President, Congress Urged to Pursue Strong Consumer Agenda

In joint letters to President Obama and Congressional leaders, eight of the nation’s leading consumer organizations urged policymakers to pursue a strong, robust agenda of consumer reforms.  With the President’s second term and a new session of Congress underway, the groups identified nine major initiatives, including measures to strengthen the consumer’s voice in Washington, to continue improvements in health care and financial services, and to ensure that Americans’ food and products are safe, as well as energy and telecommunications reforms, policies to strengthen regulations that protect the public from harm, consumer legal rights, and actions to ensure the marketplace is fair, open, and competitive.

“The agenda we are providing today is a key starting point for our recommendations regarding the top issues for consumers,” the groups wrote.  “By working together and helping consumers make more informed decisions, we are building an influential consumer movement that will be a force for change.” The letters were delivered to the White House and Senate Majority Leader Reid, Senate Republican Leader McConnell, Speaker of the House Boehner, and House Democratic Leader Pelosi. They were was signed by presidents and executive directors of Consumer Action, Consumer Federation of America, Consumers Union, National Association of Consumer Advocates, National Consumers League, National Consumer Law Center, Public Citizen, and U.S. Public Interest Research Group.

A news release on the letter is available here.

Consumer Groups Decry FHFA’s Force-Placed Insurance Action

The Federal Housing Finance Authority, the federal regulator that oversees Fannie Mae and Freddie Mac, last week brought a halt to a plan by Fannie Mae to reduce the cost of force-placed insurance for homeowners and taxpayers by purchasing the insurance directly from a consortium of low-cost insurers.  CFA, the National Consumer Law Center, the Center for Economic Justice, Consumer Watchdog, the Neighborhood Economic Development Advocacy Project, and the Center for Responsible Lending issued a press statement decrying the FHFA action, arguing that Fannie Mae’s plan would have saved borrowers and taxpayers more than $1 billion a year.

Force-placed insurance (FPI) is property insurance that mortgage servicers impose on homeowners whose insurance policies lapse or are cancelled.  The market is dominated by two insurers, QBE and Assurant, who have written 99 percent of forced-place insurance policies in the past several years.  Having studied the issue for several years in search of a more cost-effective way to provide the insurance, Fannie Mae was moving forward with a plan to purchase the insurance directly from its own vendors, at an estimated 40 percent discount to the prices charged by the two largest insurers, when the FHFA halted the program, citing a need to take a “measured approach.”

“The current structure of the force-placed insurance market is one based on reverse competition, where prices rise to allow bigger kickbacks to lenders as the primary means for competing for the lucrative force-placed business,” said CFA Director of Insurance J. Robert Hunter.  “While Fannie Mae clearly understands that, the current FHFA – which says more ‘competition’ will fix it – clearly does not,” he added.

Action Urged on Alcohol Labels

Four leading consumer groups wrote last week to Jack Lew, President Obama’s nominee to become Treasury Secretary, urging him as he takes over leadership of the U.S. Treasury Department “to complete important business pending from almost a decade ago: the proposal that all alcohol beverages under your regulatory jurisdiction have easy-to-read, standardized ‘Alcohol Facts’ labels, similar to the popular ‘Nutrition Facts; labels on foods and nonalcoholic beverages.

The four groups sending the letter – CFA, Center for Science in the Public Interest, National Consumers League, and Shape Up! America – were among nearly 80 organizations that petitioned the Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau (TTB) in December 2003 to require Alcohol Facts labels. Although the Bureau issued a proposed rule in 2007, its proposal was not “adequate in authorizing a meaningful tool to reduce alcohol abuse, drunk driving, obesity, and the many diseases attributable to excessive alcohol intake.”

The groups urged Lew, once he is confirmed by the Senate, to quickly finalize a rule requiring Alcohol Facts labels that include information on serving size, calories per serving, fluid ounces of alcohol per serving, percent alcohol by volume, the definition of a “standard drink,” number of drinks per container, and the Dietary Guidelines recommendation on moderate drinking (a maximum of one standard drink per day for women and two for men).

“Alcoholic beverages are the last consumable product without meaningful labeling,” said Chris Waldrop, Director of CFA’s Food Policy Institute. “Information about alcoholic beverages is essential so consumers who drink can make informed choices.”

New Payday Loan Bill Seeks to Close Loopholes and Protect Consumers’ Bank Accounts

Four senators introduced legislation last month, the Stopping Abuse and Fraud in Electronic Lending Act (SAFE Lending Act),  designed to close loopholes that have resulted when online lenders affiliated with Native American Tribes and banks offering payday loans have designed abusive products that evade state consumer protections.  CFA issued a news statement applauding senators Jeff Merkley (D-OR), Richard Blumenthal (D-CT), Richard Durbin (D-IL) and Tom Udall (D-NM) for their action.

Currently, online lenders that partner with Native American Tribes are claiming immunity from enforcement of state laws that cap interest rates and provide other borrower protections.  Similarly, banks that offer deposit advance loans at high rates with short repayment terms are currently not subject to state consumer protections.  The SAFE Lending Act includes provisions to ensure that all lenders play by the same rules and that consumer bank accounts are protected.

“Consumers should be able to make credit choices with the confidence that all lenders are playing by the same set of rules,” said CFA Director of Financial Services Tom Feltner.   “As state legislatures across the country continue to crack down on abusive practices, such as triple digit interest rates and unfair payment and debt collection practices, the SAFE Lending Act will ensure that consumers get the same protections regardless of whether they take out a loan from a storefront payday lender or a lender operating online.”

Consumer Assembly Program Taking Shape

Former FDIC Chairman Sheila Bair and newly minted Massachusetts Senator Elizabeth Warren are among the keynote speakers at CFA’s Consumer Assembly ’13 to be held March 14-15 in Washington, D.C.  The program also includes presentations by FCC Commissioner Mignon Clyburn, CPSC Commissioner Bob Adler, Iowa Attorney General Tom Miller, and the Pew Research Center’s Scott Keeter. Online registration is available on the CFA website.