CFPB Documents Need for Stronger Payday Loan Protections

By illustrating the harm caused when payday lenders use direct access to a borrowers’ bank account to collect payments – including frequent, high overdraft fees and even account closure – a new report released last week by the Consumer Financial Protection Bureau (CFPB) documents the need for strong protections for these high cost loans.

“These findings reinforce what consumer, civil rights and faith organizations across the country have said time and time again,” said CFA Director of Financial Services Tom Feltner in a press statement.  “Payday loans result in long-term financial hardship and pile on overdraft and other fees that put borrowers’ financial security at risk.”

The CFPB report, which uses data related to payday loan transactions conducted online, found that over an 18-month period:

• Half of all deposit accounts that made at least one payment to an online payday lender had at least one overdraft triggered by an attempt to collect a payday loan payment.
• When accounts had at least one overdraft triggered by an online lender, accountholders paid an average of $185 in overdraft fees.
• Nearly half of the overdraft fees incurred were the result of multiple, repeated collection attempts.
• Multiple collection attempts did not increase the likelihood of successful repayment, and many of the payments that are collected are only collected because the accountholder incurred an overdraft.
• Accounts from borrowers with online payday loans were more likely to be closed at the end of the study period than those that did not use payday loans (23 percent versus 6 percent), and far more likely (42 percent) if multiple collection attempts were unsuccessful.

In March 2015, the CFPB released a draft proposal to protect consumers from abusive payday and auto title loans.

Among the provisions within the proposal under consideration are a requirement to fully consider a borrower’s income and expenses before making a loan, rather than relying on bank account access to collect payments.  The Bureau is also considering a limit on collection attempts that would protect consumers’ bank accounts.

“The CFPB’s research is clear—direct access to a borrowers’ bank account puts consumers’ checking accounts at risk.  We need strong and immediate action to require lenders’ to fully consider a borrowers’ ability to repay a loan without re-borrowing, overdraft fees or other financial hardship,” said Feltner.

 

Public Power and Rural Electrics Lead Development of Community Solar

Public power companies and rural electric co-ops have been leaders in development of community (or “shared”) solar, which allows the many customers for whom rooftop solar is not feasible to invest in solar panels. This third solar option – after rooftop panels and utility-installed solar farms – is still in its infancy but offers key benefits to consumers, especially to the roughly 50 percent for whom rooftop solar is not available, according to a new white paper released last week by CFA.

Community solar involves customer investment in the purchase of power from solar panels in the same geographical area. Customers’ monthly bills reflect the amount of electricity used and the amount produced by their purchase.  As noted in the white paper, Public Power and Rural Electric Leadership on Community Solar Initiatives, of the more than 100 community solar projects in the United States, a disproportionate number have been initiated by rural electric co-ops and public power companies.

“The greater interest of rural electric co-ops and public power systems largely reflects strong interest and participation of their residential customers, who also have the final say in investment decisions,” said CFA Executive Director Stephen Brobeck, author of the white paper.

Community solar allows consumers to not only invest in solar power, but also to obtain long-term rate stability, as compared to energy sources which can spike in cost, according to Brobeck. “There are also certain advantages as compared to rooftop solar, including ease of access for the roughly 50 percent of residences not suitable for rooftop panels, lower cost of production due to economies of scale, consumers’ not being directly responsible for installation and maintenance of solar panels, and fewer potential conflicts between customers with solar investments and those without,” he said.

At present, however, the total installed capacity of community solar projects – under 100 Megawatts – is only a small fraction of the installed capacity for rooftop solar – more than 7,000 Gigawatts. If utilities and non-profit community groups could take full advantage of the federal tax credit and other incentives available to rooftop solar, including state grants, they would have greater incentive to initiate community solar projects, according to the paper.  But the paper also notes that utilities must show much more interest in this third solar option for it to become a major power source.

 

Automakers Beating Expectations with Fuel-Efficient Offerings

Automakers are doing more than ever before to meet national fuel efficiency standards, with 56 percent of available vehicle models matching or exceeding today’s targets, according to a new analysis of 1,094 2016 models released this week by CFA.

“Fuel efficiency increasingly comes standard with new cars, trucks, and SUVs” said CFA Public Affairs Director Jack Gillis, co-author of the analysis with CFA Research Director Mark Cooper. “Even if you’re in the market for a large pickup or SUV, you’d have to go out of your way to find a true gas guzzler.”

“What’s particularly noteworthy”, said Gillis, “is that there is good news on both ends of the scale.  13% of the 2016 models get over 30 MPG compared to only 1% in 2008.  On the other hand, 32% of the 2008 vehicles got less than 16 MPG and this year only 4% could be considered ‘gas-guzzlers.’”

Further, the vast majority of Americans want fuel-efficient vehicles, according to a new consumer survey conducted for CFA in March by ORC International. Despite current low gas prices, 81 percent of consumers said gas mileage will be an important consideration next time they go shopping for a new car. The same percentage said they support federal fuel economy standards.

“Consumers are understandably wary of gas price swings,” Cooper said. “Thankfully, purchasing a fuel efficient vehicle remains a practical, sensible way to save money and protect your household against gas price spikes.”  Cooper calculated that the cost of fuel-efficient technology more than pays for itself over the lifetime of a vehicle, and would continue to do so even at rock-bottom gas prices of $1.30 a gallon.

Despite their success in meeting federal fuel economy standards, automakers are asking federal agencies to lower fuel efficiency requirements between 2022 and 2025 as part of a scheduled re-evaluation process for the program, according to media reports. The Department of Transportation will produce a new fuel economy assessment over the summer, and deciding whether or not to stay the course on fuel economy will be one of the first major decisions on the next president’s desk.

“We already have immensely popular cars and trucks that meet and beat the standards 13 out of the 14 major world-wide auto companies agreed to in 2012,” Gillis said. “So it’s hard to see any reason to slow down on fuel economy.”

The full report is available on CFA’s website along with supplementary data, charts and a copy of the survey question and results.

 

 

House Passes Bill to Undermine FCC Broadband Authority

The House of Representatives passed legislation earlier this month that would prohibit the Federal Communication Commission (FCC) from regulating the rates charged for broadband internet access. H.R. 2666, the “No Rate Regulation of Broadband Internet Access Act,” passed 241-173 on a largely party line vote.

The bill’s broad definition of rate regulation would extend to the FCC’s ability to review the reasonableness of rates set by broadband providers. As a result, this bill would leave the FCC powerless to protect consumers even against clear price gouging.

The definition is so broad that it would also undermine the FCC’s ability to protect consumers from an emerging online “privacy divide” that leaves low-income Americans with fewer privacy options than are available to the wealthy, according to a letter to House members from 30 consumer and community groups, including CFA.

“There is a difference between ensuring that consumers’ right to control their personal information is not contingent on income level, and rate regulation—setting the prices broadband providers may charge for service,” the groups said. “The overbroad language in H.R. 2666 fails to recognize that difference, putting consumer privacy at risk.”

“Since the FCC has already made clear that it has no intention of setting rates for broadband, this legislation is unnecessary,” said CFA’s Director of Consumer Protection and Privacy Susan Grant. “We will vigorously oppose this and any other attempts to chip away at the FFC’s authority.”

 

FDA Urged to Withdraw Approval of Ortho-Phthalate Food Additives

CFA and a coalition of consumer, public health, and environmental groups, filed a citizen’s petition last week requesting that Food and Drug Administration (FDA) prohibit certain food additives known as ortho-phthalates from use in food packaging and food handling equipment.

Currently, the agency allows food producers to use certain ortho-phthalates in cellophane, paper, paperboard, and plastics that come in contact with food, subject to approvals that date back to 1985 or before. Under the law, chemicals that are reasonably expected to get into food from their intentional use in materials contacting food are considered “food additives.”

“The studies on ortho-phthalates link them to reproductive, developmental and endocrine health problems,” said CFA’s Food Policy Director Thomas Gremillion in a press statement. “Whenever scientists have taken a closer look atan ortho-phthalate, their studies have raised concerns about these types of health effects, which include lower IQ in young children and malformation of the male genital tract. The evidence of health effects in humans continues to grow and makes clear that FDA’s approvals of various ortho-phthalate chemicals subject consumers to unacceptable risks.”

The petition builds on a food additive petition filed the prior week. In response, FDA agreed to consider withdrawing its approvals of 30 ortho-phthalate food additives. However, the agency claimed that it could not take certain actions—such as banning a chemical’s use as a food additive—in response to a food additive petition, and so it recommended the groups file a citizen’s petition seeking the ban.

Consumer Federation of America joined the Natural Resources Defense Council, Center for Science in the Public Interest, Center for Environmental Health, Center for Food Safety, Clean Water Action, Earthjustice, Environmental Defense Fund, Improving Kids’ Environment, and Learning Disabilities Association of America in the petitions.