CFA News

CFAnews Update – August 31, 2017

EPA Attempts to Roll Back Fuel Economy Standards

The Environmental Protection Agency (EPA) has announced a new public comment period to review fuel economy standards for cars and trucks that are on track to save families thousands of dollars per year. By opening the door to rolling back the standards, which are scheduled to come into full effect in 2025, EPA is forcing families to spend more money at the pump and allowing automakers to fall behind in the global market, CFA warned in a press statement.

Years of CFA polling has shown that a vast majority of Americans – including Republicans, Democrats and Trump voters – support standards making cars and trucks run on less gas. And they do so for good reason—it puts hard-earned money back into their pockets and back into the economy.

The standards that EPA is attempting to roll back were agreed to by carmakers, unions, environmentalists and consumer groups in 2012. Earlier this year, EPA completed a scheduled midterm review of the standards and reaffirmed the fuel economy targets.

“Less than a year ago, multiple agencies completed the midterm review, which consisted of thousands of hours of research and analysis, evidence gathering for more than a year, an extensive comment period in which all stakeholders, including the auto industry and ourselves, were deeply involved,” said CFA Director of Public Affairs Jack Gillis. “To do this all over again is a waste of taxpayer dollars.”

Recent CFA research demonstrates that automakers are able to comply with national fuel efficiency targets with 70 percent of the “all-new” 2017 vehicles having a CAFE-compliant trim, compared to 41 percent of the “all-new” 2015 vehicles, and a record-breaking six vehicles are compliant all the way to 2025. Overall, according to the analysis, fuel economy improvements far exceed their cost.

“These standards are doing exactly what they were designed to do, automakers are meeting them and consumers are reaping the benefits right now,” said Gillis. “But Asian automakers are still leading in efficiency. With a global market that is beginning to shun the traditional combustion engine, standards ensure that U.S. car companies remain globally competitive and prevent the need for another government bail-out when gas prices spike again and consumers scramble for high-mileage vehicles.”

USDA Proposing to Allow U.S. Imports of Chinese Chicken

The U.S. Department of Agriculture (USDA) has proposed a rule that would allow imports of poultry products to the United States from China. In comments on the rule, CFA urged the agency to put consumer safety over politics, and to revisit its analysis in support of the proposal. The move to open U.S. markets to Chinese chicken is widely viewed as a prerequisite for China to lift the ban on U.S. beef imports that it put in place in 2003, following the detection of mad cow disease in Washington state. “Despite the agency’s claims to the contrary, Chinese insistence on a quid pro quo,” Gremillion said, “has exerted an inappropriate influence on this rulemaking process.”

Urging USDA to abandon the rulemaking, CFA’s comments emphasize China’s systemic food safety problems. “The latest food safety news out of China suggests deep-seated problems that will only resolve slowly, if ever, with broad cultural change,” said CFA Food Policy Director Thomas Gremillion. “Most recently, Chinese officials report having found more than 500,000 food safety violations in just the first nine months of 2016, including intentional adulteration of foods with industrial gelatin and counterfeit salt. These violations fit a pattern that has persisted since FSIS first cleared China to export poultry to the United States in 2006.”

Throughout the rulemaking process, FSIS has failed to conduct a frank assessment of the Chinese poultry inspection system’s “equivalence,” Gremillion said. “In 2004, FSIS somehow concluded that Chinese poultry inspection ‘laws, regulations, control programs, and procedures were equivalent to those of the United States,’ even though on-site audits later revealed that the Chinese system relied on company employees, rather than government inspectors, to screen animals for disease before and after slaughter.”

Food safety scandals have plagued China, with perhaps the most notorious example coming in 2008 when melamine-contaminated baby formula and milk products killed at least six infants and caused the hospitalization of some three hundred thousand others in China. That tragedy was compounded by the Chinese government’s attempts to muffle “negative publicity” in the run-up to the 2008 Olympics, a stark reminder of the critical role transparency plays in assuring food safety. In recent years, China has enacted sweeping food safety reforms, but scandals have persisted, including revelations in 2014 that a major meat processor supplied Chinese outlets of McDonald’s, KFC, Pizza Hut, Starbucks, and Burger King with expired and rotting meat.

The USDA rule references audits of two slaughter facilities, which CFA argues does not provide an adequate basis to recognize China’s food safety inspection system as “equivalent.” “This equivalence determination is predicated on a promise to adopt a ‘demo’ inspection system rather than evaluation of the system that is actually in operation, as FSIS regulations require,” Gremillion said. “To comply with its legal mandate and to protect American consumers, FSIS should start over.”

Vermont Takes Steps to Regulate Data Brokers

The Vermont Legislature has directed  the Attorney General and the Department of Financial Regulation to recommend whether to regulate data brokers, the first state to take such initiative. Data brokers are private firms that collect personal information from people, usually without their knowledge or consent. Also problematic: data brokers make inferences about consumers, including potentially sensitive inferences that could affect consumers’ abilities to make certain transactions or to receive certain offers; storing massive amounts of consumers’ personal information could pose security risks; and consumers do not have adequate choices with regard to data brokers’ collection and use of this information.

In a letter to the State of Vermont Data Broker Regulation Group, CFA and other consumer organizations supported state action, noting that Congress has failed to enact data broker legislation despite a call from the Federal Trade Commission (FTC) to do so. The groups suggested that data brokers should be required to provide Vermonters with:

  1. Access to their data and the ability to correct inaccuracies, at no charge.
  2. Information about the sources of their data.
  3. The ability to opt-out of their data being used for marketing purposes, with easy-to-use mechanisms to do so, at no charge.
  4. The ability to opt-out of their data being used for people search products, with easy-to-use mechanisms to do so, at no charge.

“Consumers have strong rights concerning credit reporting agencies, but other types of data brokers operate without any transparency or oversight,” said CFA’s Director of Consumer Protection and Privacy Susan Grant. “Since the FTC lacks the rulemaking authority to regulate data brokers and Congress has not acted, it’s up to the states to protect their residents and ensure that this business operates responsibly.”

Senate Committee Examines Insurance Fraud

Fraud by the insurance industry against consumers and fraud by consumers against the industry both cost consumers dearly, CFA Legislative Director Rachel Weintraub told members of the Senate Commerce Committee at a hearing earlier this month on insurance fraud.  CFA warned, however, that the threat of fraud by consumers against the industry must not be used by insurers as a device to justify unfair claims practices.

While most insurance companies and agents/brokers are honest and ethical, fraud by the insurance industry against consumers is a serious problem, Weintraub said. “It costs consumers when they pay premiums for coverage they do not need; when they pay excessive and actuarially unjustifiable rates for coverages they are required to buy; when they buy insurance priced in an unfairly discriminatory manner; and it costs them when they are presented with inadequate and misleading policy language that is constructed to make them believe they are purchasing protection they will never, in fact, receive,” she said. “And, of course, fraud by insurers also costs consumers who face unfairly denied claims, underpaid claims and claims that take far too long to be paid.”

When consumers commit fraud against the insurance industry, that too is a serious issue, Weintraub said, which largely falls into two categories: hard fraud and soft fraud. “Hard fraud entails someone deliberately planning or inventing a loss, such as a collision, auto theft, or fire, that is covered by their insurance policy in order to receive a claim payment,” said Weintraub. “And soft fraud consists of policyholders exaggerating otherwise legitimate claims.” While data on hard fraud is fairly reliable, statistics on the extent of soft fraud are inexact, and the insurers have incentives to over-report it, Weintraub said.

“We would welcome Congress undertaking research to document and to minimize these types of harmful actions that put consumers at great economic disadvantage, so long as the effort is deployed in such a way that considers the whole range of frauds being committed in the insurance market, as we have outlined here,” she said.