Financial Reform is On Track but Remains at Risk
One year after enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act, federal financial regulators have made great strides implementing its sweeping reforms, according to a progress report issued this week by CFA. That progress is threatened, however, by the unrelenting efforts of industry groups and their congressional allies to weaken and delay the rules and defund the agencies primarily responsible for making those reforms a reality, CFA warns. “Financial reforms that could protect consumers, investors and our financial system for decades rose from the ashes of a near-death experience by the American economy,” said CFA Legislative Director Travis Plunkett. “Our report finds that the fate of the Dodd-Frank Wall Street Reform and Consumer Protection Act hangs in the balance. While key investor and consumer protections are generally on schedule and on track, large financial interests and their allies in Congress have taken steps that endanger the long-term success of these reforms.”
The CFA report looks at key consumer and investor protection provisions of the bill, assesses progress in implementing those provisions and identifies threats that could undermine effective implementation. These include: the creation of a new agency devoted to protecting financial consumers, provisions to strengthen protections for retail investors, initiatives to bring much needed transparency and regulatory oversight to the over-the-counter derivatives markets, and credit rating agency reforms. “The financial crisis was hugely traumatic for American consumers and investors, undermining their faith in the integrity and stability of our financial markets and in our regulators’ ability to protect their interests,” said CFA Director of Investor Protection Barbara Roper. “The Dodd-Frank Act created a sound framework for strengthening consumer and investor protections. Regulators are working furiously to put those protections in place. It is up to Congress and the President to ensure that they get the oversight, backing and resources they need to make the promises of Dodd-Frank a reality.”
A news release on the report is available here. Roper’s testimony before the Senate Banking Committee on the status of Dodd-Frank’s investor protections is available here.
Cordray Nominated to Head CFPB
Less than a week before the new Consumer Financial Protection Bureau was due to officially open its doors, the President announced his nomination of former Ohio Attorney General and current CFPB Director of Enforcement Richard Cordray to head the agency. In a press statement responding to the announcement, CFA Legislative Director Travis Plunkett noted that the CFPB must have a leader in place as soon as possible, so that it can use all of the powers it has been granted to be an effective “cop on the beat,” protecting Americans from deceptive and unfair financial practices.
“While CFA does not endorse specific nominees, Richard Cordray certainly has the requisite knowledge of the financial services marketplace and demonstrated consumer protection track record to be qualified to be the CFPB’s first director,” Plunkett said. “As Ohio Attorney General, he was a national leader in seeking to assist consumers who had been harmed by abusive mortgage and predatory lending practices.” Moreover, as current director of enforcement for the CFPB, Cordray “is well-positioned to get the agency off to an effective start,” he added.
Plunkett also commended Elizabeth Warren “for her extraordinary efforts to protect consumers and get the CFPB off the ground. Warren not only conceived the idea of an independent consumer financial protection agency, she has worked with great energy in the last year to effectively prepare it to open its doors. Professor Warren is a true consumer hero who deserves thanks for her selfless efforts and remarkable achievements on behalf of all Americans,” he said.
He called on the Senate to move quickly with an “up or down” vote on the Cordray nomination.
Consumer Groups Urge Action on E coli Strains
Five leading food safety groups, including CFA, are calling on the Obama Administration to take additional steps to protect public health from pathogenic E. coli strains in addition to E. coli O157:H7. The statement came in response to an announcement by Beef Products, Inc. (BPI) that it was voluntarily expanding its “hold and test” program to include the six additional strains of E. coli identified by the Centers for Disease Control and Prevention as harmful pathogens in the food supply. The groups lauded BPI for its actions.
The USDA’s Food Safety and Inspection Service has proposed declaring these strains as adulterants and requiring industry to sample and test for these pathogens and hold the product until final laboratory results declare the product has no detectable level of either E. coli O157:H7 or these other six pathogenic strains of E. coli. Unfortunately, the Office of Management and Budget has kept the proposal sidelined since January 2011.
“We now know that other strains of E. coli produce the powerful Shiga toxin, are similar to E. coli O157:H7 in virulence, and are much more prevalent than we once thought,” said Chris Waldrop, Director of Consumer Federation of America’s Food Policy Institute. “It’s time for the Obama Administration to declare these additional six strains adulterants, require robust sampling protocols by the entire industry and require all companies to hold product from commerce until a negative test result is determined.”
CPSC Moves to Limit Lead in Children’s Products
The Consumer Product Safety Commission has determined that the Commission could not make a determination that it is not technologically feasible for any children’s product or category of children’s products to meet the .01 percent lead limit. This decision means that the total lead limit for children’s products will be 100 parts per million (ppm) by August 14, 2011, as required by the Consumer Product Safety Improvement Act (CPSIA). CFA, the American Academy of Pediatrics, and Consumers Union wrote to the agency earlier this month in support of that recommendation. In voicing their support, the groups praised the Commission for taking “a thoughtful and methodical approach in determining the technological feasibility of the 100 ppm lead standard.” Action is warranted, they wrote, because, “there is no safe level of lead exposure and the brain damage caused by lead exposure is permanent and irreversible…When averaged across even a modest population of children, the public health harm caused by lead exposure is significant. Reducing the lead content limit, as required by the CPSIA, will prevent lead exposure among these sensitive groups and result in a healthier, more productive population.”
Car Makers Seek Fuel Economy Exemption for SUVs
Car makers are ramping up their efforts to weaken an administration proposal to gradually raise vehicle fuel economy standards to 56 mpg by 2025. Along with expensive and intense lobbying efforts, the car companies have bought advertisements in Washington, D.C. attempting to explain why they do not want to improve the fuel efficiency of their vehicles. They are asking the White House to essentially exempt SUVs and light trucks from the standards.
In a press statement responding to the activities, CFA Public Affairs Director and The Car Book author Jack Gillis said, “this is the same shortsighted thinking that got the U.S. automakers in trouble in 2008 when gas prices caused them to be loaded with expensive SUV inventories that just wouldn’t sell. Not only is it economic suicide for the car companies to set themselves up for such a failure, but the U.S. taxpayers will not be able to bail them out again.”
“If the White House agrees to the various proposals of the car companies, reducing requirements for gas guzzling SUVs, lowering the fuel economy of cars with certain air conditioners, and providing an option to bail out on the standard, consumers will be paying literally billions of dollars more for gasoline than they should have to,” added CFA Research Director Mark Cooper. “We’ve clearly demonstrated that reaching 56 mpg by 2025 is both achievable and reasonable,” he added. “Not only is it good for consumers, but it will reduce our dangerous dependence on foreign oil and insure that the U.S. automakers remain competitive in a global market.”
New Privacy Protections Needed for Children and Teens
In a letter to the White House and federal agencies with a role in privacy issues, CFA and other consumer and privacy organizations called for enhanced Internet privacy and consumer protection safeguards for children and adolescents. “Today’s young people are growing up in a ubiquitous digital media environment, where mobile devices, social networks, virtual reality, interactive games, and online video have become ingrained in their personal and social experiences. This is especially true for teens, many of whom are living their lives online,” the groups wrote. In this environment, teenagers have become “key targets in a rapidly growing online marketplace that subjects them to increasing amounts of data collection, behavioral profiling, and manipulative techniques that threaten their privacy,” they added. Because “the needs and capacities of young people are distinctly different from those of adults,” the groups urged the Administration to incorporate a policy framework that addresses the privacy concerns of both children and adolescents in its forthcoming White Paper. The letter also outlines specific areas where additional protections are needed.