Bipartisan Draft GSE Reform Bill Is An Important Next Step

Senate Banking Committee Chairman Tim Johnson (D-SD) and Ranking Minority Member Mike Crapo (R-ID) released draft legislation last week to reform the Government Sponsored Enterprises (GSEs) which CFA Housing Policy Director Barry Zigas praised for establishing “an important series of bipartisan agreements that would benefit consumers.” In a press statement issued in response to the draft bill’s release, Zigas added, “The bill does not provide everything CFA and other consumer and civil rights advocates had promoted; it is going to need much more work. But it is a starting point and we look forward to working with the Committee to improve it.”

The product of a lengthy series of hearings, meetings with stakeholders and intensive discussions within the committee, the draft bill would replace Fannie Mae and Freddie Mac, after a transition period, with a new Federal Mortgage Insurance Corporation (FMIC) to provide a federal guarantee to qualifying mortgage backed securities to cover losses to investors once a deep layer of private capital determined by FMIC is exhausted.  “Most importantly, the draft bill reaffirms the importance of a federal role to insure that sustainable mortgage credit is made available as broadly as possible to credit worthy borrowers, and that this role must include a federal guarantee of a defined kind of mortgage backed security,” Zigas said.  “We believe these two ingredients are key to insuring consumers have access to affordable, long-term fixed rate mortgages.”

In addition, he noted, the draft bill establishes a new fee of 10 basis points (10/100ths of a percent) on all outstanding guaranteed securities to finance a range of investments in affordable housing and community development; establishes a new Market Access Fund to foster innovation and expand liquidity in hard to serve markets; and directs the new federal guarantor to monitor the market and ensure that it is broadly serving all markets through the full range of business cycles through a new Office of Consumer and Market Access within the federal guarantor.  The Johnson-Crapo bill also would support financing for multifamily housing by building on the current multifamily business lines at Fannie Mae and Freddie Mac.  “An adequate supply of capital for affordable rental housing is critical to the millions of Americans who rent their homes, and for emerging new households that cannot or do not wish to become homeowners now,” Zigas said.

Despite Dangers, States Are Increasingly Allowing ATVs on Roads

Despite the fact that a majority of all-terrain vehicle (ATV) deaths occur on roads, an increasing number of states and localities are passing state laws and local ordinances allowing ATVs to legally operate on public roads, according to a CFA report released last week.  “ATVs should not be operated on roads,” said CFA Legislative Director Rachel Weintraub in a press statement releasing the report.  “This trend is going in the wrong direction.”

In the report, “ATVs on Roadways: A Safety Crisis,” CFA evaluates laws from all fifty states and the District of Columbia.  The report finds that, in spite of warnings from manufacturers, federal agencies, and consumer and safety advocates that ATVs are unsafe on roadways, an increasing number of states have in recent years passed laws allowing ATVs on public roads.  CFA also analyzes recent research on ATV fatalities on roadways and provides recommendations to reverse this dangerous trend.

Information from ATV manufacturer manuals, required warning labels, and consistent messages from the U.S. Consumer Product Safety Commission (CPSC) unambiguously warn against the operation of ATVs on public roads.  The design of ATVs makes them incompatible with operation on roads.  ATVs have high centers of gravity and narrow wheel bases, which increase the likelihood of tipping when negotiating turns.  The low pressure knobby tires on ATVs are explicitly designed for off road use and may not interact properly with road surfaces.

“There is a clear 10-year trend toward increasing legal ATV access on roads that shows no sign of abating given the many examples of pending proposals,” said CFA Policy Advocate Michael Best. “While state laws vary about how they increase ATV access to roads – permitting certain classes of roads to be open to ATVs (Florida), delegating  ATV access decisions to local authorities (Iowa), and allowing ATVs to  be registered as a motor vehicle (Arizona) – any type of access to roads is dangerous.”

CFA’s report calls for immediate action at the municipal, county, state, and federal level to prohibit ATVs on roadways.

• States should pass laws prohibiting ATV use on all roadways.  State laws should not delegate authority over ATV access to local jurisdictions.
• Where state laws allow local jurisdictions to make decisions regarding ATV access to public roads, those jurisdictions should not expand the permissible range of ATVs on roads.
• ATVs are not under the jurisdiction of the National Highway Traffic Safety Administration (NHTSA).  However, since states are increasingly passing laws permitting on road use, and ATV deaths are occurring primarily on roads, NHTSA should take concrete steps to address ATV safety. NHTSA should share data with the CPSC and extend its current grant programs that fund enforcement efforts to ATVs.
• As the agency responsible for ATV safety, the CPSC should be a strong voice in opposing the operation of ATVs on roads and in educating consumers about the dangers of on road ATV use.  Additionally, the CPSC could improve ATV death data by including how many deaths occur on private versus public roads.
• All those interested in and working on ATV safety, including the ATV industry, need to work together to prioritize opposition to efforts to expand ATV operation on roads.

“Consumer and health and safety advocates, federal regulators, and all segments of the ATV industry must work together to prevent ATVs from operating on roads,” Weintraub said. “ATVs on roads are a serious public health risk and action must be taken now to protect consumers from this grave hazard.”

Most Uninsured Drivers Can’t Afford Insurance

Most uninsured drivers have low incomes and cannot afford to purchase high-priced minimum liability coverage required by all states except New Hampshire, according to the latest CFA report on low-income auto insurance issues. Released last week, “Uninsured Drivers: A Societal Dilemma in Need of a Solution” also reveals that these low-income drivers are increasingly adversely impacted by state and local governments through higher liability requirements (driving up premiums), more rigorous enforcement, and stiffer penalties, including large fees, vehicle impoundment, and even jail time.

“Most uninsured drivers are responsible citizens; they just can’t afford auto insurance premiums that represent their largest driving expense,” said CFA Executive Director Stephen Brobeck.  “Tough enforcement of punitive insured driver laws target many low-income workers who are struggling to survive financially.  And increases in required liability coverage just force more of them to drive without insurance.”

The report, which includes new survey data showing strong public support for mandatory insurance, acknowledges the complexity of the uninsured driver issue. But it urges policymakers to recognize that most uninsured drivers, especially those in high-premium urban areas, need to be able to drive to work and cannot afford annual liability premiums.  Recognizing that there are no easy or perfect solutions to this dilemma, the report recommends that state and local officials mitigate the problem by:

• establishing state programs, like California’s, in which low- and moderate-income residents with good driving records can purchase liability coverage for $350 or less;
• lowering liability minimums for those lower-income drivers with good driving records;
• restricting insurer use of rating factors – such as occupation, income, credit rating, marital status, and homeownership – that are highly correlated with income and discriminate against lower income drivers; and
• focusing laws and enforcement efforts on drivers who have demonstrated that they do not drive safely.

“State legislators and insurance regulators need to recognize that the uninsured motorist problem is much more about affordability than about irresponsibility,” said CFA Director of Insurance J. Robert Hunter.  “These officials need to take steps, such as eliminating insurer use of discriminatory rating factors and creating programs for safe lower-income drivers, that allow these drivers to afford required liability coverage.”

With ID Theft on the Rise, CFA Releases New Prevention Tips

With the latest research showing that 13.1 million Americans were victims of identity theft-related fraud in 2013, an increase of more than 500,000 people from the previous year, CFA released a new video and tips last week describing the seven best ways that consumers can protect themselves and the people they care about from identity theft and the damage it can cause.  Of the many kinds of identity fraud identified in the recently released survey by Javelin Strategy and Research, the most prevalent problem was account takeover, where criminals assume control over victims’ financial or other types of accounts for their own uses.

While consumers can’t prevent the data breaches at retail stores that have been in the news lately, CFA says that they can thwart many other types of identity theft and fraud by taking simple steps to secure their personal information. To help educate consumers about those techniques, CFA released a humorous new video and tips, “Get Smart: Protect Yourself, Your Friends and Your Family from ID Theft and Fraud.” This project was undertaken with support from LifeLock, Inc., a provider of identity theft protection services for consumers.

“With the amount of personal information that we have on our computers, laptops, tablets and smartphones, these devices are tempting targets for identity thieves,” said CFA Director of Consumer Protection Susan Grant. “It’s crucial to understand the harm that identity theft can cause and take basic precautions, such as locking your accounts with strong passwords and not doing financial transactions using unsecure public Wi-Fi networks.”

Report on Tax-Time Troubles Call for Regulation of Paid Tax Preparers

The biggest problem facing consumers at tax time is the lack of regulation for paid tax preparers, according annual report released last month by CFA and National Consumer Law Center (NCLC).  “This year, tens of millions of consumers will use paid preparers to fill out one of the most important financial documents of their year,” stated Chi Chi Wu, staff attorney at the National Consumer Law Center (NCLC). “Yet most of these preparers are not subject to any minimum educational, training, or competency standards.”

The lack of regulation has allowed incompetence and abuses by tax preparers to flourish, putting consumers at risk of audit by the Internal Revenue Service (IRS) or even criminal sanctions, according to the report, “It’s a Wild World: Consumers at Risk from Tax-Time Financial Products and Unregulated Preparers.”  In addition, consumers may find it difficult to get price quotes or estimates about how much a paid preparer will charge them.

The report notes, on the other hand, that high-cost, high-risk refund anticipation loans (RALs) are no longer available from banks on a large scale, nationwide basis. However, taxpayers are still at risk of needless fees from tax-time refund products, such as:

• refund anticipation checks, which do not deliver refund monies any faster than the IRS can, yet cost $30 to $55; and
• RALs from fringe, non-bank lenders, which when offered by payday and other high-cost lenders, could be more expensive and riskier than bank RALs.

Consumer advocates suggest that taxpayers looking for quick refund cash should consider lower-cost or free alternatives. Taxpayers with a bank account can get their tax refunds in 8 to 21 days with e-filing and direct deposit. Taxpayers without a bank account can get the same fast refund by e-filing and having their refund deposited to a prepaid card, including any payroll or prepaid card that the taxpayer already has. Taxpayers without a bank account should also consider opening a bank account to receive their refund. “Getting a big refund is the perfect time to open a savings account and start a nest egg,” said CFA Financial Services Director Tom Feltner.