FHFA Proposes Forced Place Insurance Reform

Force-placed insurance underwriters would be prohibited from paying fees and commissions to banks that own or service home mortgages that are either delinquent or in foreclosure under a proposal released for comment late last month by the Federal Housing Finance Agency (FHFA).  Consumer groups, who had been highly critical of an earlier FHFA action to squelch a plan by Fannie Mae to introduce reforms, cheered the action.

“CFA applauds FHFA’s strong action to protect consumers and taxpayers from some of the excesses of force-placed insurance,” said CFA Director of Insurance J. Robert Hunter.

“Sweetheart commission and reinsurance arrangements will soon end and will only be a distant nightmare for those borrowers once forced to eat these excessive costs.”

Hunter and CFA Director of Financial Services Tom Feltner were among a group of consumer advocates who met with FHFA officials last month to explain the serious problems consumers face in a market that suffers from “reverse competition.”  While the borrower pays the ultimate premium, the lender or loan servicer selects the policy and receives financial benefits for choosing a certain insurance company to write the policy, Hunter explained.  These kickbacks include commissions to a lender affiliated insurance agent, sweetheart reinsurance deals with lender affiliated captive reinsurers, or below-cost services like insurance tracking of the entire loan portfolio.  “Competition is reversed as premiums rise to allow larger kickbacks to attract lender business,” Hunter said.

If implemented, the FHFA proposal would end two of the three forms of kickbacks, commissions and reinsurance.  The agency is studying the issue of tracking fees and costs and could add proposals to address these in the future, Hunter predicted.

Senate Turns Aside Anti-consumer Budget Amendments

As the Senate considered the Budget Resolution Act (S. Con. Res. 8) before leaving for Spring recess last month, hundreds of amendments were introduced, including a number that would have severely weakened the regulatory process necessary to protect consumers from predatory financial schemes, dangerous consumer products and costly, anti-competitive practices.to fulfill their regulatory mandates.  CFA wrote to members of the Senate urging them to oppose any and all amendments “that would undermine the ability of regulators to fulfill their regulatory mandate efficiently and effectively.”  Ultimately, only one of the anti-regulatory amendments was voted on – an amendment by Sen. Richard Shelby (R-AL) to impose burdensome new cost-benefit requirements on financial regulators – and it failed on a 47-52 vote.  “This amendment would have thwarted Wall Street reform by making it harder for important financial rules to be implemented,” said CFA Legislative Director Rachel Weintraub.

USDA Urged to Protect Integrity of Country of Origin Labels

A coalition of 229 farm, rural, faith, consumer and environmental organizations from 45 states delivered a letter to the U.S. Department of Agriculture last week urging the agency to protect the integrity of Country of Origin Labeling (COOL) for meat products.  The letter was submitted to the USDA as part of the regulatory comment period, which closes on April 11.    The 2008 Farm Bill included mandatory COOL provisions for beef, pork, poultry, fresh and frozen fruits and vegetables and some nuts, but Canada and Mexico successfully challenged the implemented rules for meat products at the World Trade Organization as a barrier to international trade, the groups explained in a press release highlighting broad-based support for the COOL labeling. The WTO ruling directed USDA to offer new COOL rules by May 23, 2013.

The USDA has proposed new rules that simplify and clarify COOL to comply with the WTO decision.  They do so by ensuring that all meat from animals born, raised and processed in the United States will bear a “born, raised and slaughtered in the USA” label and eliminating some of the confusing, vague labeling provisions that were highlighted in the WTO ruling.

“Consumers want more information about the source of their food, not less,” said Chris Waldrop, Director of CFA’s Food Policy Institute. “Strengthening the Country of Origin Label provides consumers with more accurate and precise information about the source of beef and pork products they purchase.”

Legislation Introduced to Protect Consumers from Unfair Overdraft Fees

In a move cheered by CFA and other consumer advocacy organizations, Rep. Carolyn Maloney (D-NY), Rep. Maxine Waters (D-CA) and 41 co-sponsors introduced legislation last month to protect consumers from abusive overdraft practices.  The bill (H.R. 1261) would do so by requiring consumers to affirmatively opt-in to overdraft coverage for all types of transactions and prohibiting the manipulation of transactions in order to maximize overdraft fees.

Recent CFA research found that nearly 60 percent of consumers saw their account balances fall below $500 in a given month and that 40 percent of those with low balances below $500 had overdrawn their checking account in the past two years.  “Consumers, particularly those who frequently have low account balances, need to be able to pay bills, buy groceries and conduct everyday transactions without punitive, frequent and unfair fees,” said CFA Director of Financial Services Tom Feltner.

America Saves Launches Savings Motivating Text Message Service

As part of Financial Literacy Month, America Saves announced the launch last week of a new text message service that sends savers tips to help them find money to save as well as advice and reminders to help them save for specific goals. When savers take the America Saves Pledge, they choose a savings goal and an amount to save – thereby creating a savings plan. This new text message service will allow America Saves to send custom text messages to help savers save for their specified goal. “Studies show that text message reminders are an effective way to help individuals save more successfully, and research from America Saves found that having a savings plan with specific goals significantly increases the likelihood that families will save,” said America Saves National Director Nancy Register. “What better way to remind savers of the goal they set when they take the America Saves pledge than to reach them on the device they use the most.”

Leading Policymakers to Address Food Policy Conference

This month’s 36th annual National Food Policy Conference will feature keynote speeches by Sen. Mark Pryor (D-AR), Chairman of the Subcommittee on Agriculture, Rural Development, Food and Drug Administration (FDA) and Related Agencies; FDA Deputy Commissioner for Foods and Veterinary Medicine Michael Taylor; and Earth Policy Institute President and author Lester Brown.  The conference will be held April 15-16 at the Capitol Hilton Hotel in Washington, D.C.  Online registration information is available here.  The complete program is available here.