Groups Urge CFPB to Strengthen Payday and Car Title Lending Rule
Consumer and civil rights groups, including CFA, submitted final comments to the Consumer Financial Protection Bureau (CFPB) earlier this month urging the agency to strengthen its proposed rule on payday and car title lending.
The groups expressed support for the proposed rule’s underlying principle, an ability-to-repay requirement. They argued, however, that unless harmful loopholes are closed, the rule will fall short of achieving its intended goal—to ensure that borrowers can repay these loans without financial hardship and without being forced into a cycle of debilitating repeat borrowing.
“When payday lenders take unfettered access to a borrower’s checking account, consumers too often face frequent and unpredictable bank penalty fees,” said CFA Director of Financial Services Tom Feltner in a press statement. “The CFPB must take strong action to stop the aggressive collection tactics that push too many borrowers out of the banking system entirely.”
One provision in the proposed rule that raised concerns is its exemption for the first six loans per year from the ability-to-repay requirement. They note that even one unaffordable loan can cause significant harm to borrowers, impacting their ability to manage other expenses and keep their bank account in good standing.
In addition, the groups argue that the proposed rule doesn’t adequately protect against “loan flipping,” the practice of putting borrowers into one unaffordable loan after another. Additionally, the scope of the rule should be broadened, the groups contend, to include loans where the lender obtains access to the borrower’s checking account even after the first few days of the loan term; loans secured by personal property; and loans where the lender retains the right to garnish wages.
For the ability-to-repay requirement to be effective, they added, the CFPB rule must specify that both income and living expenses have to be taken into consideration when a borrower’s ability to repay a loan is assessed. And those living expenses must be based on objective standards, not the subjective judgment of payday lenders.
The groups’ comment contends as well that the CFPB should not undermine consumer protections for the 90 million Americans living in the 14 states and the District of Columbia where payday loan interest rates are capped. They underscored that the CFPB rule must build on rather than put at risk these strong state laws with rate caps. In addition, states can and must continue to enact and enforce rate caps of about 36% to most effectively prevent the harms of these high-cost loans.
FCC’S Proposal for Broadband Privacy Good for Consumers
The Federal Communications Commission (FCC) is in the process of finalizing rules to protect the privacy of broadband customers, despite industry attempts to delay the rulemaking. In a letter to FCC Commissioner Wheeler, CFA and a coalition of privacy advocacy groups pushed back against various industry claims meant to mischaracterize the FCC’s move to regulate privacy in broadband networks.
For example, industry erroneously claims that the Federal Trade Commission (FTC) opposes FCC’s proposed implementation of the privacy mandates in Section 222 of the Communications Act. This is in direct contradiction to FTC Chairwoman Ramirez’s comments that she is “very supportive of the FCC working to enhance consumer privacy in the area of broadband.”
The broadband and advertising industries have also attempted to muddy the waters of the proceeding by attempting to force a distinction between sensitive and non-sensitive data in the final rule, which is not only impracticable in the telecommunications context, but is not grounded in controlling communications law. Section 222 makes no such distinction, and to do so would undermine effective privacy protections.
In opposition to these and other industry claims, CFA Director of Consumer Protection and Privacy Susan Grant released a statement affirming support for the FCC’s proposal. Noting that the amount of personal information that internet service providers can and do collect about their customers’ online activities is vast, and that they clearly intend to monetize that data, Grant called the proposal “timely and critical.” “The FCC’s proposal is a crucial step forward in providing Americans the privacy and security they demand,” she concluded.
Revisions Needed To SEC’s Proposed Order Handling Disclosure Rule
The Securities and Exchange Commission (SEC) has a proposed much needed rule to require additional disclosures by broker-dealers to customers about the routing of their orders. In a comment letter on the rule proposal, CFA warned that serious deficiencies in the proposal that must be addressed in order for the proposal to have its intended benefits for investors, the broker-dealers who best serve their clients’ interests, and the market centers that provide the best executions.
“The SEC has correctly recognized that current disclosures don’t provide meaningful, high-quality data relating to broker-dealer order routing practices and the resulting execution quality, which leaves investors incapable of adequately assessing how their orders are being handled,” wrote CFA Financial Services Counsel Micah Hauptman. “There is currently no requirement for disclosures to have useful customer-specific information, no requirement for disclosures to have the full range of orders used by investors, and no requirement for disclosures to distinguish between marketable and non-marketable limit orders. Additionally, under current rules, disclosures can be buried on a firms’ website, making the chances of finding them low. Also, broker-dealers are not required to explain the nature and extent of their conflicts of interest.”
SEC’s proposed rule would remedy several of these issues, but requires strengthening in order to have a maximally beneficial effect, he added. He called for the proposal to do away with its artificial distinction between institutional and retail orders based on order size, and instead focus on the account placing the order as a means to making the distinction. Furthermore, while the institutional disclosure requirements proposed demonstrate a marked improvement over current disclosures, the improvements to retail disclosures as proposed are still severely deficient. Finally, SEC must do more to ensure that these disclosures are produced and presented in a user-friendly, digestible manner.
“Without high-quality data, we can’t know for certain whether broker-dealers are complying with their best execution obligations at all times or even ever. These disclosures have the potential to provide that critical information, which investors can use to make more informed decisions about whom to use for routing services,” said Hauptman. “But these benefits will only be realized if revisions along the lines of those suggested above are adopted.”
Safe Food Coalition Weighs in on Labeling for Uncooked Chicken
The National Chicken Council (NCC) has petitioned the Food Safety and Inspection Service (FSIS) to establish regulations for labeling certain not-ready-to-eat (NRTE) stuffed chicken breast products, but the proposed regulations do not go far enough, according to comments submitted last month by the Safe Food Coalition. The comment letter supports the petition’s call for new labeling rules, but urges that the agency to adopt additional requirements for a broader range of raw chicken products, as well as stronger performance standards for Salmonella and other pathogens.
“A string of recent outbreaks strongly suggests that many consumers misunderstand the risks associated with NRTE products,” the coalition letter states. “FSIS should act expeditiously to adopt more appropriate labeling standards and, consistent with the National Advisory Committee on Meat and Poultry Inspection’s (NACMPI) recommendations, monitor the extent to which these products continue to cause illness after the label changes are made, and evaluate whether further steps are necessary.”
In its letter, the coalition highlights data from the Center for Disease Control (CDC) identifying Salmonella in chicken as the food agent most responsible for outbreak-related hospitalizations and deaths. Based on this evidence, the groups argue that FSIS’ latest performance standards do not adequately protect consumers from Salmonella and other pathogens.
While the groups support NCC’s request for better labeling standards, they argued that the challenge of consumer awareness is not limited to stuffed chicken breast products. They note that other not-ready-to-eat chicken products, such as chicken nuggets, have been linked to foodborne illness as well.
“The National Chicken Council’s petition contains some good ideas that will help consumers to avoid foodborne illness, but consumers should never have to wonder whether a product is not-ready-to-eat,” said CFA’s Food Policy Director Thomas Gremillion.