"Have you no shame?" Airlines Raise Prices, Owe Consumers an Apology, Peanuts and a Few Bucks

28 July 2011

It looked like consumers might finally be getting a break this summer.  Not from the record heat, but rather from some of those mysterious fees, taxes and surcharges that are added to every airline ticket.  Last week, Congress failed to pass a bill that would continue an array of taxes tacked on to every airfare.  Yes, taxes can go away.  The:

• 7.5% excise tax on all domestic tickets;
• $3.70 tax on each flight segment; and
• $16.30 tax on international flights

-- all are history for now.  How much money is that?  The New York Times reports that the total tax per ticket averaged about $61, or a total of $25 million per day.  So, are consumers the big winners following Congressional inaction?  Nope.

First they took away meals on most flights, next it was those peanuts and pretzels in tiny foil packets.  Now it’s the tax savings.  Rather than cutting prices, the airlines simply added a like amount to everyone’s fare.  Scoundrels aren’t they?  Cynically, airline industry spokeswoman Jean Medina claims consumers’ costs have not increased.  She cleverly avoids the fact (as most spokesmen do) that the airlines have manipulated for themselves a windfall.  Same plane, same crew, same can of soda, just pay me $61 more.  Its outrageous and at a minimum the Department of Justice’s antitrust division should issue some subpoenas to investigate how so many airlines acted in concert to raise prices.  (“Ms. Medina, you are under oath…”)

Our hats are off to the few airlines doing the right thing and passing savings along to consumers: Spirit Airlines, Alaska Airlines, and Hawaiian Airlines (yes, that’s all of them).  But shame on all the other airlines; at a minimum they should throw us some peanuts.  And let’s hope those hard-working civil servants at the Department of Justice have some time to investigate the conduct of an industry that seems to perpetually place consumers at the back of the line.

Steven Berk, assisted by Zach Kady
Berk Law PLLC
http://www.thecorporateobserver.com

The More Things Change...

 28 July 2011

Two weeks ago I had the chance to testify before the House Financial Services Subcommittee on Insurance, Housing and Community Opportunity: http://financialservices.house.gov/Calendar/EventSingle.aspx?EventID=250158

It was the first time in a while that I had testified at a hearing that was clearly slanted towards the concerns of the financial services  and housing industries (8 corporate witnesses v. 2 consumer advocates) and while that didn't surprise  me - I do live and work in Washington, D.C. after all - I was pretty flabbergasted by the people who I saw in the hearing room and what they did and didn't say.  Looking across the witness table, and more importantly, at the people who sat behind the witnesses, I was amazed to see the same cast of corporate lobbyists who defended the mortgage and banking industry's insatiable greed that ultimately lead to our national's economic disaster.

In the world I live in, when you're so monumentally wrong as these folks were, I would expect maybe a little humility, a little introspection, a little rethinking about how and what I do for a living. But I guess in the world of lobbying, big money contributions not only means never having to say you're sorry, it all means that you get a level of respect and credibility in Congress that is completely undeserved. And folks wonder why Congress is so broken. The more things change...

Ira Rheingold 

Executive Director, National Association of Consumer Advocates (NACA)

Forced Arbitration in plain English – the CFPB must prioritize a study on Forced Arbitration.

 27 July 2011

Sometimes being an advocate also means being a translator; explaining how technical legislation and court decisions impact consumers.  It is not always obvious how seemingly benign legal clauses chock full of ‘in the events that,’ ‘heretoforths,’ and ‘in accordance withs,’ can and do have real and often damaging consequences for consumers.  This is especially the case with forced arbitration which is favored by large corporations with poor customer service records and a history of unfair or deceptive business practices. 

The National Association of Consumer Advocates (NACA) recently met with a Congressional staffer to discuss the detrimental impact that the recent Supreme Court decision, AT&T Mobility v. Concepcion, is having on consumers and access to justice.  We commented on the increasing prevalence of forced arbitration clauses in basic everyday transactions.  “Forced arbitration clauses are everywhere; consumers are increasingly made to click through in agreement to access basic services, products and even apply for employment,” we said. The staffer remarked: “Well, so what?  This is a normal part of everyday life.”

Is it though? Would consumers be willing to stomach forced arbitration as a reasonable cost if the fine print was translated into plain English?  If forced arbitration is not harmful – as corporations would have us believe - why bury it in, fine, impenetrable, print?  What if a standard forced arbitration clause was translated; written as it actually applies to the average consumer as seen below?  Would consumers simply click through in agreement?  You decide – compare a standard arbitration clause to the following plain language translation below; which do you prefer?

If you have a dispute with us, you can’t go to court. You must use arbitration, and you will either have to pay or share with us the costs for the arbitrator’s services (of course if you could go to court, which by signing this agreement you can’t, you’d be getting the neutral judge or jury’s time for free, courtesy of taxpayers). We, not you, get to pick the dispute resolution services company which will provide the arbitrator; in all likelihood, we will pick a company in which we hold financial interests.  If enough consumers have a legitimate gripe with us, you waive your ability to join forces in a class action law suit to enforce your legal rights collectively and publicly. (That would level the playing field between us, a mega-corporation, and you, an insignificant consumer.) We can’t allow that.  If you thought that was bad (substitute for furthermore), this dispute will be resolved according to the laws of a state far, far away from where you live and work–laws which favor us, not you. In short, the deck will be stacked so thoroughly against you that you have little hope of achieving justice.  Any decision reached through this dispute resolution service will not be reviewed by any court though we will make it sound like it came from a court.  Thanks, and have a nice day. Now, if you aren’t sick to your stomach and still want our product, service or to apply for a job, you must agree to continue.

On this issue – forced arbitration – consumer advocates’ positions are clear.  Forced arbitration is harmful to consumers and not in the public interest.  Contrary to what the corporate lobbyists would have us believe, no consumer benefits from forced arbitration and in the post-Concepcion environment, many important consumer protection battles may never get the chance to be fought in an open court of law.

One year ago the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) was signed into law and created the Consumer Financial Protection Bureau (CFPB), which has jurisdiction over consumer contracts for the sale of financial products and services.  Section 1028 of the Dodd-Frank Act directs the CFPB to study mandatory, pre-dispute arbitration in contracts under its jurisdiction and report back to Congress.  The agency will then be authorized to either ban or regulate pre-dispute arbitration clauses in contracts under its jurisdiction, provided that the “Bureau finds that such prohibition or imposition of conditions or limitations is in the public interest and for the protection of consumers.”

NACA hopes that now that the CFPB is up and running that it will make this study on mandatory, pre-dispute (or ‘forced’) arbitration a priority. 


Delicia Reynolds
Legislative Director, National Association of Consumer Advocates (NACA)

CFPB Launches TODAY but House and Senate Republicans would like to see it crash and burn!

Dear NACA Members,

Financial Reform still needs your help! Issue campaigns are as much about being ready for critical moments as they are about advancing a strategy. This week is that critical moment. One the one hand, consumer advocates are celebrating the one year anniversary of the signing of the historic consumer protection and financial reform legislation, the Dodd-Frank Wall Street Reform and Consumer Protection Act, and the fact that President finally announced the Administration’s pick to lead the Consumer Financial Protection Bureau (CFPB), Richard Cordray.  Most important, today the CFPB, which was established by Dodd-Frank, officially launches.  The CFPB was created in response to massive regulatory failures by federal banking and consumer regulators and the proliferation of unfair, deceptive and unsustainable lending practices. 

On the other hand, House and Senate Republicans are intent to hobble the agency before it even gets started.  Under the guise of accountability, however, Republicans have launched a sustained attack upon the CFPB.  This attack must be fought and your help is needed now.  Because no director has been confirmed, the Bureau will not have its full authority to protect consumers in the financial marketplace including oversight of payday lenders, mortgage companies, and credit bureaus.  Senate Republicans continue their threats to block the confirmation of any director to the CFPB.  Additionally, today the House will debate HR 1315, Consumer Financial Protection Safety and Soundness Improvement Act; this is just one of a number of bills that seek to weaken the CFPB’s authority to protect consumers in the marketplace.

This week consumer advocates released a report detailing why the CFPB is needed; many of the stories featured in this report are from the clients represented by NACA attorneys.  Call your member of Congress now and urge them to oppose HR 1315 and any other attempt to cripple the CFPB. To contact your member of Congress, you can use the U.S. Capitol Switchboard at (202) 224-3121 and ask for your Senator’s and/or Representative's office.

Thank you for your continued support on these critical issues.

Sincerely,

NACA’s Legislative Unit
Delicia Reynolds & Ellen Taverna

CFPB Making Our Country Safer

21 July 2011

The Consumer Financial Protection Bureau (CFPB) officially opens its doors today.  Created by the sweeping Dodd-Frank Wall Street Reform Act last July, the Bureau will serve as the leading federal regulator against deceptive, abusive and predatory loan products in the financial marketplace.  One important arm established at the CFPB is the Office of Servicemember Affairs (OSA), which is dedicated solely to helping America's military servicemembers and their families.

U.S. service members and their families sacrifice a lot to defend our nation; yet, they often fall victim to unfair or deceptive financial practices.  Unfortunately, many unscrupulous lenders look to take advantage of military families because of their unique demographic characteristics.   Young soldiers who are receiving steady paychecks for the first time are often surrounded by aggressive sellers and lenders outside the military base.  Military families face many challenges due to deployments and frequent moves in these difficult economic times.   During the lead up to the enactment of the Dodd-Frank Act, top military officials recognized there was a need in protecting military families from unfair financial practices.  In a letter to the U.S. Treasury Department, Undersecretary of Defense Clifford L. Stanley states that the “personal financial readiness of our troops and families equates to mission readiness.”

The Office of Service Member Affairs takes aims to deny predators who take financial advantage of those who serve.  Headed by Holly Petraeus, the OSA is designed to strengthen financial protection for service members and their families as well as promote financial education.  OSA officials will also assist the CFPB enforcement team, and coordinate efforts with federal and state agencies, when they find bad actors breaking consumer financial protection laws to harm service members.

The creation of the OSA could be a significant step toward curbing unfair or deceptive financial practices against service members.  More widespread financial literacy and awareness can also help military families better handle the financial challenges that can come with serving our nation.


Ellen M. Taverna
Legislative Associate, National Association of Consumer Advocates (NACA)

Who’s afraid of the CFPB? Consumers are not!

 13 July 2011

One year ago this month, Congress passed sweeping financial reform legislation and created the Consumer Finance Protection Bureau (CFPB) to address fundamental weaknesses in financial regulation and consumer protection.  Leading up to the creation of the CFPB, consumer advocates likened the creation of the CFPB to the creation of deposit insurance after crash of 1929; a ground breaking step forward in protecting consumers.  Prior to the CFPB, consumer protection functions were divided among seven different agencies with the primary result being that the consumer was not always protected.  With the creation of the CFPB, consumers will now have a ‘one stop’ cop on the beat that will supervise banks, credit agencies, and other financial companies.  The CFPB is due to launch on July 21st, 2011; however, if the GOP lead House of Representatives has anything to do with it, the CFPB will be severely handicapped from the start.

Presumably, strong consumer protection and enforcement against predatory and abusive financial practices are good things, right?  Not if you ask this Congress.  The House continues to weaken the CFPB by attempting to assert appropriations authority over the CFPB and make critical cuts to the independent funding for the CFPB.  The numerous attacks and attempts to undermine the CFPB coming out of the House is akin to the infamous ‘death panels’ used by opponents of health care reform.  It’s a cheap trick and a waste of time.  Republican ‘watchdogs’ who  purport to want to take back Washington for the American people seem to be doing the exact opposite; entrenching their own power and attempting to weaken down the watchdog consumer protection agency that will protect consumers from hidden bank fees, shady loans, and other financial rip-offs.  Who’s afraid of the Consumer Finance Protection Bureau?  Apparently, it’s this GOP-led Congress. 

Remind Congress, that they should be keeping consumer interests in mind!  Tell Congress to stop attacking and delaying the standing up of the CFPB.  Call your Senator and Representative now.  Tell them that subjecting the CFPB to appropriations will increase taxpayer costs and allow big banks to thwart funding.
To contact your member of Congress, you can use the U.S. Capitol Switchboard at (202) 224-3121 and ask for your Senator’s and/or Representative's office.

Delicia Reynolds
Legislative Director, National Association of Consumer Advocates (NACA)

CFPB Soon to Open Its Doors Without a Director

 07 July 2011

In two weeks, we will celebrate the one year anniversary of the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).  Despite the enormous opposition from the financial industry, Congress passed this landmark legislation that represents a victory for all American consumers.  NACA’s Legislative Unit is dedicating the month of July’s blog posts to celebrating the anniversary of this important law.

Perhaps the most significant provision of the Dodd-Frank Act is the one that creates the Consumer Financial Protection Bureau (CFPB). Now consumers have a single agency whose job it is to guard against unscrupulous, unfair, deceptive and abusive practices. 

While the CFPB officially opens for business on July 21, 2011, the agency has been working for months to improve and simplify the type of information consumers get from financial institutions so that they can make an informed decision on financial products like a credit card application or a mortgage form.  It is also working diligently to put systems in place and to hire qualified people to run the agency.

Yet one very important position has not been filled since the law’s enactment a year ago – the CFPB director.  One would think the person that first came up with the idea of a consumer financial agency and who passionately fought for consumers’ rights as the head of the Congressional Panel on TARP would make the most sense to nominate for the position.  If that were the case then Professor Elizabeth Warren would have been nominated as the CFPB’s director months ago.  Last September, President Obama named Professor Warren as Assistant to the President and Special Advisor to the Secretary of the Treasury on the CFPB, but he has yet to nominate her as the director.

Instead the banking lobby continues to fight hard to prevent the appointment of Warren.  The opposition is not only coming from industry representatives but equally as hard from the GOP on the Hill.  Forty-four out of forty-seven Senate Republicans signed a letter sent to President Obama announcing that they neither want Professor Warren, nor will they agree to the appointment of any director without significantly changing the powers, structure and funding mechanisms for the CFPB.  At this point it seems the best chance for Warren or any director to run the CFPB is if President Obama makes a recess appointment, and Senate and House Republicans have vowed to try to stop that as well.

The Senate remained in pro forma session this week, instead of adjourning for the July 4th recess.  The Senate did not officially adjourn for the Memorial Day recess either.  The House must approve a Senate recess of more than three days.  While this is usually not a controversial procedure, Republicans in the House and Senate have asked for House Speaker John Boehner (R-Ohio) to refuse to approve a Senate recess, which potentially blocks President Obama from making recess appointments.  However, the Constitution gives the president the power to adjourn either chamber in the case of disagreement between them.  Yet, Democrats seem reluctant to use that power.  It appears the Democrats are resigned to avoid a partisan procedural fight over the issue.  The failure to adjourn leaves the question of what is to come for the August recess.

Meanwhile in the absence of a director, the CFPB’s full authority is on hold regarding the oversight of payday lenders, mortgage brokers, private student lenders and other types of financial predators that for years have been targeting consumers and military personnel as well as their families.

The mission of the CFPB is too important to continue to be delayed by the partisan power struggle overshadowing the debate over a director.

Click here to sign an Americans for Financial Reform petition urging President Obama to nominate Warren to lead the CFPB, and the Senate to confirm her.

Ellen M. Taverna
Legislative Associate, National Association of Consumer Advocates (NACA)

So How Are We Going To Solve This Housing Crisis?

 05 July 2011

A day doesn’t pass without a friend, neighbor, reporter, Congressional or regulatory staffer asking me – so –what are we going to solve the housing crisis? Sometimes, if I’m particularly angry at the banks that day, I first offer a glib, “I’m just a consumer advocate – why don’t you just ask the financial and legal ‘geniuses’ who created this mess what we should be doing” response -   but then I realize – much to my disappointment, that that is exactly what the administration and Congress seem to be doing! And in many ways, that’s the reason why we remain in the housing morass we’re in – we’re doing what’s best for the banks, but not what’s best for average American homeowners and investors.

Unfortunately, there are no magic bullets that are immediately going to restore a vibrant housing market. This crisis has been long time coming and it’s going to take awhile before we have a real housing recovery. There are however, some fundamental realities that we will all need to come to grips with if we really want to move our nation forward:

• Housing prices and values have to reflect what people can actually afford.  The housing values that we saw in the run up to the collapse were almost all illusory. I’m no economist, but when people’s income remains static or actually drops (because of lower wages and the rising costs of healthcare, pension contributions and education), and housing prices nonetheless continue to significantly rise, something has got to give – and that’s what unfortunately happened! Prices won’t rise again until we have a real increase in families’ income and assets.

• Foreclosures damage homeowners, their neighbors and investors (apparently the only people who aren’t harmed are the big bank servicers).

• The foreclosures we are seeing today are different from the foreclosures we saw a year or two ago. What once was a crisis driven by predatory, unsustainable loans, is now a crisis being driven by under and unemployment.

So with this understanding, the short and long-term solution becomes much clearer and here are some things that we really have to do:

1. Mandate that servicers evaluate homeowners and offer loan modifications in any instance when this option is advantageous to the homeowner, community and investor. This decision making process must be transparent and appealable to a neutral party.
2. Require principal reduction in every instance where this will lead to a sustainable modification.  This means that when a servicer is also the owner of a second lien – they need to get out of the way, and take a significant reduction on their typically unsecured lien.
3. Force servicers to complete this process before they properly proceed to take a foreclosure action.
4. Expand programs for unemployed homeowners. The Dodd-Frank mandated EHLP program is a good start (now that it is FINALLY getting off the ground), but more programs like this need to be funded. Additionally, Fannie and Freddie and HAMP servicers must offer much longer forbearance agreements to reflect the reality of today’s unemployment.

None of these solutions are a panacea, but they will mitigate the enormous damage we’re seeing today and begin the process of stabilizing our housing market. Of course, we won’t have a real recovery until we solve our unemployment problem and put people back to work at sustainable jobs that pay a real, living wage.

Ira Rheingold 

Executive Director, National Association of Consumer Advocates (NACA)