AGs Challenge Rule Enabling Evasion of State Interest Rate Caps

Attorneys General of California, New York, and Illinois challenged a new final rule from the Office of the Comptroller of the Currency (OCC) that encourages non-bank lenders to launder loans through banks so they can charge triple-digit interest rates.

They argue that the OCC rule will worsen the problem of rent-a-bank schemes, which occur when a predatory lender launders loans through a federally regulated bank to evade state interest rate caps, that it violates the Administrative Procedure Act, and that it is “beyond the OCC’s power to issue.”

“The OCC rule is an attack on state interest rate caps, like those enacted by California and New York. In the absence of a federal usury law, consumers rely on their state governments to shield them from abusive interest rates. We commend these Attorneys General for challenging the legality of this rule and stepping in to uphold their states’ authority to protect residents with usury laws,” stated Rachel Weintraub, CFA Legislative Director and General Counsel.

“State governments see firsthand that predatory lenders target the financially distressed and communities of color, stripping them of hard-earned wealth and trapping them in devastating cycles of debt,” stated Rachel Gittleman, CFA Financial Services Outreach Manager. “State interest rate caps have proven to be the most effective way to protect consumers from unaffordable loans. We applaud the Attorneys General for standing up to this attempt to bypass state interest rates and embolden predatory lenders in the midst of a financial crisis.”

 DOE Inaction Will Cost Consumers Billions, Worsen Carbon Emissions

Consumers risk losing at least $22 billion in annual savings while the U.S. Department of Energy (DOE) fails to meet its legal responsibility to review and update overdue energy efficiency standards for an unprecedented 26 consumer and commercial products, six environmental groups warned in a notice of intent to sue letter filed with the agency earlier this month.

Failure to update these standards will also result in almost 80 million metric tons of carbon being spewed into the atmosphere by 2035—an amount equivalent to the annual tailpipe emissions from more than 17 million cars, the groups argued.

The groups, including CFA, threaten to sue DOE should it fail to meet its requirements within 60 days.  “DOE under the Trump administration has repeatedly and systemically failed to comply with these basic and important duties,” the letter states. “If DOE does not comply with its duty to complete the actions required under [the Energy Policy Conservation Act (EPCA)] to review and update the standards for these products within sixty days, we intend to bring suit to compel it to do so.”

Since its 1987 launch, the national efficiency standards program has saved Americans billions of dollars on their utility bills and is projected to save $2 trillion and help the U.S. avoid seven billion tons of carbon pollution by 2030. Under President Trump, however, the DOE has failed to review more standards than any other presidential administration in the history of the 33-year-old national energy efficiency standards program.

The iPhone was just three years old the last time some of these standards were updated over a decade ago, while technology continues to rapidly evolve. Without the required updates to standards, less efficient products remain on the market, and consumers may inadvertently choose products that waste energy and cost more to operate.

The letter to Energy Secretary Dan Brouillette notes DOE has missed deadlines for reviewing, finalizing, or adopting efficiency standards for 26 products. Under EPCA DOE is required to review a standard every six years and update it if warranted. Standards that were due for an update as far back as 2016 still haven’t been reviewed.

Instead, the agency has taken steps to roll-back existing standards. Specifically, the agency has rolled back two light bulb standards that would have saved consumers $14 billion on their utility bills and avoided 38 million tons of climate-warming carbon dioxide emissions every year. DOE has also finalized changes to its efficiency standards process that will slow down, if not halt altogether, future efforts to make America’s appliances and equipment more efficient.

“DOE’s flagrant disregard for its legal responsibility to act on efficiency standards for 26 products – among them refrigerators, clothes washers, dryers, and water heaters – robs consumers of savings on their utility bills. If the agency doesn’t move to fulfill its mandate under the law, we will have to seek remedy in the courts to have it comply responsibly with the law,” said CFA Energy Projects Director Mel Hall-Crawford.

Advocates Urge Caution and Transparency in Gene Editing Policy

Four consumer and environmental groups, including CFA, submitted comments on the U. S. Department of Agriculture’s (USDA) Agricultural Innovation Agenda earlier this month. The comments express support for the Department’s stated goal of increasing agricultural production in a sustainable manner to meet the needs of the global population in 2050 “while cutting the environmental footprint of U.S. agriculture in half,” but they urge the Department to take a more proactive stance on the genetic engineering in the food system.

The comments focus on the Department’s “genome design” agenda, with the groups maintaining that “gene editing can play a positive role in U.S. agriculture in the future,” but that it is not a “silver bullet” for the future of agriculture. “To achieve USDA’s goal of increased production to meet the needs of the global population with a decreased environmental footprint, there also needs to be broader investment and innovation in conservation, research, food access, and other key areas in addition to gene editing,” according to the letter.

The letter lays out four key points the USDA should consider while developing its Agricultural Innovation Agenda.

1. USDA Should Establish Policies that Make Gene Editing Technology Accessible to a Broad Range of Developers and Ensure it is Utilized for Societal Benefits.

“Consumer acceptance and social license for the new generation of gene edited products will be better achieved if developers ensure that gene editing technologies are accessible for use by a wide variety of public, private, and NGO institutions,” the letter states. To accomplish this, USDA should invest in academics, NGOs, and small businesses, and should ensure that any intellectual property that results from these partnerships be available to others.

The letter also stresses that USDA will need to establish policies that promote the use of gene editing to maximize societal benefit. “Specifically, USDA should prioritize funding for beneficial gene editing applications in fruits, vegetables, orphan crops, and other underfunded crop and animal applications that have not historically received public and private investment to develop varieties with improved genetics,” it states.

2. USDA Needs to Ensure Transparency about Which Gene Editing Applications are in Use in Food, Agriculture, and the Environment, and Ensure Access to Independent Information about the Benefits and Impacts of Those Products.

Transparency will be essential if agricultural innovation using gene editing techniques is to be adopted by farmers, used by companies in the food chain, and purchased by consumers, the letter argues. To provide this information, USDA should: establish a national registry of all gene edited products intended for agriculture and environmental use; make sure there is information about gene edited products already in commerce; and support research to establish methodologies to quantify, characterize, and compare benefits, impacts, and efficacy of new plant and animal varieties made with gene editing. Establishing policies that promote transparency can build public trust and will allow the U.S. to use, and expand, gene editing.

3. To Realize the Full Benefits of Gene Editing and to Manage its Potential Risks, USDA Must Put in Place Science-Based, Transparent, and Participatory Regulations that Ensure Product Safety.

“USDA needs to assess the potential risks of gene edited products before they are released to farmers using a regulatory system that is based on the best scientific evidence available,” the groups write. However, the groups also highlight that this regulatory process “…should not be so onerous as to preclude the participation of smaller institutions or public entities in the development of beneficial gene edited products, but thorough enough to ensure all products are adequately assessed for safety.”

4. USDA’s Recently Issued SECURE Rule Does Not Establish a Science-Based Regulatory System and Should be Revised.

Lastly, the groups argue that the current regulations around genetically engineered organisms “…do not establish a science-based regulatory system that adequately ensures safety for all gene edited products” and should therefore be revised or withdrawn. One key issue with the current regulations is that “…many gene edited applications are not regulated because they fall within an exemption or could be encompassed by a future exemption.”

In short, “USDA also needs to eliminate the regulatory provisions that allow developers to self-determine that their products meet an exemption and are not regulated. Those provisions set up an inherent conflict of interest because developers have financial incentives to determine themselves exempt,” the letter states.

“New gene editing tools have the potential to help solve some of the toughest challenges facing our food system,” said Thomas Gremillion, CFA Director of Food Policy. “But without meaningful public sector oversight, consumers will avoid products made with these technologies, and with good reason. Consumers have a right to information about what food products are made using gene editing and other genetic engineering technology, and to an independent safety determination of those products by federal regulators.”

DOL Rushes To Finalize Anti-Investor Advice Rule

A regulatory package being rushed through by the Department of Labor (DOL) in the guise of improving retirement investment advice for workers and retirees would instead benefit powerful financial firms at retirement savers’ expense, CFA warned in a comment letter filed with the agency earlier this month. CFA called for the regulatory package to be withdrawn in its entirety.

“This regulatory package is a multi-billion-dollar transfer of wealth from the retirement accounts of American working families to the wealthiest, most powerful financial firms,” said CFA Director of Investor Protection Barbara Roper in a press statement. “Instead of strengthening protections for workers and retirees, it makes it easier for financial firms to profit unfairly at their expense.”

The DOL regulatory package consists of two components which work together to make it easier for financial firms to evade any fiduciary obligation and to weaken that standard when it does apply:

• A final rule reinstating a 1975 regulatory definition of fiduciary investment advice that it is so riddled with loopholes that it enables firms to decide for themselves when and if they want to be held to a fiduciary standard; and
• A proposed new exemption, modeled on the Securities and Exchange Commission’s weak, non-fiduciary Regulation Best Interest, which would enable firms providing retirement investment advice to engage in a wide range of conflicts of interest without adequate safeguards to prevent those conflicts from tainting their advice.

“This package combines the worst of both worlds,” said CFA Financial Services Counsel Micah Hauptman. “Firms that don’t want to be fiduciaries won’t have to be, and those that are fiduciaries will be allowed to provide harmful, self-interested advice.”

In its letter CFA noted that, “Many if not most rollover recommendations, and virtually all of those involving rollovers into non-securities, will get a regulatory free pass as a result of the Department’s decision to reinstate this outdated, loophole-filled definition.” This is critically important, because rollover recommendations are among the most consequential decisions retirement savers make, and financial firms have strong incentives to encourage rollovers even when they are not the best course of action for the retirement saver.

When the fiduciary standard does apply, it doesn’t do enough to rein in the toxic incentives that encourage and reward harmful advice, CFA warned. “Because the proposal doesn’t include any enforcement mechanism for IRA investors, firms would have little incentive to comply, and millions of IRA investors harmed by the conflict-driven advice unleashed by this proposal would have no ability to recover their losses.

CFA also criticized DOL for adopting the definition change without any opportunity for comment and for providing a mere 30 days for comment on the proposed exemption. This “denies interested parties a meaningful opportunity to comment on a rulemaking package that will affect millions of workers and retirees,” CFA wrote, adding that “this is far too important an issue, and the potential negative consequences – billions of dollars a year in lost retirement savings – are too vast, for it to be addressed through such a rushed and reckless process.”

Instead of improving investment advice for workers and retirees, as DOL claims, the reinstated definition and the proposed exemption “will instead simultaneously unleash a flood of advice tainted by toxic conflicts of interest on unsuspecting workers and retirees and strip those retirement savers of any ability to seek recourse for the financial harm they will inevitably suffer. It is a gross betrayal of the Department’s mission and should be withdrawn in its entirety,” CFA concluded.

 Nation’s Top Consumer Complaints of 2019

Problems with car sales and repairs and home improvement and construction once again topped the list of complaints reported to state and local consumer agencies across the country in 2019, according to the an annual report released by CFA late last month.

The report, conducted by CFA Director of Consumer Protection and Privacy Susan Grant, is based on a survey of 31 consumer agencies across 19 states that asked about the most common, the fastest-growing, and the worst complaints agencies received in 2019. In addition to auto and home improvement, top areas of complaints included retail sales, landlord-tenant disputes, credit and debt, communications, services, health products and services, utilities, fraud, and household goods.

“Many complaints can be resolved through mediation, and some consumer agencies can also take formal legal action when that is warranted,” said Grant. “But when it comes to fraud, prevention is the key since the money and the culprits often disappear without a trace. The public education that state and local consumer agencies provide is crucial for preventing fraud and abuse,” she added.

In addition to identifying the top 10 consumer complaints of 2019, the survey also asked about “real-world consumer stories.” A selection of those stories are included in the report.

In a new trend reported by one consumer agency, scammers are instructing victims to stay on the phone while they go to the bank to withdraw funds or to stores to buy gift cards in order to make payment. “This enables the crooks to essentially hold the victims captive and tell them how to respond if a bank teller or cashier becomes suspicious and starts asking questions,” stated Grant.

Because it focused on complaints in 2019, the report doesn’t reflect the COVID-19 pandemic. However, the work of state and local consumer agencies has not stopped during the pandemic, only changed.

Fortunately, many agencies implemented new technology or upgraded their data systems before the pandemic struck. These changes have made complaint intake and case management easier. In some cases, consumers can provide all documentation and check the status of their complaints online. Many agencies have also beefed-up the information on their websites and increased their use of social media for public outreach.

“With so many COVID-related scams proliferating, as well as problems with price-gouging for essential goods, having state and local consumer agencies on the front-line is more important than ever,” said Grant. “The advice and assistance they provide can save consumers a lot of headaches, and money,” she concluded.

Virtual National Food Policy Conference

In response to the COVID-19 pandemic, CFA moved the annual National Food Policy Conference to the virtual stage this year.

The two-day virtual event, which attracted more than 600 registrants, featured keynote speeches by Food and Drug Administration Commissioner Dr. Stephen M. Hahn and Sen. Cory Booker (D-NJ), a conversation with Chef José Andrés and Rep. Jim McGovern (D-MA), as well as facilitated discussions where the audience got to participate in question-and-answer.

COVID-19 was a major focus of the event. Topics addressed included How COVID-19 is Changing our Food System and Food Insecurity and COVID-19.

Below is a selection of images from this year’s event.