SALLY GREENBERG REMARKS FROM 2014 NSSTA FALL EDUCATIONAL CONFERENCE LA JOLLA, CA OCTOBER 29, 2014

Transcription

1 SALLY GREENBERG REMARKS FROM 2014 NSSTA FALL EDUCATIONAL CONFERENCE LA JOLLA, CA OCTOBER 29, 2014 I m delighted to be with you this morning to talk about consumer protection and people with disabilities. Let me tell you a bit about how I got introduced to this topic. Mark Periello and I met through a consumer advisory board for Verizon, which convenes advocates for a range of different communities every quarter or so. We began to talk about consumer protections writ large and we both agreed that holding a forum on consumer protections focusing on the disability community would be a novel and interesting opportunity. My organization has been around for 115 years. The National Consumers League we have been doing work on behalf of vulnerable communities and fighting schemes, scams and rip offs for our entire history. NCL has a national fraud center that works to combat frauds and scams perpetrated against millions of Americans each year lottery scams, grandparent scams, sweetheart scams we have an Alliance Against Fraud that brings together business, government and consumer groups to combat these scams. NCL also tests food products to expose false and deceptive marketing we tested juices

2 advertising 100% pure lemon and found that all were less than 35% lemon juice. We sued Subway sandwich shops for selling multigrain bread that was actually white bread with Caramel coloring and a few grains sprinkled on top. In keeping with our to our history, we work to combat child labor and are working to get American kids as young as 7 years old out of the fields picking tobacco, where they get ill from exposure to toxic leaves. We launched a campaign in 2011 with the Surgeon General to raise awareness among patients with three chronic illnesses heart disease, respiratory and diabetes - of the need to take their medications as directed. And we run the only teen financial literacy and consumer education competitions in the country, bringing together hundreds of kids each year to compete in this program which we call LifeSmarts. NCL is also part of the community of national consumer advocates that fights in Congress, the Courts and works with federal agencies for protections for vulnerable Americans we pushed hard for pay day loan protections, and are supporting the Department of Education s protections for students lured to for-profit colleges that charge huge tuition fees, graduate few students, and their degrees are often worth little; minority and low income students often bear the brunt of these practices and are saddled with huge loans to repayand no degree or a worthless one. We work to rein in abusive debt collection practices with stronger laws and regulations. We testified for legislation to rein in rip offs by sellers of international calling cards who 2

3 promise 60 minutes of talk time which gets eaten up by a variety of bogus connection and other fees. This year I testified in the Senate in support of a bill to protect consumer s location information derived from our mobile phones - from being sold to advertisers. It was in our capacity as a consumer advocacy group that I asked Mark Periillo to lunch to learn more about the disability community s concerns. That s when I heard about Structured Settlements and factoring. Mark invited me to the launch of the Structured Settlement Caucus in Congress where I was surprised to see over 100 people in the room and a bipartisan group of members of Congress there including Congressman Jim Sensenbrenner of Wisconsin, Congressman John Lewis of Georgia and former Congressman Wow, I said to myself. These folks certainly have their Mojo working! It was clear to me that factoring of Structured Settlements is a classic predatory practice and the industry is really no different from how from payday loan companies or a car title loan companies or a rent to own companies they prey on the most vulnerable consumers and in the case of a structured settlement, those who have suffered a grievous injury or loss and are lured by fast cash. This is a bad deal for those who take the bait - Industry officials acknowledge discount rates of 28% but government and the courts say the discount rates are often 72% or higher. 3

4 Most are unsophisticated with finances and don t understand the terrible consequences and how poor the return is for them when they decide to factor their structured settlement. They could go to a bank and get a loan at 6% if they need an emergency sum of cash and use as leverage the monthly annuities they receive. They could call their lawyers and work out a far better arrangement with a bank. But those who run the factoring industry and advertise aggressively, flooding the airwaves with its your money ads and take advantage of these vulnerabilities, and often acting as investment advisor and lawyer/counsel and contractor. The numbers are substantial. In 2003, J.G. Wentworth's Assistant General Counsel estimated that factoring companies purchased structured settlement payment rights from approximately 4,000 claimants totaling $1 billion in assets. Given the existence of a $6 billion structured settlement industry, the factoring industry has a lot of room to expand their exploitation of consumers. Mark s organization AAPD and NCL held a symposium this summer that focused on two issues, telecom access for people with disabilities and structured settlements and strategies for protecting them from factoring. From a consumer protection standpoint, there are several avenues that we ve talked about including legislation and regulation. One model might be legislation similar to the Military Lending Act of 2007 which is being updated the 2007 bill sought to protect service members an appealing constituency much like the disability community. 4

5 The Military Lending Act applies a 36% interest cap and other consumer protections to payday and vehicle title loans made to members of the military. Legislation that limits the discount rate for factoring contracts on structured settlements might be worth considering. Indeed, a New York Times editorial from last week noted that poor and working class people across the country are being driven into poverty and default by deceptively packaged usuriously priced loans. The obvious solution is a national standard for consumer lending, noting that both the House and Senate have bills pending to adopt a 36% standard for all consumer transactions including payday loans, mortgages, car loans, credit cards overdraft loans and so on. We could expand category to cover a national standard for sales of annuities or pensions for the disabled, seniors and the military. There are other legislative ideas like Congressman Matt Cartwright s bill to cap rates for factoring at prime plus 5% - that are worthy of consideration. I mentioned a regulatory fix. Mark, Eric Vaughn and I have met with the Consumer Financial Protection Bureau set up to regulate predatory lending practices, to discuss whether a regulatory fix might be in their jurisdiction. CFPB has issued many reports on predatory loans and debt collections processes. We would like them to determine whether the Bureau has jurisdiction over factoring of 5

6 annuities and the very high discount rates on those transactions. It s a bit of an unknown area since we don t know and they don t know -- whether this sale of annuities would be an insurance product and thus a statement matter largely or a predatory sales transaction. But we want them to take a look and make a determination. With the bipartisan make up of the Structured Settlement Caucus in Congress, a group of members could ask the Bureau to make that determination. In closing, as a career consumer advocate, I see this as a classic area for consumer protection. We are talking about very vulnerable consumers, many of whom cannot ever work, and are totally reliant on their monthly annuity for survival. Once that is gone, hey become wards of the state, destitute and forced to rely on taxpayers to survive That s poor public policy and worthy of our efforts to prevent that from happening. 6