Ed's Blog

Just a few of the interesting consumer stories I am following this week:

-- CFPB heads to New York (official blog post) to talk about checking accounts (Feb. 22) and ways to improve disclosures of fees and account terms and, we are just guessing here, ask consumers whether they think overdraft protection practices -- such as re-ordering checks and debits to maximize penalty fees -- are fair. In PIRG's latest Big Banks, Bigger Fees report, we urged the CFPB to enforce bank fee disclosure laws (OCC does not, see below to answer the FAQ "What is the OCC?") and we urged CFPB to require banks to use machine-readable smart disclosure of fees on the Internet so consumer groups and other websites could easily generate local shopping guides.

-- Citibank charged some consumers twice to pay bills only once (NYTimes). From the NYT story by Ben Protess: "While Citi may be the first company to stumble with the iPad, it is far from the only bank to encounter electronic hiccups." Bad enough, but even scarier, check out what a bank consultant told Protess: "Big banks, experts say, are now more reluctant to estimate the scope of a problem in case the numbers grow. 'It’s very challenging to really pinpoint the number of customers affected,' Mr. Albertazzi said. 'It’s the nature of the beast.'" Comforting comment, that.

-- Consumer groups call for a real recall of Bumbo baby seat (Boston Globe story by Mitch Lipka). More from CALPIRG. Previous remedial actions (CPSC notice) including labeling the seat with warnings, haven't prevented an alarming number of injuries, including over thirty skull fractures.

-- Mortgage settlement is a good first step (PIRG statement). Here's more from nationalmortgagesettlement.com -- the official website of the 49 settling state Attorneys General and the U.S. government.

-- Sorry this blurb is so long. It's important. House opponents continue to ratchet up attacks on the new CFPB (WashPost). Here is a link to the hearing page from Wednesday. Worth reading is Professor Arthur Wilmarth's rebuke of the proposals -- from his withering testimony: "CFPB's ability to fund its operations without relying on congressional appropriations is, again, comparable to the OCC, FHFA, FDIC and FRB. The financial services industry and its allies have strongly defended the governance structure, authority, independence, and assured funding of both OCC and FHFA. Accordingly, it appears that the opposition to CFPB is primarily motivated by CFPB's consumer protection mandate, not its structure. CFPB's opponents have alleged that the bureau will be an unaccountable agency with virtually unlimited powers. On the contrary, Title X of Dodd-Frank imposes significant limitations on CFPB‟s powers and also provides for extensive oversight of CFPB....CFPB is the only financial regulator whose rules are subject to override by an appellate body consisting of the heads of other agencies....Thus, claims about CFPB‟s alleged lack of accountability are refuted by Dodd-Frank's unambiguous provisions that limit CFPB‟s authority and impose substantial oversight on CFPB." (Emphasis added.) U.S. PIRG, CFA and Americans for Financial Reform hosted an academic symposium last fall where Professor Wilmarth presented a paper that was the basis for his testimony. But wait, there's more: Next week, the CFPB director Rich Cordray himself will come before the Financial Services committee, for an oversight hearing on the CFPB budget. And here, apparently along with many others, I have long labored under what appears to be the misapprehension that the CFPB is unaccountable and not subject to Congressional oversight.

-- Over-priced "Who will pay your credit card if you die, get sick or get laid off?" products pay out only 21 cents on the dollar. This American Banker story is a good introduction to extremely profitable debt cancellation products sold as add-ons to credit card and other loans under the authority of the obscure but powerful Office of the Comptroller of the Currency (OCC), not state insurance officials. The story posits that maybe the CFPB will start to actually regulate their sale. It's about time. Under the soft touch of the OCC (best known as the agency that sleeps part of the time and either defends banks in court or preempts (prevents) state Attorneys General from during their jobs while it is awake), nationally-chartered banks can apparently get away with paying off only 21 cents on the dollar in claims, even though consumer groups recommend a minimum loss ratio of 70 cents on the dollar for similar insurance products. As Nancy Reagan would say: "Just say no to debt cancellation offers." Most people don't need the product because they qualify for other insurance. Worse, most people are duped into buying it. Even worse, the offers make promises that are not true, because the loopholes and exceptions swallow the rule. "Sorry, you weren't "involuntarily" separated from your job." Or, "Sorry, you are not really disabled." And when they do pay, it is usually the minimum payment and then only for a year. Big whoop. Not worth the money!

-- More on the CFPB's latest semi-annual report on the work it is doing to grow and protect the American people while making the marketplace fair for fair-dealing firms. (St. Louis American).

-- U.S. PIRG and the action-oriented think tank Demos document (our report) the rise of the Super-PACS ("fascinating," says MS-NBC). From the co-authors: “Super PACs represent much of what is wrong with American democracy rolled neatly into one package,” explained U.S. PIRG democracy advocate Blair Bowie. “Super PACs are like kryptonite for our democracy,” added Demos Democracy Counsel Adam Lioz. Why is this in my consumer blog? We won't fully clean up Wall Street practices until we clean up the campaign finance "system," such as it is, so take a look.

-- And finally, "Enron" -- a musical theater production about corporate crime, re-opens in Washington State (The Olympian). I can't wait for "Madoff with the money," a possible sequel.

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