CFA News

CFAnews Update – July 29, 2022

Congress Must Act to Strengthen Airline Consumer Protection Regulations

The Consumer Federation of America (CFA) joined a coalition of consumer and passengers’ rights groups urging Congress to expand and strengthen airline consumer protection regulations in the upcoming 2023 Federal Aviation Administration Reauthorization process.

The airline industry received over $50 billion of relief during the COVID-19 pandemic, yet are still reporting record cancellations, delays and poor customer service while fare prices continue to rise. The Department of Transportation (DOT), who is the sole regulator of airlines, has initiated only one enforcement action since the beginning of the pandemic.

“The combined history of airline deregulation, massive mergers, and the lack of DOT enforcement has created a situation where airlines have almost no accountability for their conduct,” said Erin Witte, CFA’s Director of Consumer Protection. “Congress needs to act quickly to reverse this process.”

CFA teamed up with a group of consumer advocates to create a list of reforms that Congress can undertake to address unfair and deceptive conduct, including:

  • Minimizing flights cancellations and delays by requiring industry-wide reciprocity for passengers, requiring carriers to maintain a percentage of on-time flights per month, and requiring public airports to post notices about compensation rights.
  • Reforming airline fees, seating and rewards by prohibiting unreasonable and disproportionate fees, prioritizing family seating requirements, establishing basic standards for air travel (including maintaining a customer service phone number with minimal wait time), requiring up front and transparent fare pricing, ending the excise tax exemption for ancillary service fees, establishing a minimum passenger seat size, and requiring reasonable notice before devaluing frequent flyer miles.
  • Enabling stronger enforcement of passenger protections by permitting state attorneys general to enforce DOT consumer protection laws, establishing a private right of action for passengers, and directing the Government Accountability Office to examine the DOT’s failure to complete prior mandates from Congress in past FAA reauthorization bills.
  • Prioritizing consumer voices by renewing the charter for the Aviation Consumer Protection Advisory Committee, requiring airport authority government boards to have at least two consumer representatives, and establishing the creation of new airports.

Report Shows No Consistent Relationship Between Home Prices and Commission Rates

A new report released this month by CFA on residential real estate brokerage found that there was no consistent relationship between home prices and commission rates.

The report compared housing prices and buyer broker commission rates in 17,805 recent home sales across 35 cities from 2021 and early 2022, and found that:

  • In ten cities, the rates were so uniform that meaningful comparisons could not be made.
  • In five cities, rates were fairly similar for all housing price categories.
  • In eight cities, higher-priced homes tended to carry higher commission rates than did lower-priced homes.
  • In only eight cities did higher-priced homes tend to carry lower commission rates.

“At the same commission rate, brokers selling a million-dollar home receive ten times the compensation of those selling a $100,000 property,” said Stephen Brobeck, a CFA Senior Fellow and author of the report. “One would expect that commissions on expensive homes would be discounted. Yet that usually is not the case for buy-side commissions. In some cities, those selling high-priced homes pay higher commission rates.”

According to the report, this inequity is perpetuated by a history of anti-competitive industry rules, with industry leaders working to establish uniform, fixed-rate commissions. Today, most commission rates have a striking degree of rate uniformity in most cities.

The report also found that while some brokers have suggested that selling a high-priced home takes more time and skill than selling a modestly priced one, other brokers have said that it takes no more effort to sell a $600,000 – $800,000 home than a $200,000 – $400,000 home.

Despite the constraints of the current compensation system, CFA urges sellers and buyers to discuss and negotiate compensation with their agent. Sellers should discuss price-rate-trade-offs, the feasibility of lowering the buy-side rate, and the willingness of their agent to lower their commission. The report suggests that uncoupling listing agent and buyer agent commission rates could also significantly increase rate competition and eventually lower the fees paid by both sellers and buyers.

Coalition Urges President Biden to Extend and Expand PLSF Waiver and IDR Adjustment

CFA joined 134 organizations representing students, teachers, student loan borrowers, workers, and consumers urging President Biden to extend and expand the current Public Service Loan Forgiveness (PLSF) Waiver and Income-Driven Repayment (IDR) Adjustment.

Currently, both the Waiver and the Adjustment exclude critical groups of borrowers and fails to fulfill the promise President Biden made to establish a system for affordable and manageable loan repayment for borrowers.

“These critical adjustments to the PSLF Waiver and IDR Adjustment are needed to maximize their effectiveness, ensure that these cancellation programs work as Congress intended, and provide relief to the most borrowers possible,” said Rachel Gittleman, CFA’s Financial Services Outreach Manager.

The PLSF Waiver, set to expire after October 31, 2022, gives credit towards PSLF loan forgiveness to public service workers who prior time was previously considered partially or completely ineligible. The IDR Adjustment, which has no specific deadline, similarly awards credit toward IDR loan forgiveness for time that was previously ineligible.

In the letter, the coalition argues that since the IDR credit counts towards PSLF loan forgiveness, “these two programs should operate in lock step to maximize effectiveness.” Currently the staggered deadlines mean that borrowers who rely on the Waiver to access PSLF loan forgiveness will be denied the later-in-time IDR Adjustment benefits.

The coalition is urging the President to specifically: extend the deadline for the PSLF Waiver through at least 2023 and calibrate the IDR adjustment timeline accordingly; expand both policies to ensure that all borrower types receive credit for the entirety of the time since they entered repayment; extend the payment pause date after which loan cancellations from the Waiver and Adjustment will be processed; and provide clear information to borrowers and the public about the two programs so that borrowers fully understand their options and can make informed decisions.

Congress Must Reboot Lax Antitrust Regulations for the Modern Digital Age

Earlier this month CFA released an Issue Brief urging the Senate to vote on and pass Sen. Klobuchar’s (D-MN) bill,  The American Innovation and Choice Online Act (S. 2992).

This bill is seeking to reduce or eliminate abuses of market power in digital services that are influenced by anticompetitive practices. These practices raise consumer costs, lower quality, slows innovation, and denies effective choice.

“This is a vitally important piece of legislation,” said Rachel Weintraub, CFA’s Legislative Director and General Counsel, “that addresses the most important competitive problem in the digital communications sector, the abuse of market power by Big Data Platforms, which are precisely defined as “covered entities.”

The Issue Brief, entitled Rebooting and Recalibrating Competition Policy: S. 2992, American Innovation and Choice Online Act, an Important First Step to Apply Brandeis’ Antitrust Principles to Rebuild the Uniquely Successful American Economic Model, evaluates the legislation from the perspective of four analyses prepared by CFA of the challenges in competition policy, as well as CFA’s previous testimony and Hill communications on related issues. The Brief also identified key elements of effective recalibration that are needed, which S. 2992 supplies:

  • The broad agenda for legislative changes that remains within the antitrust tradition that led the economy to great heights in the “Golden Age of Capitalism.”
  • Recapturing the goals of competition policy to prevent excessive concentration, which has the benefit of controlling the potential for abuse of political power and influence.
  • Thresholds for review and scrutiny that are lowered and address key challenges confronted by those charged with executing competition policy.
  • Allowing defendants to show that they merit an exception subject to very stringent conditions.
  • Conflicts of interest and self-preferencing, which are central to the abuse of market power must be controlled. This can be accomplished without undermining the incentive of platforms to innovate and offer higher quality services to the public.
  • Enhance agency oversight by providing the tools and resources necessary to effectively oversee competition and undertake new responsibilities.
  • Restore effective consumer sovereignty by requiring transparency and ex anteconditions for true consumer choice.
  • Dual Jurisdiction including antitrust and regulation has been successfully applied to the communications network for over a century.

“We find that S. 2992 is a balanced and careful approach to an area of immense consumer activity that has not been overseen effectively since its inception by handling eight policy issues in a reasonable manner,” said Mark Cooper, Senior Fellow at CFA and author of the Issue Brief.

CFA Urges Comprehensive Approach on Plan for National Strategy on Nutrition

With the White House Conference on Hunger, Nutrition, and Health set to take place this September, CFA is urging a comprehensive approach for the national strategy to end hunger and reduce diet-related diseases and the disparities surrounding them.

As explained in a recent CFA letter to Administration officials, the food system touches nearly every facet of economic, environmental, and social policy, and the responsibility for regulating the food system falls across many different federal agencies. Accordingly, a comprehensive strategy should provide for “dedicated resources and cabinet level personnel to sort through the inherent complexities of building a more equitable and environmentally sustainable food system, and to negotiate tensions between competing stakeholders.”

Currently, the United States has an “agricultural policy” but little in the way of food policy, and U.S. agricultural policy was created in the absence of an affirmative strategy to prevent diet-related disease. The consequences have been dire, including a dramatic rise in obesity rates, diabetes rates and food insecurity rates.

An effective national strategy to reduce hunger and diet-related diseases must reach across the federal government to bring coherence to the national food policy, “which currently caters to a narrow class of interests at the expense of family farmers, workers, public health, and the environment,” according to CFA’s letter. The letter urges the Biden Administration to enact policies that would increase transparency and empower consumers to be able to make choices that are not only healthier, but are better for workers, the environment, family famers and their communities and overall public health.

“The food system has enormous potential as a driver of immediate, positive changes that address longstanding public health problems, social inequities, environmental mismanagement, and market failures,” said Thomas Gremillion, CFA’s Director of Food Policy. “Unfortunately, in the absence of a coherent national food policy, consumers seeking to make food purchases that align with their values have an uphill battle to fight.”