CFPB Moves to Protect Predatory Payday Lenders

With new leadership in place, the Consumer Financial Protection Bureau (CFPB) moved quickly last month to repeal payday loan rules that are designed to protect consumers from triple-digit interest loan traps. “While not perfect, the CFPB’s final payday lending rule was a giant step toward helping struggling families avoid debt traps,” said CFA Director of Financial Services Christopher Peterson in a press statement criticizing the move.

Under that rule, finalized last October and scheduled to be implemented in August, creditors offering payday loans, car-title loans, and similar forms of credit would be required to determine whether borrowers could afford loan payments while meeting their other expenses. This compromise rule came about after years of study, analysis, and public comment, Peterson noted.

Payday loans have average interest rates of about 400 percent. A super-majority of Americans, both Republicans and Democrats, support an interest rate limit of 36 percent, Peterson noted. And the CFPB, itself, found that a majority of short-term payday loan victims are typically trapped in at least 10 loans in a row—paying far, far more in fees than they received in credit.

“The CFPB was supposed to protect consumers. Unfortunately, the agency is now working to protect payday lenders,” Peterson said.

USDA Eliminates Pro-Consumer Hog Slaughter Rule

The Department of Agriculture’s Food Safety and Inspection Service (FSIS) published a final rule last month eliminating requirements for slaughterhouses to clean hog carcasses prior to cutting them open. CFA and the Safe Food Coalition sharply criticized the action, noting that the agency has not shared any data to support its claim that more contamination will not accompany the greater “efficiency” that the agency claims will result from the rule change.

The move to deregulate comes at a time when the agency has yet to replace the Salmonella performance standards for pork that it abandoned in 2011. Those standards set a limit on the number of samples taken in a plant that could be contaminated with Salmonella bacteria. Plants that failed to meet the standards were subject to more rigorous inspection.

“Pork alone now causes over ten percent of Salmonella illnesses each year in the United States,” said CFA Director of Food Policy Thomas Gremillion, citing a recent government analysis. “Yet USDA is not keeping track of which slaughterhouses are doing a good job at keeping Salmonella levels down, and which ones are utterly failing. The agency does not seem to have any basis for determining whether this policy leads to greater levels of pathogen contamination, and as a result, more foodborne illness.”

FSIS justified the elimination of the carcass cleaning requirement in part by pointing to the experience of five slaughterhouses that were granted waivers to employ alternative procedures. However, the agency has not explained how it evaluated the performance of these slaughterhouses, all of which are operated by one corporation. The proposed rule also does not describe any of the “alternative procedures” used by the establishments or why other companies would be likely to employ the techniques.

With the sharp rise in foodborne illness associated with pork in recent years, consumer advocates are urging FSIS to more fully justify their actions in order to protect consumers and not compromise public health.

Groups Oppose Industry Efforts to Weaken Furnace Standards

An industry petition to revise energy efficiency standards for furnaces would make it more difficult for consumers to make informed choices when buying a furnace for their homes and rob them of greater savings on their heating costs, which is typically the most costly part of the home energy bill, CFA and the National Consumer Law Center (NCLC) argued in joint comments filed with the Department of Energy (DOE) in January.

The comments were filed in response to a petition by the Air Conditioning, Heating and Refrigeration Institute (AHRI) that seeks to combine the furnace metrics for annual fuel utilization efficiency, fan efficiency ratio, and standby mode/off mode energy consumption into a single energy efficiency rating. AHRI justified its proposal on the grounds that it would reduce the regulatory burden on industry while benefiting consumers.

CFA and NCLC set out four basic arguments against the petition:

• A goal of “reducing regulatory burden” does not allow the department to avoid full compliance with the Energy Policy and Conservation Act (EPCA). Moreover, much of the reduction in regulatory burden industry seeks could be accomplished simply by bringing currently separate schedules for reviewing and the three standards into synch with one another.
• The petitioners’ proposed hold on the enforcement of the “duly promulgated furnace fan efficiency test procedure and standard” is illegal. While DOE quickly granted that hold, CFA and NCLC argued that it runs counter to the intent of the EPCA, violates the anti-backsliding provision, and “will almost certainly lead to litigation, leaving all interested parties, including manufactures, in limbo.” The new furnace fan standard will greatly improve furnace efficiency.
• There is no legal authority for AHRI’s proposed “crosswalk” from existing standards to its proposed approach, and no evidence that it could be achieved without diminishing energy savings, hurting consumers, or violating EPCA. Implementing it would therefore violate EPCA.

Consumers will be harmed if the revised standard is adopted. “Consumer Groups, who have decades of experience working directly with consumers and the front-line agencies that help them, believe that the proposed combined standard (AFUE2)  will prove hard for consumers to understand and will mislead them into buying furnaces that are, in fact, more expensive to operate than would appear from the rating itself,” the groups wrote.

In short, the groups urged DOE to reject the petition on the grounds that AHRI’s proposed new standard is neither good for consumers nor allowed by the law. “The proposed standard abandons the current furnace standards, invites litigation, would likely violate the anti-backsliding provision, and makes it harder for consumers to make informed choices,” they wrote.

Consumer Groups Urge Action on Bill to Stop “Spoofed” Robocalls

CFA joined with Consumer Reports, the National Consumer Law Center, and Consumer Action in January in endorsing bipartisan legislation to address the growing problem of “spoofed” robocalls, which are mass automated calls that utilize fraudulent caller identification information to disguise the caller’s true identity. “Spoofed robocalls are the reason that consumers are unwilling to answer their phones these days,” said Consumer Action’s Deputy Director of National Priorities Ruth Susswein.

Introduced by Senators John Thune (R-SD) and Edward Markey (D-MA), the Telephone Robocall Abuse Criminal Enforcement and Deterrence (TRACED) Act (S. 151), would direct the Federal Communications Commission (FCC) to develop rules requiring providers of telephone voice services to implement an effective framework for authenticating calls to better enable them to identify and stop unwanted calls before they reach the consumer. It would also increase potential civil forfeitures and criminal fines for intentional violations of the Telephone Consumers Privacy Act (TCPA).

“Authenticating that a call is coming from the source that it purports to be is crucial in the fight against illegal robocalls, which often fraudulently spoof their caller ID,” said Susan Grant, CFA Director of Consumer Protection and Privacy. “This bill will move carriers forward to implement call authentication and provide stronger enforcement tools to use against robocallers who flout the law.”

Bill Would Undermine FTC’s Ability to Protect Consumers from Pyramid Schemes

CFA joined with other consumer advocates in January to urge legislators to refrain from re-introducing the mis-named, anti-consumer bill, the “Anti Pyramid Promotional Scheme Act,” in the current Congress. In a letter to Representatives Marc Veasey (D-TX) and Richard Hudson (R-NC), the groups argue that the bill would block the Federal Trade Commission’s (FTC) ability to protect consumers from all but the most blatant pyramid schemes.

As introduced in the 115^th Congress, the bill would have interfered with the FTC’s authority by:

• “Re-defining an ‘ultimate user’ in a way that runs counter to more than 40 years of case law.” This would eliminate “the need for direct selling operators to have genuine retail customers external to the people recruited into the business opportunity.” “Such a re-definition would relieve direct selling businesses of the obligation to operate a viable business as opposed to a fraudulent recruitment scheme.”
• “Allowing direct selling companies to drive excessive inventory loading by their recruits, letting the operators profit off a churning base of recruits who are continually incentivized to purchase more product to qualify for recruitment rewards rather than meeting legitimate retail demand for the product or service they offer.”
• “Creating a safe harbor for direct selling operators that would allow pyramid schemes to evade FTC enforcement action through the use of a ‘bona fide inventory re-purchase program’ (commonly known as a “buyback program”), regardless of whether such a re-purchase program actually reduces the risk to recruits of being stuck with unsold inventory.”

Because of these basic flaws, consumer and civil rights groups; a bipartisan group of former FTC directors, commissioners, and bureau chiefs; and members of the direct selling industry itself have urged Members of Congress not to reintroduce the Anti Pyramid Promotional Scheme Act in the 116^th Congress.  “We should be strengthening the Federal Trade Commission’s enforcement capabilities, not creating loopholes that make enforcement against pyramid schemes harder,” said CFA Director of Consumer Protection and Privacy Susan Grant.