CFA News Update- March 22, 2011
With gasoline prices spiking, House Republicans rolled out their “American Energy Initiative” last month, reviving proposals to expand domestic oil and gas production, promote nuclear energy, and encourage development of natural gas powered vehicles. At a hearing on the package of proposals in the Energy and Commerce Committee last week, CFA Research Director urged members to make improved vehicle fuel economy a central part of that plan.
“Today the United States has a better opportunity than we have had in decades to change the trajectory of our country’s gasoline consumption, lower consumer expenditures, reduce our dependence on Mid-East oil, and enhance national security by dramatically increasing the fuel economy of the vehicle fleet,” Cooper said in testimony before the committee. With high gasoline prices “pummeling household budgets,” the need is urgent, he said, public support is at an all-time high, and “the economics of putting more fuel savings technology into automobiles and light trucks have never been better more favorable to consumers.”
CFA released a survey report in conjunction with Cooper’s testimony documenting that strong public support. The survey, the eleventh on the topic commissioned by CFA since 2005, found “much higher” levels of concern than in previous surveys. Moreover, nearly two-thirds expressed support for having the federal government increase the fuel economy standard to 60 mpg by 2025. “The great concern about gas prices reflects not just rising prices and political instability in the Middle East, but also adverse impacts on household budgets,” said CFA Executive Director Stephen Brobeck. “Low- and middle-income Americans are now spending more money each month on gasoline than on their car payments.”
“The public support for dramatically higher fuel economy standards is backed up by our own economic analysis, and that prepared by federal agencies, that show a 60 mile per gallon standards is economically practicable, technologically feasible, and good for consumers,” Cooper said. “Americans increasingly understand that the only effective way to free ourselves from rising oil prices and dependence on unfriendly, unstable oil-exporting countries is to reduce oil consumption.”
Reports have emerged in recent weeks that the inter-agency group of federal regulators working on risk retention rules for asset backed securities under the Dodd-Frank Wall Street Reform and Consumer Protection Act is considering imposing high down-payment requirements as part of the standards needed for loans to be designated as qualified residential mortgages (QRMs). The QRM defines an exemption from the so-called “skin in the game” requirement for securitizers and originators to hold a 5 percent interest in any securitized assets. The exemption applies only to mortgages. The statute charged the prudential regulators, HUD, the SEC and the Federal Housing Finance Agency to collaborate on issuing a rule defining the QRM.
CFA joined with the Center for Responsible Lending, the National Association of REALTORS®, and the National Association of Home Builders in writing to federal regulators last week to express concern over these reports. “While we support a reasonable and affordable cash investment requirement, that requirement can be coupled with other underwriting features to ensure loan sustainability without unnecessarily narrowing access to credit,” the groups wrote. “If the regulators impose a 20% -- or even a 10% -- minimum down-payment requirement as part of the new QRM framework, hundreds of thousands of creditworthy households will be excluded from homeownership because of the dramatic increase in the wealth required to purchase a home.”
The House Energy and Commerce Committee voted 30-23 last week to adopt a resolution of disapproval (H. J. Res. 37) of recent Federal Communications Commission “net neutrality” rules designed to ensure open access to the Internet. The vote came just one week after CFA and Consumers Union released a new survey report showing deep public concern over network management practices and strong public support for policies to ensure Internet access.
“By a margin of three to one the public says practices like tiering, paid prioritization, and degrading and blocking websites, content and applications are problematic,” said CFA Director of Research Mark Cooper, principle author of the report, “and by a margin of four to one they want either the Congress or the Federal Communications Commission to adopt policies to ensure access.” Those percentages were even higher among respondents who said the Internet is important to them.
CFA submitted the survey results to members of the Energy and Commerce Committee in a letter urging opposition to the resolution of disapproval. Passage “would be harmful to consumers and disastrous for the Internet because it would undermine the ability of the FCC to prevent discriminatory, anticompetitive and anti-consumer behavior on the broadband Internet,” CFA wrote.
The resolution is expected to come to the House floor for a vote in April.
During Senate consideration last week of a bill to reauthorize the Small Business Innovation Research and Small Business Technology Transfer programs of the Small Business Administration, Sen. Rand Paul (R-KY) offered an amendment to cut $200 billion from the federal budget. Among its provisions, the amendment would eliminate a number of independent agencies, including the Consumer Product Safety Commission.
CFA joined with other national consumer and safety groups in writing to members of the Senate urging opposition to the amendment. “The CPSC plays an extremely critical role in protecting American consumers from product hazards found in the home, in schools and during recreation. For the past forty years, the work of CPSC has contributed to the prevention of tens of thousands of deaths due to unsafe products and has saved both consumers and companies billions of dollars in injuries and hazards averted,” the groups wrote.
The measure did not come up for a vote before the Senate left for a week’s recess. While the amendment is not considered to have a realistic chance of passing, it does illustrate the on-going challenge consumer advocates face fighting Republican efforts to use funding measures as a way to overturn pro-consumer regulations. “Defunding the CPSC is an absurd and ill-conceived strategy to destroy a critically important consumer protection,” said CFA Senior Counsel Rachel Weintraub.
As the House held hearings last week on the future of the new Consumer Financial Protection Bureau, CFA released a list of questionable and abusive financial practices that harm American families that the CFPB will need to address when it opens its doors in July. The issues identified in the release include unfair bank overdraft loans, numerous fees and few protections for pre-paid cards, the robo-signing foreclosure scandal, subprime credit cards with high fees and interest rates, wrongful foreclosure on members of the U.S. armed services, and Internet payday lending.
“The financial traps and tricks that consumers have been dealing with since Congress passed financial reform vividly demonstrate the great need for the Consumer Financial Protection Bureau, with its ability to bring transparency to the marketplace and to write and enforce rules,” said CFA Legislative Director Travis Plunkett. “The CFPB will rein in these practices and ensure that the marketplace provides products and services that are fair and sustainable.”