Insurance Commissioner Says “Price Optimization” Violates State Laws

In a victory for consumers, Maryland Insurance Commissioner Therese Goldsmith announced last month that “price optimization” – a practice that varies insurance rates based on factors other than the risk of loss, such as the likelihood consumers will shop around or tolerate price increases – is in violation of state insurance law and that all insurers must file a plan for ending this pricing strategy.

“It is the obligation of Insurance Commissioners to protect consumers from this kind of price gouging, and we applaud Commissioner Goldsmith for her action,” said CFA’s Director of Insurance J. Robert Hunter in a press statement. “Most Americans are required by law to buy auto insurance and by their mortgage company to buy homeowners insurance, and it is terribly unfair and entirely illegal for insurance companies to vary premiums based on whether or not they are statistically likely to shop around.”

CFA and the Center for Economic Justice are urging state insurance commissioners and the National Association of Insurance Commissioners to block the use of price optimization. In a 2013 letter to commissioners, CFA wrote that there is evidence that the practice of price optimization is widespread, actuarially unsound and unfairly discriminatory.

Credit Unions and Rural Electrics Score Highly in Consumer Satisfaction

In 2014 ratings by the influential American Customer Satisfaction Index (ACSI), credit unions (85) scored higher than banks (76), and rural electric cooperatives (81) scored higher than investor-owned utilities (75).  Navy Federal Credit Union, the world’s largest credit union, received one of the highest scores (88) among companies in all industries.  “These high scores are not surprising because consumer cooperatives exist to serve, and are run, by their members,” noted CFA Executive Director Stephen Brobeck.

The ACSI is a national economic indicator of customer evaluations of the quality of products and services available to consumers in the United States.  Developed in 1994 by a research unit within the University of Michigan, it uses data from interviews with about 70,000 customers annually.

USDA Urged to Approve Labels for Mechanically Tenderized Beef

With the U.S. Department of Agriculture (USDA) in the last stages of approving a rule requiring labeling on mechanically tenderized beef, members of the Safe Food Coalition wrote a letter to USDA Secretary Tom Vilsack urging him to finalize the rule before the end of the year.

“Based on FSIS labeling regulations, any rule that is finalized before December 31 will go into effect in 2016. Any rule finalized after that will not be implemented until 2018.” said Chris Waldrop, Director of CFA’s Food Policy Institute. “USDA and OMB need to finalize this rule so that we have no further delays in providing consumers with important information about mechanically tenderized meat products.”

Often used on less expensive cuts of meat to increase tenderness, mechanically tenderized products (such as steaks and roasts) are repeatedly pierced by small needles or blades, thereby increasing the risk that pathogens located on the surface of the product will be transferred to the interior.

“After treatment, these non-intact steaks and roasts have a greater risk of being internally contaminated, yet they look no different than non-treated product, the groups stated in a press statement. “Therefore, without a label, consumers have no indication that they are purchasing a high-risk product that needs to be cooked to a higher internal temperature to ensure safety.”

In their letter to Secretary Vilsack, the groups noted that Canada recently required labels on mechanically tenderized beef following a massive  recall in 2012. A report by Canadian authorities found a fivefold increase in risk from E. coli O157:H7 in mechanically tenderized products when compared to intact cuts of beef.

State and Federal Action Needed to Stem Debt Settlement Abuses

CFA has called upon state and federal agencies to take further action to curb abuses by debt settlement companies, an industry that has been criticized by federal and state government agencies, financial columnists, and consumer advocates.  Although the Federal Trade Commission adopted rules in 2010 that eliminated some of the worst practices, it did not address the fundamental flaw of debt settlement, according to CFA, the fact that it requires consumers to default on their debts.

Debt settlement companies offer to reduce consumer debt subject to creditor approval.  However, if the creditor does not approve, and often they do not, consumers can face late fees, lawsuits, and lower credit scores. “Consumers seeking assistance from debt settlement companies are essentially playing the lottery, only instead of risking only the modest cost of a ticket, they are in great danger of substantially worsening an already difficult financial situation,” said CFA Executive Director Stephen Brobeck in a press statement.

Until the industry comes up with a model where consumers cannot end up worse off, CFA urges states that currently ban debt settlement to continue to do so.  Where debt settlement is legal, states should require companies to screen clients for “suitability” for the service and include a “not worse off” provision that refunds consumers if they end up worse off.  CFA also urged states where debt settlement is legal to set limits on the fees these companies can charge.

Groups Oppose House Bill That Weakens Consumer Credit Protections

Consumer groups wrote to members of the House Financial Services Committee last month, urging them to oppose legislation, H.R. 5446, the “Facilitating Access to Credit Act 2014,” which would weaken the Credit Repair Organizations Act (CROA) by exempting credit bureaus from coverage. “CROA is a vital and important consumer protection law,” the groups wrote in a letter addressed to Chairman Jeb Hensarling (R-TX) and Ranking Member Maxine Waters (D-CA). “There is no need to weaken CROA to allow the promotion of credit monitoring products that are of dubious value and that have been the subject of highly deceptive marketing as revealed by law enforcement actions and Congress’s own findings.”

Currently, CROA broadly applies to any person who, in return for money, provides services to improve a consumer’s credit record. Only non-profit organizations and a few other entities are exempted. H.R. 5446 would create a broad exemption from CROA for any consumer reporting agency that is either “nationwide” or supervised as a “larger participant” by the Consumer Financial Protection Bureau. This would deprive consumers of important protections against deceptive practices by debt collectors and by subsidiaries of credit bureaus that offer to improve consumers’ credit scores.

“This is misguided legislation,” said Susan Grant, CFA’s Director of Consumer Protection. “It’s not necessary and would not only weaken federal law but would preempt state laws concerning the sale of credit monitoring.”