CFA News Update- February 23, 2012

Consumer Groups Support Fuel Economy Standard Increase

CFA and 23 consumer groups filed comments with the Environmental Protection Agency and the National Highway Traffic Safety Administration last week in support of the Administration’s proposal to increase fuel economy standards to 54.5 miles per gallon by 2025.  The submission included an analysis by CFA Research Director Mark Cooper of the impact of the proposed standard on both consumers and the nation.

The total national benefits are close to $600 billion, well over three times their cost.  Because higher fuel economy standards primarily benefit consumers, the consumer’s share of the savings are close to $500 billion. The CFA analysis demonstrates that, “from the consumer, economic, security and environmental point-of-view, implementing the proposed standards are a win-win-win-win,” according to a news release issued in conjunction with the comments.  “This could easily be one of the most significant energy-related regulations in our nation’s history,” Cooper said.

Insurers Shift Costs of Weather Catastrophes onto Consumers and Taxpayers

Insurance companies have significantly and methodically decreased their financial responsibility for weather catastrophes such as hurricanes, tornados and floods in recent years, shifting much of the risk and costs for these events to consumers and taxpayers, according to a report released last week by CFA.  Based on insurance industry data, the report was released as insurers in eleven states requested large homeowners’ insurance rate increases of 18 percent or more.  “Insurance commissioners should block many of these pending rate increases because they place an unwarranted financial burden on homeowners, many of whom are coping with severe financial difficulties in a bad economy,” said CFA Director of Insurance J. Robert Hunter.  “In the last twenty years, insurers have been so successful at shifting costs to consumers and taxpayers that they are currently overcapitalized and cannot justify higher homeowners’ rates.”  The states where insurers are seeking large rate increases are Alabama, Arizona, Colorado, Georgia, Kansas, Kentucky, Maine, South Carolina, South Dakota, Tennessee, and Virginia.

Survey Shows Continuing Decline in Family Finances

Despite hopeful macroeconomic signs, an increasing number of Americans are having difficulty saving to meet goals ranging from meeting emergencies to affording retirement, according to the fifth annual survey assessing household saving released last week in advance of America Saves Week.  The survey, sponsored by CFA, America Saves, the American Savings Education Council, and the Employee Benefit Research Institute, found that over the past three years, the number of Americans who spend less than their income and save the difference, are building home equity, have adequate emergency savings, and think they are saving enough for retirement all declined. However, the survey also revealed that having a savings plan has beneficial financial effects, even for lower-income families.  “The recession clearly has not ended for millions of American families, especially those with lower incomes,” said Stephen Brobeck, CFA Executive Director and a founder of America Saves. “Many working families are still apparently suffering from the high unemployment rate, stagnant incomes, and a depressed housing market.”

Anti-Investor Bills Advance in House

Two anti-investor bills – one that would roll back existing investor protections and one that would make it more difficult for the Securities and Exchange Commission (SEC) to adopt new investor protections – were approved in the House Financial Services Committee last week.  CFA Director of Investor Protection Barbara Roper wrote to the committee in advance of the vote urging opposition to the two bills.  “Investors have been devastated by an unrelenting stream of financial scandals and crises over the past dozen years.  Their faith in the integrity and stability of our capital markets has been badly shaken,” she wrote.  “These bills would make that problem worse.  They should be rejected.”

H.R. 2308, which would impose a vast new array of burdensome cost-benefit analysis requirements on the SEC, was adopted on a party-line vote, but H.R. 3606 enjoyed strong bipartisan support.  In order to encourage more companies to go public, it would delay implementation of a number of important investor protections for up to five years for a new class of “emerging companies.”  Among the regulations to be delayed are requirements designed to ensure that companies provide accurate financial information to investors.

“We are extremely disappointed that members from both parties appear to have bought into the idea that the way to promote job growth is to reduce regulations, including regulations adopted in the wake of massive, widespread frauds,” Roper said.  “If Congress makes investing riskier, as these bills would do, the inevitable result will be an increase in the cost of capital, particularly for the ‘emerging’ companies H.R. 3606 purports to benefit,” she added.

Credit Score Educational Website Now Available in Spanish

An interactive and educational website and brochure about credit scores has been translated into Spanish and is now available at www.CreditScoreQuiz.org/espanol (or www.cuestionarioparaelpuntajedecredito.org).  Hispanic America Saves, Consumer Federation of America, and VantageScore Solutions, LLC, announced the launch of the website at a news conference last week.  Both the website and the brochure feature 20 questions and answers that provide the most important information consumers need to know about these scores.

A national survey, conducted when the English version of the website was being developed, found that 60 percent of Hispanic Americans, compared with 40 percent of other Americans, said their knowledge of credit scores was poor or fair.  “Hispanic Americans can benefit from knowing more about credit scores because these scores affect the availability and costs of car loans, credit cards, mortgage loans, and even electricity and telephones services,” said Larry Garcia, President and CEO of El Paso Credit Union Affordable Housing and leader in the Hispanic America Saves program. “I’m encouraging everyone to visit this website regardless of whether they are thinking about applying for credit, as a good credit score is indicative of healthy financial behaviors,” he added.