CFA News Update- October 12, 2012
A coalition of 24 consumer, labor, public health, and civil rights groups and 16 individuals have called on the U.S. Department of Agriculture to withdraw a proposal that would increase poultry processing line speeds and remove hundreds of federal inspectors from poultry processing plants. The coalition criticized the proposal for:
- increasing the poultry line speed to an unsafe level, giving inspectors just one-third of a second to examine each chicken carcass for food safety risks and other problems;
- allowing plant employees to replace federal government inspectors for certain inspection activities;
- reducing the number of federal inspectors working at poultry plants;
- failing to require training of plant employees who take on additional inspection responsibilities;
- changing the standards for accepting or rejecting birds; and
- failing to set a standard for testing of poultry.
“This proposal allows plants far too much leeway in setting their own standards for testing and for removing defective birds from the line. Plants would not even be required to test for Salmonella and Campylobacter, which are the two pathogens most commonly associated with raw poultry,” said Chris Waldrop, Director of CFA’s Food Safety Institute. “Moreover, increased line speeds will make it even more difficult for inspectors to inspect birds for safety. FSIS should go back to the drawing board on this flawed proposal.”
In a comment letter filed with the agency last week, CFA called on the Securities and Exchange Commission (SEC) to withdraw its rule proposal lifting the ban on general solicitation and advertising in private offerings and issue a new rule that incorporates reasonable investor safeguards. “While we recognize that the Commission is required by the JOBS Act to lift the general solicitation ban, the Commission is not relieved of either its authority or its responsibility to ensure that investors are adequately protected and market integrity is maintained as it does so,” wrote CFA Director of Investor Protection Barbara Roper. “The proposed rule fails that test.”
The letter criticizes the Commission for failing even to consider the many practical proposals that have been suggested to ensure that regulators have the tools they need to police the market and that investors receive appropriate protections to balance the heightened risks they will face once the solicitation ban is lifted. “Because the Commission does not even request comment on these other alternative regulatory approaches, it would not be possible to adopt a minimally acceptable rule based on this proposing release,” the letter states. As a result, the letter argues, “The only acceptable alternative is for the Commission to withdraw this rule proposal, to conduct a meaningful economic analysis that carefully weighs the risks to investors and alternative regulatory approaches to minimize those risks, and to issue a new proposal that incorporates and requests comments on those alternatives.”
Roper reiterated those arguments at a joint news teleconference earlier this week with Americans for Financial Reform, AARP, AFL-CIO, and the North American Securities Administrators Association. The comment period on the rule closed October 5. SEC Chairman Mary Schapiro has indicated she plans to move quickly to finalize a rule. “We hope the Commission will rethink this plan,” Roper said. “Both the Commission’s investor protection mandate and its own rulemaking guidelines demand a more careful and thoughtful approach to rulemaking.”
Americans do not think it fair for auto insurers to use factors such as level of education, occupation, and lack of previous insurance in setting auto insurance prices, according to a national survey released late last month by CFA. CFA found in a separate analysis that most major insurers use these types of non-driving factors, which greatly increases premiums for low- and moderate-income drivers, often by more than 100 percent. “Insurers are permitted to use factors such as education and occupation in setting prices even though these factors have nothing to do with driving and discriminate against lower-income drivers,” said CFA Executive Director Stephen Brobeck. “Premiums should largely reflect factors such as accidents, speeding tickets, and miles driven, over which drivers have some control and which directly affect insurer costs.”
For example, the new analysis reveals that most premiums quoted for a moderate-income woman with a good driving record remain high when she is single, a renter in a moderate-income area, a high school graduate, a bank teller or clerical worker, and lacking continuous insurance coverage. Twenty-five examples – involving five companies in five cities – were examined. “The lowest rate quotes are in California because it regulates insurance premiums more effectively than any other state,” noted CFA’s Director of Insurance J. Robert Hunter. “California prohibits or limits insurers from using non-driving factors to set premium levels,” he added.
The report has received sharp criticism from both individual auto insurers and insurer trade groups. However, the arguments used to justify unfair pricing practices are either false or irrelevant, according to a CFA response released last week. “State insurance commissioners need to more carefully examine the use of non-driving factors in the pricing of auto insurance policies,” Hunter said. “It appears insurer use of these factors discriminates against Americans who are already at a disadvantage and forces many of them to drive without insurance,” he added.
Testifying last month before the Environmental Protection Agency, CFA Research Director Mark Cooper and Public Affairs Director Jack Gillis urged the agency to grant California’s request to implement a groundbreaking program to cut vehicle emissions that contribute to smog, soot and greenhouse gases. The California Air Resources Board voted earlier this year to adopt the program, which will increase the number of zero emissions vehicles on California roads as well as strengthen greenhouse gas emissions standards for cars and light trucks. Now, the EPA must green light the program in order for California to move forward.
“The direction set by California and the states that follow its lead is a wonderful example of American federalism at its best,” Cooper testified. “California’s Clean Cars Program has helped to set us on a path that will improve the performance of light duty vehicles (cars and trucks) by a greater amount in a shorter time period than ever accomplished in U.S. history.”
“Stronger emission standards also mean greater fuel efficiency,” Gillis stated. “One of the great benefits of cleaner cars is lower gasoline costs. California’s ability to set these strong standards is vitally important to the advancement of the auto industry and for meeting consumer demand for cleaner more efficient cars in states across the nation. In practice, tailpipe emissions standards encourage both the development of cars that go farther on a gallon of gas and alternatively-fueled vehicles. The result is cleaner, more efficient cars that help reduce America’s vulnerability to oil and gasoline price shocks.”
Two-thirds of middle class Americans acknowledge having made financial mistakes, often costly ones, according to an analysis of two new sources of information about family finances released last month by CFA and Primerica. While acknowledging past mistakes, middle class Americans surveyed about their finances rated their abilities to make financial decisions highly, particularly with regard to budgeting and managing credit card debt. “Considering their past mistakes and the complexity of the financial services marketplace, we were surprised at how highly most middle class Americans rate their ability to make a variety of financial decisions and how infrequently they rely on information from the Internet and publications,” said CFA Executive Director Stephen Brobeck.
The new report, “The Financial Status and Decision-Making of the American Middle Class,” also concluded that the financial condition of most middle class families is challenging, particularly in the wake of the recent financial crisis. For example, in 2010 the typical middle class family had financial assets of $27,300 – including retirement savings but not pensions – which was 28 percent less than the $37,800 held in 2007. “Families without a lot of resources are balancing difficult and expensive priorities such as saving enough for college and retirement or paying off a mortgage and consumer debt. When you consider these demands within the context of the last decade’s falling incomes, we are nearing a crisis in this country,” said John Addison, Primerica Co-CEO.