CFA News Update- October 27, 2010
On September 30, President Obama signed into law a one-year extension of the federal flood insurance program. CFA supported the decision to provide a temporary extension of the program in order to “provide stability to a program that has been allowed to lapse several times recently.” In a letter to leaders of the Senate Banking and House Financial Services Committee, however, CFA Director of Insurance J. Robert Hunter warned that “neither the Senate legislation (S. 3814) nor NFIP legislation passed earlier this year by the House of Representatives (H.R. 5114) propose the sweeping overhaul needed to fix long‐term, structural flaws in the program that are harming consumers and taxpayers.”
Hunter urged Congress to couple the one-year extension of the flood insurance program with a study that examines how to terminate the insurance aspects of the program or to dramatically revamp the program so that private insurers assume a significant amount of flood risk. “The insurance component of the NFIP has proven to be unworkable because political pressure has kept flood insurance rates in many areas below the real cost of providing the coverage. This has led to chronic taxpayer subsidies of risky coastal development, often by affluent builders and homeowners,” he wrote. “It is time to take a fresh look at the chronically troubled NFIP.”
Leading consumer organizations wrote to Secretary of Transportation Ray LaHood last month urging greater transparency in airline ticket pricing practices. CFA, Consumer Travel Alliance, National Consumers League, and European Passengers’ Federation called on the DOT to require airlines “to disclose all fees in advance through every ticketing channel in which airlines sell their seats so that consumers can compare the total cost of travel.”
Many airlines have begun to “unbundle” their airfares and charge fees for things that were once included in the ticket price, such as checked baggage, seat reservations, early boarding, front-of-the-plane seats, pillows and blankets, and many other services. As a result, it is increasingly difficult to comparison shop for the best prices, especially since information about these fees is not always provided through some of the channels that consumers now use to buy their tickets.
“Hidden fees are a violation of a traveler’s most basic right: to know how much they will have to pay for their trip,” said CFA Director of Consumer Protection Susan Grant. “When two out of every three air travelers say they have been surprised by hidden fees at the airport, you know the current system is broken and needs to be fixed.”
A copy of the letter is available here.
In a move hailed as important progress by consumer advocates, the Office of Thrift Supervision (OTS) announced in mid-October that it will end MetaBank’s refund anticipation loan (RALs) program. National and state consumer groups, including the Consumer Federation of America, subsequently wrote to the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) to urge them to follow OTS’s lead and either end RAL lending by institutions under their supervision or, at a minimum, require these institutions to underwrite RALs based on the borrower’s ability to pay back the loan.
Consumer groups had called for these changes following the August announcement by the Internal Revenue Service that it will stop providing the Debt Indicator, an IRS credit check that showed whether RAL borrowers had any pending offsets against their tax refund for debts owed to the government. In response to the IRS action, the groups urged regulators to step in and make sure that improvident loans were not made this tax season by requiring banks to underwrite RALs according to income, assets and creditworthiness of the borrower, without consideration of the borrower’s tax refund.
The groups warned that without this requirement, “the result will be a potential worst case scenario where consumers pay more for RALs, a significant number default when refunds are offset, and lenders suffer high losses.”
A copy of the letter is available here.
The Federal Communications Commission issued proposed rules in October that would help protect consumers from “bill shock” by requiring wireless carriers to alert customers when they approach their usage limit and allow consumers to set their own usage caps. CFA sent a comment letter to the agency in support of the proposed rules.
“’Bill Shock’ will be decreased when consumers know the details about wireless billing practices,” CFA Research Director Mark Cooper and General Counsel Rachel Weintraub wrote. “If consumers are alerted when they enter roaming zones, when they are reaching or have exceeded a plan’s limits and if consumers are required to opt- in to be charged additional fees, consumer knowledge about billing practices will be greatly improved. We applaud the FCC’s efforts to increase transparency related to billing practices of cell phone providers.”
In celebration of National Protect Your Identity Week, the Consumer Federation of America released tips designed to help consumers choose service providers that follow good practices when shopping for identity theft services. The tips were developed by CFA’s ID Theft Service Best Practice Group, which includes representatives from consumer organizations, industry, and government.
“Identity theft services may be able to help you detect identity theft quicker than you could yourself, and some also offer to help resolve your identity theft problems, but no service can absolutely prevent your personal information from being stolen,” said Susan Grant, CFA’s Director of Consumer Protection. “It’s important for consumers to know what to steer clear of when purchasing identity theft services.”
The tips warn about services that make exaggerated claims or use scare tactics in their promotions and advise consumers to look for services that provide clear, thorough information about exactly how they work and what assistance they provide.
The press release is available here. Other resources for identity theft services include CFA’s 2009 report on identity theft services, To Catch a Thief, CFA’s Ten Easy Steps to Protect Your Identity and Detect Fraud, and the official website for National Protect Your Identity Week, www.protectyouridnow.org.