EPA Rolls Back Money-Saving MPG Standards

The Environmental Protection Agency (EPA) confirmed its intention earlier this month to roll back highly-popular, cost-saving vehicle emissions and fuel economy standards. The EPA’s decision came just a few days after a coalition of national and state-based consumer groups from across the country delivered a letter to EPA leadership asking the agency to maintain the standards, respect states that have adopted their own vehicle emissions standards, and preserve the freedom for other states to do the same if the need arises.

“American families cannot afford to spend more money at the pump. They do not deserve to be saddled with gas-guzzling vehicles that will wreak havoc on their household finances when gas prices inevitably spike again,” said CFA Director of Public Affairs Jack Gillis.

CFA’s recent analysis clearly shows automakers are on the road to achieving the standards and saving consumers money right now. In addition, CFA’s latest survey shows that consumers across the country want more fuel-efficient vehicles and support standards that save them money at the pump.

As the letter sent to EPA Administrator Scott Pruitt points out, “Thirteen states and the District of Columbia, representing 113 million Americans and over one third of the automotive market, have chosen to exercise their right to bring cleaner, more efficient vehicles to their communities. As such, they are currently protected from an imminent decision by your Agency to weaken the standards. However, neighboring states and millions of other hard-working Americans will be saddled with more polluting, less efficient cars, trucks and SUVs that will cost them more at the pump.”

“This rollback would deny the American people access to the safest, cleanest and most fuel-efficient vehicles they’ve ever known, stress already challenged family finances, and keep those savings from being pumped back into local economies. Clearly the EPA is putting the short-sighted demands of corporations ahead of the needs of hardworking American families,” concluded Gillis.

SEC Votes to Propose Long-Awaited Broker Conduct Standard

The Securities and Exchange Commission voted 4-1 last week on its long-awaited standard requiring brokers to act in customers’ best interests when recommending securities investments. “The proposal appears to offer a modest improvement over the status quo, but to fall short of the clear and unambiguous best interest standard investors expect and need when they turn to financial professionals for help with their investments,” said CFA Director of Investor Protection Barbara Roper.

In particular, while the rule states that brokers are required to act in their customers’ best interests when recommending investments and to refrain from placing their own interests ahead of the interests of their customers, it fails to clearly define in the rule text what it means by either requirement. “A standard that isn’t clearly defined won’t be effectively enforced,” Roper said.

“That’s something we’ll be working to fix,” Roper said. “Fortunately, the discussion in the Release, as opposed to the rule text, of the term ‘best interest’ is generally consistent with how we view the meaning of that term,” she added. “We have more reservations about the extent to which the prohibition on placing the broker’s interests ahead of the customer’s interests will limit the impact of conflicts on recommendations.”

On the other hand, the proposal appears to be tougher on conflicts than some had predicted. It requires not simply that brokers disclose their conflicts, but also that they eliminate or “mitigate” financial incentives that encourage recommendations that are not in customers’ best interests. “Properly implemented, the obligation to mitigate conflicts could help to rein in practices, such as sales quotas and contests, that firms use to encourage and reward advice that puts firm profitability ahead of investor best interests,” Roper said.

“Despite the 4-1 vote to propose the standard, Chairman Clayton still faces a challenge in finding the three votes to finalize a rule,” Roper said. “All four commissioners voiced serious reservations about the proposal, and their concerns will pull the Chairman in diametrically opposite directions. That said, in getting a proposal out the door, Chairman Clayton has succeeded in doing something none of his predecessors has accomplished. We look forward to working with him and the rest of the Commission to turn this proposal into the clear and unambiguous best interest standard we could enthusiastically endorse.”

CFA Urges DOJ to Block Merger of Title Insurance Giants

CFA has called on the U.S. Department of Justice (DOJ) to stop the merger of two title insurance giants – Fidelity National Financial and Stewart Information Services. Fidelity is the largest provider of title insurance in the nation, and Stewart is the fourth largest.

In a letter to the DOJ last month, CFA pointed out that DOJ’s Horizontal Merger Guidelines make clear that this merger is problematic. The guidelines explain that any increase in market concentration – as measured by the Herfindahl-Hirschman Index (“HHI”) – of more than 200 points “will be presumed to be likely to enhance market power.” Fidelity’s acquisition of Stewart would increase the index by more than 750 points.

“The combined entity would control almost half of the title insurance market and make an over concentrated, excessively priced market even more expensive and abusive to American home buyers,” said CFA Director of Insurance J. Robert Hunter.

CFA’s letter also draws attention to the practice of “reverse competition” in the title insurance market, wherein title insurers ignore the consumers who buy their products and, instead, market to real estate professionals – real estate agents, mortgage lenders, mortgage brokers, attorneys, homebuilders – who can often steer consumers to a particular title agent or title insurer. The insurer, in turn, often richly compensates the professional for the referral.

Huge kickbacks, expensive gifts, and other inducements from the insurers to real estate professionals raise the price of title insurance to absurdly high levels, CFA argued. The letter notes, for instance, that a $500,000 title policy that sells for $2,700 in New York sells for only $110 in Iowa, where the market has been reformed.

In addition to writing to DOJ, CFA sent a copy of the letter to every state insurance commissioner, asking state regulators to review the merger and the abusive pricing results of reverse competition in the title insurance market generally.

Groups Urge FTC to Address Facebook and Google Privacy Violations

Consumer and privacy groups filed two separate complaints with the Federal Trade Commission (FTC) earlier this month calling on the agency to take action against privacy violations by Facebook and Google.

A coalition of consumer and privacy groups filed a complaint with FTC regarding potential privacy violations associated with facial recognition technology deployed by Facebook. The complaint calls for the FTC to investigate Facebook, enjoin the deployment of additional facial recognition techniques as a violation of the FTC’s 2011 Consent Order, and require Facebook to modify its biometric data practices to protect the privacy of Facebook users and non-users.

“Facebook now routinely scans photos for biometric facial matches without the consent of the image subject,” the groups wrote. “Moreover, the company seeks to advance its facial recognition techniques by deceptively enlisting Facebook users in the process of assigning identity to photo images. This unwanted, unnecessary, and dangerous identification of individuals undermines user privacy, ignores the explicit preferences of Facebook users, and is contrary to law in several states and many parts of the world. The Commission must undertake an investigation, enjoin these unlawful practices, establish sanctions, and provide appropriate remedies.”

In a separate complaint, CFA and other public interest groups called on the agency to take enforcement action against Google for violating children’s privacy laws in operating the YouTube online video and advertising network services.

Google has made substantial profits from the collection and use of personal data from children on YouTube. Its illegal collection has been going on for many years and involves tens of millions of U.S. children, according to the complaint. The groups called on the FTC to enjoin Google from committing further violations of the Children’s Online Privacy Protection Act (“COPPA”), impose effective means for monitoring compliance, and assess civil penalties that demonstrate that the FTC will not permit violations of COPPA.

“It’s important for the FTC to take swift action on these complaints, not only to remedy the specific problems that we describe but to send a strong signal that the agency is vigilantly enforcing its orders and protecting consumers’ privacy,” said CFA Director of Consumer Protection and Privacy Susan Grant.

Brobeck to Retire After 38 Years as CFA’s Executive Director

In June, Stephen Brobeck will retire as CFA Executive Director after 38 years of service.  Having served on the CFA Board from 1976 to 1979, he was appointed Executive Director in the spring of 1980.  Brobeck will be succeeded by Jack Gillis, CFA’s long-standing Director of Public Affairs.

“During his tenure, Steve unified a diverse set of consumer and cooperative organizations, built a strong financial base, and recruited leading advocates to staff in many different policy areas,” said Janet Domenitz, CFA’s Board Chair and Executive Director of MASSPIRG. He also proposed and helped launch organizations, including Advocates for Highway and Auto Safety and the Coalition Against Insurance Fraud, as well as successful programs, including America Saves and Consumer Lobby Day.  In addition, he served on more than a dozen boards of directors, including that of the Federal Reserve Board of Richmond.  Steve has been an extraordinary and effective leader for CFA,” she added.

Domenitz noted that Brobeck will serve as Executive Director until June 20th, the day of CFA’s annual Awards Dinner, after which he will pursue his research interests as a CFA senior fellow.  The June 20th dinner, held during CFA’s 50th anniversary year, will recognize CFA’s member organizations and a half-century of consumer activism.  The dinner program will also honor Brobeck and introduce Gillis as his successor.

“CFA’s Board is thrilled to have Jack Gillis continue his long-standing service to CFA in this exciting new opportunity as Executive Director,” said Domenitz.  Gillis has been CFA’s Director of Public Affairs since 1983 and is a renowned consumer advocate and author, co-author and editor of 74 consumer books including The Car Book.  He served for ten years as a contributing consumer correspondent for NBC’s Today Show representing CFA, was Good Housekeeping’s personal finance columnist, and product safety columnist at Child Magazine.