Consumers Expect to Spend Slightly Less During the Holidays This Year
Consumers report slightly lower intended holiday spending in 2015 than they reported in 2014, according to the 16th annual CFA and Credit Union National Association (CUNA) holiday spending survey. In both years, the same percentage (10 percent) said they would spend more; however, more people this year (38 percent) than last (33 percent) said they would reduce their spending.
“Holiday spending is likely to rise by 2.5 percent to 3 percent from last year’s level,” said CUNA Chief Economist Bill Hampel. “Although positive, that would be a disappointing increase considering the improved financial condition of U.S. households.”
Despite consumers’ expecting to spend less, the proportion who reported an improved financial condition, compared to the previous year, continued to increase in 2015 (29 percent) from 2014 (28 percent). The proportion who reported that they are worse off compared to a year ago in 2015 (24 percent) is the same as 2014. In addition, those who said they had sufficient “extra funds” to “pay for an unexpected expense of $1,000” continued to increase from 2012 (49 percent) through 2015 (54 percent).
“Despite lingering public dissatisfaction with the slow rates of growth, our survey reveals some improvement in the financial condition of Americans,” said CFA Executive Director Stephen Brobeck. “Still, the fact that more than two-fifths of Americans report that they lack sufficient extra funds to cover an unexpected $1,000 expense is cause for concern.”
House Passes Bill to Preserve Discriminatory Auto Financing
The House of Representatives passed legislation earlier this month on a 332-96 vote that would prevent the Consumer Financial Protection Bureau from enforcing laws against discrimination in auto financing. Dozens of organizations, including CFA, wrote a letter to members of the House in advance of the vote urging them to oppose the bill, H.R. 1737, the Reforming CFPB Indirect Auto Financing Guidance Act.
The bill would revoke 2013 guidance from the CFPB that put lenders on notice that it had evidence of discrimination in car loans held in lenders’ portfolios and gave lenders information on how to avoid fair lending risk going forward. “More than two decades of experience and data show that car dealer interest rate markups result in discrimination in auto lending,” the groups wrote. Car dealers receive a large bonus from lenders for increasing the interest rate above that for which the borrower otherwise qualifies.”
At issue is dealers’ practice of adding as much as 2 to 2.5 percentage points to the interest rates offered by lenders, based on the borrower’s risk profile, and pocketing the difference. A study conducted by the Center for Responsible lending estimated that consumers who took out car loans in 2009 would pay $25.8 billion in additional interest over the lives of their loans due to these markups.
“While the auto dealers are going to try to jam it through the Senate and get it attached to a must-pass measure, it has a lot of opposition among consumer and civil rights groups, but so far the pushback hasn’t been sufficiently tough and targeted to turn things around,” said CFA member Rosemary Shahan of Consumers for Auto Reliability and Safety (CARS). “The good news is that the Administration is opposing it, which is great — but anytime you’re up against the car dealers, you’re up against one of the most powerful lobbying groups in the country,” said CFA’s Director of Public Affairs Jack Gillis.
“Buying a car is extremely important for consumers. After a home, a car is often the biggest purchase made by a household,” the groups wrote. “The CFPB has found discriminatory pricing in the auto financing market and should have the ability to use the full range of its regulatory tools to address it.”
CFA Urges NAIC to Make State-Mandated Auto Insurance Affordable
Auto insurance required by the states is unaffordable for many and the pricing is unfair, CFA Director of Insurance Bob Hunter said in testimony at a November National Association of Insurance Commissioners hearing on the pricing of auto insurance. “We have shown conclusively that the use of socioeconomic rating factors adversely impacts low- and moderate-income (the “LMI”) Americans and people of color, while broadly diminishing the loss mitigation role that insurance pricing ought to serve,” Hunter said.
“Insurers want richer clients because they can sell them higher limits of auto insurance, insure more of their cars, insure their homes, insure their lives, sell them banking products, insure their businesses and even insure some of their yachts and planes. Companies love to, as they call it, ‘multiline’ the client,” Hunter said. “To capture this segment of business, insurers shift rates onto customers they deem less attractive. The poor, offering no multi-lining opportunities are priced up in order that the target market, the more affluent, can pay less without the insurer losing the total income they want to generate. In other words, the auto insurance pricing systems in place in most states today is built on subsidies for high wealth drivers paid for by low wealth drivers with clean records.”
CFA provided several recommendations for policymakers and regulators to address access and affordability for LMI drivers, including: collecting data that will assist state regulators in tracking insurance costs of LMI drivers; prohibiting the use of rating factors that are surrogates for income and do not have a causal relationship to insurance risk; and creating programs in which good LMI drivers can purchases basic liability coverage for affordable rates.
CFA Joins Digital Rights NGOs’ Call for Fundamental Privacy Rights
CFA, alongside digital rights organizations and consumer NGOs, issued a statement expressing concern that the 37th International Conference of Data Protection and Privacy Commissioners, held October 28 and 29 in Amsterdam, was centered on a report about how to bridge the gaps between approaches to privacy in the United State and Europe that is “remarkably out of touch with the current legal reality and what we need to do to address it.”
Citing the need to confront business and government behavior that threatens privacy and data protection, the groups complained the conference focused instead on failed policies such as self-regulation. “Unfortunately, a meaningful discussion about how to move forward on legislation, aggressive enforcement, and other steps that are long overdue was absent from the conference,” the groups stated. “The Amsterdam conference failed to engage with the many new challenges to privacy and data protection, from ‘Big Data’ to drone surveillance.”
CFA’s Director of Consumer Protection and Privacy, Susan Grant, attended the conference and noted that participants were unable to ask the panelists questions and could only express their views in small break-out sessions. “While some recommendations in the report, such as greater cooperation between the Federal Trade Commission and European authorities, are useful, it was a mistake to devote the entire conference to it since there are so many pressing issues, such as the rights of individuals not to be discriminated against on the basis of data collection and analysis, that need our attention,” said Ms. Grant. “It was a lost opportunity for robust discussion about how to deal with the privacy challenges we face today and will encounter tomorrow.”
The groups urged data protection authorities to refocus their attention on the need to update and enforce privacy law and to actively support and encourage discourse with civil society about the future of privacy and data protection.
Product Safety Groups Support CPSC’s Proposed Infant Bath Tub Standard
CFA, Kids in Danger and Consumers Union submitted a comment letter last month supporting the Consumer Product Safety Commission’s proposed standards for infant bath tubs. The groups expressed support for the proposals to increase the size of the text for warnings and instructions, require hazard color use on the product and packaging warnings, simplify and clarify language, add a warning on the risk of falls and specify the format of the warnings on the product, packaging and instructions.
CFA Legislative Director Rachel Weintraub noted that infant bath tubs are more commonly used now that there are currently no infant bath seats made or sold in the United States that meet CPSC’s mandatory standard. The biggest danger with any product used by infants and toddlers in water is drowning, she said, and while design can help direct more parental supervision, warnings are used to communicate the drowning risk directly.
“The CPSC’s proposed standard for infant bath tubs is a strong consumer protective standard, though we recommend a few additional strengthening provisions. This standard is being promulgated as part of section 104 of the Consumer Product Safety Improvement Act. This provision is proving to be extremely effective in creating safer children’s products.” said Weintraub.
Despite support for CPSC’s proposed standards, the groups expressed concerned with the lack of proposed language to address hazards from infant bath slings that are used either in conjunction with infant bath tubs or alone. Given that more than half of the product failures reported involved slings, the groups also urged the CPSC to include performance requirements for this part of the product in the infant bath tub standard as soon as possible.