Meanwhile, today's Wall Street Journal (pd. subs. req'd) has a page 1 story by Susanne Craig called Merrill's $10 Million Men: Top 10 Earners Made $209 Million in 2008 as Firm Foundered. Excerpt:

While Merrill staggered, 11 top executives were paid more than $10 million in cash and stock last year, say people familiar with the situation. An additional 149 received $3 million or more. The stock awards, which accounted for much of the compensation, have fallen sharply in value since they were made last year. New York Attorney General Andrew Cuomo has subpoenaed information about Merrill's highest-paid employees in connection with his probe into $3.6 billion in bonuses paid by Merrill in the days before it was taken over by Bank of America Corp. Thus far, Bank of America hasn't turned over the names of Merrill's highest-paid executives, claiming it would help rivals woo its top talent.

Over at her Huffington Post blog, Mena Trott writes that Citibank hates old people. It has tripled her grandparents' credit card interest rates. They're in their eighties and do pay their bills. Citibank raised interest rates because it can, not because these and other Americans (like me!) were higher risk. Trott notes:

During the election there was a lot of talk of not using a hatchet when a scalpel is needed. It seems as if Citibank just brought out their hacksaw and blunt hatchet.

At the end of January, we joined Consumers Union and numerous other groups in a letter to Treasury Secretary Tim Geithner arguing that recipients of special taxpayer bailouts from the TALF (Term Asset Backed Loan Facility) program (that is, not mere recipients of general bailout funds) should be required to immediately comply with Federal Reserve rules against unfair credit card practices issued in December that do not take effect until July 2010. No reply yet from Tim Geithner on this reasonable request.

Economic historians have documented that usury laws -- or caps on allowable interest rates -- have existed since pre-biblical times. Unfortunately, over the last 30 years or so, federal, and most state, usury ceilings had been eliminated through a series of wrong-headed court and Congressional actions. In 2006, we were successful in passing a law, the Military Lending Act, reinstating usury ceilings at 36% APR for loans to military personnel. Last week, Senator Dick Durbin (D-IL) introduced legislation, S. 500, to extend that protection to loans to all Americans. Here's the important part-- we're not just talking about predatory payday lenders, rent to own stores and their ilk. The limit would apply to credit cards and shameful bounce-overdraft protection loans made by banks. While 36% APR may sound higher than most credit card rates, the bill limits would apply to their punitive fees as well, which have the effect of triple-digit interest.

Here is a copy of the support letter from 100 organizations, including U.S. PIRG. Also, Rep. Jackie Speier (D-CA) is expected to file a companion bill this week.

The military lending law was passed because soldiers, sailors and airmen with bad credit records caused by the tricks and traps of credit cards and payday loans fail security clearances and are therefore ineligible for deployment overseas: predatory lending hurts our military preparedness, said the Pentagon.

Here is a copy of Senator Durbin's opening statement. I am having a little trouble manipulating Thomas.loc.gov (go there and type in "s. 500," select "bill number" and search) and the online Congressional Record today, but you can read Senator Durbin's statement in the actual Record if you go here and search that page for Senator Durbin's name and page S2571 (click on S2571) near the bottom. Then, you can move forward to other pages at the bottom right of that page.

We signed on to testimony delivered yesterday by Travis Plunkett of the Consumer Federation of America at a Senate Commerce Committee hearing on Consumer Protection and the Credit Crisis. The hearing focused on predatory lending, debt counseling scams, the growth of credit card debt and ways to increase regulatory and legal resources to protect consumers in the declining economy. Also appearing as a witness was University of Minnesota Law School professor Prentiss Cox, a longtime ally and former assistant state attorney general. From Travis's testimony:

The National Consumer Law Center, the Consumer Federation of America, and U.S. PIRG were among the first to warn that the nature of credit counseling had also begun to dramatically shift in ways that were very harmful to debtors. In the late 1990s, a new class of agencies emerged that aggressively marketed DMPs and related services, dramatically raised consumer fees, and had extensive relationships with for-profit vendors and consultants. Complaints about deceptive practices, improper advice, excessive fees and abuse of non-profit status sharply increased. 21 Federal and state regulators and policymakers, who had largely ignored the rise of these new agencies, and the problems they had created, began to investigate.

We testify this morning before the Subcommittee on Courts and Competition Policy of the House Judiciary Committee at a hearing on Competition in the Ticketing and Promotion Industry (you should be able to watch the hearing and download all testimony after 10am).

The hearing is really about the question: What were the behemoth monopolists Ticketmaster and Live Nation thinking when they proposed to merge instead of compete in the marketplace? Our testimony says: This merger is bad for consumers, bad for artists and bad for independent promoters. We also discuss the importance of NYPIRG's longstanding efforts to protect New York consumers against ticket scalping, question the long-term contracts between ticket and concert promoters and taxpayer-built venues and, finally, we condemn Ticketmaster's wretched, over-priced customer "service." Would you like convenience fees with that ticket? How about paying lots more than mail postage would cost for mere Internet "delivery?"

We also endorse the testimony of antitrust expert David Balto of the Center for American Progress Action Fund from Tuesday's Senate Judiciary hearing on the merger. We also approve this Huffington Post blog Stopping the Ticketmaster/Live Nation Merger by our colleague Jamie Love of Knowledge Ecology International. Our previous blog comparing the merger to the completion of Darth Vader's Death Star.

We've joined other leading consumer, civil rights and labor groups in a letter to the House of Representatives urging support for an amendment that would allow bankruptcy judges to make loan modifications to keep consumers in their homes paying their mortgages and out of foreclosure. The banks have been fighting this since last Congress, but with the muscle of the Obama administration behind it, we think we can get it through soon. Originally passed by the Judiciary Committee as HR 200, the proposal is now part of a package of bills being considered Thursday on the floor as HR 1106. Excerpt:

Judicial mortgage modification will provide a vital last resort that could prevent hundreds of thousands of foreclosures, without spending one penny of taxpayer money. Equally important, it will be the most reliable way to encourage loan servicers to offer sustainable mortgage modifications outside of court. The logic here is simple: We can’t end the financial crisis without stemming the rising tide of foreclosures. Court-supervised loan modification is an essential component of an effective and comprehensive plan to meet that challenge. At a time when an estimated 6,600 families are losing their home to foreclosure each and every day, there is no time for delay.

The Supreme Court has agreed to review an important case that would determine whether rules issued by the obscure but powerful national bank regulator, the U.S. Office of the Comptroller of the Currency (OCC), overstepped its authority by preventing states from enforcing their own laws that even OCC admits still apply to national banks. We are amici for the states (previous blog) in Cuomo v. Clearinghouse Association and OCC. From the New York Times story High Court to Rule on State Inquiries on Banks by Adam Liptak:

The case arose from a 2005 inquiry by Eliot Spitzer, then New York’s attorney general, into possible racial discrimination in the real estate lending of Citigroup, HSBC, JPMorgan Chase and Wells Fargo. Mr. Spitzer said that information made public by the banks suggested that a much higher percentage of black and Hispanic borrowers were charged higher rates than white borrowers.

UPDATE: THE CPSC RELEASE: Excerpt:

Sellers of used children’s products, such as thrift stores and consignment stores, are not required to certify that those products meet the new lead limits, phthalates standard or new toy standards. The new safety law does not require resellers to test children’s products in inventory for compliance with the lead limit before they are sold.

ORIGINAL POST: The CPSC is expected to issue a release today in response to a growing number of complaints from small toymakers and second-hand and consignment stores that it has failed to explain how to comply with new limits on lead in toys and children's products that take effect on 10 February. Yesterday, U.S. PIRG and other leading groups sent a letter to the CPSC demanding clarification. Austin American-Statesman story today. NBC17 (Durham, NC) with video. Los Angeles Times story. Our previous blog. While some elements of the toy industry campaign appear responsible and seeking clarification, some opponents of the important new law are using hysteria to rev up the issue, referring to 10 February as "National Bankruptcy Day" and the need to stop the new "supercharged" CPSC's "toy police." Excerpt from our consumer letter:

The vacuum of implementation information, as well as the proliferation of misinformation regarding actual testing requirements and the cost of testing is leading to confusion and fear. The public counts on the CPSC to protect them from dangerous products. Now CPSC must take the initiative to allay their fears by providing prompt, common-sense, and explicit interpretations regarding exemptions to CPSIA stipulations, guidance as to the realistic cost of testing, and education regarding compliance with the CPSIA for retailers, including thrift and consignment stores.

Our counsel for media and telecommunications reform, Amina Fazlullah, has sent letters to Attorney General Mukasey and to Department of Justice antitrust chief Thomas Barnette expressing our opposition to the proposed Google/Yahoo online advertising agreement on both antitrust and privacy grounds:

The combined market share of Google and Yahoo would probably exceed 90 percent. Such concentration raises concerns about a lack of competition in the paid search advertising market, which could have negative repercussions for content providers, advertisers and consumers. [...] In our opinion the proposed agreement induces the remaining paid search advertising outlets to resort to privacy invasive techniques which harms consumer privacy online and thus threatens online discourse in general.

We recently joined NACA and NCLC in an amicus (or friend of the court) brief in an important 11th Circuit case concerning the rights of consumers to enforce the federal Fair Credit Reporting Act (FCRA). In general, but in particular with the FCRA, when strong consumer remedies are eliminated by bad court decisions, then all consumers run the risk that credit bureaus and creditors will ignore the law even more than they already do. That will leave us all paying more for credit due to mistakes or even perhaps-intentional mis-interpretations that please creditor-customers at the expense of consumers. As an example of the importance of consumer enforcement of the FCRA, just a few months ago, a court stopped credit bureaus from mis-reporting debts discharged in bankruptcy. That class action is ongoing, but the injunctive relief is an important victory concerning the (information on White vs. Experian). Due to the injunctive relief granted, millions of consumers will benefit as credit bureaus are now forced to verify the accuracy of certain information received from creditors.

Without consumer enforcement, where would we be? The FTC occasionally, but not often enough, at least slaps a small fine at its regulated credit bureaus. But, when was the last time you recall one of the bank regulators penalizing a bank for violating the FCRA?

UPDATE: The White House has issued a SAP (Statement of Administration Policy) opposing the Credit Cardholders Bill of Rights (which may come up as early as 10AM Tuesday). It's more like a SOP to its industry cronies.

Original post: We're urging all members of Congress to support the Credit Cardholders' Bill of Rights, HR 5244, sponsored by Rep. Carolyn Maloney (D-NY) and 155 co-sponsors. It's something that Congress can do for Main Street, in this week of extraordinary efforts on behalf of Wall Street. Oh, by the way, the Credit Cardholders' Bill of Rights is not a bailout, it simply bans the banks' worst unfair and deceptive practices. As our U.S. PIRG floor letter, our coalition floor letter and this letter signed by leading civil rights groups all point out, it is modeled on a similar Federal Reserve proposal. The bill could be considered as early as Tuesday. Of course, it enjoys fierce opposition from the banks that have placed Americans in debtors' prisons without walls due to their use of a variety of unfair and deceptive practices it would make illegal.

Last month we and other consumer groups and leading law professors joined a petition drafted by Consumers Union urging that the FDIC strengthen insurance protections for money on various prepaid and stored value cards, including payroll cards, certain tax refund and benefit cards and other cards including gift cards. As Consumers Union pointed out in its blog, "bank accounts and stock brokerage accounts are insured, but wages directly deposited to a prepaid card might not be." From the petition:

The public puts money and confidence in U.S. financial institutions partly because of the safety net of federal deposit insurance. The development of prepaid cards of various types not specifically connected to individual deposit accounts has created uncertainty and gaps in the deposit insurance safety net that must be closed now, as the nation begins to grapple with an anticipated series of bank failures. We are particularly concerned about various forms of prepaid cards, also called stored value cards, that hold the wage payments of individuals and other funds that are important to individuals and families.

We often point out that all plastic is not created equal. This week, we joined Consumers Union in a petition to the FTC to improve the rights of gift card holders (AP story via Rocky Mountain News). If you were the recipient of a now-valueless Sharper Image gift card following its bankruptcy, you know what I mean. If not, here is an excerpt from our joint petition (the Consumer Federation of America and National Consumer Law Center also joined CU).

Gift cards do not have adequate consumer protections, particularly when a retailer files for bankruptcy. Consumers are now discovering their gift cards may be greatly devalued or not worth anything at all when a retailer declares bankruptcy. There is no guarantee to consumers that they will be able to obtain the prepaid value on their gift cards from struggling or bankrupt retailers.

Declare the sale of gift cards without both segregating the funds and holding those funds in a trust to be an unlawful and deceptive practice; and

Prescribe new rules that require retailers to both segregate and hold in trust gift card funds, and to automatically honor a consumer’s gift card from those segregated funds for goods or services until or unless a bankruptcy court orders otherwise.

U.S. PIRG Staff attorney John Krieger testifies (his testimony) today before the Senate Environment and Public Works Committee at a hearing on “Improving the Federal Bridge Program: Including an Assessment of S. 3338 and H.R. 3999.” Hearing video on this page. Excerpt from Krieger's testimony:

In order to revamp our transportation system for the needs of the 21st century, “fix it first” policies and accountability for spending must be prioritized. Unless we change the way that America finances bridge repair, we remain doomed to repeat mistakes of the past. The bridge collapse in Minnesota should serve as a wake-up call. We urge this committee to embrace an approach to highway spending that prioritizes maintenance and repair of our existing roadways and bridges. Our country can no longer afford the cost of inaction and misplaced priorities as our bridges continue to age and deteriorate.

My colleague Dr. Phineas Baxandall, Ph.D, U.S. PIRG's senior analyst for tax and budget policy, testified today (his written testimony) before the House Transportation and Infrastructure Committee at a Hearing on H.R. 6707, the "Taking Responsible Action for Community Safety Act." Link to full hearing. Excerpt from Baxandall's testimony:

The TRACS Act would address the fact that mergers can also undermine the public interest by affecting how railway companies reroute traffic, maintain existing tracks, or develop new lines. The legislation would appropriately empower the Surface Transportation Board to consider the broader public interest, including the impacts on commuter and intercity rail. This makes sense as we look toward the challenges of the future and the role that transportation must play in meeting those challenges.

As early as today (Washington Post) the FCC may act on a petition from AT&T asking that FCC weaken its requirements for telecommunications companies to provide it with important data on consumer complaints and other matters, including levels of infrastructure investments. The company makes the absurd claim that consumers can analyze JD Power and other outside rankings instead of analyzing FCC complaints. Last month, we joined Free Press and Consumers Union in a filing opposing the proposal. We said:

The Commission should deny AT&T’s petition on both substantive and procedural grounds. We believe the ARMIS reports continue to serve the public interest by openly providing valuable information to the Commission, consumers, public interest groups and state authorities seeking to protect their citizens.

Comcast has sued to overturn an important FCC order requiring it to comply with the FCC's net neutrality, or Internet freedom, principles, according to stories appearing today first at the Wall Street Journal website (pd. subs. req'd.) Here is a Marketwatch (free version) of the story. In three petitions filed on behalf of PENNPIRG, Consumers Union and Vuze.com, our attorneys at the Media Access Project have asked the court to enforce the FCC order immediately. More from MAP attorney Harold Feld's personal blog. My previous blog.

UPDATE: Check out today's New York Times editorial Listen to the 56,000 [comments to the Fed on credit card reform]. Last night, U.S. Rep. Carolyn Maloney (D-NY) and I appeared in a story (watch video) on New York City's WNBC-TV discussing the historic victory last week in the House Financial Services Committee, which approved her Credit Cardholders Bill of Rights on a 39-27 vote (previous explanatory blog) and sent it to the floor for possible action in September. The story also has soundbites from a variety of street interviews, where New Yorkers explain how their credit card company tricked them and trapped them into paying unfair fees and interest rates.

Also this week, we filed comments to the Federal Reserve Board, the Office of Thrift Supervision and the National Credit Union Administration in support of their credit card rules, which mirror the Maloney bill's provisions and would ban many common credit card company tricks and traps as illegal unfair and deceptive acts and practices. We also joined the National Consumer Law Center and others in more detailed, extended comments.

The House Financial Services Committee has scheduled a vote, or markup, of HR 5244, the PIRG-backed Credit Cardholders' Bill of Rights, to begin Wednesday at 2pm. Some other bills will also be voted on, so the event will most likely become a multi-day vote-a-rama.

After the Federal Reserve proposed surprisingly tough unfair and deceptive practices rules (still time to comment) that were quite similar to the original HR 5244, and in some ways stronger, the sponsors, subcommittee chairwoman Carolyn Maloney and Chairman Barney Frank, have modified the "committee print" of the bill to be considered to be virtually the same as the Fed proposal.

Congress should approve the bill: If it does, it in effect codifies into law a good proposed rule, which would take away two key uncertainties of waiting for the Fed: (1) That the final rule ends up weaker than the proposed rule after industry comments (possibly a problem) and (2) that the banks sue to delay, harass and overturn the rule (definitely a problem).

The banks are pulling out all the stops to defeat it. In 19 years in DC, I am unaware of any banking committee ever approving a bill that the credit card industry opposed. In 1987, before I got here, disclosure legislation was approved, resulting in the so-called Schumer Box on solicitations. But legislation making a variety of common bank practices illegal? Never. This is a big vote. We'll see which members resist the pressure from the banks to do the wrong thing. More information here in our letter to the committee.

Of course, I am aware that legislation on credit card interchange fees imposed on merchants passed the House Judiciary Committee earlier this month, but that, after all, is the Judiciary Committee, an away game. Plus, the banks were up against another powerful interest, small business. It was a big defeat for credit card companies, which means they are working even harder to delay or block or defeat legislation on their home field.

You can comment -- until August 4 -- to the Federal Reserve on its very important pro-consumer proposals to ban the worst unfair credit card practices. I agree with Bob Sullivan of MSNBC (he's got 231 interesting consumer comments on his blog post-- so, I hope they all took the extra few minutes and also filed with the Fed) on the easiest way to file.

Filing comments: Scroll down almost to the bottom of this page at the Fed website to where it says

Proposals for Comment
Regulation AA (Federal Trade Commission Act) -- Unfair or Deceptive Acts or Practices
Submit comment

You can watch Thursday's hearing of the Financial Institutions and Consumer Credit subcommittee at the CSpan website. The hearing explored the implications of aggressive credit card marketing to college students. Look for the hearing on this page (although after a few days it may move and you'll need to use the search engine). The hearing featured testimony by U.S. PIRG's Chris Lindstrom explaining the results of our report The Campus Credit Card Trap, available at www.truthaboutcredit.org. Other key witnesses were from the NY Attorney General's office, Campus Progress, and the University of Illinois at Chicago Student Government. All testimony and the House video of the hearing available here.

We had a small victory on privacy this week-- a new threat has been stopped. Earlier this month, we joined a number of privacy and consumer groups in a letter urging a Congressional investigation of a proposal by Charter Communications, a large Internet ISP, to use controversial tracking and spying technology from a company called NebuAd that essentially would allow it to track everything you do online. Following up on that letter to Chairman Ed Markey (D-MA) of the House Telecommunications and the Internet subcommittee and Rep. Joe Barton, full Energy and Commerce ranking member, Markey and Barton sent their own letter to Charter and several groups released a report on the problem (letter and report). This week, Charter said they'd drop the plan. Story from AP Charter Won’t Track Customers’ Web Use via New York Times and story from ClickZ.

Update: Victory! On a voice vote the Senate last night passed SJ Res 28 to disapprove the FCC rollback of media ownership protections (AP story via LA Times). Also, Reuters story. Action now shifts to the House bill-- HJ Res.79 (Inslee-D-WA). From Senator Dorgan's statement:

"The FCC is supposed to be a referee for the media industry, but instead they've been cheerleaders in favor of more consolidation," said Dorgan. "Diverse, independent and local media sources are essential to ensuring that the public has access to a variety of information."

Update: Republicans and Democrats alike were incredulous over the card associations' (Mastercard and Visa) testimony. Here is my testimony (my copy here is low bandwidth but go here on the committee site a clunkier apparently scanned high-bandwidth copy.

One point I made at the hearing is that there is similarity between the merchants' helpless plight and that of consumers. For many years the card issuers got away with any and all unfair tricks and traps for consumers because the regulator/cheerleader known as the OCC let them. Now, the Fed has stepped in to help consumers. Now, the Judiciary Committee appears to be playing the same role as the Fed: it has the merchants' back in their fight with the card associations.

Original post: The second highest cost of running a convenience store is credit card fees. That raises the costs for all consumers, including cash customers, at the store and at the pump. We testify today before the Antitrust Task Force of the House Judiciary Committee on interchange fees imposed on merchants by credit card companies. Link to previous testimony.

We have joined leading consumer community and civil rights groups in a coalition letter supporting a critical Brad Miller (D-NC) Steve LaTourette (R-OH) amendment to HR 5830, American Housing Rescue and Foreclosure Prevention Act of 2008, on the House floor. From our letter:

With two million families holding subprime loans projected to lose their homes due to foreclosures initiated over the next two years, and 40 million of their neighbors projected to lose collectively $200 billion in home equity, it is important that the federal government and the States use the means at their disposal to implement prompt, effective measures to mitigate the impacts of the crisis on homeowners, their communities, and the economy generally.

Meanwhile, the American Bankers Association has sent out letter making the patently false assertion that:

The Miller/LaTourette amendment, expected to be offered during floor consideration of the American Housing Rescue and Foreclosure Prevention Act of 2008, would alter long-standing authorities of the federal banking agencies to preempt state laws which conflict with federal law and which interfere with the safety and soundness and other regulation of national banks and federal thrifts.

This narrowly-crafted amendment does not overturn the recent Supreme Court decision in Watters v. Wachovia or other jurisprudence. Rather, the amendment is necessary to ensure that overzealous federal regulators do not change these current understandings in the future or attempt to use federal law to preempt such laws, to the detriment of families struggling to keep their homes.

(Update: hearing links corrected.) On behalf of several leading groups, we testified today in support of the "Protecting Americans from Unsafe Foreign Products Act," H.R. 5913, in the Subcommittee on Commercial and Administrative Law of the House Judiciary Committee. My testimony here; full hearing link. The bill deals with the difficulties injured victims -- such as victims of dangerous toys or other Chinese products -- have in bringing lawsuits against foreign companies. Here is an excerpt from my testimony:

U.S. PIRG believes that for consumers to be assured that products that they buy are safe, we must ensure at least three levels of defense above and beyond any market notions of the supposed adequacy of competition or voluntary standards to protect consumers.

First, federal laws should provide a strong floor of protection and federal regulatory agencies should enforce those laws to both deter wrongdoing and hold wrongdoers accountable.

Second, states should be allowed to enact and enforce stronger laws and state attorneys general -- often the toughest cops on the consumer beat -- should be allowed to enforce both state and federal laws to the greatest extent possible, with full authority to impose penalties, recover damages and restitution as well as to obtain injunctive relief.

Third, consumers should have the right to adequate redress -- without roadblocks -- to bring private actions against wrongdoers to obtain compensation for their injuries or damages and to deter further wrongdoing.

A combination of these three pillars of consumer protection--strong federal enforcement, strong state enforcement and strong private enforcement -- is the best protection against unsafe products.

The CPSC proposals before Congress largely address the first, and somewhat the second, pillars. The proposed legislation by Chairwoman Linda Sanchez (D-CA) addresses the third. It makes it easier for consumers to obtain justice. My testimony was on behalf of U.S. PIRG, Consumer Federation of America, Consumers Union and Public Citizen.

We've joined the Coalition for an Airline Passenger's Bill of Rights (flyersrights.org) and other leading consumer groups in a letter urging the Senate to maintain the strongest possible passenger rights language in the FAA Reauthorization Bill, HR 2881, on the floor this week. Just as the banks are whining about credit card reform -- don't hit us while we are down -- so are the airlines. But the airlines deserve nothing from the Congress (and they're expecting a lot) unless the Congress also guarantees that passengers will be treated with dignity. The airlines haven't guaranteed that, and that's a big part of their problem. Here's a Youtube video blog interview I did last summer with Kate Hanni, a stranded passenger who founded the coalition.

Today and tomorrow the House Financial Services committee will mark up, or vote on, two housing crisis reform bills:

HR 5830, the FHA Housing and Homeowner Retention Act, to expand the FHA program to help refinance at-risk borrowers into viable mortgages and also requires the Federal Reserve Board to conduct a study on the need for an auction or bulk refinancing mechanism. The second measure, H.R. 5818, the Neighborhood Stabilization Act of 2008, introduced by Subcommittee on Housing and Community Opportunity Chairwoman Maxine Waters, will provide loans and grants to states and cities to deal with problems associated with large numbers of foreclosures in neighborhoods across the country.

Moreover, most proposals in Congress will take several months or longer to implement, leaving those in immediate danger of foreclosures at the mercy of failed industry policies. For example, the “FHA Housing Stabilization and Homeownership Retention Act of 2008” (H.R. 5830) – a leading proposal in Congress – has the potential to provide relief to troubled homeowners. However, we are concerned that the voluntary nature of the legislation will not be enough to help homeowners in danger of foreclosure. In order to be successful, this and other proposals should include incentives for the industry to re-write bad loans and provide a safety net to families that may otherwise fall through the cracks. H.R. 3609 accomplishes this goal and should be added into any final floor package.

UPDATE: C-Span has archived the hearing. These links will open in Realplayer (on my computer, if you click "launch application") and maybe in other players. Here is a link to the Senators and the Consumer-Victims (panels 1&2). This link is to the Regulators and Bankers/Consumer Advocates (panels 3&4).

Well, as expected, the hearing lasted nearly all day. Senator Levin (D-MI) led off with a blistering condemnation of the unfair credit card practices that his own Senate Permanent Subcommittee on Investigations has explored in depth. The three consumer victim witnesses were brave messengers -- not afraid to explain their own financial stories -- after being given more time to consider the waivers that they had refused to sign at the eleventh hour before last month's hearing, when they refused to testify. Interestingly, no committee members or bank witnesses seemed interested in trying to impeach the victims by using account-related information from the waiver. It would have been tough, since they were all so solid. Noteworthy testimony was then given by Marty Gruenberg, vice-chairman of the FDIC. Why? The FDIC largely supported the PIRG-backed Credit Cardholders Bill of Rights, HR 5244, which was the subject of the hearing. Conversely, Julie Williams, chief counsel over at the regulator/cheerleader known as the OCC (the agency that regulates most credit card companies) largely opposed the bill. And while some Representatives said "wait for the proposed Fed disclosure rules," we and the other consumer advocate witnesses urged Congress to act now. Just yesterday, 4 more co-sponsors logged on, bringing us to an even one hundred co-sponsors. We'll continue to work with Chairwoman Maloney (D-NY) to get her bill passed. My testimony here. All testimony here.

And as for that live blogging from the thumb-thumping blackberry, we'll reserve that for short emergency posts. But it's nice to know we can blog from anywhere, if we only have our phone! It's certainly easier from the laptop.

UPDATED My testimony here.

We testify Thursday, 17 April before the House Financial Institutions and Consumer Credit Subcommittee. It's a legislative hearing (background and list of witnesses here) on HR 5244, the Credit Cardholders Bill of Rights sponsored by subcommittee chair Carolyn Maloney and 94 others, so far. Many witnesses, including two Senators, 4 consumers, regulators, consumer advocates and bankers and their flacks.

Today, the Center for Digital Democracy and U.S. PIRG filed detailed comments in the FTC inquiry into behavioral marketing, intrusive search advertising business models and the future of the Internet. We note that the entire inquiry is the result of our initial 2006 petition and we pose a solution that protects privacy while encouraging commerce on the web. Here is our lede:

The commission has failed to effectively protect U.S. consumer privacy in the digital marketing era. The commission's decision to issue its proposed staff principles on the same day it approved, 4-1, Google's acquisition of behavioral marketing and online ad giant DoubleClick -- without any privacy safeguards -- is not a coincidence. The commission—frankly under both the Bush and the Clinton administrations—has been largely incapable to take a meaningful stand on data collection and interactive marketing.

We've joined Public Knowledge, Consumers Union and other leading groups in joint comments to the FCC in a docket concerning mobile phone text messaging that our groups requested in a December petition. The petition followed several incidents where wireless carriers blocked political speech, including the widely-publicized denial of carriage by Verizon Wireless of alerts sent to members by NARAL Pro-Choice America. From our comments:

After a front-page New York Times article, Verizon reversed its decision, allowing NARAL to communicate with Verizon customers. While it may appear at first glance that the problem has been solved, Verizon still maintains that it is entitled to decide who its customers could speak to, and about what, and while it claims to have a new, less discriminatory short code policy, no policy, new or old, has been released to the public as of this filing.

What's a short code? Not too technical. People who use text messaging to vote to support their American Idol choices are using short codes. Our comments assert that, legally, short codes are subject to non-discrimination by the carriers. Our comments also assert that the underlying medium that short codes facilitate -- text messaging -- is a critical form of free speech. In fact, in our comments we point out that our petition

described how unreasonable discrimination in text messaging services harms speech, is anticompetitive, causes monetary harm, stifles innovation, affects the public health, and visits especially powerful harm on deaf and disabled users. [...]Text messaging is a critical new medium for speech whose growth is far outpacing mobile voice calling. Mobile carriers cannot be allowed to leverage their license to use the public’s airwaves in order to control who may say what to whom. These carriers have demonstrated that, given the chance, they will interfere with speech, and in fact continue to do exactly that to this day.

Here's our group letter opposing the DeMint (R-SC) amendment to substitute the narrower House bill for the comprehensive CPSC Reform Act, S 2663. In addition to the arguments I made in the previous blog entry, here's one more: If the Demint amendment passes tonight, dangerous small magnets that have killed one little boy and sent over two dozen for emergency intestinal surgery will not be regulated by the CPSC.

Other comments on floor debate: We just heard a very nice speech by Senator Ken Salazar (D-CO), who, like Mark Pryor (D-AR), is a former state attorney general. Senator Salazar spoke about the critical need to keep the state AGs on the product safety beat. Just before him, Senator Dianne Feinstein introduced a PIRG/Environment California-backed amendment to limit toxic phthalates in children's products. The amendment is based on her bill, S. 2275, which is itself based on a pioneering CALPIRG/Environment California-backed state law. Environment California? New home of CALPIRG's environmental work.

Thanks to vigilance by state legislators, state enforcers and the FTC, store-issued gift cards have even fewer fees than before and are an even better deal than high-priced fee laden bank and mall issued cards, according to a story Gift Cards Coming With Fewer Strings by Nancy Trejos of the Washington Post. The story goes on to also point out:

Many retailers have responded to consumer complaints that gift cards are too laden with fees and expiration dates, experts said. In its fifth annual gift card survey, Montgomery County's Office of Consumer Protection found that 18 of the 22 retail cards examined had no fees and no expiration dates and could be replaced if lost or stolen or had scratch-off PINs for security.

We testified today in support of legislation by Rep. Carolyn Maloney (link to hearing record) that would require the federal bank regulators to create a shared complaint hotline (HR 4332, the Financial Consumer Hotline Act of 2007). We proposed a number of amendments to force the regulators to do a better job handling consumer complaints.

MoveOn.org has joined the push against Facebook's newest privacy-invasive marketing technique, the one where Facebook broadcasts a "beacon" of your online shopping to all your friends. Oh, without your consent. As Ellen Nakashima reports in today's Washington Post story Feeling Betrayed, Facebook Users Force Site to Honor Their Privacy:

Sean Lane's purchase was supposed to be a surprise for his wife.[...]Without Lane's knowledge, the headline was visible to everyone in his online network, including 500 classmates from Columbia University and 220 other friends, co-workers and acquaintances. And his wife.

On November 12, we had joined the Center for Digital Democracy in a letter to FTC Chairman Deborah Majoras urging scrutiny of "ambitious new targeted advertising schemes on the part of both Facebook and MySpace."

UPDATE: Our coalition letter in opposition.

Along with other advocacy groups, we've been working many months with House Financial Services Committee Chairman Barney Frank (D-MA) to craft a strong bill to prevent mortgage abuses. His efforts have been laudatory, but largely because the Congressional process is so dominated by special interests, his modified compromise bill HR 3915, sponsored with others including Brad Miller (D-NC), no longer achieves the goals he set out for it. In particular, its broad sweep of preemptive limits on state law remedies outweighs its benefits. We are joining with the National Association of Consumer Advocates and the National Consumer Law Center -- expert groups whose lawyers represent in court the low-income consumers who have been most hammered by abusive mortgage practices -- in a letter in opposition to the bill. I will post our letter when finalized. If the bill passes (and those special interests still oppose it from the wrong side so the outcome is not clear) we hope to improve it in the Senate.

Despite 3 months of work, it is truly hard to say just what -- if anything -- is new, what is innovative and what is worthwhile in the Interagency Working Group on Import Safety's new "Action Plan." I guess what's new is they've got the president messaging on it. U.S. PIRG is particularly disappointed in the squishy, weasel-y language regarding safety certification of imported products. The way we read it, the administration is not supporting the concept that all imported children's products be subject to mandatory testing by a truly independent third party lab that is certified by the government for quality.

Also today, we joined Rachel Weintraub's testimony on behalf of her group, the Consumer Federation of America, and a coalition of organizations, in a House Energy and Commerce Committee hearing on its CPSC reform bill, HR 4040. At the hearing, subcommittee chairman Bobby Rush (D-IL) committed to moving forward within two weeks on on a vote on the legislation.

Today, we are signed onto testimony of the Consumer Federation of America's Rachel Weintraub before the House Energy and Commerce Committee at its hearing on product safety reform. (Note-- the committee has even posted a front page link to The Year of the Recall, a new Consumers Union report.) Meanwhile, after years of administration attacks (not mere benign neglect) on protecting Americans from product safety hazards, expect the Michael Leavitt-chaired White House import safety working group to back some sort of modest reforms today (New York Times and AP via Washington Post). We expect it will overly rely on self-regulation and the sort of tortured risk analysis favored by the administration over the more sensible precautionary principle, although press reports indicate positively that it will recommend strengthened recall authority at FDA and CPSC. Don't know just what it will say about the hazards to the public of CPSC officials flying around on the industry's planes or the industry's dime. From the Washington Post story today CPSC's Ethics-Review Process For Travel Criticized by Experts by reporter Elizabeth Williamson:

The $3,730 tab for Faulk and Nord's trip was to be paid by the Toy Industry Foundation, whose mission, according to the ethics memo, is to help at-risk children "by meeting a vital, yet frequently overlooked, developmental need often missing in their lives -- play."

The key ethics review memo states at the top that it came from Faulk, whom it describes as the "Designated Agency Ethics Official." But it was signed by someone the CPSC yesterday called "an alternate ethics officer" because Faulk was the traveler.

Brian Wolfman of the Consumer Law & Policy blog has posted an analysis of yesterday's Supreme Court argument in an important investor protection case, Stoneridge Investment Partners v. Scientific-Atlanta. We filed an amicus brief jointly with AARP and Consumer Federation of America, on behalf of investors. Our brief supports the view that investors would be better protected by making it easier to hold professionals (investment banks, lawyers and accountants) that aid and abet wrongdoers who cook the books (think Enron), accountable.

As Brian explains:

The case may help draw the dividing line between aiding and abetting a violation of the federal securities laws, which does not give rise to a private suit under those laws, and a primary violation, which, of course, does. The question presented, more formally stated, is whether claims for deceptive conduct under Section 10(b) of the Securities Exchange Act of 1934 are barred by the Court's decision in Central Bank v. First International Bank (which rejected aiding-and-abetting liability), when the defendant engaged in fraudulent transactions designed to inflate a corporation's financial statements, but made no public statements concerning those transactions.

We testified (my testimony) yesterday at a hearing on CPSC/China/toy recall issues before Senator Mark Pryor's (D-AR) subcommittee of the Commerce Committee in favor of his bill: the CPSC Reform Act of 2007, S. 2045 (we also suggested improvements) to reauthorize and modernize the Consumer Product Safety Commission.

Obviously, the National Association of Manufacturers opposed the bill, especially its provisions to increase civil penalties, let state Attorneys General police the product safety beat, and eliminate unnecessary secrecy in CPSC activities. But, astonishingly, acting CPSC chair Nancy Nord largely agreed with NAM, especially when she said that eliminating secrecy would be "counter-productive." She essentially said that their relationship with corporate wrongdoers would be jeopardized. Former CPSC Chair, Ann Brown, in Annys Shin's Washington Post story Head of CPSC Opposes Measure on the hearing, said, and we agree:

"She thinks it's the industry product safety commission," said Ann Brown, CPSC chairman under President Bill Clinton. The current law "stands in the way of consumers getting prompt information, and it should be amended and changed."

We testify this afternoon at a hearing of a U.S. Senate Commerce Committee subcommittee on major legislation, the CPSC Reform Act of 2007, S. 2045. The bill has the potential, if improved in a few ways and not watered down in others, to go a long way toward:

The bill is introduced by subcommittee chair Mark Pryor (D-AR), a former state attorney general, along with full committee chair Daniel Inouye (D-HI) and the Senate's #2 leader, Majority Whip Dick Durbin (D-IL), as well as committee members Amy Klobuchar (D-MN) and Bill Nelson (D-FL). Watch on the Internet at 2:30pm.

We joined other leading consumer groups in signing on to testimony by the National Consumer Law Center before the Senate Finance Committee yesterday. The hearing concerned whether banks are failing to protect Social Security recipients from illegal and improper seizure of their exempt benefits. The issue has grown in importance as more and more consumers receive benefits electronically. Excerpt from testimony by Margot Saunders of NCLC:

We estimate that on a monthly basis thousands of low income recipients of Social Security, SSI and other federal payments whose benefits are entirely exempt from claims of judgment creditors are left temporarily destitute when banks allow attachments and garnishments to freeze their only assets. As was illustrated in a recent Wall Street Journal article ("The Debt Collector vs. The Widow -- Viola Sue Kell thought her Social Security benefits were safe in the bank. She was wrong."), when a bank applies an attachment 14 or garnishment order to the exempt funds in a low income recipient's bank account, the consequences are generally devastating. There is no money for food or medicine. Checks written for rent or the mortgage are bounced. People go hungry. They get sick or sicker. They suffer anxiety. They are forced to pay steep bank fees and fees to merchants because the checks they wrote when they had money in the bank now bounce.

The banks (backed by their captive regulators, at least until yesterday's hearing), of course, use the first part of the Bart Simpson defense: "it's not my fault, I wasn't there, I didn't do it." More from our joint NCLC testimony:

We disagree with this assessment as a legal matter and as a policy matter. Legally, the cases have not yet caught up with the technological situation that exempt funds directly deposited in bank accounts presents, but the case law presents no bar to such a requirement. As a policy matter, how can there be any dispute that the funds provided by American taxpayers to keep this nation's elderly and disabled from starvation and destitution should be kept available rather than frozen for the convenience of creditors who have no right to the monies?

Later that same day-- updated to add these two hearing and testimony links. (1) Amina Fazlullah of U.S. PIRG's testimony; (2) link to the full hearing including all witness testimony. Other witnesses included FCC Commissioner Jonathan Adelstein and an AARP representative.

U.S. PIRG staff attorney and telecom expert Amina Fazlullah testifies this morning before the U.S. Senate Special Committee on Aging at a hearing Preparing For The Digital Television Transition: Will Seniors Be Left In The Dark?. The hearing will be webcast beginning at 10:30 AM Eastern. Here is an excerpt from Amina's testimony, which will be posted at the committee site later this morning:

It's been nearly two years since Congress established the official transition date from analog T.V. broadcasting to digital, yet virtually no U.S. consumer knows what will happen on February 17, 2009. On that date, television broadcasters will switch from analog to digital signals. The transition offers the country the return of valuable, "beach front property" spectrum that can be used to enhance emergency communications, spur innovation and improve broadband connectivity.

One other thing will happen on February 17, 2009. Every consumer who watches over-the-air TV with an analog set will have their set go dark. Including in the estimated 22 million consumers in this category are 8 million households with at least one member older than 50.

U.S. PIRG, Consumers Union and Consumer Federation of America have sent a letter to Congressional leaders and the Bush administration outlining actions that must be taken to guarantee the safety of consumer products and food. The proposals would apply to all products, but new protections are proposed for imports:

Clearly, the system of effectively protecting consumers from dangerous and toxic foods and products is broken. [...] We ask that you act quickly to provide more resources and tools to the federal agencies charged with policing the safety of the nation's product and food supply. In addition, we must put mechanisms in place to hold companies accountable for the products they import and sell in the United States including requiring independent third party testing and certification of consumer products.

Along with other leading groups, we joined testimony today by attorney Joanne Faulkner on behalf of the National Association of Consumer Advocates (NACA) before the Senate Commerce Committee's hearing on Oversight of Telemarketing Practices and the Credit Repair Organizations Act (CROA). MORE.

Faulkner's testimony concerned the CROA aspects of the hearing only. It addressed both the vile practices of credit repair doctors and also the interminable, ongoing efforts by the credit bureaus themselves to exempt their actions from CROA (previous post), which regulates the credit repair doctor practices. Credit repair doctors are ripoff artists who make a living claiming that they can fix accurate, but negative, credit report items. Unfortunately, the main reason that CROA was before the committee was only that the credit bureaus seek a self-serving exemption from the act. Why? Because their own deceptive advertising of over-priced ($12-15/month), next-to-useless (don't stop identity theft, only the security freeze can do that) credit monitoring services has gotten them caught up in class action lawsuits for violating the CROA themselves. But, after strong testimony from Faulkner, and opposition to the current industry proposal from the FTC witness, Lydia Parnes, the director of the Bureau of Consumer Protection, we doubt the committee or the Congress will move forward. Although we aren't directly signed onto their testimony, we also strongly support the views of Iowa Assistant Attorney General Steve St. Clair and AARP board member Richard Johnson, who both testified on deceptive telemarketing ripoffs primarily aimed at the elderly (previous post describing how banks aid and abet fraudsters directly debiting consumer accounts).

A series of unwise adverse court and regulatory decisions has preempted state authority to protect consumers from unfair bank practices. Today, Travis Plunkett of the Consumer Federation of America represents (his testimony) U.S. PIRG and a coalition of leading consumer and community groups at a hearing of the House Financial Services Committee on Improving Federal Consumer Protections In Financial Services. Basically, most federal consumer rules are written by the Federal Reserve Board, which could care less and often ignores Congressional deadlines. Worse, most of those rules and laws are enforced by the powerful but obscure Office of the Comptroller of the Currency (see our OCCWatch page), which has a lack of will to offend the national banks which fund its fiefdom. The question, then, is what should Congress do? In our view, the most important things that it could do are to (1) restore authority for dual enforcement by state attorneys general; (2) eliminate the sweeping preemption of state consumer laws; (3) increase oversight of the sleepy (Fed) and aider and abettor (OCC) federal regulators; (4) grant authority to the FTC over banks, as an honest broker regulator not in bed with the banks. Our testimony by Travis Plunkett has more details (excerpt below):

One of the most difficult problems that the Committee will face in attempting to improve consumer protection efforts is a culture of coziness with the financial institutions they regulate at most of the agencies and an insensitivity to consumer concerns. For example, most of the regulatory failures we highlight today are in areas, like oversight of high-cost "overdraft" loans, where federal regulators have existing authority to act and have chosen not to do so. Simply increasing the authority of the agencies to write or enforce rules, or to offer a unified complaint hotline, will not change the culture in some agencies that has caused them to ignore festering problems in the credit arena or to reject adequate consumer protection measures. [...] The key to addressing these root problems is to make the regulatory process more independent of the financial institutions that are regulated. This means allowing the Federal Trade Commission (FTC) to bring enforcement actions against national banks and thrifts for unfair and deceptive practices and to initiate regulation of these entities. It also means granting consumers the right to privately enforce federal laws. Finally, Congress should act to rein in lending abuses where agencies have shown an unwillingness to act vigorously, such as credit card lending, sub-prime mortgage lending and the use of deceptive and high-cost “overdraft” loans by national banks.

UPDATE 24 July: Here's a link to the full hearing and to my testimony last week. I was very impressed with the level of concern evidenced by committee members over the practice of Visa/Mastercard imposing high merchant interchange fees. Rep. Darrell Issa (R-CA), a business owner, expressed disdain over the industry witnesses specious claim that banks would negotiate fees. Rep. Ric Keller (R-FL) was among the many committee members with well-thought-out, insightful questions of the industry witnesses, who included Tim Muris, former FTC chair.

Original post: I testify this afternoon in House Judiciary on credit card interchange fees, which are the fees merchants pay to accept credit and debit cards. I will post my testimony when it is released by the committee. No secrets in it: consumers, whether they pay with cash or plastic, pay more at the store and more at the pump because Visa and Mastercard use their anti-competitive market power to impose high merchant interchange fees. These are passed along to everyone. Here's a link to my testimony last year in House Energy and Commerce.

Despite the joint testimony of all 5 SEC commissioners yesterday that Congress needs to take no action to amend the Sarbanes-Oxley Act, expect a floor amendment from Reps. Scott Garrett (R-NJ) and Tom Feeney (R-FL) today to the Financial Services Appropriations Act for Fiscal Year 2008. Our letter -- with the Consumer Federation of America and others -- in opposition. The Garrett-Feeney amendment is part of the incessant but unsubstantiated bleating from the U.S. Chamber of Commerce to weaken this critical Enron reform law's Section 404, which provides that corporate officers assess and corporate auditors attest to the veracity of financial statements. The amendment would delay implementation of Section 404 yet again for smaller public companies. As our letter points out:

At those companies where it has been implemented, SOX 404 has brought about dramatic improvements. It has uncovered thousands of material weaknesses in internal controls – 1,300 in 2005 and 1,118 in 2006. That drop in material weaknesses between 2005 and 2006 reflected the fact that 404-compliant companies saw a 35 percent drop in material weaknesses.

On Wednesday, the U.S. Supreme Court reversed lower courts that had stupidly given the Phillip Morris tobacco company essentially the same powers as a federal officer to "remove" cases brought against them in state courts to federal courts, under the legal theory that because PM was somewhat regulated, it must be "acting under" a federal officer. We had joined a merits amicus brief to the court prepared by Public Citizen and AARP. Over at the Consumer Law and Policy blog, Scott Nelson explains the issues. One interesting point in Scott's blog: He points out that at the petition stage, U.S. Solicitor General Paul Clement told the Court that the decision below was "dead wrong," but in his brief urged the Court to decline the case as a narrow "fact-bound" ruling. We recently noted that SG Clement had rejected an SEC request to file a brief on its behalf in support of defrauded small investors.

We had a lively credit card hearing today in the U.S. House Financial Institutions and Consumer Credit Subcommittee. The hearing was a response to the Fed's recent issuance of a 700 page proposed re-write to credit card disclosure laws. One panel had six federal or state agency heads; the second had Kathleen Keest (her testimony) of the Center for Responsible Lending and me (my testimony) representing consumers, along with four industry witnesses and a small business representative. The hearing lasted about 4 hours, not including another hour or so of floor vote breaks. A surprising number of Representatives stayed and engaged both panels. Representatives of both parties had detailed and deeply-held concerns about a variety of unfair credit card practices. The bankers were contrite and generally said: "We don't do that anymore." A few highlights: First, Chair Carolyn Maloney (D-NY) announced she would hold a credit card summit with consumer groups, regulators and credit card companies.

To discuss these issues and others, I am planning a Credit Card summit. Among the results I want to achieve from this meeting is a way to use private forces to keep the spotlight on issuers and encourage best practices. For example, what if industry, working with consumer advocates, developed a Gold Standard for credit cards and certified that certain of their products met this standard.

We look forward to working with Chair Maloney on further investigations and inquiries.

Along with our colleague Kathleen Keest of the Center for Responsible Lending, I am representing consumers at a hearing on unfair credit card practices (committee announcement: Improving Credit Card Consumer Protection: Recent Industry and Regulatory Initiatives) Thursday before the House Financial Institutions Subcommittee of the Financial Services Committee. There are apparently six regulators and five industry lobbyist witnesses. Not to worry. The Texas Rangers motto, I think, is "One riot, one Ranger." With me and Kathleen, we've got an extra Ranger. By the way, if you want a preview of my testimony, there's a video excerpt of my interview from a forthcoming documentary on credit cards, UR Pre-approved, available on the movie's "trailers" page. Scroll down.

"Led" by the "visionary" giants of our telecommunications industry and the failed "plans" of former FCC chief Michael Powell, the U.S. has fallen further behind the world in the availability of ubiquitous, low-cost and fast broadband communications. It hurts our economy, our educational opportunities, our culture and our democracy when our citizens and businesses pay more for less Internet than the citizens of South Korea and Slovenia-- when our citizens can even hook up, that is. Many are stuck with dialup as their only choice. Thank you, Michael Powell. This week, U.S. PIRG joined with other leading organizations seeking a neutral, open and affordable Internet to file comments to the FCC (large pdf) on its pending auction of the 700 mHz spectrum airwave band.

The groups calling themselves the Ad Hoc Public Interest Spectrum Coalition (PISC) urged the FCC to take actions that "foster real wireless broadband -- the fast, ubiquitous, and dynamic third pipe everyone agrees our country desperately needs[...]with the freedom to attach any device and run any application." In English, here's what you need to know:

the 700MHz band could potentially do two different things: establish a new competitor in the wireless phone space and create a third national broadband option to rival cable and DSL. From a consumer perspective, either outcome would be hugely desirable, as broadband users rarely have more than two choices and "anyone who says the wireless industry is competitive is joking," says Fazlullah.

[UPDATED SAME DAY: Added link and excerpt from the veto letter from 10 consumer and media reform groups and a link to a Palm Beach Post editorial.] An editorial in today's influential St. Pete Times urges a veto of the so-called cable competition bill enacted by the Florida legislature:

The cable television deregulation bill the Florida Legislature sent Gov. Charlie Crist does what one would expect from a lawmaking process corrupted by special interests. Under the guise of promoting competition, lawmakers would weaken consumer protection, threaten educational programming and enable providers to cherry pick customers and enjoy unfettered access to public rights of way.

The purpose of the bill is laudable--to bring competition to the cable television and broadband Internet marketplace. Yet as currently drafted, HB 529 falls far short of what is required to promote meaningful competition that will deliver lower prices, more competition, and higher quality of service to all consumers. [...] Anti-redlining provisions are insufficient to ensure low and middle income consumers are not left behind. We acknowledge and applaud your efforts to work with legislators to insert an anti-discrimination provision. However this provision alone will not guarantee that new communications technologies will be offered throughout the state to traditionally under-served communities. [...] Every community--rich or poor, rural or urban--deserves the benefits of new technology and competition. Good public policy guides the market to maximize competitive deployment across the board in video and broadband. It also protects an open, thriving and nondiscriminatory marketplace for Internet content and applications. There is currently nothing in HB 529 that gives cable or telephone companies incentives to abide by net neutrality protections.

Recently, the Senate Commerce Committee and the Senate Judiciary Committee approved data security bills. Senate Banking has not acted, nor have any major House committees. While the approved bills have the fingerprints of industry lobbyists all over them, there are a few bright spots.

It is possible that were the bill's original exception from notice for breaches of both credit card and debit card numbers when companies were part of online fraud prevention programs that it might have immunized TJX (TJ Maxx and Marshalls) from notification in its recent 45 million credit and debit card number breach.

In today's Wall Street Journal, in the story How Credit Card Data Went Out Wireless Door (pd. subs. req'd), Joseph Pereira reports that outside a Marshall's store near St. Paul, Minnesota a few years ago:

hackers pointed a telescope-shaped antenna toward the store and used a laptop computer to decode data streaming through the air between hand-held price-checking devices, cash registers and the store's computers. That helped them hack into the central database of Marshalls' parent, TJX Cos. in Framingham, Mass., to repeatedly purloin information about customers.

That purloined information included both debit and credit card numbers. Since consumers are largely unprotected by federal debit card laws, Congress should not pass laws making things worse. Consumers are largely unaware of the risks of debit cards, and are primarily protected only by contractual promise, not by law. While credit cards are protected by the strong terms of the Truth In Lending Act, debit cards (which look the same but access your own accounts) are subject to the weak Electronic Fund Transfer Act, which allows banks unduly long investigation periods before reinstating money into a victim’s account and, under some circumstances, even allows the bank to deny all the consumer’s restitution claims even after fraudulent activity. Conversely, the Truth In Lending Act limits a consumer’s fraud liability to $50, by law. Even the Fed agrees!

Industry groups want a federal data privacy law. The myth, however, is that they need it due to supposed high costs of a patchwork of state laws. Their costs are low and that's a red herring. Their strategy is more Machiavellian -- their ultimate goal is to use the furor over data security and the identity theft crime wave to convince Congress into permanently eliminating all state financial privacy laws and even weakening existing federal laws. That's the wrong outcome. Consumers have been better served by state leadership on privacy, on global warming and on virtually every policy matter. Federal law should always be a floor protecting everyone at minimum levels, never a ceiling preventing states from acting more quickly or going further in defense of consumers and the environment. As we said in our letter to Judiciary members:

States have demonstrated an ability to respond more quickly to privacy and other problems, including global warming. On the matter of privacy alone, seven states (led by Vermont) gave consumers the right to a free credit report before Congress acted, forty states had do-not-call lists before the FTC acted, at least three-dozen states have security breach notification laws (and this bill is weaker than an estimated 23 of them yet would preempt them all), and some twenty-eight states have given consumers the right to prevent identity theft through placement of a security freeze on their credit reports.

Industry claims to the contrary, the states never enact 50 different laws; indeed they tend to enact a few similar laws and then other states perfect those efforts with virtually identical laws. When Congress steps in, it should create a federal floor protecting consumers in the few remaining unprotected states; it should not override the stronger state laws, nor should it prevent further experimentation. Any specious industry claims of compliance costs could be met by simply complying with the strongest state law nationwide, as many firms have done following the first widely-reported breaches.

Three leading consumer groups filed detailed comments this week objecting to a proposed Federal Trade Commission settlement with the retailer Kmart over its practice of deceptively selling gift cards with hidden fees that reduce their value by more than $50 in less than two years of inactivity. The Consumer Federation of America, Consumers Union and U.S. PIRG, longtime advocates for stronger state and federal laws to protect gift card holders, charged that the settlement unjustly enriches Kmart by allowing it to keep its ill-gotten gains. FULL NEWS RELEASE:

FOR IMMEDIATE RELEASE: Friday, 13 April 2007
CONTACT:
Ed Mierzwinski, U.S. PIRG, 202-546-9707
Travis Plunkett or Jean Ann Fox, Consumer Federation of America 202-387-6121
Gail Hillebrand, Consumers Union, 415-431-6747

Leading Consumer Groups Oppose Proposed FTC Settlement With Kmart Over Deceptively “Shrinking” Gift Cards
-- Say Settlement “Unjustly Enriches” Violator--

Three leading consumer groups filed detailed comments this week objecting to a proposed Federal Trade Commission settlement with the retailer Kmart over its practice of deceptively selling gift cards with hidden fees that reduce their value by more than $50 in less than two years of inactivity. The Consumer Federation of America, Consumers Union and U.S. PIRG, longtime advocates for stronger state and federal laws to protect gift card holders, charged that the settlement unjustly enriches Kmart by allowing it to keep its ill-gotten gains.

"Attention, Kmart shoppers, this settlement is unfair to you," said Ed Mierzwinski, U.S. PIRG Consumer Program Director, "It's bad enough that you'll need to jump through innumerable hoops to maybe get reimbursed for your incredibly shrinking gift card, but this sends exactly the wrong signal to other corporate criminals that the FTC is soft on crime."

"Numerous states have taken action to prohibit gift card sellers from even including dormancy or other monthly fees on gift cards," said Gail Hillebrand, senior attorney for Consumers Union. "At the very least, companies should not be allowed to deceive consumers into purchasing cards with hidden fees, and should be punished when they do." [More from Consumers Union on gift cards.]

The proposed settlement was approved on a 5-0 vote, with two commissioners, Jon Leibowitz and Pamela Jones Harbour, dissenting in part over the failure to require Kmart to disgorge its ill-gotten profits. The FTC will now review comments and decide whether to make it final. In their comments, the groups noted that in another recent settlement, against Darden Restaurants, the owner of Red Lobster and Olive Garden, that the FTC ordered automatic reinstatement of card value.

This is the second settlement order in the last few months where Leibowitz has dissented due to a weak, non-disgorgement penalty (see the DirectRevenue decision of 16 February 2007), Mierzwinski noted.

The groups were represented pro bono in this matter by David Balto, a former senior FTC attorney.

"Consumers need greater rights in gift cards and indeed in all plastic cards ranging from other types of stored value cards to debit cards, where rights are vastly inferior to the protections offered credit cards," concluded Jean Ann Fox, the Consumer Federation of America's director of consumer protection. "Taking action against Kmart for deception is a first step, but it should have been a more meaningful step."
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At Wednesday's hearing (See video webcast and all witness statements, including ours and that of three other consumer advocates) on proposed legislation to grant airline passengers basic rights when wrongly "imprisoned" on planes stuck on the tarmac, our champions, Senators Barbara Boxer (D-CA) and Olympia Snowe (R-ME) asked the DOT and the Air Transport Association witnesses some tough questions. Michael Reynolds, DOT's DAS for Aviation, kept telling Senator Snowe that DOT's "market" approach to customer service was working, and when it didn't, not to worry, because of "section 41712 of Title 49 of the U.S. Code, which broadly prohibits unfair and deceptive practices and unfair methods of competition in air transportation." Nice try, Mr. Reynolds, except Senator Snowe wasn't buying it, and sitting next to you was your fellow witness, The Honorable Calvin Scovel III Inspector General, U.S. Department of Transportation, who testified:

The Department should take a more active role in airline customer service issues. ... We found that while the Office has made efforts to enforce civil rights violations, it needs to improve its oversight of consumer protection laws, including its efforts to monitor compliance with the terms and conditions of enforcement actions. In recent years, the Office has not conducted on-site compliance reviews, relying instead on self-certifications and company-prepared reports submitted by the air carriers without supporting documentation.

The event was widely covered (USA Today, San Francisco Chronicle, Newsday and its affiliates, and other outlets). A House hearing on HR 1303 (Mike Thompson (D-CA)-Barbara Cubin (R-WY)) is expected next Friday in the Aviation Subcommiittee of the Transportation Committee. If you've got an airline complaint, you need to let Congress know. Real stories from real people offer us our best shot to win reforms. Our previous blog.

We held a news conference yesterday with Public Citizen and Consumer Federation of America to warn consumers that many kitchen stoves can easily tip over and crush or burn consumers, especially children or the elderly. Manufacturers are making cheaper, lighter-weight stoves prone to tipping over. While stoves should not be inherently unsafe, retailers are also failing to comply with a voluntary safety standard requiring that stoves have a safety bracket holding them to the wall. Here is our news release. In February, U.S. PIRG and the CFA had sent a letter to the CPSC asking for more information about burns, deaths and injuries, as well as details about why no action is being taken to enforce the voluntary standard. We've had no reply. More information is available at the website killerstoves.com. The event was covered by the Washington Post (story) , CNN, AP, Miami Herald, Reuters, C-Span and other outlets.

House Energy and Commerce chair John Dingell (D-MI), along with oversight subcommittee chair Bart Stupak (D-MI) are looking into the matter. Excerpt from our release:

WASHINGTON, D.C. - Approximately 15 to 20 million kitchens in the United States are equipped with a range that can tip over and crush, scald or burn whoever is standing in front of it, consumer groups warned today in a press conference at the National Press Club. Public Citizen, U.S. PIRG and the Consumer Federation of America detailed the longstanding problem in most brands of electric and gas ranges that affect households throughout the country.

According to documents from the Consumer Product Safety Commission (CPSC) and the national retailer Sears, manufacturers and the government have known about this lurking danger for more than twenty years. Since the early 1980s, manufacturers of ranges began using lighter-gauge steel to reduce costs, even though they quickly learned that this resulted in a tendency for the lighter-weight appliances to tip over when weight was applied to the oven door.

We've joined the Consumer Federation of America and other leading groups in letters to Hill leadership and committee chairs, urging them to reject the unfounded call from various business groups and some smattering of academics to roll back the Sarbanes-Oxley Corporate Reform Act and other investor protection laws. [Here's the leader letter ; the others are similar. And here's a Reuters story on it.] Excerpt from our letters:

The war that is being waged on investor protections is based on the fallacy that U.S. markets are losing their competitive edge and that the U.S. enforcement and regulatory environment is a key reason why. Nothing could be further from the truth. In fact, our markets are thriving even in the face of the growing strength of foreign competitors. They are able to do so not despite but because of the world class investor protections they offer. Because the advocates of a regulatory rollback misdiagnose the problem, they prescribe a dangerous "cure" that threatens to undermine the very basis on which our markets are best able to compete -- their unrivaled ability to attract capital, to provide investors with a safe and profitable place to invest, and to provide companies with the lowest cost of capital in the world.

We filed comments Monday urging the Pentagon not to weaken one of the most important recent consumer laws, the Military Lending Act. You can read other comments here at the clunky government site Regulations.gov, if you can find them.

The end of the day this Monday, 5 February, is the deadline for filing comments to the Pentagon in support of the new Military Lending Act. It's the most important pro-consumer law enacted by the Congress in years. Its foes -- from the banks to the predatory lenders -- are lining up their lobbyists in Armani and Gucci-clad ranks to convince either regulators or Congress to weaken the new protections that apply to the camouflage-clad ranks [along with their families back on base] that we're sending to Afghanistan and Iraq to protect us.

The Military Lending Act protects active duty servicemembers and their families from abusive credit practices. It was passed with support of an unprecedented coalition of military family support groups, consumer advocates and the Pentagon itself, aligned because crippling, punitive predatory loans imposed on low-paid soldiers and sailors were hurting the nation's military preparedness.

The new Military Lending Act caps interest rates at 36% annual interest including extra fees and insurance premiums. It also prohibits securing loans with personal checks (payday loans), or through electronic access to the Service member's bank account, mandatory allotments, or car titles. Procedural rights are safeguarded through its ban on mandatory arbitration clauses, waiver of rights, and other burdensome requirements. You can comment at the Federal eRulemaking Portal. Follow the somewhat clunky instructions for submitting comments. Comments are posted to the public, so be careful about personal information. Include the agency name (Department of Defense) and docket number: DOD-2006-0S-0216; FR Doc. 06-9518. What should you say? Here are some ideas:

1. Congratulate the Department of Defense on its thorough report to Congress (large pdf) on the impact of predatory lending on Service members and their families. Urge quick implementation, by 1 October 07.

2. Urge DOD to automatically provide coverage to servicemembers. Tell personal stories. By far, that's my most important advice. If you've been victimized by predatory practices--explain how it worked and how it hurt you and your family.

3. List the protections in the Military Lending Act that are important to you: The 36% interest rate cap (usury ceiling) that includes all costs of borrowing in its definition, the ban on soliciting unfunded checks as security for a loan, the protections against unfettered access by collectors to bank accounts or military pay, and the civil justice protections.

4. Urge DOD to deliver on the promises of the new law by applying it to all types of lenders, especially including banks, and to all types of loans, especially including all open-end credit (e.g., credit cards) as well as bounced check overdraft "protection" loans. These are a source of inordinate predatory profit for the nation's well-heeled banks [and, think about it, are such a deal, since you can avoid those shabby payday lending storefronts. Your bank will gouge you just the same right there on your monthly statement or at its well-appointed branch office.]

These are significant protections that will eventually -- if we work hard -- be extended to all Americans. For now, however, we must simply work hard to make sure that the banks are included and that rules aren't gutted. The banks are trying to create the false inference that the only problem the new law was intended to address was payday lending, not unfair bank and credit card practices. Wrong. Their record profits have been largely fueled by their virtually unregulated and growing use of predatory practices, from credit card tricks to bounce protection loans. They, along with the full-time predatory lenders, have many friends on Capitol Hill. The banks also have many friends at the Federal Reserve and the OCC (the obscure, but arrogant chief regulator of national banks). These bureaucrats are upset that the Military Lending Act passed through the Congressional military committees, not the banking committees, and that the Pentagon, not them, was given lead rulemaking auuthority, and have been whining ever since at their lack of control of the process. [They're not left out, they're just down a ways on the chain of command structure.]

By the way, we call it the Military Lending Act, for short, or the Sens. Jim Talent (R-MO)-Bill Nelson (D-FL) amendment to the John Warner National Defense Authorization Act for Fiscal Year 2007, in Congressional longhand.

By far, one of the clunkiest, over-priced 19th-century interfaces to the digital world has been the device that sits on top of TV sets known as the set-top box. Why care? If you want your HDTV, and your TiVO, your digital cable and all your toys to play well together, we need the better devices that competition and some long-delayed FCC action on its so-called CableCard rule can force. The cable guys have had a long-standing monopoly (at a hefty monthly fee, don't forget) and they've offered a Hobson's choice. Now, as the New York Times reports from the Consumer Electronic Show in Las Vegas, Atop TV Sets, Basic Black Boxes Face Competition:

At the Consumer Electronics Show in Las Vegas last week, makers of set-top boxes exhibited devices with a host of new features: more hard-disk space for storing digitally recorded TV shows, easier-to-navigate program guides, connections to Web sites, DVD burners and video games. The box manufacturers and the cable operators like Comcast, Cox and Time Warner Cable that they sell to, have an age-old motivation for improving their products: fear.

Although the geek-meter on most of the links in this post is spiking high in the red zone, here's a succinct summary from Karen Sum-Ping:

Consumers should care about CableCARD because it is what allows digital device manufacturers to compete against that digital cable set-top box and provide better features and prices. Previously, a cable subscriber had little to no choice but to lease a digital set-top box from his particular cable provider.

The Supreme Court just now finished up oral argument in an important case (PIRG is an amicus in what is actually two cases consolidated together: Geico v. Edo and Safeco v. Burr) over whether insurance companies are violating the Fair Credit Reporting Act, and what the penalties against them should be when they fail to give consumers appropriate adverse action notices that their denial or higher premium is due to their credit report or score. The credit reporting law known as the FCRA is a remedial self-help statute-- how can you help clean up mistakes or identity theft items that lower your creditworthiness if the creditors and insurers place themselves above the law? I couldn't get over there for the argument, but our colleague Deepak Gupta of Public Citizen Consumer Law and Policy Blog has posted a long pre-argument blog with links to all the briefs, and I expect he'll post a post-argument blog later today.

We've joined coalitions of consumer groups in the following legal and regulatory filings on predatory financial practices this month:

We've joined key public interest groups including Free Press and Consumers Union in a letter to the Federal Communications Commission condemning the failure of the agency to seek public comment concerning what appears to be a blatantly political decision driven by the "needs" of the not-so-Baby Bells: the FCC General Counsel's "un-recusal" of Commissioner Robert McDowell in the ATT-Bellsouth merger: MORE:

Given that the combined entity will control half of the business and residential telephone lines in the nation, it is the public, not AT&T or Bell South which has the greatest stake in the merger’s rejection or approval, with or without conditions. Any appearance that a federal regulatory decision that so directly affects the welfare of the public is based on prior or existing commercial relationships jeopardizes the public’s trust in the federal decision making process.

On Wednesday the Supreme Court hears oral argument in an important case that could clarify when federal agencies are appropriately exercising authority granted by Congress, and when they are over-reaching. The case is especially important concerning issues of preemption of stronger state consumer and environmental laws. The case, Wachovia v. Watters, is a challenge to lower court decisions upholding preemptive rules of the national bank regulator known as the Office of the Comptroller of the Currency (OCC) (our site OCCWatch). As Kirstin Downey points out in her story, Case Tests Federal Supremacy Over Banks, in today's Washington Post:

The Supreme Court took the unusual step of agreeing to hear the case, although the lower courts had agreed to grant control to the OCC. The high court seldom hears cases in which lower-court judges have been unanimous in their rulings. Now both sides wonder what the justices' decision to take the case may mean: Will they approve the preemption practice or overturn it?

(updated links 7/24/07) U.S. Rep. Ed Markey (D-MA), a leading privacy champion on Capitol Hill, has announced his support for the U.S. PIRG/Center for Digital Democracy (CDD) complaint to the FTC on online advertising, data collection and consumer surveillance. Also, CDD has a new resources page Let The Browser Beware on the complaint. It includes links to corporate sites that are exemplars of some of the practices we've asked the FTC to investigate.

Yesterday the Supreme Court heard oral argument in a power plant pollution appeal brought by Environmental Defense, North Carolina PIRG and the North Carolina Sierra Club. Here's our brief in Environmental Defense et al v. Duke Energy Corp et al. Here's a few news reports (Lexington (KY) Herald-Leader and Portland (ME) Press-Herald, explaining some of the complex issues.

Also, yesterday, U.S. PIRG joined the American Legacy Foundation, Campaign For Tobacco-Free Kids, Public Citizen, Consumer Federation of America and other public interest groups in a petition urging the Court to review a decision of the Illinois Supreme Court that overturned a lower-court verdict awarding billions of dollars in damages to Illinois smokers in a so-called "lights" cigarette case. The implications of this case extend beyond tobacco control and, unless overturned, it could weaken the right of state enforcers to bring unfair and deceptive claims against any wrongdoer. [Note: In September, a U.S. judge certified a national class action in another "lights" case (previous blog).]

(corrected links 7/24/07) Here's the news release announcing the Center for Digital Democracy/U.S. PIRG complaint filed this morning to the FTC (previous blog). Excerpt from the release:

"Unfortunately, over the last several years the FTC has largely ignored the critical developments of the electronic marketplace that have placed the privacy of every American at risk," declared Jeff Chester, CDD executive director. "The FTC should long ago have sounded a very public alarm--and called for action--concerning the data collection practices stemming from such fields as Web analytics, online advertising networks, behavioral targeting, and rich 'virtual reality' media, all of which threaten the privacy of the U.S. public."

Current privacy disclosure policies, CDD and US PIRG contend, are totally inadequate, failing to effectively inform users what data are being collected and how that information is subsequently used. While many companies claim they collect only "non-personally identifiable" information, they fail to acknowledge the tremendous amounts of data compiled and associated with each unique visitor who visits their website. Thus even if these companies don't know the names and addresses of users, they literally know every move those users make online, through sophisticated online tracking and analysis technologies.

"The emergence of this on-line tracking and profiling system has snuck up on both consumers and policymakers and is much more than a privacy issue," said U.S. PIRG Consumer Program Director Ed Mierzwinski. "Its effect has been to put enormous amounts of consumer information into the hands of sellers, leaving buyer-consumers at risk of unfair pricing schemes and with fewer choices than the Internet is touted to provide."

It is therefore incumbent on the Federal Trade Commission, according to the CDD/PIRG complaint, to protect consumers from unfair and deceptive practices by using its authority under Section 5 of the FTC Act to address this issue on a variety of fronts:

launching an immediate investigation into the online marketplace in light of this new environment

exposing practices that compromise user privacy

issuing the necessary injunctions to halt current practices that abuse consumers

crafting policies--and recommending federal legislation--to prevent such abuses.

[Old urls updated, 13 Dec 06] Along with Consumers Union, Free Press, and Consumer Federation of America, we've filed supplemental comments opposing the merger of AT&T/Bellsouth (previous blog listing history of our participation). From today's filing:

The potential merger conditions outlined in AT&T's supplemental filing are insufficient to protect the public interest. The proposed conditions do little, if anything, to mitigate the negative effects the merger will have on consumers and competitors alike. In some cases, the proposed "conditions" represent nothing more than garden-variety "salute the flag" sloganeering. In others, the "conditions" outlined by AT&T appear to be little more than marketing strategies designed to entice existing customers to buy new services.

U.S. PIRG and a coalition of other major consumer, government reform and media reform organizations have filed comments opposing weakening of the current FCC rules preventing excessive media consolidation. We filed these comments as part of the ongoing FCC media ownership proceeding. The comments were prepared by the public interest attorneys at the Media Access Project. Excerpt:

Media ownership regulation is not simply about creating a competitive, profitable marketplace. More importantly, media ownership regulation is designed to insure a vibrant marketplace for democracy, civic discourse, and diverse viewpoints. Media ownership rules insure that we create an informed electorate, rather than "dumbing down" the public. Appropriate media ownership regulations create genuine options, rather than cookie-cutter options. Without the current broadcast ownership regulations, media ownership would simply serve what is in the best interest of broadcasters, leaving the public to wonder whatever happened to its best interest.

[update 13 Dec 06-fixed bad urls] Following a letter from commissioners and consumer champions Jonathan Adelstein and Michael Copps to FCC Chairman Kevin Martin (his reply), the chairman has been forced to delay a rubber-stamp vote on FCC approval of the AT&T/Bellsouth merger recently rubber-stamped by the supposed antitrust authorities over at the Department of Justice. Along with the Consumer Federation of America, Free Press and Consumers Union, (our petition to deny and declaration of our experts and reply comments are available at the FCC AT&T/Bellsouth merger page), we've steadfastly opposed this merger, which is anti-competitive, fails to preserve net neutrality and practically completes the anti-consumer, pro-monopoly process of putting AT&T back together again. See also our previous blogs on the AT&T/SBC and Verizon/MCI mergers and our letter urging a court review of those rubber-stamped decisions. Here's a recent news story (13 Oct) on the ongoing review by U.S. Judge Emmett G. Sullivan.

[Update 8 Dec: corrected internal URL links.] Pretexting is lying to obtain information, although some people like to call it just a "little white lie." In 1999, in the Gramm-Leach-Bliley Financial Services Modernization Act, Congress banned the use of pretexting to obtain financial records of consumers. Other types of pretexting may still be illegal as an unfair and deceptive practice in other contexts as the FTC explains or under certain state laws. As the sordid Hewlett-Packard boardroom scandal has revealed, bad guys, including private detectives, routinely call your phone company pretending to be you to obtain your detailed phone records (CPNI, see below). These phone records can then be used to build surprisingly detailed dossiers on your activities: what you do, where you go, who you associate with, etc. Will Congress protect us from it? Probably not today on the last session day before recess, despite our latest letter with Consumers Union and the Consumer Federation of America to the House urging passage of the bi-partisan HR 4943 to make pretexting illegal. But perhaps reform will pass in the lame duck session next month.

The House leadership has been sitting on this consumer group-supported phone privacy bill from the Energy and Commerce Committee since the spring. Since the phone companies they're friendly with don't like it, they don't like it. At his committee's hearings on the HP scandal Thursday and Friday, privacy champion and Chairman Joe Barton said this:

I'm going to continue to request that the House of Representatives vote on this bill [HR 4943] on the floor before this Congress adjourns this year. We must make pretexting clearly illegal. There is no room in our society for pretexters getting your phone records. If it can happen to a member of the board of directors of a Fortune 500 company, like Hewlett-Packard it can happen to any of us.

First, the legislation explicitly prohibits pretexting and other fraudulent means of obtaining customer proprietary network information, which includes detailed calling records. It also treats as a violation requesting that another party secure phone records when the requesting party knew or should have known that fraud would be used to obtain those records. These provisions will help stifle the commercial market for consumers' calling records and ensure that both those seeking to use illegally obtained records as well as those obtaining them illegally are held accountable. Moreover, it explicitly prohibits phone companies, their affiliates, joint venture partners and contractors from selling Customer Proprietary Network Information (CPNI)-- information that should never be available to the highest bidder.

While the financial pretexting law does allow banks to hire pretexters to attempt to infiltrate their own security, we wouldn't be at all surprised if it turns out that some banks knowingly went further than what's allowed, counting on their lax regulators to miss their own efforts.

One more thing, as always, the states continue to explore privacy solutions. Yesterday, California Governor Arnold Schwarzenegger signed legislation by State Senator Joe Simitian banning phone pretexting. Here's a link to a previous post on Illinois PIRG's efforts, with some fun banter from a TV interview with a private detective.

The ID Theft Task Force's most important recommendation is one that consumer and privacy groups have been calling for for years -- better protect the Social Security Number:

The Office of Personnel Management (OPM) should accelerate its review of the use of SSNs, and take steps to eliminate, restrict or conceal their use, including assignment of employee identification numbers where practicable....OMB should require all federal agencies to review their use of SSNs to determine where such use can be eliminated, restricted or concealed in agency business processes, systems and paper and electronic forms.

The red flag guidelines are supposed to require financial instiutions and credit bureaus to implement policies and programs that would spot "patterns, practices, and specific forms of activity that should raise a "red flag" signaling a possible risk of identity theft." The rules also require specific additional steps to take when address changes are made "followed closely by a request for an additional or replacement card." The problem, as we point out in our comments (drafted primarily by the Privacy Rights Clearinghouse), is this:

overall, the proposal incorporates far too much discretion that allows financial institutions and creditors to reject even the most obvious signs of identity theft. An effective Program should not allow companies to choose not only which red flags to incorporate but also which accounts are subject to the red flags. To do so creates the prospect that companies will adopt perfunctory Programs that amount to no more than the status quo. For the final rules and guidelines, the Agencies should act to eliminate the many layers of discretion incorporated into the proposal.

Indeed, it is the identity thief's ability to provide enough information to the credit card issuer for the issuer to access the victim's credit report ... that facilitates this form of theft. Allowing creditors to verify identity by obtaining the victim's credit report ... would be to permit a practice that enables identity theft and that fails to ensure that a credit card applicant is really who the person claims to be.

Indeed, the identity verification standard should, if anything, be higher for credit card issuers. In general, at least a minimum threshold of identity verification, tailored to types of financial institutions and the specific nature of identity threat, should be included in the Red Flag guidelines. Such verification should include requiring the use of documentary identification for individuals and contacting the consumer when there are address discrepancies.

A fraud alert or active duty alert is the number one red flag for both the banking and the FTC list. The proposal not only allows discretion about whether to include a fraud alert as a red flag, but incorporates leeway in deciding what actions to be taken -- assuming a fraud alert is even included as a red flag. A fraud alert should always trigger a notice requirement.

I'd been meaning for some time to do a piece on the massive PR campaign that the cell phone companies have rolled out in DC metro stations and Capitol Hill newspapers to try to convince either Congress, the courts or the FCC to preempt strong state consumer protections against unfair practices of cell phone companies. Well, Annys Shin, the Washington Post reporter who has taken over the paper's consumer blog The Checkout has beaten me to it. We're opposing two industry petitions before the FCC to weaken the rules, we're amicus in a key lawsuit (Cellco v. Hatch)and we oppose the Senator Ted Stevens (R-AK) telecommunications bill. all of which would preempt state wireless protections. Excerpt from our 8 September letter, with Consumers Union, to the Senate: MORE:

Section 1006 of the ATOR Act inexplicably preempts existing state authority to regulate the terms and conditions of wireless services―authority that Congress explicitly provided to the states under Section 332 of the Communications Act. The preemption provision was included in the pending legislation with virtually no prior committee consideration of the ramifications of eliminating consumer protections at the state level. The provision is particularly unwarranted given the substantial growth in the wireless industry under the current system of dual federal and state regulation provided by Section 332. Subscribership has grown from 13 million in 1993 to some 200 million today, demonstrating that the dual system has supported dramatic growth in the industry.

Unfortunately, widespread unfair, misleading and deceptive business practices that adversely affect consumers have accompanied that growth. The wireless industry leads the Better Business Bureau’s list of most complained-about industries, surpassing even car dealers in customer dissatisfaction. Wireless complaints to the FCC have more than doubled since 2002, exceeding the rate of wireless subscriber growth over this time. Despite this rise, FCC has never taken enforcement action against a wireless provider in response to consumer complaints in recent years.

[Update, Nov 2006, corrected internal links.] Along with a dozen groups and 17 law professors, we've joined a Supreme Court amicus (friend of the court) brief prepared by the Center for Responsible Lending in a very important case, Wachovia v. Watters, which the Court will hear in the October term. Wachovia Mortgage is a non-bank, state-licensed operating subsidiary of the national bank Wachovia; Linda Watters is Michigan's chief financial regulator. The issue: whether the lower courts have erred in deferring to the opinions of the Treasury's Office of the Comptroller of the Currency (OCC) in its rules broadly preempting state consumer and anti-predatory lending laws and their enforcement over nationally-chartered banks. In this case, in particular, the question is raised whether the OCC can extend its claimed authority not only to a national bank, but also to its non-bank, state-licensed, separately incorporated operating subsidiaries merely owned by the national bank. MORE:

While this case is critically important as a matter of state predatory lending enforcement, the decision will likely also address the issue of agency deference more broadly. Many observers believe the lower courts have so routinely, and so wrongly, interpreted the law in granting agencies what is called Chevron deference, that an increasing number of agencies are now asserting powers broader than Congress gave them, especially in their assertions that federal law trumps stronger state laws, confident that the courts will rubber-stamp their assertions. This not only erodes Congressional authority, it diminishes the longstanding right of the several states to protect their citizens from unfair financial schemes, unsafe products or unhealthy environmental practices.

Ideally, the Supreme Court's ruling will narrow the circumstances as to when a federal court should defer to an agency's expertise, and ideally rein in the far-flung ideas of a number of agencies as to their purported powers.

Wachovia v. Watters concerns 2001 and 2004 preemption determinations by the OCC. In 2001, OCC ruled that state-licensed, separately incorporated, non-bank operating subsidiaries of national banks, such as Wachovia Mortgage, were exclusively under its purview. Then, in 2004, in response to passage by several states of strong anti-predatory lending laws, it issued two even broader preemption rules. One rule broadly preempted state consumer laws as they applied to national banks (and their subsidiaries), even when no federal law protected consumers; the other, known as the visitorial rule, said that even when a national bank (or its subsidiary) must still comply with a state law (a few are left that OCC says banks must comply with), that state enforcers, such as Michigan's Watters, cannot enforce the state law, only OCC can.

We argue in our joint brief that this is wrong on policy and wrong on the law:

Section 7.4006 [the 2001 change as modified by the effect of the 2004 rules] would also prevent the fifty states from utilizing their extensive experience and resources to enforce those laws that do apply -- leaving all enforcement in the hands of a single federal agency that has shown little interest in ensuring fairness to consumers. No deference is due to an interpretation by a self-interested agency that would undermine consumers' interests and state sovereignty in such a significant way. Deference to the OCC in this case is also inappropriate because the preemption determination involves pure issues of law properly resolved by the judiciary. The OCC's rules are premised on a number of legal errors, including its failure to follow decisions of this Court that it purported to distill.

The second question--whether displacement of state law is required--entails a judgment about the degree of tension between federal and state law, and whether this tension requires displacing state law with a regime of exclusive federal regulation. In answering this question, agencies should not be given the strong deference associated with Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). The question is constitutional in nature, grounded in the Supremacy Clause; it is governed by judicially-created doctrine as to which agencies can claim no particular insight; it has systemic implications for the balance of authority between the federal government and the States, as to which agencies can claim no disinterested expertise; and it involves policing the boundaries of agency authority, a function that Congress has generally assigned to courts rather than to agencies themselves.

On behalf of a variety of associations of state and local officials, including governors, legislatures and financial regulators, one of the nation's preeminent authorities on banking law, Professor Arthur Wilmarth of George Washington University Law School, has also filed an important brief:

The Sixth Circuit Court of Appeals erred when it refused to apply a presumption against preemption of Michigan's laws governing state-chartered, non-bank mortgage lenders. The court also erred in holding that the OCC's preemptive regulations were entitled to deference under Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). ... Given the States' historic role in protecting their citizens from abusive financial practices, the OCC could not lawfully adopt rules preempting the States' authority to regulate operating subsidiaries without a clear and manifest delegation of authority from Congress. See Gregory v. Ashcroft, 501 U.S. at 461, 464. Congress has never expressed an intention to delegate such power to the OCC, and the OCC's rules are therefore invalid.

So, when an agency believes that the courts will routinely grant it deference, it pushes the line even further in its proposed rules, confident that the courts would later defer. It may claim powers Congress never gave it; it may preempt when it does not have the authority; it may do these things to grow its own own self-esteem or to please its regulated entities. The OCC is certainly the poster child for this view, with its 2001 and 2004 power grabs (our special site OCCWatch), but recently a number of other agencies -- with aid and advice from industry lawyers -- have sought to limit state authority and state legal rights (previous blogs on NHTSA here and the CPSC here). So while this case may not have the star power of a recent Supreme Court case involving Anna Nicole Smith, it is a lot more important.

Probably half the work we do in Washington isn't pitching new policy ideas; it's preventing Congress or unelected Washington regulators from scuttling the longstanding right of the states to come up with their own new policy ideas to protect consumer pocketbooks, health and safety. We need many laboratories of public policy, not just one. Our e-newsletter Preemption Alert keeps an eye out.

When Washington issues leak out into popular culture, it's a sign that the problem is serious. I noted recently that I knew that predatory payday lenders were really in trouble when the military drama The Unit included a plot line attacking them. Last December, the hit show Boston Legal did a story on how the OCC had aided and abetted loan-sharking by credit card companies. Here's an excerpt from the script:

Jerry Espenson: Used to be. Used to have usury laws but the States wanted the credit card business, so poof! Gone! Bingo! Ever inquire about a car loan?
Melissa Hughes: Actually, yes. Once.
Melissa Hughes: Bingo!
Melissa Hughes: But I didn't buy the car.
Jerry Espenson: Doesn't matter. It's called 'Universal Default'. Credit bureaus share your
information. All of it. Your credit card company just heard about your asking for a car loan.
Bingo! They raise your rates. Why? Because they can.
Melissa Hughes: Under her breath to Alan. Why doesn't he move his hands?
Jerry Espenson: The OCC is supposed to police. They don't. Bought off by the credit card lobbyists.
He walks out.
Melissa Hughes: Is he coming back?
Alan Shore: I have no idea.

U.S. PIRG (our comments) and the PIRG-backed Transatlantic Consumers Dialogue (TACD comments) have each filed requested comments to the European Chemicals Bureau in support of the proposed European chemical safety law known as REACH. Recently, the new U.S. Ambassador to the European Union, C. Boyden Gray, has been revving up industry and official U.S. opposition to the extremely pro-environmental, pro-public health proposal (my previous blog).

On July 28th, the Federal Deposit Insurance Corporation (FDIC) announced that it would not accept new, nor approve any pending, applications to establish Industrial Loan Corporations (ILCs) -- a kind of under-regulated bank that PIRG, other consumer groups and also the Federal Reserve Board believe poses tremendous risks to the safety and soundness of the banking system -- for a moratorium period of six months. The main target of the delay is the behemoth Wal-Mart's controversial (and PIRG-opposed) application to open an ILC. MORE:

There's no doubt that the tremendous public concern over the application encouraged the FDIC into reviewing its past rubber-stamp ILC approval process. After all, just as the "rich are different," as Fitgerald apparently said, Wal-Mart's application is different than any other. Letting Wal-Mart open an ILC could, like the water flowing out of Lake Ponchartrain breached (not simply overflowed) the New Orleans levees, cause an ultimate and irreparable breach in the long-standing wall between banking and commerce that's been designed to protect the financial system from both excessive risk and from credit misallocation. I am encouraged that the FDIC sat back and essentially asked itself: "Whoa, with the potential repercussions, is this an appropriate action for unelected bureaucrats to take?" From the FDIC press release:

Recently, the growth of the ILC industry, the trend toward commercial company ownership of ILCs and the nature of some ILC business models have raised questions about the risks of ILCs to the deposit insurance fund, and whether their commercial relationships pose any safety and soundness risks.

For several years, the FDIC and Utah state regulators have presided over a commmercial firm ILC gold rush. Where debtors seeking to avoid bankruptcy claims once scrawled "GTT" or "Gone To Texas" on their doors -- to take advantage of the state's powerful homestead exemption, large corporations are now etching "Gone To Utah" on the glass doors of their still-solvent Wall Street and other profit-making enterprises. They seek a pliant regulatory system and Utah's the place. That new gold rush was made possible by Utah's system of rough, frontier regulation. To date, the FDIC had provided just a light touch of federal supervision in return for the powerful magic of taxpayer-backed deposit insurance. The simple fact is this: neither Utah nor the FDIC have the full legal authority necessary to regulate the large, complex financial enterprises that ILCs are attached to in their holding company structures and that means that the taxpayer-backed insurance system is at risk today and will be at greater risk if the under-regulated ILC system continues to grow. These once small, once limited-purpose entities are now being designed to widen small cracks in the otherwise strong walls that otherwise separate banking and commercial firms and the long-term business model of many of the companies investing in them (backed by their network of "free-market" "think" tanks) is to keep pounding the regulators and the Congress to open the cracks wider. That's the wrong way to go.

Of course, Wal-Mart, claiming it deserves to be treated like all those firms granted ILCs before it, claims that it only wants the under-regulated bank for narrow, limited purposes, and that it would never want to get into full-scale banking. We agree with what 99 U.S. Representatives wrote the FDIC a month ago:

While many of these firms say that they want to own an ILC for very narrow purposes, and file narrow business plans with their applications, it is not clear that the FDIC has the legal authority to permanently prevent them from engaging in activities that are permitted by their chartering state, so long as they remain well-capitalized and operate in a safe and sound manner.

Wal-Mart’s application violates long-standing principles of banking law that commerce and banking should not mix. Recent corporate scandals show the serious risks involved in allowing any commercial entity to own a bank without significant regulatory scrutiny at the holding company level. ILCs are exempt from the Bank Holding Company Act (BHCA) which allows the Federal Reserve to conduct examinations of the safety and soundness not just of banks, but of the parent or holding company of these banks. The BHCA also grants the Federal Reserve the power to place capital requirements and impose sanctions on these holding companies. The FDIC does not have these powers. Oversight of the holding company is the key to protecting the safety and soundness of the banking system. It is immaterial whether the owner of the bank is a financial or a commercial entity. Holding company regulation is essential to ensuring that financial weaknesses, conflicts of interest, malfeasance or incompetent leadership at the parent company will not endanger the taxpayer-insured deposits at the bank. Years of experience and bank failures have shown this to be true. For example, recent accounting scandals at Sunbeam, Enron, Worldcom, Tyco, Adelphia and many others involved deliberate deception about the financial health of the companies involved. If these companies had owned banks, not only would employees, investors and the economy have suffered, but taxpayers as well.

One of the most important consumer protection fights occurring both in Washington and internationally is the battle to ensure access to knowledge and culture. Powerful special interests are using a variety of tactics and strategies to try to privatize and control access to knowledge and culture. There are many efforts, but among the most brazen is the ongoing effort by some "webcasters" to invent, then grab, property rights that never before existed. Jamie Love of CPTech has a new blog entry explaining the Bush Administration's latest submission to a Geneva-based UN agency known as WIPO, which is considering a proposed broadcast treaty that powerful webcasters -- Fox, Yahoo and AT&T and others -- have been using as a wedge to demand an unprecedented grant of new rights and control over information streamed through their servers, even if it exists in the public domain, and even if they don't own it, never owned it, and didn't create it. MORE:

Along with its other perhaps more significant claims, the Bush negotiators have also proposed that what had been called webcasting would henceforth be known as netcasting. The CPTech WIPO treaty page is here. As background, here's a joint statement a number of activists sent US negotiators in March.

For more on the philosophy and importance of preserving knowledge and culture in a shared commons, and the growing corporate threats to privatize and commodify that shared knowledge and culture instead, I recommend a book on threats to all kinds of publicly-held assets, Silent Theft (2002), by David Bollier and, more specifically, an article by Professor James Boyle, The Second Enclosure Movement. Both Bollier and Boyle explain the threat to public knowledge as having an historical parallel in the English Enclosure movement and subsequent Parliamentary Enclosure Acts -- where the rights of the public to graze and hunt on common lands and forests were taken away and those lands then granted to powerful special interests, as this review of Silent Theft explains:

In a massive project of social engineering, Parliament passed the Enclosure Acts, which stripped the commoners of their property rights and delivered the lands to individual, usually wealthy landowners. (By 1895, about half of one percent of the population of England and Wales owned almost 99 percent of the land.) Thus was born the market on a national scale. Land became a commodity---real estate---and commoners became commodities too, in the form of workers in a "labor market." Something people once thought was theirs suddenly was someone else's.

And as Professor Boyle explains:

We are in the middle of a second enclosure movement. It sounds grandiloquent to call it "the enclosure of the intangible commons of the mind," but in a very real sense that is just what it is. True, the new state-created property rights may be "intellectual" rather than "real," but once again things that were formerly thought of as either common property or uncommodifiable are being covered with new, or newly extended, property rights.

We've joined Free Press, Consumers Union and Consumer Federation of America in a letter urging Senators to oppose the Stevens telecom bill now known as the Advanced Telecommunications Opportunity Reform Act or ATOR. We oppose it because it fails to keep the Internet free (no enforceable net neutrality provision) and it fails to ensure that video providers won't cherrypick rich communities and gouge or ignore others. Excerpt:

Every community--rich or poor, rural or urban--deserves the benefits of new technology and competition. Good public policy guides the market to maximize competitive deployment across the board in video and broadband. It also protects an open, thriving and nondiscriminatory marketplace for Internet content and applications. American consumers deserve both build-out of broadband and video networks and enforceable network neutrality on the Internet platform.

U.S. PIRG and Florida PIRG have joined over 70 consumer and veterans groups calling on Congress to enact an amendment by Sen. Jim Talent (R-Missouri) and Sen. Bill Nelson (D-Florida) to protect military families from payday lenders, who trap borrowers in a vicious cycle of debt at interest rates of more than 400 percent a year. Here are copies of the consumer and civil rights groups and the veterans aid societies letters. This news release from Center for Responsible Lending and Consumer Federation of America has more information about how the amendment will rein in the usurious practices of payday, title pawn and other lenders that cripple our military readiness and hurt our military families. My previous blog with more info.

A few weeks ago I posted an entry that U.S. District Judge Emmett G. Sullivan had commendably refused to allow his court to rubberstamp the recent mergers between Verizon and MCI and ATT and SBC. This week, we and two other leading consumer groups, Consumers Union and the Consumer Federation of America, with whom we had filed joint petitions to deny the mergers, sent Judge Sullivan a letter commending him for his vigilance and reiterating the importance of his review to the public interest: Excerpt:

The undersigned representatives of leading, national consumer groups participated actively in federal proceedings in opposition to these Bell mergers, including filing a petition to deny merger approval with the Federal Communications Commission (FCC), as well as numerous and substantial presentations to the FCC and DoJ outlining the concerns of consumers. Our submissions and concerns about the mergers' anti-competitive impacts on the residential market were disregarded by both FCC and DoJ. DoJ imposed no conditions on the mergers sufficient to protect consumer interests in reducing the anticompetitive impacts of the mergers.

The floor statements of Senator Kohl and other co-sponsors of the 2004 Amendments to the Tunney Act clearly reflect the intent of Congress to overrule the precedents cited by the Department and require the Court "to review a list of enumerated factors to determine whether a consent decree is in the public interest...[and] ensure that the Justice Department's antitrust consent decrees are in the best interests of consumers and competition." Indeed, we do not see how the court can fulfill its statutory obligations by limiting the scope of its review to the complaint and providing the deference to DoJ's decision making that the Department contends is required.

In June, we joined other groups in the "Access to Knowledge" (or a2k) movement in a letter in support of legislation sponsored by Senators Jon Cornyn (R-TX) and Joe Lieberman (D-CT), S 2695, The Federal Research Public Access Act of 2006. If you, as a taxpayer, acting through the federal National Institutes of Health or the Department of Energy or National Academies of Science or some other agency that funds research, make grants of taxpayer funds to research, shouldn't you as a taxpayer be able to access the research results? Well, most of the time, that isn't the case. MORE:

Why? The research is published in extremely expensive journals, often controlled by a few powerful private publishers. The bill would require agencies with annual research budgets of more than $100 million to implement a public access policy. Advocacy for the bill is being coordinated by the Alliance for Taxpayer Access, which has a lot of background on the issue on its site. Excerpt:

From NIH funding alone, it is estimated that about 65,000 papers are published each year. Because U.S. taxpayers underwrite this research, they have a right to expect that its dissemination and use will be maximized, and that they themselves will have access to it. If this information is shared with all potential users, it will advance science and improve the lives and welfare of people of the United States and the world. This is an achievable goal – today. The Internet has revolutionized information sharing and has made it possible to make the latest advances promptly available to every scientist, physician, educator, and citizen at their homes, schools, or libraries.

Here's our consumer group letter opposing a House bill, HR 2567, granting immunity from liability to antifreeze makers who add a bittering agent so kids and pets won't drink their product. The bill overhwelmingly passed the House Energy and Commerce committee anyway. It's got a long way to go before it becomes law. Previous blog.

Along with Consumers Union and others, we filed comments opposing a Consumer Product Safety Commission plan to weaken rules requiring companies to notify the agency of potential safety hazards: From our joint comments:

In summary, this proposal is likely to jeopardize the Commission's ability to receive important product safety information that serves as a critical tool for their consumer protection function.

The Albuquerque Tribune's Ollie Reed has a very detailed analysis (as part of an excellent series) explaining how predatory auto title pawn and payday lenders have used political power from massive campaign contributions to block meaningful reforms sought by NMPIRG, Attorney General Patsy Madrid and a broad coalition in one of the nation's poorest states. A few years ago, I toured some of New Mexico's most impoverished areas with NMPIRG advocates. MORE:

We visited Gallup, the gateway city to the massive Four Corners area Navajo reservation that covers large parts of New Mexico and Arizona. A Legal Aid attorney reminded us of what General William Tecumseh Sherman had said in the 1870s: "A reservation is a parcel of land inhabited by Indians and surrounded by thieves." From the Tribune:

Most of the 700 payday and car-title stores in New Mexico are concentrated in areas populated by low-income communities. According to the Attorney General's Office, the biggest concentration per capita - about one lender to every 500 residents - is in Gallup, where many of New Mexico's American Indians live. By comparison, the ratio is about one to 2,500 in Albuquerque and one to 7,000 statewide.

Levon Henry, executive director for DNA People's Legal Services told the Advisory Committee that DNA has been in operation nearly 40 years and continues to see these problems and they do not seem to be getting any better: "Many people in the Four Corners region have been devastated by the unscrupulous business practices of car dealers, mobile home dealers, pawn shops, and the new payday loan and title loan operations. Many of the unscrupulous dealers and business operators are willing to take full advantage of the elderly who they know full well don't understand the terms and conditions of the legal documents they are signing. While some community members may say that the blatant discrimination of Native Americans and low income persons is tempered by the passing years, it remains alive and well in another forum shown through the well-documented business practices of these unscrupulous car dealers, unscrupulous mobile home dealers, and unscrupulous pawn dealers.
This is not to say that this is a reflection of this community."

We testified yesterday before the DC City Council in support of several proposals to enact a strong security freeze and breach notice law. Under two proposed security freeze laws, one from Councilmember Patterson and one from Councilmember Cropp, DC residents would gain the right to a free security freeze (free to place and free to lift) to protect themselves from identity theft. The DC Attorney General's Office and Consumers Union also supported strong privacy protections. A variety of insurance industry and credit bureau witnesses sought special interest exceptions from the proposals.

The European Commission's antitrust cops are putting heat on the Mastercard Association over possible anti-competitive practices concerning interchange fees imposed on merchants in its credit and debit card payment networks according to stories in today's New York Times and Wall Street Journal. From the Times:

The commission says that interchange fees on cross-border transactions amount to restrictive business practices because they prevent the banks from competing to offer lower fees to retailers, and indirectly to consumers. "The system could work without these fees," [an official] said.

In what is likely a calculated move designed to convince the FCC into granting an industry petition to preempt state laws regulating cell phone early termination fees (ETFs) as penalties, Verizon has announced (Washington Post) that it will reduce ETFs over the term of a two year cell plan contract. The gradual reduction doesn't solve the essential problem: ETFs prevent consumers from shopping for the best deals. This allows cell phone carriers to use a variety of unfair practices, knowing that their customers cannot afford to switch plans because they are essentially locked in a cell. MORE:

The PIRG report Locked In A Cell found that:

Nearly half (47%) of all cell phone customers would switch or consider switching cell phone service carriers to get a lower rate and better service if they didn't have to pay an average penalty of $170 to cancel their service contract. The report also found that consumers have paid $4.6 billion over the last 3 years due to the penalties-- that's $2.5 billion in actual penalties paid and $2.1 billion in lost benefits from consumers who either couldn't afford the penalty or didn't think it was worth paying.

We filed the report to the FCC as a comment in its proceeding, and also filed joint comments with the National Consumer Law Center and Consumers Union in the same docket. The industry hopes that the FCC will classify the punitive ETF fees as rates, which would not be subject to state regulation. In a related docket, the FCC has issued a rule which is being challenged in court, that would treat other state regulation (truth in billing rules) as rates. We link to comments in both dockets here. Yesterday's Senate Commerce action on telecom deregulation -- if it becomes law -- would further limit state authority to protect consumers from unfair cell phone practices.

Here's our U.S. PIRG letter delivered to the full House opposing HR 3997, sponsored by Reps. LaTourette (R-OH) and Hooley (D-OR). HR 3997 is the worst data bill ever, for the following reasons: MORE

HR 3997 as passed by the House Financial Services Committee:

It is important to note that we oppose HR 3997, the Financial Data Protection Act, as passed by the Financial Services Committee. Under House procedures, the bill was then referred to the Energy and Commerce committee, which substituted HR 4127 (the DATA Act) for HR 3997. In this version of HR 3997, we oppose the italicized section, which is the original Financial Services passed bill (pages 2-68). The remainder of the bill in boldface roman (pages 68-108) is the Energy and Commerce DATA bill, which is much better, but we cannot offer unqualifed support due to its (much narrower than HR 3997) state law preemption. See the letter for details.

Here's our letter with other leading consumer groups to the Senate Commerce Committee strongly opposing the Stevens (R-AK) telecom deregulation bill unless substantial changes are made to promote competition, protect communities and reinstate net neutrality. Net neutrality should be considered Tuesday during continuation of the markup vote begun last week. MORE:

From our letter:

The Act provides for sweeping deregulation of cable services regardless of whether meaningful competition emerges resulting in increased prices and degraded service for many consumers; gives new market entrants a license to redline; inexplicably preempts state consumer protection laws for terms and conditions of wireless telephone services where consumer abuse is rampant and growing; and fails to provide meaningful network neutrality rules to prevent anticompetitive discrimination that squelches competition and innovation. If enacted, the legislation makes consumers far worse off than they are under current law. It provides too few guarantees of new competition to justify the significant sacrifices in consumer protections at the federal, state and local level.

The lack of net neutrality is one threat to the Internet. So is the proposed WIPO webcast treaty.Here's a new letter from U.S. PIRG, Public Knowledge and other groups urging Congress to investigate the treaty, which would grant unprecedented property rights to webcasters such as Yahoo, including the right to public domain and other content that the webcasters did not create. MORE:

Two little-noticed agencies, the Commerce Department's U.S. Patent and Trademark Office and the Copyright Office of the Library of Congress, have spent the last several years over in Geneva at the World Intellectual Property Organization (WIPO is part of the UN) negotiating a treaty that would grant unprecedented intellectual property rights to webcast companies like Yahoo. But they've kept it low-profile despite numerous attempts by public interest groups to convince them to open up their process. Here's an excerpt from our new letter on what's at stake:

We are troubled not only by the substance of the treaty, but also by the fact that the U.S. delegation, represented by the Library of Congress Copyright Office and the U.S. Patent and Trademark Office (USPTO), have failed to engage in any public discussion about the effect of the treaty on consumers, industry, copyright holders and U.S. law...
The harm to the millions of consumers represented by the undersigned organizations would be particularly great – this additional layer of rights could permit broadcasters to restrict access to content within the home and could limit lawful uses of content over the Internet. Thus, this treaty could reverse the explosion of diverse and increasingly sophisticated “user generated” content that has become part of the fabric of the Internet.

Were your Representative and Senators Heroes or Zeros on key public interest votes in 2005? Find out in the PIRG Congressional Scorecard.

"At the behest of special interests, the 109th Congress has voted to give tax breaks to big oil companies, nuclear power and coal, voted to weaken consumer protections, failed to cut global warming pollution, failed to increase automobile fuel economy, and failed to make polluters pay for toxic waste cleanups," said U.S. PIRG Legislative Director Anna Aurilio. "These scorecards are an important tool to educate the public about the voting records of their elected officials and to help citizens hold those officials accountable."

"We applaud the 166 members who scored 80 percent or more for consistently voting in the public interest. We are particularly disappointed in the 208 members who consistently voted to put special interests before public health and safety and scored 10 percent or below."

UPDATE: corrected bad urls 15 Jan 07] (I'll get to credit bureaus and the phone company in a minute, and even access to knowledge and culture and your fair use rights, as a sidebar.) But first you need to know about Johnny Fever and the Phone Police. I've seen a few comments on the big blogs this week referring to the classic "Run, it's the phone police!" episode of the hilarious late 70's-early 80's show WKRP in Cincinnati. The 2006 blog comments are of course in reference to the recent news (see e.g., Does Anyone Have Privacy Left? in the Baltimore Sun) about the phone companies assisting NSA in spying on us. On WKRP, I recall that the phone police were chasing manic deejay Dr. Johnny Fever (played by Howard Hesseman) because he hadn't paid his phone bill. MORE:

The phone police from the show are probably phone company in-house debt collectors. The phone companies always chase down the bills. Of course, the firms have always had a powerful cudgel hanging over their customers' heads, whether or not they ever employ phone police: "Can't pay us? No problem, we'll shut off your phone. Have a nice day."

Now, the phone companies may actually be turning their efficient payment apparatus into a force for the public good. Verizon is beginning to report your regular payment history -- late is bad or on-time is good -- to the credit bureaus, as Gary Haber recently reported in a comprehensive story about Verizon and credit bureaus in the Delaware News Journal. Previously, they only reported extremely negative payment behaviors -- phone shut-offs, sent to collection, etc.

However, it is a complex issue. I hope that the phone company reporting to bureaus will help consumers with thin credit histories. As the Delaware News-Journal reports:

Mierzwinski, a supporter of expanding the information collected on credit reports, said the variable is whether timely phone-bill payments improve credit scores enough to outweigh the risk that late payments will hurt credit scores.

[NCRA does not include the so-called Big Three repository credit bureaus Equifax, Trans Union or Experian as members. Instead, its members include a variety of specialized credit bureaus, including many whose business model actually includes manual labor: such as making actual phone calls to verify files to assist consumers in getting the best mortgage rates. Ask one of the Big Three to make a phone call to check out your dispute. Of course, first you'd need to get someone on the phone, but that's another blog for later!]

Consumer groups, including U.S. PIRG, support broadening the information on credit reports in principle. We supported a successful 2003 effort by U.S. Senator Debbie Stabenow (D-MI) to require a study of common unreported transactions in credit reports. In PIRG-endorsed 2005 Congressional testimony on new credit reporting systems by Margot Saunders of the National Consumer Law Center, NCLC, PIRG and other consumer groups testified that while rental payments were an excellent indicator of creditworthiness and that phone payments probably were, most energy-related utility payment patterns were not, and payments for over-priced predatory loans certainly were not:

Many of the programs devised to protect low income households from shut off of essential utility service do not punish for late payments. Indeed, in some of these programs, additional benefits are triggered only after payment delinquencies. As a result, the utility payment histories for low income households will quite often have little relevance to the issue of whether the consumer would make timely payments if they were able.

We summarized the issues this way in Margot's testimony:

if the new data and scoring systems are built and used appropriately, the potential benefits to consumers are significant. However, because of the way that credit data and scores are being used in the marketplace, if these systems are built incorrectly, or used inappropriately, the danger to these consumers could be devastating.

As a coda to my reference to WKRP, it turns out that talking about WKRP also gives me a chance to talk about copyright and access to knowledge and culture. In my web research of the show, I noticed numerous on-line ads for DVDs of the show's episodes. I'd be wary. Why? I also noted numerous stories, such as this one from Wired News, that said that the cost of "clearing rights" to all the music heard in the show was prohibitive. I don't know if that problem has been solved, or if the music has been replaced on the DVDs-- the Wired story notes that several other old shows that have put on DVD were first modified with new canned background music replacing the original soundtracks. Jaime J. Weinman's blog excerpts a very recent TV Guide interview with WKRP star Loni Anderson that indicates the problem hasn't been solved, so I am not about to buy one of these possibly altered DVDs. In his book, Free Culture, (see page 107 of the pdf online edition) Professor Larry Lessig explains the problem. He describes how John Else delayed release of his documentary movie about the making of Wagner's Ring Cycle due to rights problems. As a review of the book summmarizes:

Lessig provides an example of this with a young filmmaker and teacher, John Else, who was making a documentary about Wagner's Ring Cycle. During one scene the filmmaker was shooting some stagehands playing a board game, and in one corner of the room where filming was happening there was a television set playing an episode of "The Simpsons." When the filmmaker finished the film he attempted to clear the rights for 4.5 seconds of "The Simpsons" and was told by Fox that it would cost him $10,000. As the filmmaker feared being sued by Fox if he claimed "fair use" and couldn't afford to pay for the rights, he ultimately re-edited the film using different footage.

Last night so-called Senate Health Week got off to a stunning start as two Senator Frist-backed (R-TN) bills to weaken protections for victims of medical malpractice were crushed, as Dana Milbank reports in Take Two of These and Call Us Next Year in today's Washington Post. Next up, S 1955, Senator Enzi's (R-WY) proposal to expand health coverage affordability by exempting some plans from state laws requiring minimum coverage. Expanding health insurance coverage is a well-intentioned goal, especially when compared to Dr. Frist's proposals to cap the damages available to victims of drug company, hospital or doctor malpractice. But the Enzi approach is misguided. It will only precipitate a race to the bottom as our letter in opposition explains:

Twelve governors, 41 state Attorney Generals and dozens of state Insurance Commissioners oppose this legislation. We do have a health insurance problem in this country, but this bill is not the solution and may make things worse by negatively affecting the health care of 85 million Americans. Instead of supporting S. 1955, we urge you to support the Durbin-Lincoln Bill, S. 2510, which would allow small businesses to join purchasing pools to lower their insurance cost, but would still require that all health insurance plans meet state benefit and provider access protection laws.

Here's our consumer group letter urging the U.S. Senate Banking Committee to reject any extremely anti-consumer amendments to the so-called regulatory relief package expected to be approved in committee today. We remain disappointed that the Congress thinks it is OK to enact massive grab-bag bills sought by the banks and credit unions, without including any pro-consumer provisions. Like Neo stops these bullets from the multiple Mr. Smiths, we hope we can stop all of the worst possible amendments outlined in our letter, especially the proposal by the predatory rent to own boys to override strong consumer laws in the states that protect their consumers best. It will be hardest to stop an expansion of a tawdry relationship that allows debt collectors to send official-sounding letters to consumers who bounce checks for as little as $15 that threaten them with criminal charges. The catch? The threatening letters from the debt collectors are on District Attorney letterhead.

The regulatory relief bill is derived from an original 187-item pick list known as The Matrix. Whatever passes the Senate will be conferenced with the extremely anti-consumer HR 3505, which has already passed the House (previous blog). Free your mind, Congress. Pass pro-consumer bills, not knee-jerk industry relief bills.

Get Free Music. Fight Acne. Stay Cool. That's a link to a web ad by Galderma Labs promoting the acne drug Differin to teens. Two free downloads for signing up (doesn't she looks psyched?), 7 more for filling a prescription and ten more downloads for renewing it. MASSPIRG and USPIRG have joined the Prescription Access Litigation Project and other groups in comments to the FDA calling for a ban on coupons for prescription drugs.

The coupons are even worse ideas when marketed to kids. Ask your doctor for drugs so you'll get "free music?" Bad idea. Here's why coupons for prescription drugs are a bad idea for all consumers, from our comments:

We see deceptive marketing by pharmaceutical companies as one of the primary factors driving up the cost and inappropriate use of prescription drugs in the United States. Coupons, as a type of Direct To Consumer Advertising (DTCA), contribute to the negative effects of drug marketing and represent one of its crassest forms...
1) Coupons interfere with the doctor-patient relationship;
2) Coupons foster overuse of brand-name drugs at the expense of generic drugs;
3) Coupons inevitably affect the perception of risk and benefit;
4) For consumers with government prescription coverage, coupons can constitute an illegal kickback.

Here's the testimony in opposition we presented today at the FDIC's hearing on Wal-Mart's request for taxpayer-backed federal deposit insurance for its proposed Utah-chartered Industrial Loan Corporation (ILC). In my testimony, I referenced a January 2006 letter from Chairman Alan Greenspan of the Fed to Rep. Jim Leach (R-IL), who was chairman of the House Banking Committee when the 1999 Gramm-Leach-Bliley Financial Services Modernization Act was enacted. More.

At that time, Congress chose to allow mergers between banks and other financial firms, but largely maintained the longstanding wall between banking and commercial or industrial firms such as Wal-Mart. In that 1999 act, Congress closed one major loophole between banking and commerce, but for inexplicable reasons did not completely shut the door on ILCs. Some of these once-small and limited purpose entities are now as large as and conducting activities nearly as broadly as the largest banks, yet remain sorely under-regulated.

Chairman Greenspan, his successor Chairman Ben Bernanke and Rep. Leach remain strong opponents of the ILC loophole that Wal-Mart seeks to drive through. The Greenspan letter details how a Utah ILC and its parent company (Wal-Mart) would be subject to less oversight than a bank that is part of a holding company structure should be and goes onto describe why expansion of ILCs is a bad idea. While the FDIC may have an impressive edifice in Arlington, neither the FDIC nor the Utah regulators who've been aggressively marketing their ILC loophole have the legal authority to conduct consolidated oversight and supervision of ILCs like the Wal-Mart Bank and its parent, big Wal-Mart.

Over the two days of the Wal-Mart hearings out at the FDIC's massive Arlington, VA bastion, nearly all witnesses have argued that Wal-Mart's application must be denied because its corporate character is deficient and because the risks to the financial system and, indeed, as we argued, the entire economy, of either credit misallocation by a Wal-Mart Bank or, worse, a Wal-Mart Bank failure, are too great to ignore.

I'm testifying Tuesday at the FDIC's "Wal-Mart Wants A Bank" hearing. It's the second of two days of DC hearings on the issue; the FDIC is also holding a hearing in Kansas City. This previous entry links to our previous written comments against Wal-Mart's application.

Along with my colleagues Travis Plunkett of the Consumer Federation of America and Margot Saunders of the National Consumer Law Center, I am delivering testimony today before the Senate Banking Committee (it may be webcast here) in opposition to hundreds of bank regulator and bank and credit union industry proposals to roll back consumer laws. Some of the proposals preempt state laws, including an effort to eliminate New Jersey's tough rent-to-own protections. Others weaken federal law. Here's our joint written testimony. We're each speaking before the committee and focusing on different pieces of it. I'll put up a longer blog later. with highlights.

Despite the bright spotlight of the ongoing trial of Enron and its top executives Ken Lay and Jeff Skilling, yesterday an SEC advisory committee made recommendations that "small" (fully 80% of all companies now covered) companies should be allowed to ignore the key components of the Sarbanes-Oxley Corporate Reform Act, the law passed to prevent more Enrons. PIRG, the Consumer Federation of America, Consumers Union and other leading groups sent a strongly-worded letter today to SEC Chairman Chris Cox and Public Company Accounting Oversight Board Acting Chairman Willis Gradison urging them to reject the recommendations and disband the committee. We argued that the recommendations

are in direct conflict with the law, would undermine investor confidence, and do not fulfill the Committee's original charge to "conduct its work with a view to protecting investors." Instead, we urge you to disband the advisory group and to start fresh in your search for ways to minimize the cost of regulatory requirements for smaller public companies while retaining their important investor protections.

In today's Washington Post, Kathleen Day's story Piggy Banker? analyzes Wal-Mart's latest attempt to buy, build or make a bank. PIRG, the Consumer Federation of America and other consumer groups all oppose Wal-Mart's application to the FDIC to enter banking through the backdoor loophole of a Utah-chartered Industrial Loan Company. So have the Federal Reserve Board and many others. More:

The Post quotes former House Banking Committee (now the Financial Services Committee) chairman Jim Leach (R-IA), explaining why combinations between industrial/commercial companies and regulated banks should not be allowed (e.g., why the Wal-Mart Bank is a truly bad idea):

"What's really at issue is the nature of the American economy," says Rep. Jim Leach (R-Iowa), who for two decades has fought efforts by industry to lift the ban. "If such concentrations are allowed, you could have our largest banks combined with our largest retail companies and high-tech companies and create questions about how credit is allocated. It has enormous consequences for competition, and I think America would become less competitive in the world."

The Wal-Mart proposal is also opposed by an unprecedented coalition of bank associations, labor and retailers as well as by community groups including Inner City Press and the National Community Reinvestment Coalition. All comment letters, mostly from other opponents, here at FDIC.

One reason that the FDIC has held up further consideration of the proposal is that it lacks a fifth member, its chairperson. Rumors are swirling that the nomination of New York's Supervisor of Banking, Diana Taylor, to be FDIC chair has been derailed because of her personal relationship with New York mayor Mike Bloomberg, by Senators allied with his enemies at either the tobacco industry or the NRA, take your pick. The New York Post was among the first to cover the story-- I can't find it online anymore but I believe the headline a few weeks ago was something like "Mike's Gal Pal Takes Bullet." Taylor has been a leading opponent of the outrageous 2004 power grab by the federal bank bureaucrats over at the OCC (our page OCC Watch).

MASSPIRG and U.S. PIRG have joined a variety of public interest and media reform organizations in support of an FCC petition by Continental Airlines (also backed by a wide variety of other business organizations) urging rejection of a request by the Massachusetts airport authority, or MASSPORT, to use trumped-up public safety concerns to seize monopoly control of wireless (wi-fi) deployment at Logan Airport. An FCC ruling for MASSPORT could grant similar undeserved authority to any and all landlords (and incumbent providers as well) to block innovation and competition. MASSPORT's request, if granted, could have broad negative repercussions in the deployment of community wireless networks and other unlicensed and licensed uses of spectrum everywhere. Excerpts from our filing:

...the implications of this proceeding go far beyond airport applications and could affect literally millions of business users of unlicensed spectrum. Moreover, the implications extend far beyond the applications that are the focus of this proceeding. Last year alone more than 1 billion RFID devices and 100 million Bluetooth devices were sold in the U.S.; these and many other unlicensed devices, such as cordless telephones – some of which operate in the same band as WiFi - could all be affected by this proceeding and the dangerous precedent it could set...

...The Commission is charged under Section 1 of the Communications Act of 1934, as amended "to make available, so far as is possible, to all the people of the United States … a rapid, efficient, Nation-wide … radio communications service with adequate facilities at reasonable charges." For more than two decades the Commission has been making the presumption that reasonable competition was the best way to further this goal and the burden has been on those opposed to competition to show why monopolies are in the public interest. Massport has failed to do so.

As a consequence of the Commission’s pro-competitive policies in management of Part 15 devices, the unlicensed spectrum market is witnessing explosive growth and innovation.

The public interest filing was prepared by Jim Snyder of New American Foundation and Harold Feld of Media Access Project.

In a letter today, U.S. PIRG and five other leading consumer and civil justice groups urged Senators to oppose efforts to pass a defense spending bill that includes a sweeping immunity clause for drug manufacturers. While the prvision is ostensibly to urge them to make adequate stocks of pandemic vaccines, its immunity is broad. News release.

Over the weekend, without a vote, Senate Majority Leader Bill Frist (R-TN) attached a 43-page provision granting drug companies unprecedented and sweeping immunity from liability lawsuits to a conference report on the so-called "must-pass" defense spending bill. It's a shocking giveaway to some of the biggest campaign donors in Washington, has little to do with increasing vaccine supplies and could apply even to existing over-the-counter drugs if used in a pandemic. Any conduct less than willingly injuring or killing people appears to be protected from lawsuits for harm ("willful misconduct" is defined as evidence that the drug company had actual knowledge that its product would injure or kill someone). Here's more:

The provision is on pages 423-465 of the Conference Report on HR 2863, Defense Appropriations. Here's an excerpt from a letter consumer groups including USPIRG sent up to the hill last week opposing a still-shocking but slightly less unfair version of the drug company protection proposal.

We recognize the urgent need to prepare adequately for infectious disease outbreaks. It may very well be that during public health emergencies expedited approval of vaccines and drugs is necessary for the nation’s security...Broadly shielding manufacturers from responsibility for gross negligence, recklessness and other egregious behavior and leaving victims with no recourse, may cause more public harm than the pandemic disease itself. As doctors and public health officials have warned, if individuals know there is no remedy for injuries caused by the vaccine’s side effects or by a defective batch of vaccine, they are likely to refuse immunization, thus undermining efforts to contain outbreaks.

According to Rep. David Obey (D-WI), a conferee, Frist's action also was against promises repeatedly made that it would not be included. Obey said in Congress Daily:

"For the last eight hours we have been dealing with a majority leadership that has stripped out of the appropriations process and the conference virtually every understanding in those bills...We've had the United States Senate ram down our throats an ANWR [Arctic National Wildlife Refuge] provision, and after we were assured in conference there would be no [liability language] three hours after the conference report we get 45 pages..."

Frist had the help of Senator Ted Stevens (R-AK and Chairman of Appropriations Subbcommittee on Commerce, Justice and Science), who also has attached PIRG-opposed drilling in the Arctic National Wildlife Refuge to the same bill.

You can contact FTC Chairman Deborah Platt Majoras and urge her to take action on the PIRG petition regarding some toy manufacturers deceptively labeling toys, teethers, and other children's products as "phthalate-free" when they in fact contain these toxic chemicals. The petition is a followup to independent lab tests we commissioned for our annual toy safety report in November. Previous blog.

The Washington Post (free reg. req.) has two separate stories by Jonathan Krim this week reporting on the arrogance of BellSouth, one of the Baby Bell phone monopolists.

Today's story Angry BellSouth Withdrew Donation, New Orleans Says reports:

Hours after New Orleans officials announced Tuesday that they would deploy a city-owned, wireless Internet network in the wake of Hurricane Katrina, regional phone giant BellSouth Corp. withdrew an offer to donate one of its damaged buildings that would have housed new police headquarters, city officials said yesterday.

Perhaps more troubling even than BellSouth's pouting treatment of a nearly destroyed city trying to climb back from its near-destruction, however, are reports that it wants to remake the open, democratic Internet in its own monopolistic image. Krim reported Thursday in the story Executive Wants to Charge for Web Speed that BellSouth executive William Smith:

said yesterday that Internet service providers should be allowed to strike deals to give certain Web sites or services priority in reaching computer users, a controversial system that would significantly change how the Internet operates.

"The incredible potential of broadband will be severely compromised if network operators are permitted to be the gatekeepers of the Internet, deciding what content, applications and services succeed or fail on the Internet," wrote the coalition, which includes Amazon.com Inc., eBay Inc., Google and IAC/InterActive Corp.

On Tuesday, our colleague Paul Bland of Trial Lawyers for Public Justice will argue an important case, Buckeye vs. Cartegna, before the U.S. Supreme Court. Here's the brief Paul and co-counsel filed. Here's the amicus brief of Center for Responsible Lending, U.S. PIRG and National Association of Consumer Advocates. The case is an appeal by usurious payday lenders of a Florida Supreme Court ruling that consumers cannot be subjected to mandatory arbitration if the underlying contract is unconscionable and therefore illegal. The payday lenders' goal: preempt a strong state consumer law. Previous blog with more detail.

One reason we need 51 laboratories of public policy, not just 1, is to ensure strong solutions to real problems that hurt consumers and the environment. Industry's goal is to enact weak federal rules that just coincidentally also limit state authority. This week, automakers moved to block strong state air pollution laws. Also, a comment period on a Bush administration roof safety proposal ended. If approved as proposed, the automakers will get a weak rule that won't save lives but will prevent victims from suing under state law. Finally, although a dollar short and a day late, the GAO has issued a report critical of a 2004 power grab by the bank bureaucrats over at the OCC.

We've written extensively in this blog on preemption threats to state authority. PIRG has a site devoted to watching state law preemption efforts by the unelected national bank bureaucrats over at the Office of the Comptroller of the Currency (OCC Watch) and another site on stronger state laws generally. While we often comment in the blog on preemption of state laws protecting privacy, the threat is broader.

Today's New York Times has a story by Danny Hakim, Battle Lines Set as New York Acts to Cut Emissions, on automaker litigation against New York's adoption of stricter California emissions standards to fight pollution and global warming (free reg. req.):

The rules, passed this month by a unanimous vote of the State Environmental Board, are expected to be adopted across the Northeast and the West Coast. But the auto industry has already moved to block the rules in New York State, and plans to battle them in every other state that follows suit.

Also this week, Public Citizen led efforts to oppose proposed new roof safety rules issued by the Bush National Highway Traffic Safety Administration. The NHTSA rules are abjectly weak and won't save many, if any lives, for the cost, but come with a kicker.

The proposed rule also contains a “pre-emption�? provision that would prohibit people from suing manufacturers for injuries sustained from crushed roofs if the vehicles meet the government standard. This would effectively shut the courthouse doors on consumers and would remove incentives for manufacturers to make safe vehicles when minimal government standards are insufficient or outdated, or are not well enforced, Public Citizen argued. It also would burden the taxpayers with the costs of these crashes.

Also last week, the Government Accountability Office (GAO) issued a new report sharply critical of the decision-making process used by OCC in implementing 2004 rules sharply limiting state authority over both national banks and their operating subsidiaries. According to OCC Preemption Rulemaking: Opportunities Existed to Enhance the Consultative Efforts and Better Document the Rulemaking Process:

We were able to determine the process OCC followed for the preemption rulemakings only by pulling together information from multiple sources, including the rulemaking dockets, other OCC documents, and officials and stakeholders we interviewed. OCC’s rulemaking files alone did not contain much of this information—the files omitted details on both the fact and substance of OCC communications with key stakeholders. Given the controversial circumstances surrounding these rulemakings, it might have been in the agency’s best interest to have created better documentation of its actions and decisions.

Yesterday Senate Judiciary approved S 1789, the security breach notice and data broker security bill drafted by Chairman Arlen Specter (R-PA) and ranking member Pat Leahy (D-VT). While the bill includes an unacceptable preemption provision, it has the strongest breach notice "trigger" of any bill moving in the Congress. Here's more:

Unlike all the weak "industry-approved" triggers that variously give the company that lost data the authority to decide whether it has reason to believe that there may be some or substantial or reasonable risk, Specter-Leahy requires notice by companies unless they can show "no risk." Also, Specter-Leahy gives consumers privacy rights against data brokers like ChoicePoint. Most bills skip this important step (see previous blog Cutting The Privacy Baby In Half). Here's our letter on S 1789 to the committee. Also, last week I testified (summary) before the state of Vermont on security breaches. Vermont is one of the leading state laboratories of privacy democracy.

Continuing our theme of companies seeking to avoid responsibility: today, despite efforts led by champion Barbara Boxer (D-CA), the Senate Commerce Committee approved S 1110, the Engine Coolant and Antifreeze Bittering Agent Act (Allen-R-VA; Pryor-D-AR). The bill broadly immunizes antifreeze makers from liability for any consumer or environmental harms caused by inclusion of a so-called bittering agent designed to make the antifreeze unpalatable for children or pets. Excerpt from a PIRG/consumer group letter opposing the bill:

While this bill seems to be a well-intentioned proposal to reduce the incidence of poisonings of children and pets that may ingest antifreeze – a goal we support – this bill would waive all forms of liability for the industries involved in producing and selling antifreeze and coolants that contain the bittering agent denatonium benzoate (“DB�?) even if the use of this agent causes groundwater contamination, personal injury, property damage, or even death. This unprecedented liability waiver would apply even if children or pets are injured or killed by the DB additive, jeopardizing the very people and animals the bill purports to protect. Congress should not provide such sweeping liability waivers for a chemical such as DB that may not readily biodegrade, for which there is little human health data, and which could end up in drinking water supplies.

U.S. PIRG and other privacy advocates, including EPIC, have sent a letter to hill leaders (html or pdf) detailing bottom line privacy principles for any privacy legislation that Congress might enact this year.

Congress has still not taken any action on any strong privacy and security breach legislation. Last week Senator Specter intended to hold a Judiciary vote on S. 1789 (Specter-Leahy), a bill with several positive policy provisions, although it unacceptably preempts stronger state laws, but did not have a quorum. So far, that committee had previously approved an "industry-approved" bill, S 1326 (Sessions-R-AL). More here on what other committees have done in a previous blog, Cutting The Privacy Baby In Half.

We joined 17 media reform groups in a letter to the House Energy and Commerce Committee criticizing its latest staff draft of a more Baby Bell-friendly, less-consumer friendly, less competition-friendly, less net neutrality-friendly telecom rewrite. While we like the bill's section recognizing the right of local communities to provide community broadband services, free from the intervention of state governments, the rest of it is weaker than the first draft, especially its capitulation on net neutrality, which threatens the open, democratic Internet. The committee held a hearing today. Gene Kimmelman of Consumers Union provided consumer testimony, which we endorse.

From the letter:

Policies that do not respond to the public interest, but instead serve special interests, will inhibit economic development, hinder efforts to expand equality of opportunity for all citizens, and stunt economic competitiveness and innovation.

Groups signing our letter include: Alliance for Community Media, Association of Independent Video and Filmmakers, CCTV Center for Media and Democracy, Center for Creative Voices in Media, Center for Digital Democracy, Common Cause, Consumer Project on Technology, Deep Dish TV, Fairness & Accuracy In Reporting, Free Press, Future of Music Coalition, Hawaii Consumers, Media Access Project, Media Democracy Chicago, National Hispanic Media Coalition, The Peoples Channel, and U.S. PIRG.

We're signed onto today’s testimony in a House Financial Services hearing by Evan Hendricks, publisher of Privacy Times, and we endorse the testimony of Vermont Assistant Attorney General Julie Brill. Here's a short PIRG news release. HR 3997 is yet another bill that makes consumers worse off, doesn't make good privacy policy and eviscerates stronger state laws.

U.S. PIRG, Consumers Union, Privacy Rights Clearinghouse and EPIC have sent a strong letter opposing a weak data privacy bill, HR 4127 (Stearns-R-FL) to be voted on Thursday in a House Energy and Commerce subcommittee.

Letter from U.S. PIRG, AARP, Consumers Union and Consumer Federation of America urging Senators to oppose the Ensign amendment to the massive budget reconciliation bill-- the amendment would reduce funding for the consumer assistance program intended to compensate consumers whose TV sets will go dark through no fault of their own in April 2009. Previous blog.

DTV, media reform, reconciliation, converter boxes, consumer protection

The Media Access Project, acting as attorney for PIRG and other public interest organizations that filed a petition to deny the transfer of the bankrupt Adelphia cable assets to Comcast and Time Warner, has filed a motion at the FCC urging the commission to delay consideration of a Comcast proposal to acquire a different cable company, Susquehanna.

As Media Access Project Attorney Harold Feld colorfully points in the "motion to hold in abeyance," Comcast is seeking a New England monopoly:

An old adage advises that one can boil a frog by putting a frog in water and slowly raising the heat until the water boils and the frog dies. Comcast has apparently found a similar way to create a cable monopoly throughout the Northeast -- acquire systems in separate transactions so that each transaction creates only a marginal increase in regional concentration capable of surviving scrutiny if viewed in isolation. Rather than let Comcast boil the subscriber “frog,�? the Commission should hold the above captioned transaction in abeyance until it receives applications for the proposed Susquehanna transfer and can review both together.

Our previous blog has details on the proposed Adelphia to Comcast/Time Warner transfers and related transactions.

The Department of Justice has rubber-stamped the anti-competitive mergers of the Baby Bell SBC with AT&T and the Baby Bell Verizon with MCI. PIRG, Consumers Union and Consumer Federation of America filed peitions to deny in both SBC/AT&T and Verizon/MCI. The mergers must still be approved by the FCC. More below.

Here's the FCC's SBC merger page and its Verizon merger page. Here's an excerpt from our SBC petition to deny:

FAILURE TO PROMOTE THE PUBLIC INTEREST
The Commission simply cannot look back on the carnage of the past six years and conclude that its decision to allow a handful of incumbents to dominate the local telecommunications market has served the public interest. Not only have we suffered through a wave of bankruptcies and scandals that destroyed billions, if not trillions of dollars of equity, but the piecemeal approval of mergers and the failure to enforce market opening and network access policies enacted by Congress has allowed the industry structure to devolve into what
Business Week called a “cozy duopoly.�? This “cozy duopoly�? has failed to serve the most fundamental public interest objective of the Communications Act. The “cozy duopoly�? fostered by the Commission’s policies has failed to provide ubiquitous advanced telecommunications services at affordable prices.

Along with CFA and CU, in June we also published the report BROKEN PROMISES AND STRANGLED COMPETITION on the failed promises of the Bells. Excerpt:

THE ANTICOMPETITIVE IMPACT OF THE TELECOM MEGA-MERGERS The wave of proposed mergers in the telecommunications industry — SBC attempting to gobble up AT&T, and Verizon trying to swallow MCI — mark the ultimate demise of any hope for consumers getting more choices and lower prices for local, long distance, wireless, and the new Internet-based services exploding on the market. Evidence submitted to regulators across the country proves the pending mega-mergers of telephone giants SBC/AT&T, and Verizon/MCI will have a devastating impact on the nation’s residential customers.

Taken together, the merger protests submitted by consumer groups show beyond a shadow of a doubt that the mergers are anticompetitive and will impose substantial harm on consumers. The harm posed by these mergers goes well beyond local and long distance markets that are already highly concentrated. More importantly, the mergers will destroy the feeble competition in markets for the telecommunications facilities that are necessary to provide a wide range of telecommunications services, including access to the Internet.

These mergers would create super-Regional Bell Operating Companies (RBOCs) that monopolize the in-region public switched telephone network and “mega-Peer Internet backbone�? providers that dominate access to the Internet for end-users. After a decade of market opening, the two firms being acquired account for about three quarters of the competitive presence in telephone markets. The four companies in question comprise the number one, two or three largest providers of local and long distance service, network access, switching and transport services.

The remaining competitors in the telecommunications business would be minuscule in comparison, lacking the size and geographic reach to provide a competitive check on the two dominant firms. Illogical promises of greater concentration bringing greater competition should be flatly rejected by regulators. The track record of the RBOCs since the passage of the Telecommunications Act of 1996 shows a persistent pattern of bad acts, broken promises and the failure to compete. Intermodal competitors—such as Voice over Internet Protocol and wireless—have all been recently been examined and correctly dismissed as substitutes for retail services by both the Federal Communications Commission (FCC) and the Department of Justice (DOJ).

That RBOCs’ dismal competitive track record, combined with the dearth of competitive alternatives and the dramatic increase in market power that the megacompanies would possess post-merger, demand the conclusion that anti-competitive and anticonsumer behavior would sharply increase post-merger.

Every year when the banks and credit unions say "Jump," the House Financial Services Committee often says "How High?" This year's early holiday gift is a package of supposedly non-controversial, so-called "regulatory relief" items, HR 3505, Hensarling (R-TX), expected to to be approved tomorrow in committee. Here's a group letter opposing and here are some excerpts (annotated with additional comments that are my own, not necessarily the group's):

Errors of omission (it's all for the banks, nothing for consumers):

-- The bill fails to increase the vastly outdated jurisdictional limits and statutory penalties initially included in the Truth in Lending Act (TILA) in 1968.
-- The bill fails to “clarify�? recent rules issued by the Federal Reserve Board to require bounce protection loans with extremely high interest rates to be covered by the basic consumer protections found in TILA.
-- The bill fails to include an important amendment requested by the state investment fraud cops over at the North American Securities Administrators Association (NASAA) to amend its Section 209 to allow state securities regulators to oversee the loosely supervised business of selling risky, uninsured “jumbo�? Certificates of Deposit that exceed $100,000 in value.

-- As yet another way to limit access to justice, Section 213 would establish that for diversity purposes in federal court, both federally chartered savings banks and national banks would be considered citizens only in the states in which they have their main office. This would clog up the federal courts, and worse, in most states would create a procedural morass that would likely result in many consumers losing their homes to illegal foreclosure. Because of a split among circuit courts on this matter, the issue is now pending before the U.S. Supreme Court.
-- Section 301 would allow privately-insured credit unions meeting certain criteria the same access to the benefits of Federal Home Loan Bank membership as taxpayer-insured credit unions, essentially granting less expensive financing options such as the discount loan window to privately-insured firms. Giving more benefits that they don't deserve to risky privately-insured credit unions will only encourage more credit unions to switch. That's bad public policy. While credit unions have long played a critical role in offsetting the most unfair and over-priced banking products, many in their leadership have lost their way -- they ask Congress for ridiculous and risky subsidies like this and they support the credit card industry's unfair bankruptcy bill, yet they fail to back consumer initiatives. We'll have more blogs on credit unions and their disappointing positions.
-- Section 401 is another preemption section-- it will make it harder for states that currently do not allow banks to automatically branch to protect their consumers.
-- A biggie: Section 401 takes the very dangerous step of allowing Industrial Loan Companies (ILCs) to branch at will into all 50 states. This would allow financial firms and some commercial entities to set up a new, nationwide commercial banking system through ILCs that is subject to much less rigorous oversight than under the current structure. The bill has a so-called "No Wal-Mart" provision that attempts to stop de novo branching if an ILC is directly or indirectly controlled by a commercial firm receiving more than 15 percent of its annual revenue from non-financial sources. However, this minor limitation is overwhelmed by the fact that the overall number of ILCs and the amount deposited in them would likely escalate without a corresponding increase in the oversight of safety and soundness at these institutions. Moreover, the bill allows the very states that are aggressively attempting to charter more ILCs to make the all-important determination about whether ownership of an ILC is commercial in nature; a clear conflict-of-interest.
-- Section 504 would preempt the Arkansas Constitution. This is truly a brazen play by the preemption crowd. With the backing of much if not all of the state's Congressional delegation, this stealth provision overturns a constitutional usury limit that's been upheld by the voters numerous times. That's bad for all consumers and unfair to Arkansas voters. This proposal would prohibit the people of Arkansas from establishing any limits on interest rates in their state. This proposal not only undermines federalism – the voters of Arkansas have repeatedly rejected raising the ceiling on interest rates -- it also will mean that Arkansas consumers will pay far more than necessary for credit and risk exposure to discriminatory lending practices. That is why this proposal is opposed by a broad coalition of national civil rights, labor and consumer rights organizations.
-- Section 601 weakens the enforcement of the Community Reinvestment Act (CRA.) The banks have never liked this very important law, which simply says: don't take the money and run. If you take deposits in a community, especially a lower-income community, you must reinvest in it. The CRA is a very simple and very legitimate duty that taxpayer-insured and heavily federally subsidized banks continue to hack away against.
-- Section 617 would unjustifiably exempt certain financial institutions from the annual privacy notice disclosure requirement under the Gramm-Leach-Bliley Act (GLBA). It makes little sense to alter the privacy notice requirement at this time as regulatory agencies currently have two open rulemakings on the subject.
-- A truly anti-consumer provision of the Manager’s Amendment would exempt check diversion companies from the Fair Debt Collection Practices Act. This provision will allow private companies to use the punitive power of the local prosecutor’s office to force consumers to pay for checks that they may not even owe, as well as exorbitant fees that are not authorized under state law. Believe or not, certain elected prosecutors allow debt collectors to send out threatening letters on their letterhead and this amendment makes it worse. Consumers will be subjected to threats of criminal prosecution for not paying for the checks without being granted basic rights, such as the right to request copies of the checks or protections against unfair, abusive or deceptive collection practices. This provision also places no reasonable limits on the activities of check diversion companies, which have a track record of abusing consumer rights throughout the country. Despite the fact that consumer organizations and the Federal Trade Commission have opposed this unjustifiable exemption in the past, it has been slipped into this bill without public hearings or genuine debate.

While HR 3505 is a bad bill, as noted above, we're also watching the Senate Banking Committee carefully. Former FDIC Vice-Chairman John Reich (now OTS director) has championed a process known as EGRPA that has resulted in development of a massive package (although OTS, FDIC or Reich may not support all of them) of regulatory relief items, with the aid of a variety of bank trade associations. See all the testimony at this hearing in June, including PIRG-backed consumer group testimony by Travis Plunkett and Carolyn Carter. The working title for the 187-item package the Senate is considering is "The Matrix." Many provisions seem as diabolically anti-consumer as the world-view of the machines that ran the matrix in the movie trilogy. While the matrix does include 5 or 6 consumer-backed provisions based on our testimony, we're watching carefully to make sure none of the objectionable provisions make it into the Senate Banking Committee's version of HR 3505.

The House Energy and Commerce Committee will vote today on its digital television (DTV) transition bill. Many low-and-moderate income TV viewers will see their sets go dark, unless the committee accepts a Dingell (D-MI)-Markey (D-MA) amendment to Chairman Joe Barton's (R-TX) unacceptable proposal to create a fund of less than $1 billion to compensate consumers for converter boxes to keep their sets working. As a letter from PIRG, Consumers Union and Consumer Federation of America points out, this is not about subsidies or windfalls or free money, but essential fairness and holding consumers harmless:

Consumers paid good money for their TVs with the reasonable expectation that they would receive broadcast signals over their useful electronic life. The $10 billion or more in auction revenue facilitated by the transition is more than enough to fully compensate consumers for the costs they are asked to bear just to keep those TV sets working.

Full compensation for the cost of converter boxes is far from a windfall for consumers. The boxes do not provide for a government-supported technology upgrade; they merely allow consumers’ existing analog sets to continue displaying analog images—something they have a right to expect. Nor is compensation a subsidy. By compensating consumers, Congress isn’t giving them anything; it merely holds them harmless from a government mandate that would otherwise make their perfectly good personal property virtually useless.

National Journal reports today on the issue and references a similar letter from AARP. Last week, the Senate Commerce Committee approved a much better bi-partisan proposal for $3 billion in converter box compensation (previous blog).

As President Bush announced the nomination of Professor Ben Bernanke to replace Alan Greenspan as chairman of the Federal Reserve, U.S. PIRG and other leading consumer groups sent a letter to Senate Banking Committee Chairman Richard Shelby and issued a news release urging that the nomination hearings be used to evaluate how well the Fed protects consumers and to ask Professor's Bernanke's views on whether it can do a better job.

The letter urges the committee to ask Professor Bernanke whether he will urge the Fed to do a better job in 7 key areas where banks now have the upper hand over consumers, to our detriment.

• Reduce check hold times – Reduce as much as feasible the current delays before banks must make funds available from a deposited check. Check clearing is speeding up, but check holds have remained the same. This increases the risk of a consumer bouncing a check and paying higher fees. • Protect all debit cards holding significant household funds – Extend legal protections under the Electronic Fund Transfer Act (EFTA) to debit cards that are used to deliver payroll, emergency benefits, and other funds significant to a household. Of particular importance is placing a limit on loss of funds from unauthorized transactions. • Credit cards – Use the regulatory power of the Federal Reserve Board to curtail practices by credit card issuers that harm consumers, such as universal default clauses, high fees, and credit limits that outstrip the ability to pay. • Change overdraft policies – Require banks to provide consumers with the true cost of bounce protection loans before the consumer incurs the fees. • Adopt proactive policies for future disasters – The Federal Reserve Board can take an active role to better prepare the U.S. financial system for future disasters, including establishing a comprehensive set of best practices and developing information for the public about federally chartered and federally insured financial institutions compare to the best practices and to one another when a disaster strikes. • Stop abuses in mortgage lending – The Federal Reserve Board has the power to define certain mortgage lending abuses as unfair or deceptive practices as a tool to help police the marketplace for subprime loans. • State consumer protection law and state law enforcement – Question the nominee on his recognition of the value and role of state consumer protection laws and state law enforcement as applied to federally-chartered financial institutions.

The letter and release take no position on the nominee. U.S. PIRG does sometimes take positions on judicial or administration nominees, but not all signatories do.

Letter from U.S. PIRG, Consumers Union, AARP and Consumer Federation of America urging the Senate Commerce Committee to include a $3 billion compensation fund to help purchase converter boxes for consumers whose over-the-air analog TVs will otherwise "go dark" when the Congressionally-ordered digital transition (DTV) is made in April 2009.

When broadcasters make this switch to digital spectrum, some of the taxpayer-owned analog spectrum they have been using will be allocated to public safety communications and a large part of the remainder will be auctioned off to phone companies and others, netting a one-time budget windfall of $10-100 billion.

Yesterday, the Senate Commerce Committee included the converter box funding in its DTV bill, although similar House funding is not guaranteed.

On the negative side, the bill had no additional language ensuring that a portion of that analog spectrum be retained, not auctioned off, for "unlicensed uses" such as community wi-fi projects. Details in previous blog.

Leading consumer groups are now urging Senators to oppose (new letter) an amendment we'd previously supported by Elizabeth Dole (R-NC). As originally intended (previous blog with support letter) Senator Dole's amendment would have protected military families from payday lenders and other high-cost predatory lenders. Anyway, the latest version of the amendment is not only weak, it could roll back current protections, so we now oppose it.

Two items on protecting access to knowledge and medicine from one-sided patent and copyright protection:

(1) Here's a letter (15 Oct 05) to Congress from CPTech, U.S. PIRG and others opposing a dangerous new proposed broadcast/webcast treaty moving through the UN's World Intellectual Property Organization (WIPO). Previous blog here explains how it grants extraordinary intellectual property rights to firms, above and beyond existing copyright protections.

(2) An International Commission convened by the Royal Society of Arts in London has issued an important proposal: the Adelphia Charter.

The Charter sets out new principles for copyrights and patents, and calls on governments to apply a new public interest test. It promotes a new, fair, user-friendly and efficient way of handing out intellectual property rights in the 21st century.

Members include Larry Lessig of Stanford Law School (also Chair of the Creative Commons Board) Jamie Love of CPTech (Jamie and CPTech have been leaders in the fight to bring low-cost AIDS and other medicines to Africa, as well as in fighting the WIPO broadcast/webcast treaties), Jamie Boyle of Duke Law School, Nobel Laureate Sir John Sulston (who has worked to keep the Human Genome Project "open-source" (article)) and others.

On Friday the U.S. House narrowly passed (vote here, with public interest vote= NAY) the controversial Gasoline for America's Security Act, HR 3893, after leadership held the voting machine open for over 40 minutes on a nominal 5-minute vote while it twisted arms. If enacted, a little-noticed "loser pays" provision would reverse centuries of U.S. jurisprudence and require citizen groups to pay attorneys' fees of the prevailing parties (the government and the oil companies) if they lose legitimate (non-frivolous) lawsuits brought in good faith against oil refinery and pipeline projects.

The "tort deform" provision threat would deter legitimate challenges to anti-environmental projects. The provision appears to be a one-way provision-- if the oil companies lose, they do not pay. Here's a letter specifically in opposition to the "loser pays" provision from U.S. PIRG and other leading groups. Of course, there is much more that is objectionable in the Gas Act. U.S. PIRG outlines real energy solutions in a September report, called Solutions to America’s Oil Crisis: A Federal Agenda for Reducing Oil Demand and Protecting Consumers.

U.S. Senator Daniel Akaka (D-HI) has introduced pro-consumer legislation to rein in the tawdry practice of payday lending. According to a letter of support from PIRG and six other leading groups the “Predatory Payday Loan Prohibition Act of 2005" would:

"prohibit lending based on checks or debits drawn on federally insured depository institutions...and...would prohibit banks from partnering with payday lenders, a tactic used by storefront lenders to evade state small loan and usury laws."

PIRG and other leading groups have sent the IRS a letter with detailed exhibits criticizing an apparently recently rescinded gag rule that prohibited tax volunteers from warning taxpayers about over-priced, unnecessary Refund Anticipation Loans (RALs) being peddled by firms such as H&R Block and Jackson-Hewitt. Meanwhile, the IRS itself encourages the high-cost RALs by providing direct links from its site to those of these for-profit commercial firms. As we point out in the letter:

"...the IRS website www.irs.gov specifically directs taxpayers to the websites of certain commercial tax preparation companies, who then freely promote RALs to taxpayers, creating the appearance of a government endorsement. There appears to be a significant double standard here."

A Refund Anticipation Loan (RAL) is one of the worst forms of predatory lending. It's a short-term loan using your tax refund as collateral (not much risk there!). Plus, you'll get your refund in a few weeks anyway, so most people really don't need the loan. Worse, it not only picks your individual pocket if you get one; it picks every taxpayers' pocket as well. That's because these triple-digit APR RALs are targeted by tax preparation firms directly at the low-income recipients of the Earned Income Tax Credit (EITC). Billions of dollars annually that Congress voted to transfer to low-income consumers are instead skimmed off by powerful corporate interests.

For years, consumer groups have criticized the cozy way that the IRS allows tax preparers, especially those allowed to link directly to its website under the boondoggle "free file" program designed to encourage electronic filing, to promote RALs and other various costly add-on products when consumers click from .gov to .com, leaving the IRS site for a presumable trusted third party. (Here's a 2002 news release from PIRG and others; and here's a 2003 report from Consumer Federation of America and National Consumer Law Center.)

The bean counters at the IRS can't seem to reconcile the multiple missions given them by the Congress. While they are supposed to promote e-government through electronic filing, they are not supposed to leave low-income taxpayers at the mercy of profiteering firms selling over-priced RALs without even having to work at it. After all, their customers find them through the government's own direct link. Worse, that link means the RALS are sold with the appearance of a government endorsement, and the tax preparers end up taking billions out of an important goverment transfer program intended for the poor, for their own largesse.

CCTV has posted a RealPlayer TV webcast here of a town meeting organized by U.S. Rep. Bernie Sanders (I-VT), VPIRG and CCTV last night to discuss the Comcast/Time Warner acquisition of the bankrupt cable company Adelphia's assets. (Comcast and Time Warner have proposed to divvy up the various U.S. consumer markets, and Comcast pretty much gets Vermont under their proposal.)

Speakers at the Burlington, Vermont event included Rep. Sanders, Mark Reilly (Comcast), Commissioner David O'Brien (VT Public Service Dept.), Paul Burns (VPIRG), Burlington Mayor Peter Clavelle and Lauren-Glenn Davitian (Vermont Access Network & CCTV). (If you want, you can skip ahead to about 41 minutes, where you can hear Paul followed by Lauren-Glenn, but the whole webcast is worth hearing.) Here's a previous blog that links to both the Petition To Deny the merger filed by the Media Access Project on behalf of U.S. PIRG, CCTV and other media reform groups and to other merger documents filed by all parties at the FCC.

U.S. PIRG and other leading financial advocacy groups have sent letters to the House Financial Services and and Senate Banking Committees urging and detailing a plan of Katrina relief for the actual victims of Katrina. Meanwhile industry lobbyists of all stripes are bellying up to the Congressional trough looking for corporate welfare-- we can only hope that Congress helps the people who lived in the path of the hurricane first, and then rejects the various industry demands for consumer law waivers and corporate pork handouts.

U.S. PIRG has joined National Association of Consumer Advocates and the Center for Responsible Lending in a Supreme Court amicus brief in Buckeye v. Cartegna, a case that will decide on the enforcability of a mandatory arbitration clause that happens to appear in an underlying payday lender contract that itself is illegal and usurious. Basically, if a loan shark is breaking the law, can that loan shark diminish your legal rights by forcing you into one-sided arbitration?

It's an important case that addresses the widespread abuse of one-sided binding mandatory arbitration clauses -- which limit your civil justice rights -- in consumer contracts. Our brief, primarily prepared by Amanda Quester of CRL, details the costs to consumers and the economy of unfair arbitration clauses and criticizes the weak "studies" that the industry players who've filed briefs all rely on to assert that arbitration is good for consumers. It's not. Our three organizations are founding members of a national campaign against binding mandatory arbitration (Stop BMA).

Arbitration was originally developed for parties of equal size to work out disputes outside the courtroom but is increasingly forced on consumers and small businesses by powerful opposing parties. The Congress has passed a law saying it is unfair for car dealers (e.g., supposedly "small and weak") to be forced into arbitration by big and powerful car manufacturers, and the Senate, at least, has previously approved a similar proposal protecting small farmers from powerful agribusiness concerns. But Congress, so far, refuses to bail out consumers, who routinely are forced to accept BMA in their form contracts to open bank or credit card accounts, obtain health insurance, buy cars from those dealers or, apparently, even to obtain a usurious triple-digit APR payday loan. Our colleague Paul Bland of Trial Lawyers for Public Justice successfully argued the case in the Florida Supreme Court.

Excerpt from our brief:

Companies frequently draft arbitration clauses to limit or prevent certain types of traditional monetary damages that predominantly benefit consumers and are central to effective law enforcement, including punitive damages and certain types of compensatory damages...Arbitration clauses may also include other one-sided provisions that benefit only companies, not consumers—for example, excluding from coverage certain types of claims that only companies would bring...As noted above, prohibitions on class actions also prevent many consumers from filing at all, particularly in cases where each individual’s stake may be relatively small....Because of the real-world limitations on public resources and all of the problems with binding mandatory arbitration discussed above, preventing consumers from challenging illegal contracts in court would impede the enforcement of important state and federal consumer protection laws.

The U.S. Chamber of Commerce, the Florida Bankers and various payday lender lobbies have filed briefs seeking to diminish consumer protection. AARP has also filed a pro-consumer brief.

More on predatory payday lenders here, in our 2001 report on "Rent A Bank Payday Lending," which documents how usurious payday lenders seek to circumvent laws that rein them in.

The Senate Banking Committee has posted a Realplayer video archive of yesterday's hearing where we opposed preemption of stronger state security breach notice and security freeze laws. At the hearing, the other witnesses (all on the industry team), practically begged Congress to preempt the states, even though they provided absolutely no information or studies to show that their allegations about the difficulty of complying with more than one state law were at all valid.

Also, yesterday NJ Governor Richard Codey signed that state's tough NJPIRG-backed identity theft law.

Governor Codey's statement on the security breach and security freeze law signing is here. A few news stories with quotes from NJPIRG's Abigail Caplovitz on the tough new law are here (AP, Asbury Park Press and the Newark Star Ledger). Also yesterday, a California court heard the claim of the big credit card associations, Mastercard and Visa, (AP story) that it's not their fault and they shouldn't have to provide notices to hundreds of thousands of consumers due to security breaches at the third party processor Cardsystems. Instead, they say, their member banks should send the notices. More on that case after we read the complaint and the card association briefs in a case brought against Visa and Mastercard and Cardsystems and others. Previous breach blog.

We testify today (PIRG testimony) in the Senate Banking Committee on security breach notices, security freezes, privacy and identity theft. All leading consumer and privacy groups have endorsed our testimony. Also today, NJ Governor Codey is expected to sign their NJPIRG-backed security freeze and breach law-- among the strongest in the nation. NJPIRG release from June legislative passage of the bill.

While the leadership of this committee hasn't yet proposed its own bill, the Senate Banking Committee will play a key role in in ongoing negotiations over any final law because of its jurisdiction over the Fair Credit Reporting Act.

The leadership of both the House Financial Services (counterpart to Banking) and House Energy and Commerce Committees have floated their own draft bills, which we have critiqued. Rumors abound that the Senate Judiciary Committee may finally vote next week on a hybrid of Feinstein and Specter-Leahy proposals. The Senate Commerce Committee has already approved a well-intentioned but deeply flawed bill, S 1408 (previous blog). Despite state leadership, as documented in our testimony, many members of Congress seem insistent on giving industry the prize it seeks -- a weak federal bill that broadly eliminates state authority to protect consumers better.

The Consumer Federation of America, U.S. PIRG and numerous state and local groups are urging the Senate (our letter) to support Senator Elizabeth Dole's (R-NC) critical amendment to the Defense Authorization bill, S 1042. The Dole amendment would restrict loans to military and their families to an annual interest rate of 36% APR.

As our letter notes:

"Such a limit would make sense in any case, but now it is critically needed, first, because this is a time of war, and second, because predatory lenders are targeting young military families, entrapping them in lending schemes that strip them of their hard-earned pay at annual interest rates of 400% and higher."

We've filed copies of our new report on cell phone Early Termination Fees, Locked In A Cell (previous blog), as an ex parte comment (link to the filed comment in FCC Docket WT- 05-194) in two FCC dockets on Early Termination Fee issues. Michelle Singletary of the Washington Post has a nice piece on the report in her syndicated column (free registration required) this week.

Today, we filed comments to the FDIC, along with the Consumer Federation of America and others, urging rejection of Wal-Mart's new plan to enter banking through the back door of a Utah-chartered Industrial Loan Company (ILC). Believe it or not, consumer groups and the Fed's Alan Greenspan stand together on this one.

The growth of under-regulated ILCs is a problem and Wal-Mart owning one makes them a bigger problem. ILCs exist under an old loophole that was never supposed to encourage new, large entrants, but Wal-Mart and some powerful Wall Street securities firms, with support from the Utah political apparatus (which has gone so far as to promote ILC's as an alternative to burdensome Fed regulation) are trying to push the ILC door open to allow more mixing of banking and commerce.

It's a truly bad idea that has harsh risks for the economy: (1) Bad business practices by the firm that owns the ILC could result in losses by the ILC that place the safety and soundness of the taxpayer-guaranteed FDIC insurance fund at risk. (2) Loans from the ILC itself could be made either imprudently (also a safety and soundness issue) or with favoritism or cronyism, skewing credit allocation in the marketplace and further consolidating Wal-Mart's demonstrable power over a broad sector of the economy.

Excerpt from our letter: "Allowing the largest retail firm in the world to purchase an industrial loan company (ILC) would represent a dangerous and unprecedented blending of banking and commerce. It would allow Wal-Mart to offer many of the same services and loans as commercial banks without the same rigorous regulatory oversight."

For more on Wal-Mart and banking, see this piece by Stacy Mitchell in the New Rules Project's Hometown Advantage Bulletin.

The FCC, in its continued quest to serve the powerful telecommunications industry at the expense of consumers, has two critical decision items before it. First, it has proposed a rule that would limit state oversight of cell phone billing practices. Second, it is considering a petition by the industry asking that the FCC declare that its punitive Early Termination Fees (ETFs) of $170 or more are "rates," not penalties. The industry goal? Of course, get out from under pesky state laws. The State PIRGs and other consumer advocates are actively opposing both anti-consumer proposals.

The proposed rule “tentatively concludes�? that states are preempted from regulating cell phone companies’ billing practices, based on the specious claim that bills affect rates and states cannot regulate rates. We have filed joint comments and reply comments opposing this rule along with Consumers Union, AARP, the National Consumer Law Center, the Asian Law Caucus, and Disability Rights Advocates. The cell phone companies, of course, argued that states were preempted, and they also claimed that consumers were satisfied with the industry.

We have also filed joint comments -- along with Consumers Union and the National Consumer Law Center -- opposing the treatment of ETFs as rates, not penalties. ETFs are clearly designed to function as penalties-- the threat of paying such a high penalty to switch keeps consumers from shopping around and allows the oligopoly at the top of the cell phone heap (just four companies control 80% of the market) to keep their shoddy service without improving it, which they'd need to do if consumers could afford to vote with their feet.

Several members of the House Financial Services Committee have introduced new PIRG-backed bills to protect consumers. One bill fights unfair credit card practices, one bill fights sleazy bank overdraft protection schemes that resemble tawdry payday loans and the last bill restores state authority over unfair national bank practices.

Rep. Bernie Sanders (I-VT) and Rep. Barney Frank (D-MA) introduced the Consumer Credit Card Protection Act of 2005, HR 3492, which would ban the unfair practices of universal default (raising rates on consumers whose payments to the company are timely, but who allegedly paid someone else late or had a drop in their credit score) and retroactive rate increases. See PIRG's Truthaboutcredit.org for more info. The bill would also require disclosure of "months to pay" if you make the minimum payment. Rep. Carolyn Maloney (D-NY) has introduced a bill to regulate the tawdry payday-loan like "bounce-protection" products from which banks are reaping huge profits. PIRG and other groups sent an endorsement letter for the two bills. The third bill, introduced by Rep. Luis Gutierrez (D-IL) and ranking member Barney Frank (D-MA) is the "Preservation of Federalism in Banking Act," and a companion was introduced by Senator Jon Corzine (D-NJ). The bills rescind much of the power to protect consumers unfairly grabbed from the states in 2004 by the unelected federal bureaucrats at the Office of the Comptroller of the Currency. Support letter from PIRG and others. More here at PIRG's OCC Watch page.

This week, the U.S. House is expected to consider H.R. 5, legislation that would cap damages awarded to patients who have been injured by medical negligence. U.S. PIRG's Lindsey Johnson and other advocates have sent an opposition letter to the full House. What is astonishing is that in the wake of the Vioxx and other scandals, the bill not only caps damages for doctor malpractice, but also for drug company and medical device company malpractice.

The bill limits awards of what are called non-economic damages -- meaning the damages are not related to your reduced earning potential due to the injuries. Instead, non-economic damages compensate victims for pain and suffering related to particularly egregious harms, such as brain damage, paralysis, disfigurement and loss of child-bearing capacity. Because it is difficult to calculate anticipated wages for non-workers, non-economic damages are often the only way to compensate them fairly, making caps particularly harsh on children and non-working women.

Last week attorneys at the Media Access Project filed a petition to deny the transfer of the bankrupt Adelphia's cable assets to the monopolists Time Warner and Comcast. PIRG and other citizen petitioners argued that "The unmistakable purpose of this transaction is to create or maximize regional monopolies or monopsonies in 14 of the top 25 [market areas] and eliminate all head to head competition between the two largest [multi-system operators] in those markets. As such, the Commission must refuse permission for this transaction or designate the applications for hearing." Our petition and all other materials -- including the transfer application and all comments -- dealing with the proposal are at the FCC here.

A broad range of 40 socially-responsible investment firms and advisors, shareholder rights groups, investor advocates and unions sent Senate Banking Committee Chairman Richard Shelby (R-AL) a letter today outlining critical issues the committee must review in its confirmation of President Bush's nominee, U.S. Rep. Chris Cox (R-CA), to chair the Securities and Exchange Commission. Excerpt: "It is vital that the Senate Banking Committee support an SEC Chairman who will put investors first." The Senate Banking Committee hearing on the nomination is tomorrow.

In 1995, Cox was chief sponsor and prime architect of arguably the worst anti-investor legislation ever. The Private Securities Litigation Reform Act was enacted over President Clinton's veto. Cox also worked in 2002 to weaken and delay the Sarbanes-Oxley Corporate Reform Act, but after he and other opponents, including George W. Bush, were unsuccessful in these efforts they became born-again corporate reformers as we have previously blogged. Public Citizen has posted a webpage summarizing concerns and opposition to the Cox nomination. At this time, while U.S. PIRG has not voted to formally oppose the nomination, we have grave concerns about the nominee's views, as outlined in the group letter above. Representative Cox has a lifetime 12% score on the PIRG Public Interest Scorecard, which evaluates votes on issues including investor and consumer protection as well as environmental preservation and democracy.