for producers to produce instead of giving up and fleeing to the Bahamas with last year's earnings.

Even Bill Gates weighed in on the subject, arguing in his 1995 book, The Road Ahead, that the Internet would lead to “friction-free capitalism,” where buyers and sellers would cut out the middleman, markets would function with maximum efficiency, and consumers would reap the rewards. Some contrarians wondered if capitalism could actually survive perfect pricing, if it ever materialized on a wide scale, but those heady days were tough times for skeptics.

Well, guess what? It never happened.

The closest we’ve come is eBay, where buyers and sellers, in theory, negotiate directly. EBay isn’t always what it seems – it has suffered from the problem of shill bidders, and from the fact that individual sellers can be hard to distinguish from big businesses – but, at its best, it operates like a nationwide bazaar.

Elsewhere, most sellers still know far more than most buyers, and can use that knowledge to keep consumers off balance. And one technique that has moved online quite happily is what Joe Turow would call "the mattress problem."

Ever try to comparison shop for mattresses? You've probably noticed what Turow has: Manufacturers and retailers go out of their way to dodge head-to-head price and quality comparisons. It’s rarely apples to apples, or even to oranges. Sometimes it’s more like apples to begonias.

Internet marketers have adopted that tactic, says Turow, a professor at the University of Pennsylvania’s Annenberg School for Communication. Many now offer their best deals in forms, such as travel packages, that defy straight-up comparisons.

But that's not the only impediment to perfect, friction-free e-commerce, or even the biggest one. According to a new study by Turow and two grad students, some marketers are using the Internet's advantages to sharpen their edge against customers who'll never know what's hit them.

Turow's study (to see it, click here) reveals widespread consumer ignorance about how personal and financial data are bought and sold nowadays. Nor do consumers understand “price discrimination” – the practice, online or offline, of giving different prices to different people in differing circumstances, sometimes based on that personal information.

In case you're wondering, price discrimination is perfectly legal, as long as a seller doesn’t discriminate against a “protected class,” such as by charging more to Asian people or Anglicans. Benign examples abound, such as senior-citizen discounts, or doctors’ charging less to the poor. So do cases where businesses openly use leverage – as when airlines, for instance, charge more to those who make last-minute plans.

But Turow believes that a more insidious form of price discrimination has emerged from the Internet's capacity to present individual buyers with customized prices.

With so much data for sale, businesses can easily profile our personal finances and habits. As a result, I might get one price while you get another, for reasons known only to the sellers and their computer programmers. Loyal customers may still get discounts, as they do at groceries that reward regular shoppers. But they also might get charged more – say, by a business that can identify those whose loyalty seems unshakable – without ever even noticing.

It's a crafty, smart practice that many consumers would abhor if they knew about it. It's made possible by our extremely loose laws on the privacy of most personal data.

The one thing it isn't is “perfect pricing” – unless the perfection you’re talking about is a business' ability to charge every customer what his or her pocketbook and attention span will bear.

Has drug advertising driven switches from Vioxx?

Did heavy marketing after the withdrawal of Vioxx lead to a spike in prescriptions — and in price — for Mobic, another anti-inflammatory drug used to treat patients with arthritis?

That intriguing question was raised today by Consumers Union, in a report on trends since Vioxx was removed from the market in September because of evidence linking it to increased risk of heart attacks and strokes.

According to the report (read it here), prescriptions for Mobic rose 136 percent in the six months following Vioxx’s withdrawal, and Mobic’s price for cash-paying retail customers climbed 9 percent, to an average of $111 or $157, depending on dose.

Mobic is not a COX-2 drug like Vioxx, Bextra or Celebrex — the only one of the three still on the market.

Instead, it’s one of the most recently developed brand-name entrants in the broader category of nonsteroidal anti-inflammatories, or NSAIDs, which includes the COX-2s as well as generic ibuprofen and naproxen, drugs that are also available over-the-counter.

Not coincidentally, that makes it one of the most expensive alternatives for patients who were being treated with Vioxx or Bextra and whose doctors want to avoid Celebrex. Prescriptions for Celebrex have fallen by more than 50 percent.

(The Food and Drug Administration says evidence of increased risks from Celebrex is inconclusive. To read the FDA’s most recent analysis of overall NSAID risks, click here. )

The Consumers Union report says the average retail price for a month’s worth of 7.5-mg tablets of Mobic rose 7 percent, from $104 to $111. For the 15-mg dose, it rose 11 percent, from $142 to $157.

Prices for some doses of prescription ibuprofen and naproxen also rose, though others stayed level or dropped. But the prices were already much lower. In March 2005, a month’s supply of prescription-strength ibuprofen ranged from $26 to $30. Generic versions of prescription-strength naproxen cost $44 to $50 a month.

So is the mass switch to Mobic a good choice by doctors, or something else?

Consumers Union says it may partly “reflect the belief among some doctors that Mobic may be easier on the stomach (the advantage touted for the COX-2s) — a belief fostered by some discussion in the professional literature but not endorsed by the FDA, many experts, or supported by definitive clinical trial data.”

But the report concludes that it’s more likely just further evidence of the distorting effect of drug advertising, both to doctors and directly to consumers.

“Doctors and consumers are unquestionably swayed by the ads and promotions for costly new medicines, even when lower-cost options that are just as effective are available,” says study author Steven Findlay.

Many doctors also make the point that rare side-effects for any medication take a while to get noticed and documented. A newer drug may indeed be safer and better. But it also may pose unexpected risks that won’t show up for a while.

So go ahead and ask your doctor about Mobic, or the latest brand-name medicine you read or hear about.

Then ask why it’s being prescribed, and whether an older, less-expensive drug might be a better choice.

Rating the experience of Internet shoppers

How do Internet shoppers rate the top e-retailers? Not as well as many would like, according to a study out today by ForeSee Results, which uses the University of Michigan’s American Customer Satisfaction Index to rank the top 40 online sellers.

The Ann Arbor, Mich., company recently surveyed 11,000 people who had visited at least one of the 40 companies' sites within the previous two weeks. (To learn more, click here.)

They didn’t necessarily make a purchase. ForeSee says it’s interested in the reactions of anyone who browses the sites, because it believes the attitudes of those who shop without buying are at least as important, in the long run, as the attitudes of those who click and spend.

Among its main conclusions:

* Web shoppers aren’t especially price-sensitive, even if the Internet is often the first place people to go to compare prices.
* Some of the biggest names in traditional retailing are doing a pretty poor job online.

(Full disclosure: Even the worst-ranked of these e-retailers look good when compared with some other industries, including my own. Newspapers in general scored a 63, tying us with wireless phone companies, according to a recent Inquirer article by my colleague Tony Gnoffo about the University of Michigan's latest survey. We were ahead only of cable and satellite-TV companies, which came in at 61. On the other hand, the U.S. Postal Service scored a 73 – better than Buy.com, CompUSA.com, Costco.com, and Kmart.com.)

Here are 42 Web sites ranked by browser satisfaction on a scale, on which 100 would be completely satisfied. (The number is parentheses is the e-retailer’s ranking by revenue – there are more than 40 sites listed because some companies own multiple sites. I’ve also omitted Cornerstone Brands, 37th in revenue, because there was insufficient data to rank its sites.)


Netflix.com (17th in revenue) – 85
Amazon.com (1) – 84
QVC.com (28) – 84
Newegg.com (9) – 82
LLBean.com (38) – 82
OldNavy.com (21) – 81
TigerDirect.com (32) – 81
Apple.com (16) – 80
Avon.com (19) – 80
BN.com (Barnes & Noble) (20) – 80
Williams-Sonoma.com (22) – 80
HarryandDavid.com (34) – 80
HSN.com (Home Shopping Network) (31) – 79
Gap.com (21) – 78
Drugstore.com (27) – 78
EddieBauer.com (29) – 78
PotteryBarn.com (27) – 77
Dell.com (2) – 77
HPShopping.com (Hewlett-Packard) (5) – 77
JCPenney.com (11) – 77
Quixtar.com (14) – 77
ToysRUs.com (23) – 77
OfficeDepot.com (3) – 75
Staples.com (4) – 75
BestBuy.com (10) – 75
Walmart.com (12) – 75
Overstock.com (18) – 75
1800Flowers.com (30) – 75
NeimanMarcus.com (40) – 75
Sears.com (6) – 74
SonyStyle.com (7) – 74
Target.com (13) – 74
CircuitCity.com (15) – 74
FTD.com (39) – 74
BananaRepublic.com (21) – 73
CDW.com (CDW Corp.) (8) – 73
Gateway.com (24) – 73
Chadwicks.com (25) – 73
Buy.com (33 ) – 71
CompUSA.com (35) – 71
Costco.com (26) – 70
Kmart.com (36) – 69