CFA News

CFAnews Update – August 31, 2022

Pandemic Related Issues Continue to Impact 2021’s Top Ten Consumer Complaints, Auto Sales and Repairs Rank No. 1 for Sixth Year in a Row

Earlier this month CFA released its annual Top Ten Consumer Complaints Survey Report, with auto sales and repairs ranking number one in the category of complaints made to local and state consumer agencies in 2021.

“For the sixth year in a row, the number one consumer complaint to agencies involves deceptive conduct in the sale of new and used cars as well as complaints about auto repair shops,” said Erin Witte, CFA’s Director of Consumer Protection. “It is clear that auto sales and repairs are a longstanding problem and that consumers rely heavily on these agencies for assistance when they have suffered harm.”

Twenty-three agencies from 15 states responded to the 2021 survey, which asked about the complaints the agencies received last year, the worst most common COVID-related complaints, and what their greatest achievements for the year were. The report includes numerous examples of complaints that these agencies received from consumers.

The report noted that the global pandemic in 2020 “created a shift in the types of problems consumers faced, the volume of complaints received by agencies, and the operating methods of these agencies.” Into 2021, “…agencies continued to adjust and serve the public while managing continually new types of complaints regarding issues, [related to the pandemic] like masking policies, vaccine scams, and housing issues.”

These agencies collectively handled over 208,000 complaints, securing over $119 million in monetary relief for consumers, along with providing unique non-monetary relief to consumers (such as working to resolve a year-long complaint with a power company, and negotiating investments in capital expenditures to improve internet access) across the country as the COVID pandemic continues.

“Each year, we are delighted to work with the dedicated public servants at each participating agency and learn about their efforts,” Witte said. “Their responses give us insight about what is happening in the marketplace and which strategies have been particularly successful.”


CFA Supports SEC Proposals to Enhance Environmental, Social and Governance-Related Disclosures and Update Names Rule

Earlier this month CFA submitted comments in support of two proposals by the Securities and Exchange Commission (SEC) that would ensure retail investors have accurate and reliable information about the products and services marketed and sold to them.

The first proposal, the Environmental, Social, and Governance (ESG) Disclosures for Investment Advisers and Investment Companies, would require investment companies and investment advisers to provide specific disclosures regarding how they incorporate ESG considerations into their investing practices.

In the comments for this proposal CFA wrote that by requiring “…funds and advisers to provide more detailed explanations about their ESG investing practices to investors in funds’ registration statements, funds’ annual reports, and advisers’ brochures,” this will provide “…investors with more meaningful information on which to make investment decisions,” and would “…help investors make more informed investment decisions that better reflect their preferences, objectives, and expectations.”

The second proposal, Investment Company Names, would expand the scope and applicability of the SEC’s current Names Rule to cover a broader set of funds’ naming conventions, including funds’ use of ESG-related terminology in their names and the use of derivative investment instruments in investment portfolios.

CFA’s comments on the Names Rule proposal emphasized that expanding the scope of the existing rule in this way would “…represent a significant improvement over the status quo,” and is “urgently needed to protect the many investors that reasonably rely on the accuracy and reliability of fund names when making investment decisions and throughout the duration of their investments.” CFA also highlighted areas for additional improvement, specifically by amending the proposal to explicitly limit the ability of single-state tax exempt funds to use names that mislead or deceive investors about what they are investing in.

“We are pleased by both of these rule proposals,” said Dylan Bruce, CFA Financial Services Counsel. “We strongly support the SEC’s effort to enhance the disclosures that investors receive from funds and advisers regarding ESG considerations in fund strategies and investments. We also support the SEC’s proposal to improve the reliability and accuracy of fund names—the current Names Rule is in dire need of updating, and this proposal would better inform the many investors that reasonably rely on the accuracy and reliability of fund names when making investment decisions.”


CFA Supports Department of Energy’s Proposed Standard for Non-Weatherized Gas Furnaces

CFA submitted written testimony earlier this month to the Environmental Protection Agency (EPA) in support of the Department of Energy’s (DOE) proposed standard for non-weatherized gas furnaces at the technical standard level (TSL) 8, that is at 95% Annual Fuel Utilization Efficiency (AFUE) for all such furnaces.

“For over thirty-five years CFA has advocated for cost-effective energy standards at the state and federal levels, as they benefit consumers through lower utility bills,” said Richard Eckman, an Energy Advocate at CFA. “A strong updated efficiency standard will ensure that the efficiency level of all furnaces on the market will meet a higher minimum standard, saving consumers over $30 billion over the life of the furnace.”

In its testimony, CFA wrote that in households where “…heat is provided by a non-weatherized gas furnace, the cost of gas often represents the household’s largest energy bill.” CFA’s extensive review on research about efficiency standards shows that “…regulator predictions of costs in prior standards dockets have been consistently higher than the actual cost increases associated with the efficiency standards and industry predictions have been even wider off the mark,” thus DOE has “…routinely underestimate[d] the net benefits of increased efficiency.”

While CFA believes that DOE should continue to study the impact of a uniform standard, “…the exemption for certain furnaces is no longer necessary.” This is because “…reductions in expenditures for fuel use are larger than costs of the fuel-saving technologies,” with CFA finding that:

  • The payback period is less than half the life of the appliance
  • Many more consumers enjoy net benefits than bear net costs
  • Individuals who benefit have much larger gains than the losses of the individuals who do not
  • All conclusions about consumers benefits in the aggregate apply to low-income consumers as well
  • As large as the consumer pocketbooks benefits are, DOE has underestimated the net pocketbook benefits by overestimating the costs and underestimating the benefits
  • The consumer pocketbook savings are augmented by other indirect and external benefits (e.g., environmental, public health, and macroeconomic)

“Although the harm done to consumers through a quarter century of inaction and stonewalling by the gas utilities on this standard cannot be undone, by adopting a higher standard today, future harm can be prevented,” said Eckman. “We urge the Department to move with all due speed to finalize a long overdue, much-needed standard that does away with inefficient, energy-wasting furnaces so that consumers will pay less on their energy bills.”


CFA Urges Kentucky Department of Insurance to Stop Discriminatory Pricing of Auto Insurance

CFA called upon Kentucky Insurance Commissioner Sharon Clark earlier this month to investigate and address discriminatory auto insurance pricing in the state that leaves financially vulnerable Kentucky drivers with massive surcharges, even when they have perfect driving records.

In a letter sent to the Commissioner, CFA analyzed premium data on the cost of basic auto insurance in every ZIP code in the state, finding dramatic price differences based on consumers’ credit history and the neighborhood in which they live. CFA’s research found that statewide, Kentucky drivers with a perfect driving record and excellent credit pay an average premium of $689. But if the driver has the same driving record but poor credit, their premium increases to $1,625 – a 136% increase based solely on a difference in credit scores. CFA’s investigation also found that in Louisville mostly Black, low-income ZIP codes pay higher premiums compared to mostly white, wealthy ZIP codes.

“Kentucky requires all drivers to have auto insurance, but the Department isn’t doing enough to make auto insurance affordable or to prevent unfair discrimination in the market,” said Michael DeLong, CFA’s Insurance Research Advocate. “They should investigate this discrimination, prohibit credit-based pricing, and block the kind of territorial rating that leads to the unacceptable disparities we see in Louisville. Kentucky consumers deserve better.”

CFA’s letter followed research conducted earlier this month by Louisville’s WAVE 3 news, which focused on price differences among different ZIP codes in Kentucky, but did not address the impact of residents’ credit history on rates. Following this, WAVE 3 ran another segment focusing on credit scores and how insurers use them to overcharge consumers. Despite the letter and both news stories, the Kentucky Department of Insurance’s only response has been a brief statement that auto insurance prices are not a Louisville specific issue. CFA agrees: auto insurance prices affect drivers across the country, and Kentucky should do its part to protect consumers from unfair and excessive premiums.

The Texas Department of Insurance also recently issued a short bulletin reminding insurance companies that they have a duty to act in good faith toward their policyholders and to promptly pay valid and settled claims. This bulletin is in response to a recent letter sent by CFA and consumer organizations Texas Appleseed and Texas Watch, demanding that the Department investigate unfair delaying of insurance claims; a law firm recently published an article saying that delaying claims can be a good strategy for insurers (this article was hurriedly taken down once it started receiving criticism).