CFA News

CFAnews Update – August 27, 2018

Administration Rolls Back MPG Standards

The Environmental Protection Agency (EPA) and the National Highway Traffic Safety Administration (NHTSA) announced last month that the agencies will abandon fuel economy standards for passenger cars and light trucks, freezing the gradually increasing fuel efficiency requirements intended to carry through to 2025 at the year 2020 level. They took this action despite the fact, as demonstrated in a recently released CFA report, that new vehicles have become safer, sold more and are replacing older less safe vehicles in record numbers as fuel efficiency has increased.

“This report completely refutes the Trump Administration’s convoluted rationale for rolling back the standards,” said CFA Executive Director Jack Gillis in a press statement. “Safety is up, fuel economy is up and sales are up. Older, less safe, more expensive to operate, gas guzzling cars are being replaced by some of the safest and most efficient vehicles ever produced.  Consumers are responding by buying new cars in record numbers—clearly they want vehicles that save both lives and money.”

The report found that the average fuel economy of “all-new” 2018 vehicles, models that have been significantly redesigned, increased to 25.1 MPG from 21.8 MPG in 2011 (a year before current standards were adopted). As a result, drivers of “all-new” vehicles introduced in 2018, compared to their 2011 models, will save an average of $2,605 as a result of fuel savings, which more than pays for the average sticker price increase of $2,127. Not only will fuel savings cover any cost of fuel saving technology, but they will cover all of the other costs that go into carmaker price increases, including new safety features, new technology and design changes.

For the 75 percent of car buyers who can’t afford to buy new and who therefore purchase used cars, the availability of safer, more fuel efficient vehicle choices increases every year.

An analysis of NHTSA crash results further rebuts the Administration’s claim that it is making the move because fuel economy standards undermine vehicle safety. When CFA looked at all 19 of the new 2018 models, which NHTSA crash tested and had a crash test for the previous model, it found that 14 models weighed less and had better fuel efficiency than the previously crash tested vehicles. Of those lighter vehicles, NHTSA gave 8 of the 14 the exact same crash test rating as the previous version and six more actually received better crash test ratings. “The Trump Administration basing its rollback on safety is flat-out wrong and completely ignores the facts that they, themselves, have produced,” Gillis said.

A subsequent analysis of sales trends for SUVs, crossover vehicles, and pickups found that those whose MPGs (miles per gallon) increased by over 15 percent between 2011 to 2017, had a 70 percent increase in sales, compared with a 50 percent increase in sales for those with less than a 15 percent increase in MPG. “This analysis completely debunks automaker and Trump Administration claims that consumers don’t value good gas mileage,” Gillis said. “Clearly, the more improvement in MPG, the better the sales.”

“Rolling back our miles-per-gallon standards is a broken promise to the American people. Families cannot afford to spend more money at the pump,” said Gillis. “These standards protect consumers from rollercoaster gas prices that are already on their way up again (21 percent in the last year). Households don’t have a choice in what they pay at the pump, so they need fuel efficient choices at the dealership, whether it’s a car, truck or SUV. Denying families fuel savings will wreak havoc on household finances.”

SEC’s Long-Awaited “Best Interest” Standard for Brokers Fails to Live Up to Its Name

In the guise of strengthening protections for retail investors, the Securities and Exchange Commission (SEC) has proposed a regulatory package that, despite its name, doesn’t clearly require brokers to do what is best for their customers, doesn’t clearly prevent them from placing their own interests ahead of their customers’ interests, enshrines as policy the Commission’s weak and ineffective approach to enforcing the Investment Advisers Act fiduciary standard, and requires disclosures by brokers and advisers that are more likely to mislead investors than to dispel investor confusion.

CFA outlined these and other weaknesses in the SEC proposal in a comment letter filed with the agency earlier this month. The letter responds to the Commission’s request for comment on three related regulatory proposals: (1) Regulation Best Interest, which purports to raise the standard of conduct that applies when brokers make securities recommendations (Reg BI); (2) a new interpretive release regarding the standard of conduct for investment advisers (IA Guidance); and (3) a proposal to create a new relationship summary disclosure document for brokers and advisers (Form CRS).

“It is easy to be beguiled by the rhetoric surrounding Regulation Best Interest into thinking the SEC has done something meaningful to improve protections for average mom and pop investors, but a look beneath the surface quickly dispels that illusion,” said CFA Director of Investor Protection Barbara Roper in a press statement. “Unless the SEC undertakes extensive revisions, the proposal will put investors at greater risk, misled into expecting protections the proposed standard doesn’t provide.”

Among the proposal’s most serious shortcomings is that it fails to define the term “best interest,” let alone do so in a way that matches investors’ reasonable expectations. For example, it does not require brokers to recommend, from among the reasonably available investments, those that are the best match for the investor. Instead, brokers would remain free to recommend higher cost investments that pay them more, except in the narrowest of circumstances.

“There’s a huge gap between what investors expect when they hear the term ‘best interests’ and what this rule actually delivers,” Roper said. “If the SEC isn’t prepared to require brokers to recommend the best of the reasonably available investments, they should stop calling this a best interest standard. It’s misleading.”

The proposed standard also does too little to prevent brokers’ conflicts from tainting their recommendations. It doesn’t even prevent brokers from artificially creating incentives – like sales quotas and bonuses for recommending certain products – that encourage recommendations that put the firm’s interests ahead of the customers’ interests.

“Instead of cracking down on toxic incentives that firms use to encourage and reward brokers for giving bad advice, such as sales quotas and contests, it defers to the firms. As long as they go through the motions of mitigating conflicts, that appears to be good enough under the proposed standard,” said CFA Financial Services Counsel Micah Hauptman.

These same shortcomings are on display in the Commissions proposed guidance regarding investment advisers’ fiduciary obligations, and the proposed disclosure documents are more likely to mislead investors about the protections they are likely to receive than to dispel confusion about the differences between brokers and advisers, according to CFA’s analysis.

CFA called on the Commission to “go back to the drawing board” to get the regulatory proposal right, and its comment letter includes a redline of the proposed best interest standard that would achieve the intended result. “The question is whether the SEC is willing to make the necessary changes to protect and serve investors or whether it is content with an approach that protects and serves the brokerage industry,” Hauptman said.

Farming, Food Safety, and Environmental Organizations Call on DOJ to Block Bayer-Monsanto Merger

CFA has joined a coalition of farming, consumer, and environmental groups in calling on the Department of Justice (DOJ) to block the merger of Bayer and Monsanto. The groups delivered more than 97,325 public comments, signed by farmers and others across the country, urging the agency to reverse its conditional approval of the merger.

Friends of the Earth, Natural Resources Defense Council, Farm Aid, Family Farm Defenders, and ActionAid USA were among the groups arguing that the merger threatens competition and innovation in our food system, compromises the future sustainability of agriculture, and harms farmers, agricultural workers and consumers. Regardless of the divestitures DOJ is requiring of Bayer, the merger could significantly reduce farmer seed choice, decrease quality and diversity of seeds, and increase prices, the groups said.

“The Justice Department is missing an important opportunity here to stand up for competition in an increasingly uncompetitive market,” explained CFA Senior Fellow Mark Cooper. “Bayer and Monsanto have used their control over chokepoints in the supply chain to stifle competition. By binding traits, seeds, and chemicals, these companies are able to misuse intellectual property to the detriment of competition and consumers. The proposed merger would fuel even more abuse.”

Ninety-three percent of farmers surveyed have expressed concerns that the merger will have a negative impact on independent farmers and farming communities. Nine out of ten Americans have serious concerns about the merger, according to a poll conducted by Public Policy Polling. Nearly 325 consumer, farmer, and environmental groups oppose it, and more than 1 million Americans have signed petitions calling on DOJ to block it.

However, the Department of Justice has downplayed public opposition, and has erected barriers to those wishing to submit public comments. DOJ prevented the groups from delivering over 1 million comments in person back in November 2017. Instead, it required all public comments to be sent by mail and received – not postmarked – by August 13.

Groups Highlight Product Safety Hazards, Encourage CPSC to Prioritize High-Impact Projects

Six leading national consumer safety organizations, including CFA, wrote to the Consumer Product Safety Commission (CPSC) in July urging the agency to use its limited resources during the remainder of the 2018 fiscal year (FY) and FY 2019 to focus on “projects that would have a clear and forceful impact and would help eliminate or substantially reduce product-related deaths and injuries.”

Specifically, the groups voiced strong support for the agency’s important work as part of its Operating Plan to address safety hazards involving portable generators, furniture tip-overs, infant sleep safety, lithium-ion and coin cell batteries, all-terrain vehicles (ATVs), and magnet sets, as well as its work to improve the consumer incident database.

Among the priorities highlighted by the group were: implementation of a mandatory standard for portable generators to address the risk of carbon monoxide poisoning and other safety risks associated with the products; focus groups to address infant sleep hazards; and injuries and deaths associated with tip-over incidents, particularly those involving dressers and other clothing storage unit furniture.

“The CPSC is a critical agency with insufficient funding and staff to fully carry out its safety mission,” the groups wrote. “Given the CPSC’s limited resources, the CPSC must evaluate its work to ensure that it prioritizes projects that would have a clear and forceful impact and would help eliminate or substantially reduce product-related deaths and injuries.”

“Consumers depend on the U.S. Consumer Product Safety Commission to keep their products and their families safe. As the CPSC prioritizes its work it is critical that the agency keep death and injury reduction as their main goal,” said CFA Legislative Director Rachel Weintraub.

Consumer Groups Celebrate the 10th Anniversary of Landmark Product Safety Law

This August, consumer and product safety organizations are marking the tenth anniversary of the Consumer Product Safety Improvement Act (CPSIA), a landmark safety law passed with overwhelming bipartisan support in Congress that includes strong product safety reforms and helped strengthen the work of the U.S. Consumer Product Safety Commission (CPSC).

The law was passed in response to a record number of product recalls in 2007, which highlighted the need for Congress to take action to ensure that cribs were safe, that toxic chemicals were banned from children’s products, and that the CPSC had the tools and resources it needed to fulfill its mission.

CFA, Kids In Danger, Consumers Union, the American Academy of Pediatrics, U.S. PIRG, Public Citizen, Breast Cancer Prevention Partners, the Union of Concerned Scientists, the Coalition for Sensible Safeguards, and SafeKids Worldwide lauded the significant safety breakthroughs in the ten years since the CPSIA was passed, including:

  • The reduction of lead in children’s products through lower lead limits.
  • Strong mandatory standards for cribs and other infant and toddler products.
  • A mandatory safety standard for children’s toys, which includes a mechanism for the CPSC to improve those standards if necessary.
  • CPSC’s increased authority to hold violators of product safety rules accountable.
  •, a consumer incident database that helps the CPSC identify trends in product hazards and gives consumers a tool to report and research harm associated with a consumer product.
  • A requirement for third-party pre-market safety testing for children’s products subject to mandatory standards.
  • A requirement that manufacturers include a product registration card for durable nursery goods.
  • A ban on eight phthalates, chemicals that soften plastic, in kids’ toys and childcare articles. Phthalates are endocrine disrupting chemicals and exposure to phthalates has been linked to breast cancer, developmental issues, decreased fertility, obesity and asthma.

The groups also released a CPSIA Tenth Anniversary Album, documenting the important impact that the CPSIA has had on safety in the United States.

“The CPSIA represents the most significant strengthening of product safety laws since the CPSC was created. Consumers, including children, are safer as a result of the CPSIA and its effective implementation,” said CFA Legislative Director Rachel Weintraub. “The CPSC must continue to build on this success and implement more mandatory standards for infant and toddler products, assess meaningful and timely civil penalties, and make an even more effective resource.”

Consumers, Food Companies Tell Congress Not to Undermine Integrity of Organic Program

Earlier this month, CFA joined 168 national and local consumer and public health advocates, as well as many food companies, to write a letter to congressional leaders asking them to scrap recent proposals to overhaul the National Organic Standards Board in the Farm Bill. The groups expressed concern that language in the Senate and House bills would makes changes to the authorities or composition of the Board, potentially undercutting the integrity of the organic program, undermining consumer trust in the organic label, and severely damaging the reputation of the industry as a whole.

“Organic farming is a bright spot in the U.S. rural economy,” the groups wrote. “Data show that organic farms are 35 percent more profitable than the average farm and that rural counties with a high level of organic farms and businesses have higher household incomes and reduced poverty rates by as much as 1.35 percent, even more than major anti-poverty programs. Domestically, the organic sector is home to over 26,000 certified organic family farms and businesses.”

Among other things, the group letter is urging Congress to act on the following:

  • Provide mandatory funding of $11.5 million annually for the National Organic Certification Cost Share Program (NOCCSP) and keep the Agricultural Management Assistance (AMA) program intact.
  • Increase funding for the Organic Agriculture Research and Extension Initiative (OREI) to $50 million by fiscal year 2022 and beyond.
  • Fully fund the Conservation Stewardship Program (CSP).
  • Create a new allocation within CSP to allocate funds to each state to “support organic production and transition to organic.”

“The National Organic Program has succeeded the way it has because the ‘USDA Organic Certified’ label is meaningful to consumers,” said CFA Food Policy Director Thomas Gremillion. “Sabotaging the governance structure of the organic program would hurt farmers and consumers alike.”

Home Alarm Sales Tactics Have Emerged as a Concern on CFA’s Annual Complaint Survey

Problems with home alarm sales tactics were flagged as an issue to watch in the latest report from the latest survey of state and local consumer agencies regarding trends in consumer complaints conducted annually by CFA. Forty agencies from twenty-three states participated in the survey, which asked about the most common complaints, the fastest-growing complaints, and the worst complaints received in 2017. In addition, the report identified new kinds of consumer problems, agencies’ greatest achievements, and new laws enacted in the agencies’ jurisdictions last year to protect consumers.

“This year sales of alarm systems have emerged as an area of particular concern. These complaints involve the use of misleading solicitations and scare tactics,” said CFA Director of Consumer Protection and Privacy Susan Grant in a press statement. “In one case, a company sent a letter that looked like it came from the county government to new homeowners warning that their neighborhoods were unsafe because of ‘the opioid crisis’ and offering ‘free’ alarm systems as part of a county-wide program.”

Noting that many of the complainants in these cases are elderly or disabled, Ms. Grant said, “Alarm systems are supposed to protect consumers, but consumers need better protection from rogue alarm companies and salespeople who try to take advantage of them.” While states generally regulate alarm companies from a public safety standpoint, the licensing and registration requirements do not address sales practices. Ms. Grant pointed to the Electronic Security Association’s Code of Ethics as a useful reference. “As with solar sales, it might be helpful to have rules for sales of alarm systems requiring clear disclosures, prohibiting misleading and unsubstantiated claims, and providing strong penalties for noncompliance,” Grant said.

The following are consumer complaints most frequently cited as the top problems reported to state and local consumer agencies last year.

  1. Automobiles: Misrepresentations in advertising or sales of new and used cars, lemons, faulty repairs, auto leasing, and towing disputes.
  2. Home Improvement/Construction: Shoddy work, failure to start or complete the job.
  3. Retail Sales: False advertising and other deceptive practices, defective merchandise, problems with rebates, coupons, gift cards and gift certificates, failure to deliver.
  4. Credit/Debt: Billing and fee disputes, mortgage modifications and mortgage-related fraud, credit repair, debt relief services, predatory lending, illegal or abusive debt collection tactics.
  5. Landlord/Tenant: Unhealthy or unsafe conditions, failure to make repairs or provide promised amenities, deposit and rent disputes, illegal eviction tactics.
  6. Services: Misrepresentations, shoddy work, failure to have required licenses, failure to perform.
  7. Communications: Misleading offers, installation issues, service problems, billing disputes with phone and internet services.
  8. Health Products/Services: Misleading claims, unlicensed practitioners, failure to deliver, medical billing issues.
  9. Household Goods: Misrepresentations, failure to deliver, defective merchandise, faulty repairs, in connection with furniture or appliances.
  10. (Tie) Home Solicitations: Misrepresentations, abusive sales practices, and failure to deliver in door-to-door, telemarketing or mail solicitations, do-not-call violations; and
  11. Internet Sales: Misrepresentations or other deceptive practices, failure to deliver online purchases; Travel: Misrepresentations, failure to deliver, cancelation and billing disputes.