CFPB Reverses Course on High-Cost Lending Rules

The Consumer Financial Protection Bureau (CFPB) announced earlier this month that it is planning to reconsider rules adopted by the agency last October to protect consumers from abusive payday loans and certain other types of high-cost installment loans.

Under the rule, creditors offering payday loans and some similar forms of credit were required to determine whether borrowers can afford loan payments while still meeting basic living expenses and major financial obligations. Payday lenders were required to comply with these protections by August 19, 2019.

“While not perfect, the CFPB’s final payday lending rule was a strong step toward helping struggling families avoid debt traps,” CFA Senior Fellow Christopher Peterson said in a press statement. He noted, moreover, that the Bureau’s final rule was the product of years of study, analysis, and public comment.

With new leadership in place at the CFPB, the agency is now signaling its intentions to re-open the rulemaking process and reverse course on the payday lending rule.

“President Trump came into office promising to remember the forgotten people that are struggling throughout middle America. Instead, the Administration has taken the side of predatory payday lenders that collect triple-digit interest debts from our most vulnerable families,” Peterson said. “A super-majority of Americans, both Republicans and Democrats, support traditional interest rate limit of no more than 36 percent. Instead, of siding with the public, or even the CFPB’s compromise regulation, President Trump is working hand-in-hand with the usurious money changers that cause so much suffering.”

The CFPB also announced that is dropping a lawsuit against a group of payday lenders associated with an American Indian tribe. In April 2017, the agency sued four online lenders for deceiving consumers by collecting debt they were not legally owed. “It’s an earth-shattering change,” Peterson said. “This is signaling that the CFPB is going to stand down on the online payday lenders who refuse to comply with state interest-rate caps.”

Voluntary Standard on Window Covering Cords Improves Safety, but Risks Remain

A new version of the window covering voluntary standard was approved earlier this month that, for the first time, will require some window coverings to be cordless. The standard requires window coverings sold as stock products (products sold “as is” in terms of color, design features, size) to be free of dangerous accessible cords.

“This is an important step forward in reducing the number of dangerous corded products put into the market,” said CFA’s Legislative Director Rachel Weintraub in a press release. “However, it is troubling that the standard continues to allow cords on custom products.”

This updated version of the ANSI/WCMA standard was preceded by decades of mounting death and injuries caused by window covering cords. As a recently published article in the Journal of Pediatrics reported, approximately eleven children die and 80 children are treated for entanglement and near fatal injuries every year as a result of window cord strangulation. “The voluntary standard for window coverings has failed for over two decades to significantly reduce or eliminate the strangulation hazard posed by window coverings. The AAP study confirms that too many children are being harmed by these cords,” Weintraub stated.

In light of the failure of the voluntary standard to address the strangulation hazard, CFA, Parents for Window Blinds and Safety and other groups petitioned the Consumer Product Safety Commission to issue an effective mandatory standard to address the risks that corded window coverings pose to children. The revised voluntary standards were adopted in response to the petition.

CFA warned, however, that risks remain. The standard still permits “custom” products, which make up an estimated 20 percent of the market, to be made with cords that can strangle children. Moreover, millions of window blinds with dangerous cords currently exist in consumers’ homes, because in most cases blinds with dangerous cords have not been recalled. Finally, voluntary standards are not enforceable by the CPSC, and there are no requirements to test window coverings to ensure that they meet the voluntary standard before being put into the market.

Weintraub called for the voluntary standard to be reopened immediately to address the risks posed by custom products.

CFA Urges FDA to Avoid More Delay on Menu Labeling

In a comment letter filed with the Food and Drug Administration (FDA) earlier this month, CFA urged the agency to finalize its proposed menu labeling guidance for industry without further delay. The agency had previously announced a delay of the rules just one day before they were set to go into effect, citing confusion among regulated stores and restaurants. Consumer advocates sued, and the agency announced that a new compliance date in May of 2018. Finalizing this draft guidance will help to facilitate timely enforcement actions in the spring.

Congress mandated calorie labeling on menus at food services establishments nearly eight years ago, as part of the Patient Protection and Affordable Care Act. “Congress passed the menu labeling law because consumers have a right to information that enables them to protect their health and well-being, and because over half of large chain restaurants were failing to provide any nutrition information to consumers,” said CFA’s Food Policy Director Thomas Gremillion.

“Congressional findings show that, when eating out, people eat more saturated fat and fewer nutrients, and that children eat almost twice as many calories as compared to when they eat at home. A large body of research studies, moreover, demonstrates that providing nutrition information to restaurant patrons leads to healthier food choices,” he added.

“CFA supports FDA’s implementation of menu labeling rules without further delay,” Gremillion said. “By reaffirming interpretations of the menu labeling law’s requirements that FDA has made through rulemaking, previous guidance, and technical assistance, the draft Guidance should position the agency to begin timely enforcement of menu labeling requirements with minimal uncertainty.”

House Continues Its Attack on Financial Consumer Protections

The House Financial Services Committee continued its attack on financial consumer protections last week, marking up a series of bills that undermine sensible safeguards adopted in the wake of the financial crisis and roll back investor protections.

CFA wrote to members of the Committee urging opposition to five bills that pose particular concerns regarding financial consumer protections. These include:

• H.R. 1264, the Community Financial Institution Exemption Act, which would exempt 99 percent of all banks in the country – those with assets of $50 billion or less – from Consumer Financial Protection Bureau (CFPB) regulations.
• H.R. 4550, the Practice of Law Technical Clarification Act, which would shield debt collectors operating under the guise of a law firm from regulation under the Fair Debt Collections Practices Act.
• H.R. 2226, the Portfolio Lending and Mortgage Access Act, which would undermine the carefully considered exemptions provided by the CFPB under the Qualified Mortgage rule.
• H.R. 3746, the Business of Insurance Regulatory Reform Act, which would expand insurance companies’ exemption from CFPB regulations to include instances in which they are engaged in an activity related to a consumer financial product or service, such as when they provide mortgage title insurance.
• H.R. 4607, the Comprehensive Regulatory Review Act, which would require agencies to review all regulations more frequently, every seven years instead of ten, and would prioritize reducing regulatory burdens within those reviews, rather than focusing on how to improve public protection.

“With credit card, auto, and student loan debt all topping a trillion dollars, while new delinquencies are accelerating, it would be a grave mistake to create new loopholes for bad actors to escape oversight,” CFA Legislative Director Rachel Weintraub wrote. “This is precisely the type of mindset that created the conditions for the most severe financial crisis since the Great Depression.”

CFA wrote separately urging opposition to two bills that would undermine investor protections.

H.R. 4738, the Mutual Fund Litigation Reform Act, would make it even more difficult than it already is for mutual fund shareholders to hold fund companies accountable when they charge excessive fees. “Excess costs that persist in pockets of the fund market erode investor returns, undermining their ability to save for long-term goals such as retirement,” said CFA Director of Investor Protection Barbara Roper. “Congress should be looking for ways to better discipline those costs, not making it harder to hold funds accountable.”

H.R. 4785, the American Customer Information Protection Act, undermine the SEC’s ability to conduct market surveillance and ensure market integrity by summarily prohibiting the Consolidated Audit Trail (CAT) from accepting any personally identifiable information (PII), except with respect to large traders. In so doing, it would preempt steps already underway to ensure the use of PII is limited and appropriate.

“The CAT is a critical tool that will allow regulators to better understand how our computerized marketplace works, better and more quickly identify and address market disruptions, eliminate improper behavior, and more thoughtfully create effective rules of the road,” said CFA Financial Services Counsel Micah Hauptman. He urged Congress not to give in to “a concerted industry campaign underway to undermine the CAT and leave the SEC in the dark.”

All but one of the bills opposed by CFA were adopted in Committee. H.R. 4550, the debt collector bill, was pulled from the mark-up.

The previous month House Financial Services Committee approved three bills that would undermine the capital markets by weakening protections for investors, and another anti-investor bill was approved by the full House. Meanwhile, Senate sponsors continue to push to action on bipartisan legislation – S. 2155, the Economic Growth, Regulatory Relief, and Consumer Protection Act — that would repeal or weaken a number of critical laws designed to ensure consumers, investors, and honest market participants are appropriately protected from abuses in the marketplace.

“Rather than providing meaningful protections for consumers, these bills undermine important sensible safeguards put into place after the financial crisis that culminated a decade ago,” Weintraub said.

EPA Urged Not to Weaken Emissions Standards for Big Truck Gliders

The Environmental Protection Agency (EPA) has proposed to repeal emissions requirements for glider vehicles, glider engines, and glider kits rule. In the big truck industry, a ‘glider’ is when a new truck cab is placed on an old engine and chassis. In a comment letter filed with the agency earlier this month, CFA warned that the proposal would have harmful impacts on both air quality and consumer pocketbooks.

“The administration’s new, and we believe woefully misguided interpretation of the Clean Air Act, does not justify weakening any portion of this thoughtful, well-designed, and achievable standard, including the Glider Kit provision,” CFA Director of Public Affairs Jack Gillis wrote. “In fact, weakening the Phase 2 heavy-duty standards will not only have harmful economic, consumer health and pocket book impacts, but it will hurt the companies employing thousands of workers who are designing and building new technology aimed at meeting the standard.”

Gillis noted in his letter that the older-model diesel engines that these glider kits use produce far more exhaust emissions and are far less efficient than engines that meet the current standard. From a public health perspective, the EPA’s own data estimates that requiring that gliders use modern engines in 2018 would prevent between 350 and 1,600 premature deaths over the lifetime of those vehicles.

While these environmental impacts are important, Gillis noted that lowering the standards would also have economic impacts, which would “disproportionately harm the most vulnerable among Americans struggling to survive financially. It will weaken a standard that saves consumers money. Consumers should not have to pay to benefit glider manufacturers,” Gillis wrote.

“Fuel costs associated with shipping goods cross-country significantly impact the price of everything we buy from a carton of milk to a flat screen TV. By keeping the standard intact, we will cut fuel use by nearly 50 percent, putting $29.5 billion dollars back into the pockets of Americans,” he concluded.