CFA News Update- May 4, 2011
The Financial Institutions and Consumer Credit Subcommittee is scheduled to mark up two bills this week that would dramatically undermine the new Consumer Financial Protection Bureau before it even opens its doors. A broad coalition of groups, including CFA, wrote to members of the subcommittee this week urging opposition to the two bills. H.R. 1315 would grant broad leeway to block CFPB rules to the same financial regulators who failed so spectacularly in the past to protect consumers and prevent the financial crisis. H.R. 1121 would alter the leadership of the CFPB from a single director to a five-member commission, making the agency less accountable and more likely to slide into gridlock and inaction. “If enacted, these bills would virtually guarantee that the CFPB would be a weak and timid agency without the will or ability to curb the kind of financial abuses that caused the nation’s worst financial crisis since the Great Depression,” said CFA Legislative Director Travis Plunkett.
In a major blow to consumers’ and employees’ right to redress, the Supreme Court ruled 5-4 last week that companies can include a ban on class action lawsuits in the fine print of contracts. The Court held that arbitration clauses can preempt the right of consumers and employees to band together in class actions to hold corporations accountable for fraud, discrimination, or other illegal practices. CFA was one of many consumer groups, civil rights organizations, state attorneys general, and law professors who joined in filing an amicus brief “requesting that the Supreme Court preserve this important legal right to organize in class actions.” In response to the court decision, Senators Al Franken (D-MN), Richard Blumenthal (D-CT) and Rep. Hank Johnson (D-GA) announced that they plan to introduce legislation as soon as this week to eliminate forced arbitration clauses in employment, consumer, and civil rights cases. Unless Congress acts to overturn the Supreme Court decision, consumers are likely to be “unwittingly boxed into mandatory arbitration proceedings, which are held by arbiters often handpicked by the corporation and who most often side with the corporation,” said CFA Senior Counsel Rachel Weintraub.
The Food Safety and Inspection Service issued a final rule on interstate shipment of meat and poultry products last month that CFA praised for reinforcing “the principle that meat and poultry products sold in interstate commerce should remain subject to the requirements of the federal meat and poultry inspection laws.” The rule creates a new voluntary cooperative inspection program that permits certain small plants, those that were previously state inspected and that can meet all federal inspection requirements, to ship their products in interstate commerce. “The first priority of meat and poultry inspection is protecting us and our families from adulterated food products. FSIS’ final rule assures that products shipped in interstate commerce meet federal standards for safety,” said Carol Tucker-Foreman, Distinguished Fellow for Food Policy at CFA.
The Department of Transportation has issued new rules strengthening the rights of airline passengers when their bags are lost, they are bumped from flights, or their plane is delayed on the tarmac. In addition, the rules would require that all ancillary airline fees, such as baggage check fees, be disclosed in every sales channel so that consumers and travel services alike could see and compare the full cost of flights. CFA was part of a coalition of consumer groups that pushed for fuller fee disclosure. “Consumers should be entitled to see the true cost of air travel before they decide to buy their tickets,” said CFA Consumer Protection Director Susan Grant.
In a comment letter filed with the agency last week, CFA urged the Securities and Exchange Commission to withdraw its proposal to eliminate reliance on credit ratings in regulations governing money market mutual funds. “While we sympathize with the challenge the Commission faces in fulfilling its congressional mandate to remove all regulatory references to ratings, we do not believe the current proposal satisfies that mandate, which specifically directs regulators to adopt alternative standards of credit-worthiness to substitute for reliance on ratings,” wrote CFA Director of Investor Protection Barbara Roper. Rather than making money market funds safer, the proposed rule “would throw open the door to even riskier investment practices by money market mutual funds,” she added. Roper urged the SEC to withdraw this proposal until it can come up with an alternative approach “that both reduces reliance on ratings and appropriately minimizes the risks money market funds may assume.”