CFA News

CFAnews Update – March 28, 2022

CFA Adds Key Staff for Investor and Consumer Protection Roles

This month the Federation announced the appointments of Micah Hauptman as the new Director of Investor Protection and Erin Witte as the new Director of Consumer Protection. Hauptman formerly served as Counsel to Securities and Exchange Commission Commissioner Caroline Crenshaw, and prior to that role, served as CFA’s Financial Services Counsel. Witte formerly served as an Assistant Attorney General for the Commonwealth of Virginia.

“Micah’s return to CFA brings his extraordinary experience as a seasoned and effective advocate for retail and retirement investor protection, as well as market efficiency and fairness,” said Jack Gillis, CFA’s Executive Director. “Erin Witte’s background and experience is exactly what we need to continue CFA’s long-standing expertise as a leading consumer protection organization in the United States.”

While working with Commissioner Crenshaw, Hauptman focused on investment management issues, examining investment advisers, investment companies, broker-dealers, and the regulatory implementation of Regulation Best Interest. As CFA’s new Director of Investor Protection, Hauptman will use this experience to contribute to CFA’s continued leadership of investor protection.

During her time at the Virginia Attorney General’s Office, Witte served as litigation counsel, creating and developing case strategies prioritizing consumer protection objectives. As the Director of Consumer Protection, Witte will advocate for consumer protections in Congress and at regulatory agencies, communicate policy positions to the press and to the public, organize meetings with stakeholders on consumer protection issues, and provide educational tools to help consumers better navigate marketplace challenges.

CFA Announces Policy Proposal to Reduce Black Homeownership Gap

CFA released a policy proposal this month identifying a way to close the African-American homeownership gap, through the transfer of previously unused home loan benefits for any veteran to the veteran’s surviving spouse, child, grandchild, and other direct descendants without limitation. Eliminating the African-American homeownership gap has been an unmet policy objective for the country for over 60 years.

The proposal calls for the transfer of VA loan benefits accrued to veterans whose service period overlaps with the federal government’s support of racially restrictive housing policies, cited in the 1944 GI Bill and up through the enactment of the 1977 Community Reinvestment Act. CFA estimates that less than half of all Black households in America own their home, which is due in part to the passage of racially restrictive housing loan policies. This problem factors greatly in the continued generational wealth gap between Black and White households.

Based on these factors, CFA’s proposal argues that expanding the VA home loan benefit program is an especially attractive approach to reducing the Black homeownership gap for three reasons:

  1. The VA loan program lacks any income or income-paired, geographic restrictions that would exclude higher-income African-American borrowers;
  2. The proposal would increase revenue for the federal government by decreasing the need to subsidize the Veterans Housing Benefit Program Fund; and
  3. In an environment where there is a perceived increase in judicial hostility to using race-based policy preferences to ameliorate systemic discrimination, the proposal creates a race neutral program with exaggerated and disproportionate benefit to African-American and other minority descendants.

If implemented, CFA estimates that roughly 12,649,337 descendants of African-American veterans would be eligible for VA-financing, and as a result would be able to access homeownership without making a down payment. This would allow African-American households to begin to accumulate the much needed generational wealth that was withheld from them based on past racially discriminatory policies.

“Historically, racially discriminatory polices supported by the federal government deprived many African-American veterans of the ability to buy homes using their VA home-loan benefit,” said Mitria Wilson-Spotser, CFA’s Director of Housing Policy and author of the report. “As a result of those barriers, the current down payment requirement for home financing has especially disadvantaged African-American borrowers due to their lack of transferable generational wealth. This proposal would rectify that challenge by righting a historical wrong that left so many African-American veterans without the ability to purchase homes and accumulate transferable wealth to leave to their families in the first place.”

President Biden Must Continue Pause on Student Loan Payments

CFA joined over 209 organizations urging President Biden to extend the pause on student loan payments until his administration has fully delivered on the promises made to fix the broken student loan system and cancel federal student debt.

The U.S. Department of Education holds approximately $1.4 trillion in federal student loans, making the United States one of the largest holders of consumer debt in the world. The pause is currently set to end on May 1, 2022.

In the letter, the organizations wrote that “tens of millions of student loan borrowers are slated to be thrown back into repayment on federal student loans they are ill-equipped to pay as the economy experiences the highest level of inflation in nearly four decades.” The organizations pointed out that data from the Department of Education reveals the powerful impact of the payment pause, citing that “borrowers are saving approximately $5 billion per month from the temporary 0% interest rate.” They state that this pause is the single largest action that the Biden administration has taken to expand college affordability.

A continued pause on student loan payments has broad bipartisan support from voters and those with current student debt. The organizations wrote those with student debt will have to make “major changes to saving or spending” if payments restart, and that 4-in-10 borrowers are not confident that they will be able to manage their student loan payments.

“It is imperative that the Administration continue the pause on student loan payments, especially as consumers navigate the ongoing COVID-19 pandemic and record high inflation,” said Rachel Gittleman, Financial Services Outreach Manager with Consumer Federation of America. “The pause must continue until the Biden Administration delivers on promises made to student loan borrowers to fix the broken system.”

CPSC Development of a Mandatory Standard for Window Coverings Will Save Lives

CFA strongly supports the U.S. Consumer Product Safety Commission’s (CPSC) development of a mandatory standard to prohibit hazardous accessible window covering cords to include those on custom window coverings, which the Federation and other product safety advocates have advocated for consistently for over two decades.

In comments submitted to the CPSC, Rachel Weintraub, CFA’s Legislative Director and General Counsel, wrote that an “effective mandatory standard that addresses the strangulation hazard posed by all window coverings is necessary because the current voluntary standard has failed to address the key hazard pattern associated with corded window coverings available on the market.” From 2009 through 2020, the CPSC was made aware of 194 reported incidents, including 89 fatal strangulations and 105 near-miss strangulations from children becoming entangled by cords on window coverings. The CPSC estimates that at least eight children die every year because of cords on window coverings.

Weintraub wrote that a mandatory standard addressing strangulation risks posed by operating cords on custom products is “necessary to achieve the goal of minimizing risk to children,” and that the “current voluntary standard does not address all hazardous cords on window coverings and is inadequate.” A strong mandatory standard would also address millions of unsafe window coverings in homes, and would allow consumers to replace their older window coverings with ones that do not pose a strangulation risk.

DOL Must Update and Strengthen Fiduciary Rule

CFA joined a diverse coalition of leading worker, consumer, and investor advocates urging the Department of Labor (DOL) to expeditiously update and strengthen the current rules governing retirement investment advice.  CFA was instrumental in the previous DOL fiduciary standard which was overturned during the Trump Administration.

The organizations wrote that DOL’s current fiduciary rule, particularly the regulatory regime’s five-part definition of when investment advice is “fiduciary advice” under the Employee Retirement Income Security Act (ERISA) “makes it easy for retirement investment advice providers to avoid fiduciary responsibility even when retirement savers are relying on them as trusted advisers,” and that it may “allow advice providers to avoid application of the fiduciary standard…leaving retirement savers less protected when conflicts, risks, and potential long-term costs are greatest.”

The organizations also called for amendments to the Department’s Prohibited Transaction Exemption, which would “ensure that those who invoke the Exemption remain unambiguously subject to ERISA’s core fiduciary standard.” Currently, disclosure requirements under the Exemption are “inadequate both in substance and timing,” and that the “Exemption’s self-correction provision should be eliminated” because it “conflicts with a regulatory goal of protecting retirement savers and deterring misconduct.”

“The current rule allows for conflicted investment advice that puts the retirement savings of millions of Americans at risk and is inconsistent with the letter and spirit of ERISA, the statute whose purpose is to promote the retirement security of workers and retirees,” said Micah Hauptman, Director of Investor Protection for CFA. “The DOL can and should better protect Americans’ retirement savings by strengthening the rules that govern the provision of retirement investment advice, and we urge the DOL to take this critical action with all deliberate speed.”