House Passes Bill to Weaken Health, Safety and Financial Protections

The House of Representatives voted 250-175 earlier this month to adopt H.R. 185, the Regulatory Accountability Act (RAA) of 2015, which would cripple the ability of federal regulators to adopt critically important health, safety, and financial protections.  “This bill handcuffs federal agencies and poses a significant threat to consumer protection, health and safety,” said CFA Legislative Director Rachel Weintraub. “If adopted, H.R. 185 would waste federal resources, minimize the ability of federal agencies to do their jobs to protect the public and ultimately harm American consumers.”

CFA sent a letter to members of the House urging opposition to the bill, noting that it would “require all agencies, regardless of their statutorily mandated missions, to adopt the least costly rule, without consideration of the impact on public health and safety or the impact on our financial marketplace. As such, the RAA would override important bipartisan laws that have been in effect for years, as well as more recently enacted laws to protect consumers from unfair and deceptive financial services, unsafe food and unsafe consumer products.”

The legislation was also opposed by the Coalition of Sensible Safeguards, of which CFA is a member.  The Coalition issued a joint statement in opposition to the bill.  “The costs of blocking crucial standards and safeguards are clear,” they stated. “The Wall Street economic collapse, the Upper Big Branch mine explosion in West Virginia, countless food and product safety recalls and massive environmental disasters including the Dan River coal ash spill in North Carolina and the Freedom Industries chemical spill in West Virginia are just some of the most recent examples.”

The bill now heads to the Senate, where it has been referred to the Committee on Homeland Security and Governmental Affairs.

FSIS Proposes New Measures to Reduce Foodborne Pathogens

The Food Safety and Inspection Service (FSIS) in the U.S. Department of Agriculture last week issued the first ever performance standards for Salmonella and Campylobacter for raw poultry parts and updated standards for ground poultry.  “Pathogen rates on poultry parts and ground poultry are way too high,” said CFA’s Director of the Food Policy Institute Chris Waldrop in a press statement praising the USDA action.  “These standards are essential to protect consumers and help drive down rates of contamination in these products.”

Waldrop noted that FSIS’ standards have historically focused only on poultry carcasses. “While reducing contamination on the carcass is critical, this approach has failed to address contamination levels once the bird is cut up into parts or processed into ground poultry,” he said. FSIS’ own testing revealed high prevalence levels of contamination on raw chicken parts – 24.02 percent for Salmonella and 21.70 percent for Campylobacter.  Moreover, FSIS’ previous standards for ground poultry only addressed Salmonella (and not Campylobacter) and were set at nearly 50 percent, so that a plant could fail almost half of FSIS’ sampling set and still meet the standard.

“These new performance standards will help improve the safety of the products that consumers are most frequently purchasing and consuming,” Waldrop said.

FHA Reduces Mortgage Insurance Fees

President Obama announced earlier this month that the Federal Housing Administration (FHA) would reduce its yearly mortgage insurance premium by one-half of one percent, from 1.35 percent of the mortgage amount to 0.85 percent.  CFA’s Director of Housing Policy Barry Zigas strongly supported the move, noting that, “FHA historically has served lower wealth consumers, and today’s announced roll-back of insurance premiums to lower but still financially sound levels will be welcome news to hundreds of thousands of consumers for whom the price of responsible homeownership has been too high.”

The White House estimated in its announcement that 250,000 new homeowners would benefit from the rate changes over the next three years.  FHA does not make mortgages.  Instead, it insures lenders who do make mortgages against losses from loan defaults.  Consumers pay an ongoing fee to cover this insurance, in addition to a one-time fee when the mortgage loan is closed.  The announcement left unchanged the upfront fee, and the requirement that borrowers pay the ongoing fee for the life of their loan.

Like private mortgage insurers, FHA suffered significant losses in the Great Recession. While it never failed to pay a valid claim, its main insurance fund fell below a required two percent reserve level.  Last year the agency needed an infusion from the U.S. Treasury to make up a capital shortfall.  This was the first time since FHA’s founding in 1934 that it required any support from US taxpayers.  In response, FHA adopted a series of aggressive credit management initiatives beginning in 2009 that included raising both the upfront and monthly insurance fees to add new revenue to offset these higher losses. The newly reduced ongoing fee is still higher than the pre-recession fee of .55 percent.

With a new actuarial report from late last year showing that FHA was once again in the black, although still somewhat below the two percent required capital reserve, CFA joined more than 40 other national consumer, civil rights and industry groups in a letter to HUD Secretary Julian Castro earlier this month urging him to reduce fees.  “Since the beginning of the financial crisis, FHA has stepped up to the plate and provided critical countercyclical support to the housing market by helping millions of Americans purchase and refinance their homes when private capital either fled the market or raised its prices beyond many consumers’ reach,” Zigas pointed out.

Large Auto Insurers Charging High Prices for Lower-Income Drivers

Annual auto insurance premiums are especially high for the estimated 8 million low- and moderate-income drivers who finance their car purchases, according to a survey of auto insurer website price quotes released this week by CFA. These drivers must purchase the comprehensive and collision coverage required by auto lenders in addition to the liability coverage required by states.

The survey obtained 147 price quotes from five insurers in fifteen cities and found that not one quote was under $500 and only eight (5 percent) were under $900, with half of those from Cleveland.  Over half of all quotes (52 percent) were higher than $1,500, nearly one-third of the quotes (31 percent) were higher than $2,000, and 16 (11 percent) were above $3,000.

“High auto insurance premiums represent a huge barrier to car ownership, and economic opportunity, for millions of lower-income Americans,” said Stephen Brobeck, CFA’s Executive Director in a press statement.  “Researchers agree that they and other Americans, even those in large cities, gain access to better jobs and other opportunities through access to a car.”

In a related nation opinion survey undertaken by ORC International for CFA, respondents were asked what they thought was a reasonable annual cost for a “30 year old woman with modest income and ten years driving experience with no accidents or moving violations.” Nearly four-fifths (79 percent) said that a fair annual cost for this auto insurance coverage was less than $750 and one-half said that a fair annual cost was less than $500.

“As well as denying economic opportunity, these high premiums pressure many lower-income drivers to break the law by driving without insurance,” noted Hunter. “We’ve estimated that one-quarter to one-third of these drivers have let their policies lapse, or never purchased them in the first place, because they confront the Hobson’s choice of paying for insurance or more basic necessities like food, rent, or electricity.”

Public Interest Groups Join Forces To Protect Americans’ Retirement Savings

Consumer, labor, retiree, and financial reform groups have launched a new campaign to protect Americans from the “Retirement Advice Loophole” that can drain away tens of thousands of dollars of hard-earned savings from individuals’ retirement accounts.  As a focal point for their efforts, the groups launched SaveOurRetirement.com, a new website that is intended to educate workers and retirees about threats to their retirement security that are allowed under current law and mobilize their support for long-delayed consumer protections that the U.S. Department of Labor (DOL) is working to adopt.

A regulatory loophole allows brokers, mutual fund companies, insurance agents, and banks that provide retirement advice to retirement plans and plan participants to portray themselves as trusted financial advisors while acting as self-interested salespeople, as described in a press statement announcing the launch of the campaign.   “The DOL is reportedly close to sending a revised regulatory proposal to close that loophole to the Office of Management and Budget for review, but they face relentless opposition from the affected financial services groups and their allies on the Hill,” said CFA Director of Investor Protection Barbara Roper.  “To overcome that opposition, they need the public’s support.  Through this website and other efforts, our groups are hoping to raise public awareness of the problem and enlist their support for DOL rulemaking to solve the problem.”

A memo allegedly from a high ranking White House economic adviser leaked last week estimates aggregated costs to retirement savers in the billions as a result of conflicted advice from financial advisors.  “This memo makes the most powerful case yet for how ‘perverse incentives’ encourage abusive practices and why new rules are needed to ensure that financial professionals who provide retirement advice put the interest of their customers first,” said CFA Financial Services Counsel Micah Hauptman.  “We look forward to working with the Administration to ensure that strong new standards are adopted to ensure that all financial advisors are held to appropriate standards when providing retirement advice to American workers and retirees.”

ATV and ROV Deaths Exceeded 500 in 2014

All-Terrain Vehicles (ATVs) and Recreational Off-Highway Vehicles (ROVs) deaths exceeded 500 in 2014, according to analysis released by CFA late last year. CFA noted that this was likely an underestimation of total deaths. As part of its ongoing work to educate consumers on using ATVs and ROVs safely, CFA along with members of  the ATVs on Roads coalition, composed of ATV safety advocates, academics and medical professionals has been tracking and posting ATV and ROV fatalities on www.consumerfed.org/ATVunsafeonroads. “This new data reinforces key safety messages that CFA has been making for many years: do not operate ATVs or ROVs on roads; these vehicles are not toys; do not let children operate vehicles that are too large and powerful for them to operate,” stated CFA Legislative Director Rachel Weintraub.

The analysis also found that the majority of deaths took place on roads; recreational off-highway vehicles ROVs are a significant percentage of fatalities; and nearly 20% of those killed were under the age of 16 and approximately 10% were under age 12.

In March of 2014, CFA released a report, “ATVs on Roadways: A Safety Crisis,” which found that, in spite of warnings from manufacturers, federal agencies, and consumer and safety advocates that ATVs are unsafe on roadways, an increasing number of states have passed laws in recent years allowing ATVs on public roads.  “The combination of the results from our March 2014 report and the fatality data we are sharing today should be considered as further evidence that ATVs do not belong on roads,” stated CFA’s Policy Advocate Michael Best.