DOL Adopts Landmark Protections for Retirement Savers

Earlier today the Department of Labor announced that it had finalized long-awaited rules to strengthen protections for workers and retirees who turn to financial professionals for advice on how best to save and investment for retirement.  Years in the making, the rules require all financial professionals to act in their customers’ best interest when providing retirement investment advice.

“Average Americans who scrimp and save to afford an independent and secure retirement should be able to trust that the financial professionals they turn to for advice will act in their best interests,” said CFA Director of Investor Protection Barbara Roper in a press statement. “For too long, however, loopholes in the regulations governing advice to retirement investors have denied workers and retirees that basic protection at a cost of billions in diminished retirement savings. We applaud the DOL for persisting in the face of relentless and well-funded opposition to deliver this much needed market reform.”

The actual rule text was not immediately available Wednesday, but judging from the information provided, it appears that the rule delivers on all the key investor protection priorities.  “While we will conduct a more detailed analysis of the rule over the coming days and weeks, our initial review indicates that the rule is a huge win for consumers,” said CFA Financial Services Counsel Micah Hauptman. “It appears that the rule properly closes the loopholes in the current rule so that financial professionals can no longer evade their obligation to serve their customers’ best interest, appropriately applies to recommendations to roll over to an IRA, which is often the time at which retirement savers have the most money at stake and are most vulnerable to being preyed upon, and has a strong, legally enforceable best interest standard, backed by requirements for firms to rein in toxic and often perverse compensation practices that reward financial professionals for working against their customers’ best interests.”

Finalization of the rule is a huge hurdle, but is unlikely to be the end of the fight. Some industry rule opponents have already begun laying plans to challenge the rule in court, and they have also sought legislation to overturn, delay, or water down the rules.  “The rule rewards firms that are prepared to compete by offering high quality services and investments at a reasonable price,” Roper said. “We remain hopeful that some of the more responsible industry members who are comfortable competing on this basis will seize this opportunity to separate themselves from the herd and move forward quickly to implement this rule. Firms that take the lead in embracing a strong fiduciary standard stand to benefit both their customers and themselves.”

Groups Urge Action to Finalize FDA Rule on Generic Drug Labeling

The Food and Drug Administration (FDA) proposed regulations in 2013 to clarify the ability, and the responsibility, of generic drug manufacturers to initiate safety, efficacy, and dosing updates to their products’ labeling. Nearly three years later, CFA and two dozen other organizations are urging the Obama Administration to move forward with finalizing the FDA’s proposal.

“Requiring all prescription drugs to carry up-to-date safety warnings is essential for improving the safety and efficacy of all FDA approved drugs as well as for shoring up needed consumer safeguards and protections,” the groups wrote in a March comment letter to the Department of Health and Human Services. “Extending this process to generic drug manufacturers will give physicians, patients, and their family members access to better and more accurate information about the risks and benefits of the medications they are taking, regardless of whether a drug is brand-name or generic.”

The current system’s heavy reliance on brand-name manufacturers to initiate all labeling changes, even after generics enter the market, no longer makes sense since the brand-name manufacturer loses market share shortly after a generic enters the market, the groups argued.

They urged the agency to resist efforts to delay or water down the rule. “One alternative offered would go so far as to prevent brand-name manufacturers, in certain circumstances, from promptly updating safety information, again, as most prescription drugs sold in the United States have done since the 1980s. That alternative proposal would be a significant step backward for consumer safety.”

“Prescription drugs should have reliable safety warnings. Whether the drug is a brand name or a generic should have no impact on the accuracy of the safety warning,” said CFA Legislative Director and General Counsel Rachel Weintraub.

Advocates Urge FCC, EU to Protect Consumers’ Privacy 

The Federal Communications voted 3-2 last week to initiate rulemaking to strengthen broadband data privacy and security protections.

“We welcome the FCC’s action and will push for the strongest possible rules to give consumers meaningful control of their personal information when they use broadband services,” said Susan Grant, CFA Director of Consumer Protection and Privacy, in a press statement. “Internet service providers should be required to get consent before they use or share information about customers and their online activities for purposes other than providing the services to which they have subscribed.”

Earlier last month, CFA joined more than two dozen civil society groups to call on European leaders to re-negotiate the “Privacy Shield” data-transfer agreement which governs how data transferred between the United States and the European Union is handled and used.  The groups argued that the agreement does not comply with the standards set by the Court of Justice of the European Union.

“Without more substantial reforms to ensure protection for fundamental rights of individuals on both sides of the Atlantic, the Privacy Shield will put users at risk, undermine trust in the digital economy, and perpetuate the human rights violations that are already occurring as a result of surveillance programs and other activities,” the groups wrote.

Food Safety Advocates Voice Support for USDA Rule on Chemical Residues

In a joint comment letter filed last week with the U.S. Department of Agriculture, CFA and other members of the Food Safety Coalition voiced strong support for the Food Safety and Inspection Service’s proposal to set de minimis standards for dioxin, heavy metals and other hazardous chemicals that may find their way into the food supply and threaten consumers’ health.

Current regulations do not “effectively or uniformly address heavy metals, dioxins, and many other potential contaminants that fall outside the categories of animal drugs or pesticide chemicals,” the groups wrote.  “This regulatory disorder affects consumers,” they added, citing a recent report from Pew Charitable Trusts which funds that such chemicals “clearly do pose an important public health risk.”

The new standards will guide agency inspectors in determining when these chemical residues pose a threat to food safety. They will not, however, mandate limits on the amount of allowable contamination. For that reason, the groups urge the agency to also establish “action levels” that make clear when products contaminated by these chemicals must come off the shelves.

“The de minimis standards are a step in the right direction but the agency still needs to go further,” said CFA Director of Food Policy Thomas Gremillion. “Consumers should have the assurance that when the agency finds dangerous levels of heavy metals, dioxins, or other hazardous chemicals in a food, it will pull that food from the market.”

Taxpayers Face Risks from Unregulated Preparers

Taxpayers who seek assistance from paid tax preparers face a minefield of consumer protection risks, including needless fees, fraud and errors, and lack of price transparency, according to a report released last month by National Consumer Law Center and CFA.

Among the key risks described in the report:

• Paid preparers offer and promote financial products that can be unnecessary and expensive, such as refund anticipation checks (RACs). The report warns of a new generation of such loans being offered this year that claim not to charge a fee but that can still impose high costs on the taxpayer.
• The vast majority of paid tax preparers are not required to meet any minimum educational, competency, or training standards. The lack of competency standards for paid preparers exposes consumers to potential error.
• Tax preparation is one of the few services that do not provide meaningful price information to consumers. Fees can be as high as $400 to $500, but preparers often refuse to provide firm price quotes ahead of time.

“The report highlights the need for consumer protections in the paid preparer industry,” said CFA Senior Policy Advocate Michael Best, who was a contributing author of the report. “Our recent national poll results show that 4 out of 5 respondents believe paid tax preparers should have to pass a competency test, be licensed and provide a list of fees before completing a tax return.”

Consumer Assembly Celebrates its 50^th Anniversary

Consumer advocates, policymakers, industry representatives, and members of the media gathered in Washington, D.C. in early March for CFA’s 50^th annual Consumer Assembly. The conference featured keynote speeches from: former Representative Henry Waxman (D-CA); Consumer Product Safety Commission Chairman Elliot Kaye; Scott Keeter, Director of Survey Research with Pew Research Center; Columnist for Mullings and Republican Strategist Rich Galen; Distinguished Professor of Public Theology of Wesley Theological Seminary Mike McCurry; and Stanley Greenberg, CEO of Greenberg Quinlan Rosner Research and Author of American Ascendant.