FDIC INSURED 6 MONTH CD
AMERICAN FIRST *ASSURANCE*
Fine print.........It turned out that, as stated by the representative from American First Assurance, this was a "bait and switch" advertisement for a certificate of deposit that didn't exist. Insurance annuities were the real product being sold. The original article describes in more detail what happened when I showed up, checkbook in hand, to open my 3.45% APY CD. This article is about what happened over the next month.
Not Feeling the Love From the Colorado Division of Insurance
I make it a habit to inform regulators when I see something that just looks inherently unfair. So, as I have done in the past, I forwarded the column to the Colorado Division of Insurance. I've worked with clients in the past to help file claims with regulators and have a track record thus far of zero successes, even when the financial firm has paid the client to settle a grievance. In fact, I've even described this same sort of CD Bait and Switch tactic back in 2006 as part of Trick or Treat Investments.
And based on the responses I've received from the regulator, I feel pretty sure my track record isn't going to change. I'm also pretty sure that I won't be winning any popularity contests from this regulator or the vast majority of others I've dealt with in a similar capacity.
This time it's different?
That is not to say this experience was a carbon copy of all the others. This time I actually received a letter from the regulator that didn't take the usual defensive posture. They wrote that the Colorado Division of Insurance has "concerns" over the tactics used to sell insurance. In fact, the letter noted that they were investigating the matter. I consider this a very positive change from past responses.
But what has really changed?
So each Sunday, I open the Business Section of my Denver Post in search of the advertisement for a CD that's too good to be true. As of last Sunday, American First Assurance is still placing the ad. The rate is down from 3.45% to only 3.15% APY, but I suspect the leopard has not changed its spots and that they are using the same tactics. Interestingly enough, the Colorado Springs location I wrote about is no longer listed in that advertisement.
American First Assurance has never returned any of my calls. If they had, I would have asked them if they were concerned about the possible violation of laws? Judging by the fact that the advertisement continues to run, I'm guessing that they aren't too concerned.
I would like to say that the recent financial crisis has galvanized regulators into actually regulating but, unfortunately, I don't see any evidence that this has happened. I use the Colorado Division of Insurance only as an example of what I see among the majority of financial regulators. I also don't believe it's budget driven as I often see the smaller regulators taking more of a consumer protection stance.
So what does this mean for you?
My advice is to never count on any regulator to protect you. Even if regulators do get their act together, I would urge investors to embrace the philosophy of "an ounce of prevention is worth a pound of cure." And in this instance, that ounce of prevention is to not get tricked into buying a product you don't understand. Because if you do, the pound of cure will be needing to ask a regulator for help in getting out.
Be ever watchful of someone trying to sell you a product that turns out to be quite different from the one being hyped in an advertisement to lure you into the adviser's office.
MORE ON MONEYWATCH
Is a 3.45 APY CD Too Good To Be True? When a Stranger Calls With a Great Investment Bonds vs. Bond Funds? An Easy Choice! Roth on Roth IRAs and 401(k)s Bear Markets Suck, But Don't Give Into The Pain