House Committee Votes to Preserve Protections for Military Borrowers

In an important victory for servicemembers, Military Lending Act supporters succeeded in beating back an attempt to delay new rules to protect military service members from 400 percent payday loans and other forms of high-cost credit.  The new rules are expected to be released by the Department of Defense (DoD) later this year and are opposed by lenders that have modified predatory products to escape regulation and target servicemembers.

“Loopholes in the Military Lending Act rules have allowed payday and other high-cost lenders to target servicemembers – putting their security clearances and careers in jeopardy,” said CFA Director of Financial Services Tom Feltner in a press statement.  “These loopholes have allowed lenders to circumvent the current 36 percent rate cap for servicemembers and their families by structuring loans as a day longer or a dollar more than the current limits.  The Department of Defense’s exhaustive research is clear – the current rules are not working for one in ten enlisted servicemembers that are still being targeted by predatory lenders.”

House Republicans had inserted a provision in the National Defense Authorization Act (NDAA) for fiscal year 2016 (H.R. 1735) that would have needlessly delayed finalization of a DoD proposed rule to close loopholes in Military Lending Act protections.  Among other things, the bill would have required DoD to conduct numerous additional studies and report back to the committee next year before moving forward with the rule.

Faced with an outpouring of opposition, however, the House Armed Services Committee adopted an amendment from Rep. Tammy Duckworth (D-IL) striking the report requirement and allowing the rulemaking to move forward without delay.

“We applaud Rep. Duckworth for her steadfast leadership implementing the Military Lending Act,” Feltner said.  “We also thank the bi-partisan group of House Armed Services Committee members that supported this amendment and blocked efforts to delay these much-needed protections.”

Report Finds Room to Improve Food Safety Regulatory Program

The U.S. Department of Agriculture’s (USDA) primary meat and poultry food safety program has resulted in benefits to public health, according to an in-depth analysis of the program by CFA, but further progress has been hindered by gaps in the program and by a legal challenge which has constrained robust action.

The report analyzes the Pathogen Reduction/Hazard Analysis and Critical Control Points (PR/HACCP) regulation, which was implemented following the 1993 E. coli 0157:H7 illnesses and deaths linked undercooked hamburgers sold at Jack in the Box restaurants.  It cites two examples of ongoing problems that have not been adequately addressed in the 17 years since the regulation first took effect:

• First, the plants have too often failed to developed effective food safety plans and USDA has failed to adequately identify problems with those plans.

• Second, plants are repeatedly cited for reoccurring food safety violations with little consequence.

“USDA needs to provide better assurance that plants are reducing contamination of meat and poultry products and that the agency is effectively enforcing its regulations,” said Chris Waldrop, Director of CFA’s Food Policy Institute, in a press statement. “Enforceable standards would allow the agency to take decisive action when a problem is first identified rather than after an outbreak has already occurred.”

The report also discusses the harmful impact of a court case, brought against USDA by meat processes Supreme Beef in 1999, which has hindered the USDA from enforcing food safety regulations. “In particular, the court case limited the ability of USDA to enforce its regulations, effectively barring the government from shutting down a plant which fails to meet safety standards for Salmonella,” Waldrop said. “Consumer groups have argued since that Congress should provide USDA with explicit authority to set and enforce food safety performance standards.”

Groups Urge Stronger Protections on Laundry Packet Standard

As the first ballot for the American Standard Test Measure (ASTM) voluntary standards process for liquid detergent packets closed, consumer groups participating in the process submitted negative votes.  Noting the progress that the standard activity has made, the groups urged that additional provisions be included to better protect consumers from the hazards posed by laundry packets.

Laundry packets are popular, convenient, but sometimes dangerous products that can deliver hazardous chemicals to children in colorful, bite-sized packages that look like candy, according to a joint press statement from CFA, Consumers Union, and Kids in Danger.  Based on two years of data, the National Poison Data System (NPDS) reported that 769 children have required hospitalization for injuries, including seizures, vomiting blood, fluid in the lungs, dangerously slow heartbeats, respiratory arrest, gastric burn, and comas, as a result of ingesting the contents of these packets. Overall, NPDS has also received 17,230 calls involving children exposed to chemicals by the packets.

“While the voluntary standard in its current form addresses the packaging container of the packets to some degree, and includes warning labels, more should be done,” said CFA Legislative Director Rachel Weintraub. “Our organizations have urged that the voluntary standard not only ensure that the outer packages are child resistant, but also require that the packets are individually wrapped to prevent ingestion or eye injuries and that there are comprehensive requirements for addressing the taste and burst strength of the film covering the packets (based on current European Union (EU) requirements).

“Multiple layers of safety are needed to protect children from hazards posed by laundry packets – particularly given that a significant number of children have gained access to loose detergent packets, and when they do, injury can be almost immediate,” she added.

In addition, U.S. Rep. Jackie Speier (D-CA) and Sen. Richard Durbin (D-IL) have introduced legislation, the Detergent PACS Act (H.R. 1139/S. 588), that would expand the U.S. Consumer Product Safety Commission (CPSC) rules requiring child-resistant packaging to cover liquid detergent packets; address the design and color of the packets, so that they aren’t as attractive to children; address the composition of the packets, so that the consequences of exposure are less severe; and ensure the adequacy of the warning labels, to properly inform consumers about the risk.

“We look forward to continuing to work within the ASTM process, as well as with Congress and the CPSC, to adequately address hazards posed by liquid detergent packets,” Weintraub said.

Comcast and Time Warner Abandon Merger Plans

Faced with opposition from the staff at the Federal Communications Commission (FCC) and Department of Justice (DOJ), Comcast and Time Warner recently announced that they had abandoned their merger plan.  “This is an extremely positive development for the public and consumer interests,” said CFA Research Director Mark Cooper in a press statement.

Shortly after the Comcast-Time Warner merger was proposed, CFA released an analysis that concluded the merger represented such a dramatic increase in concentration at key choke points in the digital communications ecology that is was “unapprovable.” Application of the DOJ and the Federal Trade Commission merger guidelines showed that the merger caused increases in concentration that are at least three times higher than the threshold at which the merger is “presumed to be likely to enhance market power.”

The “public interest” merger review standard of the Communications Act goes beyond the antitrust standard of protecting competition to a broader charge to promote the public interest. In comments to the FCC, CFA and 23 of its member groups concluded that the merger failed to pass that standard by an even wider margin and that “no regulatory tools exist to control the market power over customers, set top boxes and middle mile transport that Comcast will have if it is allowed to acquire Time Warner. Competition, consumers and the public interest can only be served by blocking this merger.”

Groups Request Investigation into Children’s App

CFA and several other groups have called upon the Federal Trade Commission (FTC) to investigate whether Google’s YouTube Kids app, which is designed for children and features popular children’s programming, violates Section 5 of the FTC Act, which prohibits unfair and deceptive marketing practices. The groups are troubled by the large amount of commercial material that is presented as programming.

“Much of the content on YouTube Kids would violate long-standing Federal Communications Commission policies if it aired on television,” the groups stated in a letter. “It has long been recognized “that children — especially young children — have greater difficulty distinguishing programming from advertising than adults.”

The groups found that:

• The videos provided to children on YouTube Kids intermix commercial and other content in ways that are deceptive and unfair.
• Many of the video segments endorsing toys, candy and other products that appear to be “user-generated” have undisclosed relationships with product manufacturers.
• Although it claims that all the ads are pre-approved by YouTube’s policy team, much of the content on the app violates its own polices.

“This complaint is based on the fundamental principle that it’s wrong to disguise advertising to children as programming,” said CFA’s Director Consumer Protection and Privacy Susan Grant. “We hope that the FTC will act to send a strong signal that this will not be tolerated, regardless of the platform on which such programs appear.”

CFPB Takes Action on Abusive Allotment Fees

The Consumer Financial Protection Bureau (CFPB) is taking action against Fort Knox National Company and its subsidiary, Military Assistance Company, for charging servicemembers millions of dollars in hidden fees. “We applaud the CFPB for its strong action against a major participant in the allotment process responsible for charging servicemembers millions of dollars in unfair and undisclosed fees,” said CFA’s Director of Financial Services Tom Feltner in a press statement.

The military allotment system allows servicemembers to deduct payments directly from their earnings. Creditors, however, have in recent years been known to direct servicemembers to use the system to collect payments straight from servicemember earnings.

“Allotments were designed to make it easy to send money home, save and pay a mortgage, not serve as security for credit transactions,” Feltner said. “However, as this enforcement action demonstrates, too many lenders have relied upon, or even required, payment by allotment as a quick way to get paid first out of military pay even before funds are deposited to servicemembers’ accounts.”