Senate Banking Committee Advances Financial Appointments

Meeting in executive session Tuesday, the Senate Committee on Banking, Housing and Urban Development voted along party lines to confirm Richard Cordray as Director of the Consumer Financial Protection Bureau (CFPB) while giving strong bipartisan support to the nomination of Mary Jo White as Chairman of the Securities and Exchange Commission (SEC).  Republican opposition to the Cordray nomination appears to have little if anything to do with concerns about Cordray himself and instead is part of a campaign to force changes in the structure and funding of the CFPB. Both nominations are expected to be brought to the Senate floor for a vote after Congress returns from its spring recess.

“With today’s vote to confirm Richard Cordray as Director of the CFPB, the Senate Banking Committee prioritized the interests of consumers,” said CFA Legislative Director and Senior Counsel Rachel Weintraub in a press statement released in response to the vote.  “Consumers need a confirmed director at CFPB to make sure that the Bureau’s work to date is not compromised and that consumers can make decisions about their financial future knowing that consistent and predictable safeguards are in place.”  Calling for a full Senate vote “as soon as possible,” Weintraub urged the Senate to reject conditioning Director Cordray’s confirmation on changes to the structure and funding of the CFPB.  “Proposals to alter the CFPB’s leadership structure and funding are unprecedented, unnecessary and put consumers at risk,” she explained.

White is a former federal prosecutor and current corporate defense attorney with the law firm of Debevoise and Plimpton.  While questions have been raised in some quarters about White’s extensive ties to the securities firms she will be required to regulate, in particular by Sen. Sherrod Brown (D-OH) who cast the lone no vote in committee, no serious opposition to her appointment has emerged.  “Mary Jo White has been good at every job she’s taken on over the course of an impressive career,” said CFA Director of Investor Protection Barbara Roper.  “Her statements during her confirmation hearing reflect a clear understanding of the many challenges facing the agency.  We look to working with her, once she is confirmed as chairman, on addressing top agency priorities, in particular completing the important work still remaining to implement the Dodd-Frank financial reform act.”

Bipartisan Commission Recommends Continued Federal Role in Housing Finance

After 16 months of deliberations, the Bipartisan Policy Center’s housing commission released an extensive report in late February that reaffirms the importance of a federal role in the housing finance system.  Citing the importance of the long-term, fixed rate mortgage for American consumers, the report strongly recommends the phased-in replacement of Fannie Mae and Freddie Mac with a new system that would be based on a Public Guarantor to provide a guarantee to the buyers of mortgage backed securities.

Under the plan outlined in the report, the Guarantor would be a publicly owned company, outside the government but owned by it.  The Guarantor would approve the types of loans that could be included in guaranteed securities and would charge a fee to create an actuarially sound insurance fund to back its guarantee.  Issuers of securities receiving the guarantee would have to provide a significant level of private capital that would be at risk to cover any losses before the government guarantee would be called, and the government would not extend any protection to those investors or their shareholders in the event that calls on their credit insurance exceed their resources.

The Commission also examined the needs of low income renters and recommended significant increases in funding to reduce their rent burdens, through a combination of: an expanded and reformed housing voucher program that would be designed to assure all very low income renters access to assistance if they qualify; a 50 percent increase in the allocations for the Low Income Housing Tax Credit (LIHTC); a $1 billion increase in funding for HOME to support LIHTC projects; full funding of public housing’s deferred maintenance needs over 10 years; and a new, temporary assistance program to help low income renters who lose their homes because of displacement, unemployment or other reasons.

“This is a difficult time to recommend increased funding,” noted CFA Director of Housing Policy Barry Zigas, who served as one of the commissioners.  “But our report notes ways in which current funding patterns, which overwhelmingly favor homeowners through tax benefits that mostly benefit higher income families, could be reallocated to cover much, if not all, of these increased costs.”

Only Half of Americans Report Having Good Savings Habits

Only about half of all Americans report having good savings habits, according to the sixth annual national survey of household savings habits released in late February by CFA and the Employee Benefits Retirement Institute (EBRI) as part of America Saves week.  For example:

• 54 percent of survey respondents said they “have a savings plan with specific goals,” but just 43 percent said they have a spending plan that allows them to save enough money to achieve the goals of their saving plan.
• Among those who have not yet retired, 50 percent said they “save for retirement at work through a 401(k) or other contributory plan.”
• 41 percent said that, “outside of work,” they “save automatically through regular preauthorized transfers from checking to savings or investments.”
• 49 percent know their net worth.

In addition, while nearly two-thirds of respondents (65 percent) reported they “have sufficient emergency savings to pay for unexpected expenses like car repairs or a doctor visit,” only 49 percent of the non-retired said they are saving enough to support “a desirable standard of living” in retirement.

The survey showed no improvement in the financial condition of families over the past year.  “The recession still has not ended for millions of American families,” said Stephen Brobeck, Executive Director of CFA and a founder of America Saves.  “Many working families are still suffering from high unemployment rates, stagnant incomes, and a housing market that is just beginning to recover. The over one thousand organizations who have signed up to participate in America Saves Week recognize this and are helping individuals and families to save and improve their finances.”

The survey was released the first day of America Saves Week, an annual event where government, business, and non-profit organizations at the national, state, and local levels work together to promote good savings behavior.  America Saves, managed by CFA, and the American Savings Education Council (ASEC), managed by EBRI, coordinate this annual effort.  “America Saves Week provides individuals and families the opportunity to take financial action and to ‘Set a Goal. Make a Plan. Save Automatically,’” said Nancy Register, America Saves Director and CFA Associate Director. “From incentivized savings accounts to motivational workshops and financial education sessions, thousands of organizations are using America Saves Week to help people improve their financial situation.”

ATVs Must Be Redesigned to Be Safer

Responding to new death and injury data from the Consumer Product Safety Commission (CPSC), CFA and the American Academy of Pediatrics (AAP) have called for all-terrain vehicles to be redesigned to increase their safety.  “ATVs cause hundreds of deaths and over a hundred thousand injuries a year. They cause more deaths and injuries than almost any other product under CPSC’s jurisdiction,” said CFA Legislative Director and Senior Counsel Rachel Weintraub.  “ATVs must be designed safer to substantially reduce these tragic incidents.”

According to the 2011 Annual Report of ATV-Related Deaths and Injuries released by the CPSC earlier this month, at least 57 children lost their lives in 2011 and 29,000 were injured seriously enough to require treatment in a hospital emergency department.  While the number of child deaths appears to have decreased slightly, serious injuries caused by all-terrain vehicles appear to have increased.  “As these most recent data demonstrate, ATVs are dangerous to children,” said AAP President Thomas K. McInerny. “Children are not developmentally capable of operating these heavy, complex machines. The American Academy of Pediatrics warns all parents that no child under the age of 16 should drive or ride an ATV.”

In 2006, consumer groups filed a petition with the CPSC calling for the CPSC to ban the sale of adult-size ATVs for use by children.  While the agency denied the petition, the CPSC began a rulemaking process to create new ATV safety standards.  The Consumer Product Safety Improvement Act required the agency to promulgate new federal safety rules, and in August 2011, Congress passed legislation directing the CPSC to complete the ATV rulemaking within a year of enactment. The rule has not yet been completed.

Consumers Confused About Telemarketing Rights

Consumers are highly suspicious of telemarketing calls, but most consumers don’t know their basic telemarketing rights, according to a survey released by CFA earlier this month as part of National Consumer Protection Week.  According to the survey, nearly 9 in 10 adults in the United States are concerned that telemarketing calls they receive from companies they haven’t done business with before might be scams, and more than three-quarters think that it’s hard for most consumers to tell if a sales call is legitimate or not.

To help address the problem, CFA is offering new resources on its website to help consumers avoid telemarketing fraud. They include a guide about consumers’ basic telemarketing rights, tips on spotting fraud, and a short, humorous video. This educational project was supported by a grant from Western Union.

“Knowing your rights can help you tell the difference between legitimate telemarketing offers and scams,” said Susan Grant, Director of Consumer Protection at CFA and leader of CFA’s Consumer Protection Institute.  “Simple things such as understanding when companies are violating your Do Not Call rights and when they’re not can help consumers detect possible fraud, because legitimate companies usually follow the rules, scammers don’t,” she added.

Old Risks Decrease, New Risks Arise with Tax-Time Financial Products

For the first time in decades, millions of taxpayers will avoid having their refunds drained by refund anticipation loans (RALs) this year, as these loans are no longer available from banks on a large scale, nationwide basis, according to the eleventh annual report on the tax-time financial products industry released by CFA and National Consumer Law Center (NCLC) in late February.  On the other hand, new and even riskier, higher-cost tax-time products have emerged in the form of:

• RALs from fringe, non-bank lenders such as payday lenders;
• phantom RALs apparently offered as a bait-and-switch tactic by shady tax preparers without the financial capability to offer the loans to a large number of customers; and
• refund anticipation checks (RACs), which do not deliver refunds any faster than the IRS can, yet cost $30 to $55 delivered via check.  Some preparers charge add-on fees, which can range from $25 to several hundred dollars, for these checks.

CFA and NCLC recommend 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 21 days or less with e-filing and direct deposit.  Taxpayers without a bank account can get the same three week or less refund by e-filing and having their refund deposited to a prepaid card, including any existing payroll or prepaid card that the taxpayer already has.

“As with any financial product, taxpayers should compare prepaid card costs and consumer protections,” said CFA Financial Services Director Tom Feltner.  “Taxpayers without a bank account should also consider opening a bank account to receive their refund,” he advised. “Getting a big refund is the perfect time to open a savings account and start a nest egg.”