CFA News Update - September 3, 2013

President Outlines Pro-Consumer Plans for Housing Recovery

President Obama delivered a speech earlier this month outlining a coordinated set of initiatives to build on the housing economy’s emerging recovery.  In a press statement issued in response to the speech, CFA Director of Housing Policy Barry Zigas called it an “important step in reaffirming housing’s importance to American consumers, whether they are renters or owners.”

In the press statement, Zigas responds specifically to the various initiatives outlined in the president’s speech, including a pledge to continue existing rescue programs, such as HAMP and HARP, and to increase focus on spending the $7.6 billion provided to the so-called ‘hardest hit states’ with the highest rates of home foreclosures.  Also important was the President’s focus on the high rent burdens facing millions of renters, the need for improved access to mortgage credit, and mortgage finance reform.

“Access to sustainable, affordable home finance has been a fundamental supporting pillar of the American dream,” Zigas stated.  “President Obama’s speech reaffirmed that fact.  The policies he outlined are important, positive steps that will help Americans build economic and family security through a strong and resilient housing economy.”

House Approves Anti-Consumer Bill to Impede Regulation

Just before leaving for their August recess, the House voted 232-183 to approve the REINS Act (H.R. 367), a bill that would impede the ability of federal agencies to adopt important consumer protections.  CFA sent a letter to members of the House shortly before the vote describing how the bill would undercut the ability of federal agencies to protect consumers from unsafe food, predatory financial products and schemes, and dangerous consumer products.  The letter, signed by CFA Legislative Director Rachel Weintraub, Director of the Food Policy Institute Chris Waldrop, and Director of Investor Protection Barbara Roper explained: “The federal rulemaking process is already lengthy and difficult. This bill would make it even more time-consuming, expensive, and burdensome for federal agencies to propose consumer protection measures. The end result will be harm to American consumers.”  With the Obama Administration having expressed its opposition, the bill is not expected to advance in the Senate.

Groups Urge Expanded Protections Under the Military Lending Act

A broad range of organizations filed comments with the Department of Defense in early August strongly urging expanded protections against high cost credit practices under the Military Lending Act.  “Ensuring that all high-cost lenders are subject to the strong protections enacted by Congress is key to ensuring the financial health of our servicemembers,” said CFA Director of Financial Services Tom Feltner.

Short-term payday loans and auto title loans made to active-duty service members are currently subject to a 36 percent rate and fee cap as well as other consumer protections.  However, some lenders have developed longer-term loans and other products not subject to the rate cap and continue to make loans to servicemembers at triple digit interest rates.

In a letter to Secretary of Defense Charles Hagel, CFA,  the Center for Responsible Lending, the National Association of Consumer Advocates, and the National Consumer Law Center argued that “the rule should apply to all consumer credit currently regulated under the Truth in Lending Act (TILA), to overdraft programs, and to rent-to-own transactions.”  Similarly, a group of 39 national and local consumer, community, and civil rights groups submitted a comment letter urging the DoD “to strengthen the rule and ensure that all active duty service members and their dependents are adequately protected.”

Military and veteran services organizations, including the Fleet Reserve Association and the American Legion, as well as the Veterans’ Affairs Departments of Idaho, Illinois, Tennessee and Washington also called for improved and expanding protections.

Financial Regulators Propose New Rules for Mortgage Finance

Moving regulatory initiatives required by the Dodd Frank Act one step closer to completion, six federal financial regulators published a new proposal last week to implement risk retention requirements for asset backed securities.  The new proposal, released for a 60-day comment period, affects all asset backed securities and follows an earlier draft regulation published for comment in 2011.

The proposal would significantly change that earlier proposal, especially in its definition of so-called “Qualified Residential Mortgages” (QRMs) that would be exempt from the risk retention requirement.  DFA required the regulators to assure that entities securitizing assets retain some “skin in the game.”  The QRM was designed by Congress to exclude certain mortgage backed securities from this 5 percent risk retention requirement.

The new proposal would make the QRM definition the same as the Qualified Mortgage (QM) definition already adopted by the Consumer Financial Protection Bureau (CFPB).  This represents a major victory for consumer groups, who along with mortgage industry representatives strongly opposed the original proposal that called for a minimum 20 percent down payment to qualify for QM.

“The new proposal is an important improvement over the original proposal,” said CFA Director of Housing Policy Barry Zigas.  “We look forward to commenting on this new, much improved version.”

Recession-related Consumer Complaints Persist

Consumer problems related to the recession persist in 2012, according to the latest survey of state and local consumer protection agencies conducted by CFA and the North American Consumer Protection Investigators (NACPI) and released earlier this summer.  “Foreclosure rescue scams, dirty debt collection tactics, sudden store closings, and landlords skimping on the heat and ignoring needed repairs are just some of the issues that confront consumers in these difficult economic times,” said CFA Consumer Protection Director Susan Grant. “In addition to those problems, new types of scams and new payment methods that are being exploited by fraudsters pose challenges for consumers and consumer agencies.”

Forty agencies from twenty states responded to the survey about the most common, fastest-growing and worst complaints they received in 2012.  The survey respondents are general-purpose consumer protection agencies that deal with a variety of complaints; CFA and NACPI did not survey federal agencies or state agencies that focus only on one area such as insurance or banking.

According to the survey, perennial complaint areas such as auto sales and repair, home improvement and construction, and credit and debt issues continued to top the list of consumer complaints.  Fastest growing complaint sources included: towing disputes; landlord/tenant problems; abusive debt collection practices; telephone service billing issues; and unlicensed contractors.  According to the consumer complaint agencies, the most serious complaints involved foreclosure issues; problems with home repairs after disasters; sweepstakes scams and other frauds targeting elderly consumers; business opportunities and work-at-home offers; and violations of do-not-call and other telemarketing rights.

“This survey report illustrates the wide range of problems that state and local consumer protection agencies handle every day and why it’s so important to ensure that they have the resources and training they need to protect the public,” said NACPI President Amber Capoun, a Legal Assistant in the Office of the State Banking Commission in Kansas.

Additional information, including consumer tips, can be found at and