CFA News Update- August 2, 2011

Administration Makes Fuel Economy Increase Official

Nearly lost in last week’s coverage of the debt ceiling crisis was the official announcement by the White House that it had reached agreement on a plan to raise the average fuel economy standards for passenger vehicles to 54.5 miles per gallon by 2025. Under the new standards, fuel economy for cars would have to increase by 5 percent a year from 2017-2025, while SUVs and pickups would be allowed to increase by a less-stringent 3.5 percent a year through 2021 before rising more sharply to 5 percent a year from 2021 to 2025. Though the ultimate goal of 54.5 mpg is not quite as high as the 56.2-mpg standard the White House was reportedly considering, it represents a dramatic improvement over the existing 27.3-mpg standard.

“Hard, good faith bargaining has produced a program that is very good for consumers and the auto industry,” said CFA Research Director Mark Cooper. “By sticking to the steady, 5 percent improvement scenario, the program will deliver the biggest bang for the buck in the types of vehicles – cars – that consumers are most likely to purchase. At the same time, the program provides incentives to meet the more difficult challenges in transforming the vehicle fleet – getting hybrid engines into pickup trucks and promoting electric vehicles.”

CFA Public Affairs Director Jack Gillis, author of The Car Book, joined Cooper in praising the deal. “The President has taken a giant step in reducing the burden of rising gas costs on the American family, reducing our dependence on foreign oil, and keeping the U.S. car companies competitive,” he said. “President Obama demonstrated an uncanny ability to bring together consumer advocates, car companies, unions and environmentalists to responsibly address America’s energy challenges.”

In the weeks preceding the announcement, car companies lobbied heavily for a number of concessions to weaken the deal. CFA and Consumers Union responded with a joint campaign promoting the economic benefits of the standards. “While our resources pale in comparison to the giant Auto Alliance, we are determined to ensure that the economic benefits to consumers of a higher standard are taken into account. It’s clear from our polling that consumers want more fuel efficient vehicles,” Cooper said in a statement issued before the final deal was announced. Once the deal was reached, CFA and Consumers Union issued a joint statement praising the White House announcement, which they said would “help consumers save money, cut pollution, and reduce the nation’s dependence on foreign oil.”

Consumer Groups Weigh In on Fed’s Mortgage Underwriting Rules

With the comment period drawing to a close, CFA commented both separately and jointly with other consumer groups on the Federal Reserve Board’s proposed rules to carry out certain provisions of the Dodd-Frank Act with respect to mortgage underwriting. “The proposed rule would establish important consumer safeguards for mortgage lending,” said CFA Director of Housing Policy Barry Zigas.

Specifically, the proposed rule would establish how lenders should comply with requirements designed to ensure that loans are based on the borrower’s ability repay the loan. This includes defining “qualified mortgages” (QM) through which lenders can obtain a presumption of complying with the ability to pay requirement. The rule proposal lays out two alternatives for meeting that requirement, one which would provide a safe harbor for lenders and one which creates a rebuttable presumption that loans that meet certain standards satisfy the ability to pay requirements.

Both the CFA comment and the group comment letter argued strongly for the second alternative, arguing that the statute does not support creation of a legal safe harbor and that the safe harbor proposed is missing several key components of an acceptable standard. In contrast, the second alternative will both encourage lenders to emphasize loans that meet the QM definition while assuring consumers of significantly greater protection from abusive or ineffective underwriting than the standard proposed for the safe harbor, Zigas said.

“Consumers were subjected over the last 10 years to a wide range of abusive lending practices,” he wrote. “The evidence is clear that without strict guidelines and consumers’ ability to pursue relief where lending standards have been ignored or applied inappropriately, weak and even fraudulent underwriting can victimize consumers… Lenders that follow the rules and ensure that their loan originators are using sound, well documented and verified underwriting will, we believe, be well protected by the proposed rebuttable presumption in Alternative 2.”

Safe Food Groups Call for Revisions to FDA Food Inspection Plan

As the Food and Drug Administration moves forward with plans to implement the FDA Food Safety Modernization Act, food safety groups called on the agency to abandon its plan to rely on states to inspect food facilities until it addresses serious concerns about that approach. “If FDA is going to ask state and local food safety authorities to conduct inspections of food facilities on their behalf, the agency must be assured that those inspections are being done to federal standards and provide the states with sufficient resources so as to not take away from the food safety work the states are already doing,” said Chris Waldrop, Director of CFA’s Food Safety Institute.

In joint comments from the Make Our Food Safe Coalition and the Safe Food Coalition, the groups argued that FDA has a responsibility to carry out an increased frequency of inspections as mandated in the FSMA. “We strongly oppose passing on this responsibility to the States without resolving some key issues,” they wrote. Instead, they urged FDA “to use state inspection resources as a supplement to, and not in lieu of, a robust federal inspection program.”

Among those key concerns are inconsistency in state inspections, inadequate oversight of state inspection programs, and lack of resources for inspections in states that are struggling to balance their budgets in this difficult economic climate. Before moving forward, “FDA should work with States and local governments to improve their performance of regulatory programs they have administered for years, such as retail and restaurant food inspection,” the groups wrote. “If FDA is going to rely on States to conduct inspections on behalf of the agency, FDA must assure that it has strong federal inspection standards to be followed by the States and that only States that can meet these standards are selected. FDA must assure adequate oversight of state programs and provide sufficient funding to support an acceptable level of inspection activity in the States chosen without jeopardizing the important food safety work that the States already do.”

“State and local public health authorities are the only ones conducting food safety inspections of retail and restaurant facilities and institutions like nursing homes, schools, and hospitals,” said Waldrop. “Requiring these agencies to conduct additional inspections of food facilities under FDA’s jurisdiction could undermine the essential public health work they are already doing.”

Report Highlights Top Consumer Complaints, Consumer Protection Challenges

The tough economy continued to pose problems for consumers and state and local consumer protection agencies in 2010, according to the latest consumer complaint survey conducted by CFA, the National Association of Consumer Agency Administrators (NACAA), and the North American Consumer Protection Investigators (NACPI). Thirty-one agencies from

18 states participated in the survey, which asked about the most common, fastest growing and worst complaints they received last year, as well as their biggest achievements and challenges. Half of the agencies that responded to the question about their biggest challenge last year cited budget cuts and limited resources, which often forced them to “do more with less.”

“Much of what state and local consumer protection agencies do, from preventing rip-offs to mediating individual complaints, goes unheralded,” said CFA Director of Consumer Protection Susan Grant. “State and local consumer protection agencies need more funds to do their jobs effectively,” she added. “They provide essential public services, like firefighters and police, and deserve the same support.”

As in the previous survey, complaints about credit and debt were second only to auto-related complaints in 2010, while fraud was a new category among the top ten complaint areas.

The complaints that state and local consumer agencies received last year ran the gamut from auto sales to sweepstakes scams, with no one category standing out as either the worst or the fastest growing. However, many of the complaint examples they provided were related to the difficult financial situations that consumers and businesses faced last year, such as abusive debt collection practices, bogus offers of debt assistance, and business closings. Between them, the agencies surveyed received more than 252,000 complaints in total last year and collectively obtained in excess of $208 million in restitution and savings for consumers.

CFA released new tips in conjunction with the survey report to help consumers avoid scams and rip-offs.

A copy of the news release is available here.