Consumer eViews

Volume 2, Number 27, July 4, 2005   

On July 4, 1776, as a nation, the United States claimed our independence from Britain and democracy was born.  Every day thousands leave their homes to come to the “land of the free and the home of the brave” so they too have the opportunity to seize the American Dream.

Many of us are with family and friends today to celebrate our great country and the freedoms that we cherish and have long fought to protect.

Today offers us a special opportunity to recognize and reflect on the generations of men and women who for more than two centuries have fought to protect our country and have given their lives to defend our freedoms.  Their love of country and devotion to duty is an inspiration.

As an army veteran, I am proud to have served my country.

Amidst the celebration, let’s pause for a moment and pray for our troops who are bravely fighting for us to maintain our independence.  We also acknowledge the families and loved ones who support our troops and remember the service of our veterans.

Enjoy yourself this Independence Day and please celebrate safely.


                     -- Tom Gallagher


Florida’s Chief Financial Officer Tom Gallagher cautioned Floridians to be on the lookout for con artists who claim to be members of the same religious or community-based group and use that affiliation to defraud group members.  Gallagher said “affinity” fraud includes a variety of Ponzi schemes in which affiliation is used to gain trust.

About 400 Floridians allegedly invested about $15 million in fictitious “prime bank notes” in this scheme that has now been placed in receivership.  According to the U.S. Securities and Exchange Commission, Learn Waterhouse Inc. operated a Ponzi scheme that defrauded 1,900 investors in 39 states out of $56.5 million in 2003 and 2004.  Learn Waterhouse Inc. allegedly depended on investments from new recruits to pay off earlier investors and diverted millions of dollars to the personal use of its officers and directors.

“It’s unconscionable that con artists would exploit the faith, trust and friendship among members of a church,” Gallagher said.  “Floridians should be wary of people who ask them to invest money and use their shared background as their primary marketing tool.  Always thoroughly research an investment and its salesperson.”

The civil suit against Learn Waterhouse Inc. claims that its operators, one of whom used the fact that his father was a pastor, lured members of Florida churches into the scheme.  They allegedly also quoted the Bible to make sales. 

“It’s not just investment scams that can hit religious and community groups hard. Some fraudulent charities may also target groups they know have a history of giving back to the community,” Gallagher said, offering the following tips on how to avoid affinity fraud: 

  • Beware of anyone who drops names or uses testimonials from other group members.
  • Obtain a prospectus detailing the risks in the investment and procedures to get your money out.
  • Ask for professional advice from a neutral outside expert not in your group—an accountant, attorney or financial planner—to evaluate the investment.

Before investing any money, call the Department of Financial Services to find out if they are registered to do business in your state. Ask if the investment is allowed to be sold.  If one or the other is not registered, inquire further or walk away.

So far this year, the Office of Financial Regulation, housed within the Department of Financial Services, has received 111 complaints or referrals regarding unregistered securities.

If you suspect that you may be the victim of fraud, call the Florida Department of Financial Services Helpline at 1-800-342-2762.

The Department of Financial Services also has a Verify Before You Buy web page at to provide consumers with information they can use to verify they are dealing with a licensed entity and salesperson.  Gallagher said Floridians should invest with Florida-licensed investment brokers and companies. 


In need of a quick fix to a cash flow shortage, people may decide to take out a “payday loan.”  But Florida’s Chief Financial Officer Tom Gallagher urges consumers to beware - this type of borrowing can become very expensive, and for some customers, impossible to pay off.  

Predatory lenders often seem legitimate.  However, they target people who can least afford to lose money, namely seniors who are property-rich but cash-poor, inexperienced young borrowers and consumers in dire financial straights.  Junior enlisted service personnel are prime targets in military towns.  

“Our service men and women are experiencing the extraordinary pressure of family separation and deployments, and these kinds of loans may seem like an easy option to help with emergency needs.  Military personnel are more susceptible to the pitches of the loan companies in times of stress,” Gallagher said.

The lenders also know service men and women are getting a steady paycheck – which minimizes the lender’s risk. Lenders also know these men and women are eager to keep their finances in order, which creates an incentive for quick fixes if finances are slipping.  Payday lenders are lined up outside the military bases, as proximity means access. Many have names like Armed Forces Loans or Loans for Military which make them sound legitimate. 

Payday loans are usually small, short-term, and carry a high interest rate. They are called by a variety of names, including cash advance loans, check advance loans, post-dated check loans, and deferred deposit check loans. Money transmitters, doing business as deferred presentment providers, can offer these loans to people who need quick cash, but in Florida, these companies must be registered with the Department of Financial Services, which licenses companies and investigates complaints.

 Deferred presentment providers can accept personal checks from customers for the amount they want to borrow, plus 10 percent of the amount loaned and a $5 verification fee.  These are the maximum charges permitted under Florida law.  The payday lender holds the check for no less than seven days, but not more than thirty-one days.  The borrower can redeem the check with cash at any time during that period.   

In addition, recent legislation prohibits borrowers from taking out more than one payday loan at a time, limits payday loans to $500, and requires a 24-hour period between the termination of one loan and the extension of the next.  The “roll-over” of payday loans is no longer permitted, and payday lenders must now allow 60-day grace periods to consumers who can’t pay at the end of their deferment without imposing any additional charges on the borrowers.  To qualify for the grace period, the borrower must make an appointment with a consumer credit counseling agency within seven days of the loan coming due, and must complete the counseling by the end of the grace period.  Both the borrower and the payday lender must agree on the payment plan set up by the consumer credit counseling agency, and the payday lender can not deposit the borrower’s check during the grace period.    

Consumers are urged to review all sources available to them when looking to borrow money, and compare the true cost of each option.  Borrowers should keep in mind that they are entitled to full disclosure of the cost of any loan under the Truth in Lending Act.  Military men and women can seek advice from the Division officer or the Unit’s Command Financial Specialist. If a loan has already been taken out and the financial situation gets worse, help is available from the Navy/Marine Corps Relief Society, Financial Counselors on base, or the base’s Family Support Center.  Use these support groups as a first resource, not a last resort.

Before taking out a payday loan, call the Department of Financial Services helpline at 1-800-342-2762 to see if the company is licensed in Florida and if any complaints have been filed.


The agreement reached by Allstate Floridian Insurance Company and Insurance Commissioner Kevin McCarty doesn’t offer any real relief to policyholders.  This is just a smokescreen by Allstate to delay an outrageous rate hike without scrutiny by regulators.

“On top of that, the agreement only calls for one public hearing.  That’s ridiculous considering Allstate Floridian has 640,000 policyholders.  More public hearings must be held so policyholders have the opportunity to ask the company questions and to voice their concerns.

“We need to re-evaluate the practice of ‘use and file’ in Florida. Every rate request should be reviewed and approved by the insurance commissioner before Floridians get the bill.”


 A father and his son are facing workers’ compensation fraud charges for allegedly not having the required workers’ compensation coverage for employees, resulting in more than $1 million in evaded premiums.  The arrests on Wednesday were the result of an investigation by the Department of Financial Services (DFS), Bureau of Workers’ Compensation Fraud.

John J. Reaves, Jr., 63, allegedly knew that his son, Shawn, 32, operator of O’Hara Supplies, did not have workers’ compensation coverage for his employees, who provided labor for two companies owned by the elder Reaves, Southeast Enterprise Group and JR Deck Systems.  FCCI insured SE Enterprise Group and JR Deck Systems Inc., but incurred losses attributable to employees of O’Hara Supplies.  

“Evading premiums puts employees at risk of not having the coverage they would need if they are injured on the job and shifts the cost burden to honest employers,” said Florida’s Chief Financial Officer Tom Gallagher, who oversees DFS. “A healthy workers’ compensation system is crucial to Florida’s economy, and we will continue to aggressively investigate instances of fraud and abuse.” 

If convicted they each could face up to 30 years in prison. The case will be tried in Duval County by the Statewide Prosecutor’s Office in the Fourth Judicial Circuit of Florida.

FCCI learned about O’Hara Supplies through audits and forwarded the information to DFS, alleging that Reaves’ company owes them $1,000,036 for premiums that have not been paid.

The Department of Financial Services, Division of Insurance Fraud, investigates various forms of fraud in insurance, including health, life, auto, property and workers’ compensation insurance.  Anyone with information about this case or another possible fraud scheme should call the Department’s Fraud Hotline at 1-800-378-0445.  A reward of up to $25,000 may be offered for information leading to a conviction. 

Consumer Services HelpLine
(800) 342-2762.