FCC Adopts Strong Net Neutrality Rules

The Federal Communications Commission (FCC) voted 3-2 yesterday to adopt new net neutrality rules to replace, strengthen and supplement FCC rules struck down by the U.S. Court of Appeals for the District of Columbia Circuit more than one year ago. “The FCC has taken vigorous, but careful, steps to protect consumers and promote competition in Broadband Internet Access service.  The most egregious practices (blocking, throttling and paid fast lanes) have been banned and the FCC will apply a light touch approach to overseeing the broad conduct of network owners,” said CFA’s Director of Research Mark Cooper.

The new rules are designed to prevent broadband providers from blocking access to content, impairing or degrading internet traffic, or favoring some internet traffic over other traffic. The rules also include an Open Internet conduct standard that prevents Internet Service Providers (ISPs) from harming consumers or edge providers, imposes enhanced transparency requirements, and outlines the reasonable network management activities that ISPs may engage in. By reclassifying the rules under Title II of the Communications Act and Section 706 of the Telecommunications Act of 1996, the new rules have broad legal certainty for guaranteeing an open Internet.

“As part of the network neutrality debate, many on both sides have recognized the need to modernize and update regulation to fit the conditions of digital communications era,” said Cooper in a press statement. “Once we get past the political labels, it is clear that this is exactly what the FCC orders have endeavored to do.”

As with past efforts, the rules are expected to be challenged in court by industry opponents.  However, congressional leaders acknowledged earlier this week that they do not have the support necessary to adopt legislation overturning the rules.

President Calls for Strengthened Protections for Retirement Savers

Strengthened protections for retirement savers moved one step closer to reality this week, when President Obama announced that he was directing the Department of Labor (DOL) to move forward with a proposed rulemaking to require all financial advisers to act in the best interests of their clients when providing retirement advice.  CFA cheered the announcement as an important step forward in what has been a long and arduous battle to raise the standards governing retirement advice.

“By closing loopholes in the current regulations and subjecting all retirement investment advice to a fiduciary duty to act solely in the best interests of the client, a well-crafted DOL rule has the potential to save millions of Americans billions of dollars each year,” said CFA Director of Investor Protection Barbara Roper in a public statement. “Financial services firms would still be able to adopt a variety of business models and make a reasonable profit, but not by preying on the lack of sophistication of the average worker or retiree who relies on them for best interest recommendations.”

Financial services firms, which had sought to prevent the rules from being re-proposed, continued to fight back using often misleading claims about its likely effect.  See here for a myth-fact sheet rebutting industry arguments against the rule.

“The war that industry has waged and the factually baseless arguments they have made to try to bottle up this process should really make the public wonder what they have to hide,” said CFA Financial Services Counsel Micah Hauptman.  “I imagine it will all be clear when the economic analysis finally comes out, showing in blistering detail the perverse incentives that currently allow financial professionals to extract billions of dollars a year in excess costs from retirement savers.”

While the rule proposal must still go through regulatory review before it can be issued for public comment, White House backing helps to ensure that process will move forward expeditiously.  “The strong statement of support from President Obama makes clear that the Administration is committed to making this rule a reality,” Roper said.  “That is good news for workers and retirees who need to make every dollar count in their efforts to afford a secure and independent retirement.”

Despite Low Gas Prices, Consumers Still Want Fuel Efficient Cars

Consumers expect the national gasoline price average to rise by almost 50 percent in the next two years – from $2.14 to $3.20 – and by over 80 percent in the next five years – to $3.90, according to a new survey released earlier this month by CFA. This analysis confirms why consumers still want higher mileage vehicles despite low gas prices.

“There’s a good reason why today’s car buyers still believe fuel efficiency is important – they understand that gas prices always go back up,” said CFA’s Director of Public Affairs and author of The Car Book Jack Gillis in a press statement. Asked how much gas mileage do they want in their next vehicle purchase compared to the gas mileage on their current vehicle, survey respondents overage said they expect their next car to get 30 mpg compared to the 25 mpg rating of their current vehicle.

The survey findings accompany a new report, “Staying on the Road to 54.5 mpg by 2025: Riding the Gasoline Roller Coaster.” “According to our analysis, the impact of fuel inefficiency is substantial,” said CFA Research Director and report author Mark Cooper. “Looking backward, a consumer who was misled by the dip of gasoline prices in late 2008 into thinking that the dip was permanent and chose to purchase a low mileage vehicle (15 MPG) instead of a high mileage vehicle (25 MPG), would have paid dearly.”

“Consumers are smart and have long memories, so it’s no surprise that they still want more fuel efficiency even though today’s gas prices may be low,” said Gillis. “Those manufacturers who stay on the road to 54.5 mpg by 2025 will be the best-positioned to take advantage of this consumer demand.”

Congress Proposes More Burdens for Federal Agencies

The new Congress wasted no time in taking up bills to make it more difficult, if not impossible, for federal agencies to adopt pro-consumer regulations. Two such bills passed the House in early February. “These bills add roadblock after roadblock to our regulatory process. These roadblocks will entirely thwart or significantly delay necessary consumer protections”, said CFA Legislative Director Rachel Weintraub.

The Unfunded Mandates Information and Transparency Act (H.R. 50) passed the House on a 250-173 vote during the first week of February.  The Coalition for Sensible Safeguards, a group CFA participates in, sent a letter prior to the vote urging opposition.  The bill would require federal agencies to alert businesses when they are considering drafting a rule and solicit their feedback, even before the public learns there may be a rule under consideration. “Businesses could block even a hypothetical future rule, and the public would never be the wiser. Industry interests don’t need special access to government regulators, yet this bill would write that access into law,” the groups wrote. This bill also included a particularly onerous provision that was added as an amendment that would fund the bill through a $36 million decrease in the Consumer Financial Protection Bureau’s funding authority.

One day later the House passed the Small Business Regulatory Flexibility Improvements Act (H.R. 527) on a 260-163 vote.  The bill would add a number of new analytical requirements for agency policy actions – including rulemakings and guidance documents – that might affect a large number of small businesses, even if that effect is largely “indirect.” Groups sent a letter to the House, urging representatives to oppose the bill, which would tie the hands of agencies by forcing them to delay actions until new analyses are completed. The bill would “would increase unnecessary and lengthy regulatory delays, increase undue influence by regulated industries and encourage convoluted court challenges,” they wrote.

“These bills represent exactly the opposite of what consumers expect from our government. Consumers want safe food, cars and products, protection from fraud and a fair financial market place. These bills make it almost impossible for these types of consumer protections to be implemented,” Weintraub said.

Data Breach Legislation Falls Short

A new legislative proposal from the President to address data breaches would do more harm than good, according to a letter from consumer and privacy organizations to members of the Senate Committee on Commerce, Science, and Transportation.

The groups criticized the proposal for its broad preemption of existing and future state data breach notification requirements; the 30-day period that it would give breached entities to notify affected consumers, which is far too long; and its failure to provide a private right of action. Existing rights that consumers have under state laws to bring private suits related to data breaches would also be preempted. More broadly, the groups voiced their opposition to data breach bills that would eliminate existing protections at the Federal Communications Commission (FCC), which some members of Congress have proposed.

“The Personal Data Notification & Protection Act offers nothing new to protect consumers,” the groups wrote.  “Rather than replacing state breach laws with a weaker single standard and preventing states from taking stronger measures, a federal bill that addresses notice should offer greater protections than exist under the law today.”  They also suggested that Congress should focus on requirements for data security program and data access in order to improve security, and on enacting comprehensive privacy legislation.

“Notice is after the fact, it does not prevent data breaches from occurring,” said CFA Consumer Protection Director Susan Grant. “Since most states now have data breach notice laws, many of which are stronger than what the administration has proposed, the most pressing issue is how to better protect consumers’ personal information.”