We totally agree with Harold Feld's blog comments praising departing FCC Commissioner Jonathan Adelstein. The good news, however, is that he is not departing government -- he is moving over to run the rural broadband program at the U.S. Department of Agriculture's Rural Utilities Service where he'll make sure that rural America benefits from enhanced broadband deployment. Here's a 2007 blog entry of mine with some pictures of Adelstein onstage jamming with first the North Mississippi All-Stars and then with the Austin Lounge Lizards.

UPDATE: Excerpt from CQ Midday Update: Despite industry objections, the proposal to create the agency – in one form or another – will almost certainly make its way into the final overhaul bill in both chambers. Barney Frank , D-Mass., and Sen. Christopher J. Dodd ., D-Conn., the chairmen of the banking committees in the House and Senate, have both announced their support for the idea. “It’s going to happen,” Frank said last week. “You all keep writing about it like this is some kind of issue. It’s not. It’s going to happen.”

We're reading it now. Here is the 152 page CFPA draft and here is an amendment to the FTC Act. More at financialstability.gov

In recognition that the skyrocketing cost of education has long driven graduates away from low and moderate paying public service careers such as teaching, with the problem exacerbated by the double whammy of the horrible economy limiting availability of any job, the U.S. Department of Education launches tomorrow

"a repayment plan that lets graduates reduce their loan payments, based on their income,"

"It enables all borrowers to be able to face their life circumstances and know there is some flexibility and responsiveness based on what life throws their way.”

UPDATE: Reuters on the launch.

As reported by the Associated Press and the LA Times, we will be participating in a campaign that SEIU is launching today to help whistle-blower workers protest their incentive-based participation in programs designed to put consumers into the worst accounts, extra accounts and over-priced loans and mortgages. From Daniel Wagner's AP story:

"One of the core parts of the economic collapse is a business model that encourages too much risk or short-term profit over long-term stability," said Stephen Lerner, who runs the financial reform project for the Service Employees International Union, which is coordinating the effort. Lerner said employees under pressure to sell high-fee products ended up targeting vulnerable populations, including students and the elderly.

Gabby Ornelas, a former teller at the giant Bank of America Corp., remembers the training sessions. And she remembers her marching orders: "Sell, sell, sell." Ornelas was instructed to use her Spanish language skills and Latina heritage to sign up customers for as many kinds of banking services as possible, she said -- services that led to lucrative fees for the bank and financial entanglement for many customers. [...] Ornelas and three other former BofA tellers, all Latina women, said they and their co-workers were repeatedly instructed to seek potential new Spanish-speaking customers outside the bank. Some were instructed to go to embassies where recent emigres often wait in queue for visa and passport services.

Although BofA denies wrongdoing, it recently paid $35 million to settle a class-action suit in California that alleged it deliberately ranked customer debits by order of size rather than by the time of day they occurred in order to maximize overdraft charges. [...] "Bank of America has moved to the top of the charts for fees being charged to consumers by big banks," said Jean Ann Fox, director of financial services for the Consumer Federation of America.

UPDATE: LA Times story. New York Times story. USA Today story. Finally, here is the Forbes story. The bank kids do a good job in all these stories of sticking to their tired, false "patchwork" messaging. They seem to like that better than "balkanization" these days even if neither is accurate. What happened is this: The court simply put real corporate crime cops back on the beat enforcing their narrow set of non-preempted laws. The next step, reinstating all the other state laws OCC wrongly preempted, is up to Congress.

Original post: The Supreme Court has issued its decision in Cuomo vs. Clearinghouse and OCC, holding that when a state attorney general seeks to enforce state laws over national banks in his or her role as the state's chief law enforcer, he or she is not preempted by the overly-broad OCC preemption rules. However, the decision is not 100% on our side, as it is unclear how investigations could be conducted under the lines drawn by the court. In any case, we knew that win this case or not, we'd still need Congress and the President to go further to reinstate state rights, as the President has proposed. We'll have more after our legal eagles analyze the scope of the decision.

We were amicus in the case on the side of the states. Dow Jones via CNN Money. Lauren Saunders of the National Consumer Law Center has issued a statement: Excerpt:

“The Supreme Court today has given states only a limited ability to enforce state fair lending laws. States can sue if they are confident that a violation has occurred, but cannot act responsibly by investigating first. Banks’ lending practices are a black box, and states cannot peer inside to see what is really happening. The decision also leaves in place a number of other decisions and regulations, based on the same Civil War-era law, that continue to allow banks to ignore state predatory lending and other consumer protection laws."

We expect to see legislative language from the Treasury Department implementing President Obama's proposal for a Consumer Financial Protection Agency (CFPA) sent to the hill, probably Monday. Following Wednesday's House Financial Services hearing on the proposed CFPA (watch video, download testimony), the fight is just getting started. Industry groups have staked out their position: they strongly oppose an agency to protect consumers. They like the current system. But that system failed, the last I checked. But the bankers like it because they dominate its captured regulators. As the American Bankers Association's Ed Yingling testified as he sat right next to me: "We believe that a separate consumer regulator should not be enacted…." Further, the U.S. Chamber of Commerce will oppose a standalone agency "that cannibalizes regulatory expertise, adding yet another regulatory layer." (AP) The Chamber has also launched a $100 million campaign against “mounting government regulations:” (National Journal). Even the Wall Street lobby group (Securities Industry and Financial Markets Association-SIFMA) whose members’ excesses and greed exacerbated the collapse has a new campaign on ‘Populist Overreaction’ (Bloomberg).

The New York Times, in its editorial today On the Road to Regulation, points out that a key test of the new CFPA legislation will be whether it gives consumers the right to enforce the banking laws, too.

"Lawmakers will also have to ensure that the administration’s very good idea (link to previous editorial) for a consumer financial-products safety commission translates into a truly robust agency. One sign that is happening would be for the law to include a right for consumers to sue firms that violate certain doctrines established by the new agency."

After the jump, I have a lot more commentary plus links to news stories on what will be a critical reform battle between the banking lobby that failed our economy and the people and groups trying to ensure that it won't happen again.

That Times editorial On the Road to Regulation goes on to critique other parts of the Obama reform proposal, including its failure to democratize the Fed. Our coalition, Americans for Financial Reform, has made similar critiques. We look forward to working with the White House and the Congress to broaden and strengthen the proposals. We expect that the financial industry, whose excesses and greed led to the world's biggest economic collapse since 1929, will use its network of political connections and continued massive campaign contributions to oppose sensible improvements to and even attempt to weaken the Obama plan. As we told Business Week for their aptly titled story this weekend Financial Regulation: Industry Objections Increasing--Obama's plan for financial reform has sparked a growing chorus of protest from banks, hedge funds, and other interests, part of the industry's strategy is to "blame it on the other guy—they're hoping to water down reform, deflect criticism of their industry." Another way to look at what they are doing is this: invoking the Bart Simpson (video) defense: "I didn't do it, no one saw me do it, there's no way you can prove anything! Of course, the banks did do it, everyone saw them do it, and we can prove it." But, on Capitol Hill, "blame the other guy" works well to confuse and delay needed reforms.

There is plenty of coverage of the fight over the CFPA. Kevin Hall for the McClatchey papers Debate joined over new Consumer Financial Protection Agency:

In sometimes-testy exchanges, [Professor Elizabeth] Warren fought off suggestions by several Republican lawmakers that a new entity isn't needed, just new powers for existing regulators. "Congressman, that sounds like a good plan but that's what we have been doing for the last 70 years, and it hasn't worked very well," Warren responded.

Financial services companies are coming up with cash nobody knew they had to fight the proposal, which would put hidden credit card fees on a par with faulty bike helmets and flammable pajamas.

Denial, noun: An unconscious defense mechanism characterized by refusal to acknowledge painful realities, thoughts or feelings. The banking industry wasted no time declaring its opposition to President Barack Obama's recent proposal for a regulatory agency that would protect consumers from rapacious lending practices.

U.S. banks are fighting the Obama administration plan to create a consumer agency for financial services as they seek to protect fees, such as credit-card penalties that have almost doubled to $19 billion in five years.

Rep. Scott Garrett (R-N.J.) called the proposal an example of an "Orwellian, heavy-handed, government-knows-best mentality," and [Rep. Jeb] Hensarling [R-TX] said the new regulators would rule as "un-elected philosopher kings" over the financial services industry. Edward L. Yingling, president of the American Bankers Assn., also opposed the plan.

The chairman of the House Financial Services Committee, Barney Frank, scoffed yesterday at assertions that a new consumer protection agency would morph into “some out-of-control entity. There is no pattern of overregulation I can see in the consumer area, and I don’t see one here,’’

“Wall Street’s largest trade group has started a campaign to counter the “populist” backlash against bankers, enlisting two former aides to Treasury Secretary Henry Paulson to spearhead the effort.”

The best part of the plan is the creation of a Consumer Financial Protection Agency that would limit or forbid many of the worst bank practices still allowed under law. That includes excessive and surprise overdraft fees and outrageous credit card interest rates.

Over the past decade, federal bank regulators looked the other way as responsible loans were crowded out of the market by aggressively marketed financial products carrying hidden costs and fees. Tricky products, whose most “innovative” feature was their ability to obscure their true cost, led a race to the bottom that stifled innovation of any benefit to consumers. The aggressive marketing of these products caused an enormous loss of wealth across the middle class and sparked the current economic crisis.

Bank of America this year raised the maximum number of times customers can get hit with overdraft fees from five a day to 10. On top of that, it began charging a one-time fee of $35 if the account remains in the negative for more than five days. The bank also raised the monthly fee on My Access checking accounts to $8.95 from $5.95.

She added that in some cases, the bank changes have favored consumers. For instance, she said, the bank reduced the overdraft fee to $10 an item if overdrafts in a day total $5 or less.

Finally, this Huffington Post blog reports on an excellent exchange of views between Rep. Donald Manzullo (R-IL) and me, and fellow witnesses Elizabeth Warren and Ellen Seidman, during Wednesday's hearing. I think most Congressional witnesses would join me in saying that we enjoy engaging with the members. It's a lot more interesting than when a member uses most of his or her 5 minutes in a long statement with no real question involved.

UPDATE MONDAY: Stories today (Washington Post) say that GM has agreed to only compensate victims of defect cases that arise after the bankruptcy is finalized. From the Post:

Consumers could file the claims even if their vehicles were made by the "old" GM. However, those with past claims would have to pursue the GM left behind in bankruptcy with nothing but unwanted assets, debts and other liabilities.

ORIGINAL: The New York Times is reporting today that G.M. to Maintain Legal Liability for Claims. Recently, U.S. PIRG had joined other leading advocacy groups in a letter to the President urging this condition to the government-negotiated bankruptcy plan. Otherwise, victims who are maimed or killed by product defects would have little or no recourse. From the Times:

G.M. and the administration’s auto task force have been negotiating with more than a dozen state attorneys general who have objected to the company’s plan to sell its desirable assets to a new, government-financed entity. A hearing to approve the plan is scheduled for Tuesday in federal bankruptcy court in Manhattan.

U.S.PIRG tax and budget analyst Nicole Tichon has released our latest TARP transparency and accountability report card. The Obama administration gets a first quarter 09 "C", up from the Bush Treasury's last quarter 08 "F."

Our web site is still being rebuilt after a server crash, so the full report may not be available today, but you can read more about it over at Arthur Delaney's Huffington Post interview with Nicole:

"We're coming from an abysmal state: There was no information available about the participants, no information about why they were receiving the money," said U.S. PIRG's Nicole Tichon, author of the report card, in an interview with the Huffington Post. "The fact that there's lip service being paid to taxpayer protection is a great step." The report card praises the administration for making "important progress around transparency in terms of developing online resources, fact sheets, guidelines, interactive programs and tools to help taxpayers navigate the myriad programs and hundreds of participants" in the TARP.

The Associated Press (via Washington Post) is reporting that

"Inspection reports from a Nestlé USA cookie dough factory released yesterday show the company declined several times in the past five years to provide Food and Drug Administration inspectors with complaint logs, pest-control records and other information."

[Unlike CPSC and DOT] Currently, food recalls are largely voluntary—federal agencies responsible for food safety, including FDA, have no authority to compel companies to recall contaminated foods, with the exception of FDA’s authority to require a recall for infant formula.

Kudos to Florida's Republican governor Charlie Crist who, unlike his legislature, stood up to the powerful insurance lobby and just vetoed an outrageous legislative giveaway to the biggest property insurance companies. Here is Florida PIRG legislative advocate Brad Ashwell's statement praising the veto. (Previous blog has link to Brad's op-ed explaining the issue.) Florida Sun-Sentinel:

Although the legislation (HB 1171) was called the "consumer choice" bill, it actually would have allowed about 40 of the largest property insurers to start charging virtually any price they want for policies with hurricane coverage, and to bypass regulations the state imposes on other companies.

The House Financial Services Committee has posted the testimony of nearly all the public witnesses for tomorrow's hearing on Regulatory Restructuring: Enhancing Consumer Financial Products Regulation. The joint testimony being delivered by me and Travis Plunkett of the Consumer Federation of America on behalf of over a dozen reform organizations is here. It's fully 56 pages long, so don't worry, we weren't going for a two-for-one discount!

Thanks to Maria Lewytzkyj and her Examiner.com blog entry Economic Crisis 2009 for some coverage of the Consumer Financial Product Safety Commission you know I mean-- Consumer Financial Protection Agency -- the new name. She quotes Peter Eavis of the Wall Street Journal Heard on the Street column (pd. subs. may be req'd.):

[that bank opponents are gearing up against the CFPA because] many banks earn “fat profit margins from products where borrowers aren’t made clearly aware of a loan’s potential costs. And some bank marketing is designed to attract borrowers likely to pay high fees for being behind on payments or over-limit.” He also suggests that banks will fight against the oversight and anything that will put them at a disadvantage to large foreign financial companies.

Policy Matters Ohio has released a new study: Paying More, Renting Debt: Why Rent-to-Own is a bad deal for Ohio consumers.

“Ohio provides modest protection to rent-to-own consumers by requiring disclosure and limiting prices to twice the inflated cash value of items,” said David Rothstein, Policy Matters researcher and a report co-author. “But by allowing the cash value to be so deceptive, failing to require depreciation for used items, and allowing firms to charge up to twice the already-inflated cash value, we leave Ohio’s most vulnerable consumers in the position of paying three to four times the retail price for products that are sub-par to start with.

Meanwhile, up in Congress, the industry continues to push two bad bills as well. The Consumer Rental-Purchase Agreement Acts, HR 1744 (Rep. William Lacey-Clay (D-MO) and S 738 (Sen. Mary Landrieu (D-LA) are designed not to improve protections for consumers nationwide, but to take away protections from consumers in the states with the best laws (New Jersey, Wisconsin, Minnesota and Vermont) and to prevent other states from emulating them.

Speaking of reform opponents, we also have the securities firm where your broker works and we have the credit bureaus, making a mess of people's financial lives with their mistakes for decades and more recently, selling over-priced credit monitoring services and faux credit scores. Two stories of interest appear in today's Washington Post.

Our colleague Barbara Roper of the Consumer Federation of America explains in the Bloomberg story Proposed Rules for Brokers May Remake Industry by Alexis Leondis and Elizabeth Hester that "President Barack Obama's proposal to require brokers recommending investments to put clients' interests ahead of their firm's is long overdue." These investor reforms will not be under the new Consumer Financial Protection Agency, but to Securities and Exchange Commission (SEC) rules.

Also, Nancy Trejos has a story Credit Score Shell Game explaining that while scores are dropping due to missed payments due to job layoffs or other problems at the same time as lenders are relying more on scores, consumers face two problems.

First, even though credit reports are free by law, credit scores are not (although you can also get them free from your mortgage lender if you ask). Due to the concern over the economy and the growing interest in scores, credit bureaus are doing a land office business selling scores, but not all scores are created equal. Credit bureaus are hustling consumers to buy their own second-rate "educational scores," even though lenders mostly use the FICO score.

Two things to do to improve your score: One, pay down credit card balances. Balances of more than 33-50% of your credit limit ding your score. Yes, the bank appears to give you the use of all that money, but if you use a lot of it or even just a third of it, the credit scoring model dings you.

Two, look at your credit report and fix the mistakes. If you've recently been denied credit or other services on the basis of a credit report, or are indigent or unemployed, you can get a free report. Anyone else can also get a free credit report every year on request from each national credit bureau. Here is FTC information on free credit reports and how to get them by Internet, phone or mail. Hint, you get them on request at annualcreditreport.com. You do NOT get free credit reports at the over-priced, deceptively named site freecreditreport.com which is owned by a credit bureau (Experian) looking to take your money (previous blog).

Over at the White House blog, you can watch a video of President Obama talking about why he intends to fight for passage of the Consumer Financial Protection Agency. The video was filmed during his regular Saturday radio address. The President challenged the special interest opponents of reform to a fair debate (AP via Yahoo):

"I welcome a debate about how we can make sure our regulations work for businesses and consumers," Obama said. "But what I will not accept — what I will vigorously oppose — are those who do not argue in good faith." By that, Obama said, he meant those who defend the status quo at any cost. He didn't name any people or organizations, but said special interests are already mobilizing to fight change. He called that typical Washington. "These are the interests that have benefited from a system which allowed ordinary Americans to be exploited," Obama said. The president said he would stand up for his plans, saying: "While I'm not spoiling for a fight, I'm ready for one. The most important thing we can do to put this era of irresponsibility in the past is to take responsibility now."

"These interests argue against reform even as millions of people are facing the consequences of this crisis in their own lives. These interests defend business-as-usual even though we know that it was business-as-usual that allowed this crisis to take place."

We're all a little safer. The Senate today unanimously approved the nomination of Inez Tenenbaum to chair the Consumer Product Safety Commission. The president will likely swear her in next week. Previous blog.

As the U.S. and European Union governments, acting at the behest of powerful drug companies and copyright holders (film, music, book publishers) continue to lead closed-door negotiations on an outrageous, secretive and sweeping Anti-Counterfeiting Trade Agreement (ACTA), the PIRG-backed TransAtlantic Consumer dialogue (TACD.org) has issued a new Resolution on the enforcement of copyright, trademarks, patents and other intellectual property rights. Here is a TACD blog entry with more background on why. ACTA statement from Knowledge Ecology International (KEI). Release from U.S. PIRG and others (2008) demanding that ACTA negotiations be made public. IP Justice ACTA page.

Basically, the rightsholders are using the threats of "counterfeiting" and "piracy" to convince the governments to enact overly-broad restrictions through a treaty that they could never enact in the light of day in a legislature. Drug companies will use its provisions to block legal provision of low-cost drugs to the poor. As IP Justice points out, it could also change the Internet and stifle free expression:

ACTA places an emphasis on restricting the free flow of information on the Internet. It will require Internet Service Providers (ISPs) to police and control their systems for infringing content and require ISPs to turn-in their customers to law enforcement for prosecution of intellectual property violations. It threatens to require ISPs to block access to online information or delete their customers’ websites at the request of Hollywood entertainment companies and without any due process of law. The new IPR enforcement tools created by ACTA will make it easy to stifle online criticism of companies or products that are trademarked or copyrighted in violation of free expression.

Our colleague Jeff Chester of the Center for Digital Democracy testifies at the hearing Behavioral Advertising: Industry Practices and Consumers’ Expectations before the House Energy and Commerce Committee today on our shared concern-- threats posed by tracking, profiling and targeting of consumers by advertisers on the Internet and mobile platforms. Chester’s testimony. The three CDD/USPIRG complaints to the Federal Trade Commission on online and mobile privacy are available at
1. Original Internet ad complaint 11/06,
2. Updated complaint 2007,
3. Complaint extended to mobile marketing: 2008

Jeff's full news release after the jump:

For Immediate Release Contact: Jeff Chester (202-494-7100)

June 18, 2009 Center for Digital Democracy (www.democraticmedia.org)

Consumer Advocate Warns Congress of the Dangers of Invasive Online and Mobile Marketing Practices

House Joint Subcommittee Hearing Examines Threats Posed by Tracking, Profiling and Targeting of Consumers

Washington, DC: Jeffrey Chester, executive director of the Center for Digital Democracy (CDD), urged Congress today to pass legislation that would ensure meaningful consumer protection online, especially for privacy. As more consumers increasingly rely on the Internet to obtain such sensitive services as financial products or health information, he explained, it is especially critical that the public be assured they will be treated fairly when engaged in online commerce.

Chester pointed to the failure of the regulatory system that should have protected Americans from irresponsible business practices that led to the current financial crisis. “As with our financial system, privacy and consumer protection regulators have failed to keep abreast of developments in the area they are supposed to oversee,” he explained. “In order to ensure adequate trust in online marketing—an important and growing sector of our economy—Congress must enact sensible policies to protect consumers.”

“Whether using a search engine, watching an online video, creating content on a social network, receiving an email, or playing an interactive video game, we are being digitally shadowed online,” Chester told a joint hearing by the House Subcommittee on Commerce, Trade, and Consumer Protection, and the Subcommittee on Communications, Technology, and the Internet. “Our travels through the digital media are being monitored, and digital dossiers on us are being created—and even bought and sold.” Singling out behavioral and “predictive” targeting for their violations of user privacy, Chester noted that the “consumer profiling and targeted advertising take place largely without our knowledge or consent, and affects such sensitive areas as financial transactions and health-related inquiries. Children and youth, among the most active users of the Internet and mobile devices, are especially at risk in this new media-marketing ecosystem.”

Chester’s CDD, in collaboration with the U.S. Public Interest Research Group (USPIRG), was instrumental in bringing the online privacy issue to the forefront in a series of petitions filed with the Federal Trade Commission in 2006 and 2007. Earlier this year, the two groups called on the agency to “conduct a special investigation into mobile marketing privacy threats and inappropriate practices targeting children, adolescents, and multicultural consumers.”

In his formal testimony today, Chester called on Congress to enact meaningful regulations to protect consumer privacy in the online and mobile arenas, effectively bringing the FTC’s Fair Information Practice Principles fully into the digital age.

“Americans shouldn’t have to trade away their privacy and accept online profiling and tracking as the price they must pay in order to access the Internet and other digital media,” Chester declared, adding that far from being an impediment to continued growth in the online sector, meaningful privacy safeguards will actually stimulate the digital economy. “The uncertainty over the loss of privacy and other consumer harms will continue to undermine confidence in the online advertising business,” he explained. “That’s why the online ad industry will actually greatly benefit from privacy regulation. Given a new regulatory regime protecting privacy, industry leaders and entrepreneurs will develop new forms of marketing services where data collection and profiling are done in an above-board, consumer-friendly fashion.”

A copy of the Chester’s testimony can be found at

http://www.democraticmedia.org/doc/cdd-testimony-20090618

The three CDD/USPIRG FTC complaints on online and mobile privacy are available at

1. Original Internet ad complaint 11/06,
2. Updated complaint 2007,
3. Complaint extended to mobile marketing: 2008

In the Middle Seat column in today's Wall Street Journal, Scott McCartney reports: Paying for the Pool: Hotels Are Piling On Fees (Pd. subs. may be req'd):

Some hotels are charging mandatory valet parking fees if you show up with a car. Some have upped their "resort fees," required whether or not you use the pool or exercise room. Housekeeping gratuities and bellman fees are aggressively being added to bills, travelers report. Some motels are even charging for in-room safes, regardless of whether you use them.

One day after the President announced his support for a new Consumer Financial Protection Agency it is clear that the bankers are going to attack it on all fronts: