CFA News Update, October 31, 2012
Expecting that Hurricane Sandy will result in hundreds of thousands of claims for wind damage by homeowners and tens of thousands of federal flood insurance claims, CFA issued advice to consumers on how to get fair claims payments. Because so many consumers experienced claims problems in the wake of Hurricanes Katrina and Irene, CFA urged homeowners dealing with losses caused by Hurricane Sandy to be vigilant with their insurance companies to ensure that that they receive a full and fair settlement. The release includes tips on such topics as how to maintain appropriate records to support a claim, how to determine whether to file a claim, what to do if a claim is denied, and how to file a complaint.
“Families should take every precaution to ensure their safety during this severe weather event, including evacuation if recommended by local authorities,” said CFA Director of Insurance J. Robert Hunter. “After the storm, however, we are concerned that families will have to dig deeper into their pockets because insurers have been steadily shifting liability to consumers by increasing hurricane wind coverage deductibles and imposing other policy limitations. Not all insurance companies handle claims badly, so go into the claims process with an open mind,” he added. “Be vigilant though, or you run the real risk of being shortchanged.”
CFA announced last week that it has joined with Public Citizen and Consumers Union to appeal a federal court opinion permanently sealing from public view key facts about a lawsuit filed by an anonymous company against the Consumer Product Safety Commission (CPSC). Released last week with key sections blacked out, the decision indicates that the case, originally filed in October 2011, was decided in the company’s favor more than two months ago after nine months of proceedings conducted out of public view and without opportunity for public participation. The decision prevents the public from seeing the company’s name and relevant court findings, and it bars the CPSC from posting to its online consumer complaint database the report of consumer injury about which the company sued.
The CPSC’s searchable online database, available at www.saferproducts.gov, was launched in March 2011 pursuant to a congressional mandate to provide consumers with information about potentially dangerous products after a spate of product recalls. Nearly 9,000 reports had been filed as of June 2012. “The court blocked the CPSC from publishing a report of harm, but the facts underlying the decision are entirely blacked out,” said CFA Legislative Director Rachel Weintraub. “The court’s seal prevents the public from assessing the court’s reasoning, and understanding its impact on the integrity of the CPSC database.”
The consumer groups objected to the company’s motion to litigate the case anonymously and under seal shortly after the lawsuit was filed in the fall of 2011. But the court allowed the case to proceed in secret and did not rule on the motion to seal until July 2012, when it also granted the company’s motion for summary judgment. The consumer groups’ appeal, entitled Company Doe v. Public Citizen, will be heard by the Fourth U.S. Circuit Court of Appeals. The notice of appeal was filed in late September and, pursuant to the district court’s order, is still under seal. The CPSC also has appealed.
Consumers are finding it increasingly difficult to avoid rising bank checking fees unless they directly deposit regular income checks such as paychecks, pension checks, and Social Security checks, according to a new CFA report, Can Consumers Avoid Checking Fees?, released earlier this month. While checking policies and practices varied greatly among the 25 large banks analyzed, CFA found that many interest and noninterest-bearing checking accounts impose monthly account fees that total as much as $300 annually on the large majority of bank customers who are unable to maintain average balances of $1,500. Just triggering one debit card overdraft, having one check returned for insufficient funds, and having one deposit rejected could add an additional nearly $100 in charges to the annual cost of using a checking account, according to the report.
“Banks are increasing fees and balances needed to avoid fees,” said CFA Senior Adviser for Financial Services Jean Ann Fox. “These higher fees and hurdles to avoid fees are especially challenging to the 45 percent of accountholders who maintain low balances and are most likely to overdraw their accounts.”
An analysis of Raddon Financial Group survey data on consumer checking accounts found that nearly three-fifths (59 percent) of respondents saw checking balances fall below $500 in a typical month, with over one-third (36 percent) saying their balances fell below $100. Less than one-quarter (24 percent) said they had been able to keep balances above $1,000. Not surprisingly, those with low balances were the most likely to overdraw their accounts. While 40 percent of those with low balances below $500 reported having overdrawn their account in the past two years, only 3 percent of those with low balances above $1,000 reported having done so. Furthermore, both checking account balances and the likelihood of directly depositing income checks are highly correlated with income, according to the survey. These differences are important because a large majority of big banks will waive minimum or average balance requirements if income checks are directly deposited at least monthly.
“The families who most need free or low-cost checking are the least likely to be paid by direct deposit, either because their employers do not offer the service, they work in short-term positions, or because they are unemployed,” noted CFA Executive Director Stephen Brobeck. “Consumers who cannot waive fees through direct deposit and who do not have a comfortable cushion in their accounts at the end of the month pay the full freight for checking accounts.”
The release also includes advice to consumers on how to minimize the fees they pay.
Rachel Weintraub, CFA’s longtime Senior Counsel and Product Safety Director, has recently become CFA’s Legislative Director. She replaces Travis Plunkett, who left CFA to join the Pew Center on the States as Deputy Director, Family Economic & Financial Security Portfolio.
To continue CFA’s work on auto insurance reform and issues related to the Consumer Financial Protection Bureau, Tom Feltner has recently joined CFA as Director of Financial Services. Tom previously served as Vice President of Woodstock Institute in Chicago, where he worked on both national and state financial services issues. At CFA, Tom will also work with Jean Ann Fox on high-cost lending issues. Jean Ann has reduced her hours but will continue to represent CFA as Senior Adviser on Financial Services.
“We will greatly miss Travis and a fulltime Jean Ann, but are very pleased that Rachel has agreed to broaden her work on policy issues and that Tom has agreed to join the CFA team," said CFA Executive Director Stephen Brobeck.