Administration Urged to Appeal WTO Decision on COOL

Despite modifications in response to an earlier ruling, the World Trade Organization (WTO) ruled last week that U.S. country-of-origin labeling (COOL) regulations still constitute a technical barrier to trade.  The U.S. Department of Agriculture had revised its COOL regulations to provide consumers with more precise information in response to a 2011 ruling from the WTO.

“Today’s decision flies in the face of the overwhelming numbers of U.S. consumers who want more information about the origin of their food. Basic information of this type should not be considered a barrier to trade,” said Chris Waldrop, Director of CFA’s Food Policy Institute, in a press statement.

CFA conducted a poll in 2013 that found that a large majority of Americans strongly support mandatory country-of-origin labeling for fresh meat and strongly favor requiring meat to be labeled with even more specific information about where the animals were born, raised and processed.

The United States can appeal WTO’s recent ruling. If the United States were to lose the appeal, only then would the WTO begin the process of determining the extent of any trade sanctions that Canada and Mexico, who first challenged COOL, will be allowed to impose against the United States.  “CFA strongly urges the Obama Administration to appeal the WTO decision and continue to fight for U.S. consumers’ right to know the origin of their food,” Waldrop said.

CPSC Unanimously Votes to Move Towards Window Cords Safety Rule

The Consumer Product Safety Commission (CPSC) voted 5-0 this month to begin a rulemaking process to protect children from the preventable strangulation hazard posed by cords on window coverings. A week before the Commission vote, CPSC staff had recommended that the CPSC grant the petition to initiate rulemaking.

CFA and other consumer and safety groups noted that each year CPSC documents an average of 11 deaths and 6 injuries from strangling in loops formed from the cords on window coverings, including serious injuries such as permanent brain injuries. Earlier this year, in just twenty-two days, four children strangled to death from cords on a window covering.

“Today’s important vote by CPSC confirms that the voluntary standard has failed American consumers and paves the way for a strong mandatory standard that protects children from this hazard,” stated CFA’s Legislative Director Rachel Weintraub in a press statement. “We applaud CPSC’s critically important decision to protect children from the strangulation risk posed to children by cords on window coverings.  I look forward to the day that families no longer suffer as a result of injuries and deaths caused by these cords.”

Improvements Needed in Mortgage Eligibility Rules

Consumer, housing, and civil rights groups submitted comments to the Federal Housing Financial Authority’s (FHFA) earlier this fall stating that the agency’s proposed private mortgage eligibility insurance requirements (PMIERs) will raise the cost of credit for the very borrowers for whom the Government Sponsored Enterprise mission is most important. The groups also called for greater transparency in FHFA’s assumptions used in PMIERs changes.

“FHFA should balance the need for strong and adequate capital in MIs to cover expected losses with a broad assessment and pricing of risk,” said CFA’s Director of Housing Policy Barry Zigas.

In their comments, the groups provided suggestions to avoid unnecessary increases in cost, including eliminating the tiered capital weight structure imposed on loans with higher debt to income, higher loan to value, and lower-FICO scores; accounting for the lower risks associated with qualified mortgage and seasoned loans; counting future premium income towards capital requirements; providing capital relief for other risk-reduction efforts; and coordinating guarantee fees with PMIERs.

CFA, along with Center for American Progress and Mortgage Finance Working group, also submitted comments in response to FHFA’s request for input on guarantee fees charged by the Enterprises. The groups urged the agency to consider guarantee fees in the larger context of the role of affordable mortgage credit because the issue about pricing can quickly become technical and detailed. They also urged FHFA to consider the vastly different posture of the Enterprises in 2014 compared to 2008.

“The purpose of guarantee fees should be to ensure that Fannie and Freddie will be able to fulfill their obligation to pay full interest and principal on mortgage backed securities” Zigas said. “They also have statutory obligations to serve the markets as broadly as possible, and should risks and price their guarantees so as not to shut out or unreasonably burden those who are good credit risks but may need lower down payments or other underwriting flexibilities.”

Groups Urge DOT to Improve Airline Fee Transparency

As the U.S. Department of Transportation (DOT) seeks comment on a number of proposals regarding transparency of airline ancillary fees and other consumer protections, consumer groups filed comments urging the agency to focus on the consumer’s ability to see, compare and buy ancillary services when they buy airline tickets.

“A robust docket shows that American consumers need and demand price transparency, the ability to comparison shop increasingly complex airline tickets along with fees for ancillary services and the ability to purchase those services wherever airlines choose to sell their tickets,” the groups wrote.  They emphasized that consumers do not want to see this issue delayed again if other portions of the rulemaking require additional consideration.

In order to achieve the goal of fee transparency, the groups urged DOT to finalize a rule that ensures that consumer are able: to see the full cost of flying, including basic ancillary fees; to comparison shop across airlines, including passenger and flight specific ancillary fees; and to purchase these ancillary products at the same time that they pay for their airfares.

“Consumers comparison shop for airline tickets in many different ways now, and however they do so, they should be able to see what the whole cost would be including all the extra fees that may apply,” said CFA’s Director of Consumer Protection Susan Grant.

Extension of 7-year-old “Temporary” Rule Opposed

CFA filed comments with the Securities and Exchange Commission (SEC) last month opposing its proposal to extend for an additional two years a “temporary” rule first adopted in 2007.  “If this extension were granted, it would bring to nearly a full decade the time that this regulation has been in effect without any careful regulatory review,” said CFA Director of Investor Protection Barbara Roper.  “That is a serious abuse of process.”

The rule in question provides broker-dealers that operate non-discretionary fee-based accounts with an alternative means of complying with the Investment Advisers Act principal trading rules.  It was adopted as an interim final rule in 2007 in the wake of a court decision ruling that these accounts, which had previously been regulated as brokerage accounts, were subject to the Investment Advisers Act.  From the outset, investor advocates have criticized the rule on the grounds that it provides investors with inadequate protections against abusive principal trades.

As it has in the past, the Commission justifies this proposed extension on the grounds that it is considering the issue as part of its broader review of the regulatory requirements governing broker-dealers and investment advisers. “While we agree in theory that the principal trading rules would best be considered in the context of a broader review of the regulatory requirements for broker-dealers and investment advisers,” Roper wrote, “the Commission offers no evidence that a broader assessment of alternative regulatory approaches is in fact underway. With no active rulemaking having been undertaken or even promised, the Commission cannot justify further delaying a formal consideration of principal trading rules for fee-based accounts on this basis.”

“Instead, we urge the Commission to begin formal rulemaking to review and revise principal trading rules,” CFA wrote. “In order to ensure that its rules promote the best interests of investors, that rulemaking must both analyze the effectiveness of the existing regulatory approach and give full and fair consideration to alternative regulatory approaches with the potential to better protect investors from principal trading abuses.”