CFPB Seeks Information on Financial Products Targeted at Military Personnel

Earlier this month, the Consumer Financial Protection Bureau issued a call for information regarding financial products and services that are offered to and used by military servicemembers and their families.  In a comment letter filed with the agency last week, CFA described findings of its recent examination of credit products sold to servicemembers.  Conducted in recognition of the five-year anniversary of the Military Lending Act, that analysis has focused on loans that do not fit the definitions for “covered credit” in the Department of Defense rules implementing the Military Lending Act and on loans sold specifically to servicemembers to be paid from bank accounts or through the military allotment system.  CFA expects to provide additional information to the agency when its analysis is completed later this year.

“Protecting servicemembers should be a priority for CFPB and we urge the agency to work closely with the Department of Defense and other financial regulators to make sure lenders that target these consumers comply with consumer protection requirements, make full and accurate disclosures, and lend responsibly,” CFA wrote in its letter to CFPB.  In the letter, CFA specifically recommends that CFPB: “take action to protect consumers from payday?loan type bank products and to enforce the Electronic Fund Transfer Act prohibition against conditioning the extension of credit on a requirement to make electronic payments;” and “apply the Military Lending Act requirement that payment by allotment be truly voluntary to all forms of credit” and work with the Department of Defense and bank regulators “to reexamine whether allotments pose on undue and unnecessary risk to servicemembers.”

“Military consumers are prime targets for harmful lending and need a strong CFPB to prevent unfair, deceptive and abusive lending practices,” said CFA Director of Financial Services Jean Ann Fox. “CFPB should make sure that lenders do not evade the intent of the landmark Military Lending Act by tweaking their loans to evade DoD rules that took effect four years ago.”

Consumer Groups Voice Opposition to Express-Medco Merger

The nation’s leading pro-competition consumer organizations, including CFA, wrote to the Federal Trade Commission last week in opposition to the proposed merger between two of the nation’s three largest pharmacy benefit managers, Express Scripts and Medco Health Solutions.  The groups praised the FTC for issuing a second request for information in its investigation, which they said “signals a commitment that this deal, and the concerns of consumers, will be carefully and adequately reviewed.”  If approved, the groups wrote, the deal would significantly harm consumers by:

• reducing competition in the pharmaceutical benefits manager market and thereby increasing costs to plans, employers, and ultimately consumers;
• increasing the incentive and ability for the merged company to create highly restrictive pharmacy networks, thereby restricting patient choice;
  • establishing tremendous dominance for Express Scripts in the specialty pharmacy area, likely resulting in decreased access to care for our most vulnerable patient populations; and
  • limiting access to new and innovative drugs by creating a market landscape more conducive to deal-making between pharmaceutical benefits managers and pharmaceutical manufacturers.

“The proposed merger will significantly reduce competition and, in turn, cause significant harm to consumers. We urge the Commission to thoroughly review these consumer concerns in their investigation and to particularly focus on the impact on the ultimate consumer—the patient,” they concluded.

DOT Proposal Would Increase Airline Fee Transparency

The Department of Transportation has proposed to collect more detailed information regarding the fees that airlines impose on passengers.  Earlier this month, CFA, Consumer Action, Consumers Union, and National Consumers League submitted a comment letter in strong support of that proposal.  “All of our organizations have long been concerned about transparency of airline pricing, particularly in recent years after the widespread adoption of baggage fees and other forms of what the industry terms ‘ancillary revenue,’” the groups wrote.  Because the fees are not transparent, consumers “are not always able to determine the bottom-line cost of an airline booking, inclusive of all fees,” they added.  They urged the department to strengthen its proposal to provide “complete pricing transparency for all airline bookings, inclusive of all fees, through all booking channels and ticket sellers.”

Meanwhile, the groups joined with a larger coalition of consumer organizations to protest the failure of most airlines to pass on to consumers some $500 million in tax savings that resulted when the taxing authority of the U.S. Federal Aviation Administration (FAA) temporarily lapsed on July 23.  In a joint letter to the Air Transport Association, the groups also took the industry to task for airlines’ failure to provide prominent disclosures of optional fees in accordance with recent DOT rules.  “We believe that the airlines can and must do better in order to fulfill the DOT’s clear intent to provide transparency for consumers with respect to proliferating airline fees that can add substantial amounts to ticket prices,” they wrote.  “Actions speak louder than words. Airlines, like all businesses, should be driven by customer service, price transparency and honest disclosures. Suffice it to say, we are disappointed in most of the airline industry’s response to the new DOT rules.”

Congress Urged To Support Improved Protections for Customers of Stock Brokers

In testimony before the House Capital Markets Subcommittee earlier this month, CFA Director of Investor Protection Barbara Roper called on members of Congress to support, rather than impede, Securities and Exchange Commission efforts to improve protections for retail investors who invest through broker-dealers.  Earlier this year, the SEC issued a report proposing to require brokers to meet the same standard to act in their customers’ best interests that all other investment advisers are held to when they give personalized investment advice to retail investors.  The proposed approach outlined in the SEC study has won praise from investor advocates, such as CFA and AARP, state securities regulators, adviser groups, and the two leading broker-dealer trade associations.  Nonetheless, some members of Congress have continued to pressure the agency to conduct additional cost-benefit analysis before moving forward with a rule proposal.  “In its study, the SEC has proposed a way to move forward on fiduciary duty that maximizes investor protections while minimizing industry disruption.  In doing so, it was won broad support from industry and investor advocates alike.  It would be tragic if opposition from a few industry members intent on maintaining the status quo were able to derail that progress.  Despite the self-interested claims of certain industry members, it is the middle income investors who must make every dollar count who are most in need of these enhanced protections,” Roper said.

Housing Regulators Seek Solution to Foreclosure Backlog

With hundreds of thousands of foreclosed properties on their hands, federal housing regulators are seeking suggestions on how best to dispose of them.  CFA joined with Americans for Financial Reform (AFR) and other housing organizations in filing a comment letter earlier this month outlining specific suggestions and overarching principles to guide the government’s approach to handling the large existing inventories of foreclosed properties owned by the government or by Fannie Mae or Freddie Mac.  The groups emphasized, however, that the best strategy is to prevent the foreclosures in the first place.  “While we are encouraged by the Administration’s willingness to look for creative solutions to the substantial problem of foreclosed and abandoned properties owned by the government or Fannie Mae and Freddie

Mac, we want to be sure to express our view that the most effective way to reduce the number of foreclosed properties is to execute an effective and meaningful program to prevent them in the first place,” they wrote.  “The agencies and FHA should use available tools like more aggressive modifications, ending dual?track, principal reductions and low?cost refinancing to both reduce foreclosures and stabilize the housing market overall.”  That would have the added benefit of helping to create a stronger economy and more of market for existing inventories, they added.