Consumer Protection From Washington?

The last few years have been difficult for consumers on the federal level. More and more legislation provides immunity to various businesses for defective products or drugs, and new agency level interpretations of existing statutes have been interpreted as preempting more favorable state laws. But the last few weeks have brought some small glimmer of hope.

Yesterday, Senator Trent Lott announced that he had inserted a provision into legislation to investigate potential fraud in the insurance industry. Lott also announced that he plans to introduce legislation that would require insurance companies to make policies written in plain English understandable by the common man. This would be particularly welcome in Texas. Until a few years ago, virtually every homeowners’ policy was a standard policy, known as an HO-B policy. Consumers could compare apples to apples because the coverage was identical.  While the consumer might not understand all the terms of the policy, at least they knew that the rates quoted from several companies were for the same coverage. Now, there are many forms of homeowners’ insurance on the Texas market. While the choice may be a benefit, it is almost impossible for a lay person to understand the different policies and to make an apples to apples comparison of quotes between companies.  Requiring plain English so a consumer could make an informed choice when buying insurance would be a welcome change.

We have made other posts about Lott’s issues here.

In addition to Lott’s announcement yesterday, Congress is also acting on predatory lending affecting military personnel. An August USA Today story describes lending agencies offering military personnel, among others, payday loans — short term loans with interest rates that often approach 600 to 800 percent. Once in the system, it is difficult for a consumer to escape the cycle. The Senate and the Senate/House conference committee have recently passed the Talent/Nelson amendment to the defense budget appropriation bill that would limit interest rates on payday loans to military personnel and their families. The bill also provides that any agreement to arbitrate any dispute about the extension of consumer credit will not be enforceable against military personnel or their dependents. While the relief is currently limited in scope, we hope it is at least a mild recognition that some type of reform is needed for the general population.