Federal Regulators Issue Guidance to Rein in Bank Payday Loans
Earning enthusiastic praise from consumer advocates, the Federal Deposit Insurance Corporation (FDIC) and Office of the Comptroller of the Currency (OCC) issued guidance last week directing banks to stop making predatory, high-cost loans that trap borrowers in a cycle of debt. “Requiring banks to assess a borrower’s ability to repay and make loans that borrowers can afford to repay is just common sense,” a number of consumer groups wrote in a joint statement in response to the announcement. “It is also a fair directive, since banks have received generous government support and currently borrow money themselves from the government at close to 0% interest.”
The groups called on the Federal Reserve, which regulates two of the financial institutions engaged in bank payday lending, to follow the lead of the FDIC and OCC. While welcoming the action of the bank regulators, they also noted that non-bank payday lending continues to trap thousands of vulnerable borrowers in debt. They urged the Consumer Financial Protection Bureau to act quickly and decisively to curb payday lending by all types of lenders.
The announcement came just one day after the Consumer Financial Protection Bureau released a report highlighting ongoing consumer challenges with high-cost, short-term credit with potentially abusive features. The report confirmed previous findings from consumer advocates that borrowers are predominately lower-income, are charged triple-digit interest rates for a short-term loan, and that repeat borrowing is frequent. “The Bureau has taken a thoughtful and in-depth look at this market; one which we hope represents the first step toward a data-driven response to concerns about common abusive practices,” says CFA Director of Financial Services Tom Feltner said in a press statement on the report. “This information, in addition to the information that the Bureau routinely collects from consumer complaints and examination of lenders, will help guide new, meaningful protections.”
Consumers Embrace New Fuel Economy Standard
Consumer demand for more fuel-efficient vehicles is high, and the nation is well on its way to establishing a more fuel-efficient vehicle fleet, according to new research released this week by CFA. The analysis, “On the Road to 54.5 MPG: A Progress Report on Achievability,” provides the first ever “progress report” on the response of consumers and automakers, as both begin to experience the effects of the newly adopted 54.5 miles-per-gallon federal fuel economy standard. “Looking at current market offerings, consumer purchasing trends and our surveys of consumer demand, there is no doubt that the federal effort to significantly raise fuel economy is benefiting consumers, car companies, autoworkers and the environment,” said CFA Public Affairs Director and report co-author Jack Gillis.
According to a new nationwide poll, the first by CFA since the federal adoption of the new standard last year, a large majority (85 percent) of Americans support federal government requirements to increase the fuel economy of new cars to 35 miles per gallon by 2017 and to an average of 55 miles per gallon by 2025 (using CAFE ratings). An even larger percentage of respondents (88 percent) say fuel economy will be an important factor in their next vehicle purchase, including 59 percent who say it will be a “very important” factor. “These results should lay to rest any concerns that some car dealers had about consumer demand for more fuel efficient vehicles,” Gillis said.
The gas mileage of popular cars, pick-ups, and vans has increased significantly in the past few years, with the percentage of popular vehicles getting at least 30 mpg tripling. Comparing popular 2009 models with 2013 models, the new analysis shows that the percentage of vehicles getting at least 30 mpg rose from four to 12 percent. Over the same time period, the percentage of popular vehicles getting at least 23 mpg rose from 30 to 56 percent; and the percentage getting less than 22 mpg fell from 70 to 44 percent. In part, this increasing mileage reflected the growing popularity of four-cylinder vehicles. “What is remarkable is that improvements in engine efficiency, driven by the standards and consumer demand, resulted in a significant increase in four-cylinder vehicles with little compromise in performance,” said CFA Director of Research and report co-author Mark Cooper.
Consumer demand for higher-mileage and alternative fuel vehicles is clearly a function of the enormous impact that gas costs have on the average wallet. “In looking at what consumers paid for gasoline in 2012, we determined that the average car owning household spent $3000. That’s 50 percent more than the total amount they spent on the energy costs needed to run their homes,” said Cooper. “Our analysis has consistently shown that increases in vehicle prices are more than offset by savings from gasoline purchases.”
“The decision to reform and restart the fuel economy program has played a much larger part in triggering the increase in fuel economy than gasoline prices, although they matter too,” Cooper said. Added Gillis: “The impact of the standard and the dynamic response of the market are strong indicators that the long-term goal of 54.5 miles per gallon by 2025 is achievable and in the consumer and national interest, which is why it enjoys such widespread support.”
Groups Oppose Delay of Children’s Online Privacy Rule
Consumer, children’s and privacy groups wrote to the Federal Trade Commission (FTC) last week expressing strong opposition to recent calls by two trade associations to delay the implementation date of the revised Children’s Online Privacy Protection Act rule. “Delay in implementing these already overdue reforms is unwarranted, would be harmful to children, and would undermine the goals of both Congress and the FTC,” the groups wrote.
The FTC adopted its revised rule in December, more than two years after the rule was initially proposed and after several rounds of public comment. In adopting the rules, the Commission set an effective date six months after adoption to provide industry with ample time to come into compliance.
The revisions “are necessary to protect children and assist parents in light of the growing use of computers, mobile phones, and tablets, the increasing amount of data that is collected through these devices, and the sophisticated methods used to target and market to consumers,” the groups wrote. “Parents, child advocates, and the public at large strongly support the updated rules. Thus, we respectfully urge the Commission to reject the request for a further delay in implementing these important rules.”
SEC Urged to Incorporate Investor Protections in JOBS Act Rule
In a letter to the newly confirmed SEC Chairman Mary Jo White last week, investor advocates urged the chairman to re-propose a JOBS Act rule permitting mass marketing of “private” offerings in order to incorporate appropriate investor protections. The letter from CFA, Americans for Financial Reform, and AFL-CIO was intended to counter pressure the agency was receiving from some on the Hill to move forward with the rule as initially proposed, despite its lack of investor protections and the agency’s failure to follow normal rulemaking procedures, including its recently adopted guidelines for economic analysis, in proposing the rule.
Rushing ahead without incorporating investor protections would have severe adverse consequences, both by putting investors at risk and by undermining the agency’s credibility as an investor protection agency, the groups warned. “We urge you to seize this opportunity to send a clear message that the views of investors will be given serious consideration on the issues that are important to them in Commission rulemaking,” they wrote, “and that procedures designed to ensure that the Commission carefully considers the economic consequences of its actions will be applied just as scrupulously to rules that roll back investor and market protections as they are to rules that are designed to strengthen those protections.”
“We recognize that Chairman White is under enormous pressure to show quick progress on JOBS Act implementation, but it would be a costly mistake to try to appease agency critics by rushing to approve a final rule based on what is clearly a legally deficient rule proposal,” said CFA Director of Investor Protection Barbara Roper. “Not only would it deny investors needed protections in what is generally agreed to be a risky and poorly regulated market, but it would also send the very troubling message that investors’ concerns carry little weight with the Commission. After all, the SEC’s Investor Advisory Committee voted unanimously to recommend that a series of investor protection provisions be incorporated in the rule.
It was the Commission’s earlier misplaced haste that resulted in rulemaking delays, Roper added. “Had the commission from the outset followed the legal requirements of notice and comment, the general solicitation rules could have been completed months ago.”
Progress Stalled in Reducing Foodborne Illnesses
Progress continues to remain stalled on reducing illnesses from the major foodborne pathogens, according to the Centers for Disease Control and Prevention’s recently released annual report on the incidence of foodborne illness in the United States. Findings of the report are summarized in a CFA news release. Preliminary data from the CDC for 2012 reveals statistically significant increases since 2006-2008 for illnesses from Campylobacter and Vibrio, and virtually no change for illnesses from Listeria monocytogenes, Salmonella, E. coli O157:H7 and other shiga-toxin producing strains of E. coli (non-O157 STECs). “The data demonstrate a need for greater vigilance in efforts to reduce illnesses from these pathogens,” said Chris Waldrop, Director of CFA’s Food Policy Institute.
“The lack of progress in reducing illnesses from these pathogens is particularly concerning,” Waldrop noted, “as the Food Safety and Inspection Service is seeking to implement a new inspection program for poultry, yet the agency has almost no data on how the proposed program will actually affect Campylobacter rates on poultry. The agency’s proposal also does not require poultry plants to test for Salmonella and Campylobacter, significantly limiting the agency’s ability to assure that poultry plants are reducing contamination from these pathogens.”
Advocates Petition CPSC To Address Risks of Adult Portable Bed Rails
CFA joined with the National Consumer Voice for Quality Long-Term Care (Consumer Voice), bed rail activist Gloria Black, and 60 other organizations in filing a petition with the Consumer Product Safety Commission last week requesting a ban of adult portable bed rails or mandatory standards if a ban is not accepted. The groups are also asking CPSC to recall dangerous bed rails and refund consumers.
According to CPSC data, there were an estimated 36,900 visits to hospital emergency departments due to incidents related to both portable and non-portable bed rails in the nine-year period from 2003 to 2012 and 155 portable bed rail deaths, although the actual death rate is believed to be much higher. According to a 2012 CPSC report, these deaths and injuries most commonly occur when the victim is “caught, stuck, wedged, or trapped between the mattress/bed and the bed rail, between bed rail bars, between a commode and rail, between the floor and rail, or between the headboard and rail.”
“Too many people have been seriously injured or killed while using adult bed rails that are marketed as products to increase the safety of consumers,” said CFA Legislative Director and Senior Counsel Rachel Weintraub. “These asphyxiation and entrapment deaths and injuries have not been adequately prevented by any voluntary efforts by bed rail manufacturers. These incidents could and should have been prevented by strong federal efforts, which is why we are urging the CPSC to take action today.”