CFPB Proposes to Restore Consumers’ Right to Join Class Actions
Earlier this month, the Consumer Financial Protection Bureau (CFPB) announced proposed rules to prohibit bans on class action lawsuits in consumer financial product contracts. Class action bans, generally buried within forced arbitration clauses requiring consumers to waive their right to go to court if a dispute arises, prevent consumers who have been harmed on a systematic basis from joining together to seek remedies from the offending company.
“This rule will restore an important tool to consumers who have been harmed and will also deter bad actors who know that if they mistreat consumers even in small ways, those consumers will be able join together and efficiently get the remedies they are entitled to,” said CFA Legislative Director Rachel Weintraub in a press statement.
Fulfilling a mandate in the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB released an exhaustive study last year examining arbitration in disputes involving consumer finance disputes. Among other things, the report found that very few consumers ever bring – or think about bringing – individual actions against their financial service providers either in court or in arbitration. Instead, class action lawsuits provide the primary means of redress.
“While we would also like to see a ban of individual forced arbitration agreements in all consumer financial contracts, allowing consumers to form class actions will go a long way to leveling the playing field between consumers and financial services companies,” said CFA Director of Financial Services Tom Feltner.
The proposed rules would allow groups of consumers to obtain relief when companies skirt the law; they would incentivize companies to comply with the law to avoid group lawsuits; and they would make the individual arbitration process more transparent by requiring companies that use arbitration clauses to submit any claims filed and awards issued in arbitration to the CFPB.
CPSC Urged to Recall Tipping IKEA Furniture
Following the death of a third toddler due to tipping IKEA furniture, CFA, Kids in Danger, Consumers Union, and the National Center for Health Research have called on the Consumer Product Safety Commission (CPSC) to issue a formal recall for the defective IKEA Malm dressers.
The most recent death from the defective furniture occurred in February 2016, when a 22-month-old boy in Minnesota was killed when the Malm dresser in his room tipped over on him. In July 2015, the CPSC and IKEA reported two deaths from the tipping dressers, and launched a repair and education campaign for the products, but did not issue a recall. With this most recent death, CFA is urging a formal recall, including a stop-sale of unsafe products and refunds for consumers who would like them.
“To learn that a tipping IKEA Malm dresser killed yet another child, when the company and the CPSC chose not to do a recall after the first two deaths, is beyond heartbreaking – it is unacceptable,” said CFA Legislative Director Rachel Weintraub.
Illinois Considers Ban on Use of Credit Information in Auto Insurance Pricing
The Illinois Senate Insurance Committee held a subject matter hearing earlier this month on legislation (SB 2208) to prohibit the use of a consumers’ credit information or credit report to calculate auto insurance rates. State and national consumer groups Citizen Action Illinois, Woodstock Institute, CFA, and Consumers Union testified at the hearing urging lawmakers to support the bill and other efforts to make auto insurance affordable and accessible for lower-income people and communities of color.
When auto insurance is fairly priced, lower-income people can safely and affordably purchase, maintain and insure a car to get to the best job for which they are qualified, CFA Director of Financial Services Tom Feltner testified. “We urge states to take immediate action to protect consumers from the unfair use of factors such as credit score, education, occupation and other factors unrelated to a driver’s performance behind the wheel and outside the driver’s control.”
Those views were echoed in testimony by Citizen Action Illinois Legislative Director Joshua Collins, Woodstock Institute Vice President of Policy Brent Adams, and Consumers Union Programs Director Check Bell.
California, Massachusetts and Hawaii already prohibit credit-based auto insurance pricing.
FCC Moves to Stop Special Access Overcharges
The Federal Communications Commission (FCC) has declared that a lack of competition in the Special Access market has led to pricing abuse by the dominant local telephone companies who have a virtual monopoly over these services. “After fifteen years of obvious abuse, this is a step in the right direction,” said CFA Research Director Mark Cooper in a press statement.
Cooper noted, however, that the FCC has only addressed a small part of the problem, specifically contract terms and conditions that impede competition. “Banning anticompetitive contract terms may improve the prospects for new entrants, where market conditions will support competition, but that will take time and there are many markets that will remain monopolized,” Cooper said.
Before the FCC moves to further alleviate the problem of monopolization in Special Access, the agency will be trying to figure exactly how bad the pricing abuse is, and how future abuse can be controlled in a market where competition is not likely to be possible or sustainable. CFA has suggested that New Networks Institute’s (NNI) data on the costs and revenues in the special access market would be a good start for the FCC’s investigation.
NNI found that “the majority of expenses were diverted to ‘Local Service,’ while the Verizon affiliate companies were able to a) dump expenses into the local service part of the state utility financial accounting, b) not pay market prices that other competitors pay, and c) use this massive financial shell game to claim that the local networks are unprofitable to invent policy justification to ‘shut off the copper,’ migrate customers to more expensive services, including data capped wireless, and use this to create obscene profits in special access services.”
Cooper noted, “subsidizing these services with money from captive, local ratepayers is not only unfair, it is illegal under federal and state laws that prohibit such cross subsidies.” CFA suggests that the FCC can arrive at “just and reasonable” rates by both lowering the price of special access and correcting the misallocation of costs to local service.
DOE Advances Energy Efficiency Improvements
The Department of Energy (DOE) issued a final rule in May prescribing new energy conservation standards for commercial package air conditioners and heat pumps that advocates say will save more energy than any standard previously developed by DOE. The agency also proposed new energy conservation standards for general service lamps.
In a letter to the Department, CFA and other energy efficiency groups praised the final rule for small, large, and very large commercial package air conditioners and heat pumps. “The energy savings will result in billions of dollars in economic benefits for the businesses which purchase and operate this equipment, their customers and ultimately, the economy at large, as well as very large reductions in environmentally harmful emissions,” they wrote.
Consumer and energy efficiency groups also submitted a comment letter broadly supporting the proposed rule for general service lamps (GSLs), which if adopted would apply to all GSLs manufactured in, or imported into, the United States three years after the publication of the final rule anticipated at the end of this year. In addition, however, they suggested several improvements to increase savings, including: modifying the proposed rule to place a limit on energy consumption in standby mode for GSLs capable of operating in standby mode, and including the 22 lamp types and incandescent reflector lamps exempted from the definition of GSLs in the proposal.
“DOE’s proposed rule on general service lighting is a critical part of an historic transition from incandescent to solid state technology for light bulbs in the US. We estimate that the cumulative electricity savings from the light bulb standards enacted by Congress in 2007 will exceed 1.5 trillion kWh of electricity by 2030, or enough electricity to power every home in the US for a year,” the groups wrote. “Those energy savings will translate into more than $11 billion in annual electricity bill savings for consumers, the largest savings from any one energy efficiency standard ever enacted by Congress.”
“We are pleased to see the Department of Energy acting on energy efficiency standards with such significant savings that ultimately benefit consumers and the economy as well as the environment,” said CFA’s Energy Projects Director Mel Hall-Crawford.