CFA News

CFAnews Update – January 17, 2019

Rollback of Fuel Economy Standards Will Ravage Low-Income Consumer Budgets

As the Trump Administration continues to consider a rollback of federal fuel economy standards, CFA released an analysis last month showing that a rollback would hurt low-income consumers the most, forcing them to pay more for gas and leaving less for family and household essentials. The analysis shows that lower income households spend almost nine percent of their income on gas, two times as much as middle income households.

“This makes preserving the nation’s fuel economy standards critically important to millions of financially challenged Americans,” said CFA Executive Director Jack Gillis. “Fuel economy standards that allow consumers to get the most out of a tank of gas are vital in helping keep low-income families mobile.”

CFA noted that the proposed rollback is based on a fallacy, that the higher fuel economy standards make new vehicles unaffordable for low-income consumers. However, low-income consumers rarely buy new vehicles. About 92 percent of vehicle purchases among low-income households are used, not new, vehicles. Under the current fuel economy standards, low-income consumers will save almost $900 during the typical six years that they own their used vehicle, according to the CFA analysis.

In addition, the analysis explains that due to vehicle depreciation, buyers of new cars absorb a significant amount of operating and ownership costs, including the cost of new fuel efficiency technology. This means that used car buyers receive a disproportionate share of the fuel economy benefits resulting from the standards. In fact, only one-fifth of the cost of new vehicle fuel economy technology is reflected in the price of a used car. This means that low-income consumers buying used cars essentially get the improved fuel economy benefits at a significantly reduced price.

“For low-income families, every dollar counts,” Gillis said. “Many of these families don’t have the choice not to own a car. The current fuel economy standards now in place guarantee that whatever car they buy will save them money.”

Finally, because gasoline represents a much higher percentage of a low-income household’s expenditures, fuel efficiency standards provide them with a higher proportion of savings. The percentage of a low-income American’s household budget that is saved thanks to fuel economy standards is over six times what a high-income household will save.

“What is so tragically ironic about the Trump Administration’s claim that the fuel economy standards hurt low-income consumers is that they spend a higher percent of their income on gasoline than any other group. As a result, they need the standard more than any other income bracket,” concluded Gillis. “While every American will benefit from the current standards, it’s America’s most financially challenged that need them the most.”

California Prohibits Gender-Based Auto Insurance Pricing

Outgoing California Insurance Commissioner Dave Jones adopted regulations, which took effect January 1, that eliminate the use of gender in auto insurance pricing in California. CFA and the Consumer Federation of California (CFC) applauded the decision and called on policymakers and regulators around the country to take similar steps in their states in order to end the discriminatory practice of allowing insurers to charge women with good driving records more, on average, than men with similar driving records.

The new rules make California the seventh state to prohibit gender discrimination in auto insurance rating, alongside Hawaii, Massachusetts, Michigan (with exceptions), Montana, North Carolina, and Pennsylvania. The rules also eliminate the pricing problem faced by transgender drivers who, under a new California law, can have their gender identified as “non-binary” on California driver’s licenses.

“Eliminating gender from auto insurance pricing is consistent with the idea that our premiums should reflect how we drive rather than who we are,” said Douglas Heller, a CFA insurance expert who provided testimony to the California Department of Insurance in support of the rule changes.

The changes will lower auto insurance premiums charged to women in California, who, like women across the country, pay more than men for auto insurance, despite widespread misconceptions to the contrary. According to a 2017 national survey conducted for CFA by ORC International, a significant plurality of Americans think women pay less for coverage than men. However, separate research in recent years by Consumer Federation of America, the California Department of Insurance,  Texas Appleseed, and the Michigan Coalition Protecting Auto No-Fault demonstrate that women, especially those over 25 years old, pay more than men with comparable driving records for auto insurance.

CFA and CFC said that virtually every state prohibits unfair discrimination in auto insurance pricing, which means that every state insurance commissioner could follow the lead of Commissioner Jones and issue rules prohibiting the use of gender in pricing.

“Our research over the years has uncovered a variety of discriminatory pricing strategies by auto insurance companies, but when we found that insurers had begun charging women more, that really surprised me, especially because the gender-based pricing was so erratic,” said CFA Director of Insurance J. Robert Hunter. “Given the odd and unfair prices we see in the market, gender should be banned across the country as not determinative of risk and, like race, gender should not be used in pricing auto insurance.”

CFA Asks USDA, FDA to Ensure Safety of Cell-Cultured Meat Products

In the wake of a joint meeting of the USDA Food Safety and Inspection Service (FSIS) and the Food and Drug Administration (FDA) last fall to discuss the potential hazards, oversight considerations, and labeling of cell cultured food products derived from livestock and poultry tissue, CFA submitted a comment letter last month urging FSIS and FDA to clarify the application of the existing regulatory framework, and where appropriate, to develop new guidance or rules.

CFA’s letter urges the agencies to use existing regulations, or develop new rules or guidance, to ensure that:

  • cultured meat products undergo an initial, transparent, impartial safety assessment by government regulators before going on the market;
  • government inspectors oversee the production of cultured meat products in a manner, and with sufficient frequency, to avoid the most significant risks of adulteration; and
  • labeling makes consumers fully aware of which products contain cultured meat, discloses pertinent information, such as the use of genetic engineering and animal-derived products such as fetal bovine serum to produce a cultured meat product, and warns of potential allergen risks.

CFA acknowledged that cell-cultured meat has the potential to reduce certain food safety hazards, and noted that, according to the Centers for Disease Control and Prevention’s latest estimates, meat and poultry cause 22 percent of foodborne illness and 29 percent of the deaths from foodborne illness. Pathogens like Salmonella and E. coli O157:H7 spread among live animals and from carcass to carcass in slaughter facilities, in many cases as a result of fecal contamination, a problem that would not apply to cultured meat, CFA noted.

“We commend FSIS and FDA for collaborating now to ensure that, someday, consumers may purchase cultured meat products with full awareness of the nature of these products, and with confidence that these products meet adequate safety standards,” said CFA’s Food Policy Director Thomas Gremillion.

FTC Urged to Investigate Google for Deceptively Promoting Apps to Kids

In a complaint filed with the Federal Trade Commission (FTC), a coalition of public interest groups, including CFA, have called on the FTC to investigate Google’s unfair and deceptive practices in marketing apps for children.

Recent academic studies have found that many Play Store apps Google identifies as expressly suitable for children are not actually appropriate for them. The coalition is asking the FTC to investigate whether Google is misrepresenting to parents that the apps in the Family section of the Play Store are child-appropriate when they are not, in violation of Section 5 of the FTC Act.

“Parents reasonably expect that an app directed to children would comply with the Children’s Online Privacy Protection Act (COPPA). They do not expect that children’s apps will engage in deceptive or unfair advertising practices or include content inappropriate for children,” the groups wrote. “Moreover, Google’s eligibility criteria for inclusion in the Family category requires that apps comply with COPPA, as well as Google’s policies regarding advertising and content.”

Many of these apps violate COPPA by collecting personal information from children without giving notice to parents and obtaining their verifiable consent, the groups stated. “Some apps that Google promotes as family-friendly also deploy unfair and deceptive advertising practices—such as manipulating kids to watch ads or make purchases in order to advance in a game. Our research also revealed that many apps feature inappropriate content for children,” the groups wrote.

“Parents should be able to rely on apps that are promoted for family use to be educational and fun without having to worry about whether they are secretly spying on their children or using underhanded techniques to try to sell them something,” stated CFA’s Director of Consumer Protection and Privacy Susan Grant.

Consumer Groups Weigh in On FTC Military Credit Monitoring Rules

Under a law passed by Congress in 2018, members of the military who are on active duty now have the right to ask credit reporting agencies for free electronic credit monitoring services. “For people on active military duty, it may not be so easy to get their credit reports or keep a close eye on their accounts,” explained CFA Director of Consumer Protection and Privacy Susan Grant. “Free credit monitoring will be a big help to these military members.”

Before this free access begins, however, the Federal Trade Commission (FTC) must write rules to define “electronic credit monitoring services,” “material additions or modifications” to credit reports, and other terms in the law. The rules also cover what information can be required for members of the military to prove their identities and active duty status, and bar unfair practices such as misrepresenting that it’s necessary to buy a product or service in order to get the free credit monitoring.

Earlier this month, CFA and other consumer groups submitted comments in which they offered suggestions on how the FTC should implement free electronic credit monitoring services for active duty military consumers. Among their key points:

  • Military members should have free online access to their credit reports, so they can check them when they receive alerts from the credit monitoring services.
  • The definition of “material additions or modifications” that would trigger alerts should include a significant drop in the person’s credit score, which could be a sign of fraud.
  • The proof of identity required to request the free credit monitoring should accommodate the special circumstances of active duty military personnel.
  • The personal information that military members must provide to get free credit monitoring services shouldn’t be used for marketing or other unrelated purposes.
  • Advertising for other products and services shouldn’t be allowed during the process of enrolling in free credit monitoring.
  • Military members shouldn’t be asked to agree to terms and conditions such as “forced arbitration” in order to get the free credit monitoring.

“While credit monitoring doesn’t detect all fraudulent uses of one’s personal information, it can alert people to some of the most common types of identity theft and give them a head start on resolving the problems that may result. We all should be able to check our credit reports, any time we want to, for free. This new law is a good first step,” concluded Grant.