Popular Dating and Health Apps Violate Privacy

Several popular dating and health apps are collecting and sharing user data with third-party advertisers without user consent or knowledge, according to a new report from the Norwegian Consumer Council. Citing the report’s findings, consumer groups in the U.S. have called on state and federal officials to investigate the apps.

The apps – Grindr, Tinder, OkCuipid, Happn, Clue, MyDays, Perfect365, Qibla Finder, My Talking Tom 2, and Wave Keyboard – all allow commercial third parties to collect, use, and share sensitive data in a way that is hidden from the user and with parties that the consumer neither knows about nor would be familiar with. This data collection clearly violates the European Union’s General Data Protection Regulation, which forbids the sharing of information with third parties without users’ knowledge or consent, according to CFA Director of Consumer Protection and Privacy Susan Grant.

CFA and eight other groups sent a letter earlier this month asking the Federal Trade Commission (FTC), Congressional lawmakers, and the state Attorneys General of California, Texas, and Oregon, to investigate the apps. The groups hope that Congress will use the findings from this report as a roadmap for a new law to ensure that such flagrant violations of privacy found in the EU are not acceptable here in the United States.

Consumers have some ability to limit the tracking on desktop computers via browser settings and extensions. The same cannot be said for smartphones and tablets, which are used throughout the day, the groups warned. These devices are recording information on sensitive topics such as our health, behavior, religion, interests, and even sexuality.

“Consumers cannot avoid being tracked by these apps and their advertising partners because they are not provided with the necessary information to make informed choices when launching the apps for the first time. In addition, consumers are unable to make an informed choice because the extent of tracking, data sharing, and the overall complexity of the adtech ecosystem is hidden and incomprehensible to average consumers,” the letters sent to lawmakers and regulators warn.

“For those of us in the U.S., this research by our colleagues at the Norwegian Consumer Council completely debunks the argument that we can protect consumers’ privacy in the 21st century with the old notice-and-opt-out approach, which some companies appear to be clinging to in violation of European law. Business practices have to change, and the first step to accomplish that is to enact strong privacy rights that government and individuals can enforce,” Grant said.

Efforts to Strengthen Investment Advice Standards Continue in Court, States

With Regulation Best Interest, the Securities and Exchange Commission’s weak and ineffective new standard for broker-dealers, due to take effect July 1, efforts continue in court and at the state level to strengthen the protection investors receive when they rely on investment professionals for advice and recommendations.

Two lawsuits, one brought by two investment adviser firms and the other brought by seven states and the District of Columbia, claim that in issuing Reg BI the SEC failed to follow the will of Congress as set forth in the Dodd-Frank Act and the rule should therefore be set aside. CFA and Better Markets filed an amicus (friend of the court) brief in the Second Circuit earlier this month in support of those lawsuits, arguing that the rule is both contrary to the law and arbitrary and capricious.

The brief highlights the problem that the Dodd-Frank Act was intended to address: broker-dealers market themselves and function like investment advisers, but they are regulated as salespeople under an entirely different and inadequate regulatory framework. Because broker-dealers have misled the investing public about the nature of their services and legal obligations, investors cannot distinguish between broker-dealers and investment advisers. They suffer real financial harm when they rely on brokers’ conflicted sales recommendations as if they constitute trustworthy investment advice that is designed to serve their best interest.

“Section 913 of the Dodd-Frank Act was written and widely understood to address this problem,” said CFA Financial Services Counsel Micah Hauptman. “Dodd-Frank provided the framework for establishing a uniform fiduciary standard for broker-dealers and investment advisers when they provide personalized investment advice to retail investors, but the SEC ignored that framework,” he continued.

The CFA and Better Markets brief highlights how the SEC expressly refused to promulgate the standard that Congress dictated, providing neither a uniform standard nor a fiduciary standard. “Reg BI preserves different standards, imposes weak requirements on broker-dealers that mirror existing suitability requirements, exacerbates confusion, and relies almost entirely on disclosure as the principal mechanism in the Rule, despite extensive evidence that disclosure does not protect investors,” the brief states.

The brief also argues that, “Reg BI was divorced from any reasonable assessment of the facts and the law. It was first and foremost a regulatory action designed to preserve and protect the broker-dealer industry, not vulnerable investors. It appears by all accounts that Reg. BI’s ‘best interest’ standard is designed to operate as a slogan, not a meaningful and enforceable standard designed to ensure investors are protected from the harms that result from brokerage conflicts of interest.”

Citing similar concerns, Massachusetts has proposed a strong, uniform fiduciary standard for broker-dealers and investment advisers operating in the state. State action is needed to fill the gap left by the SEC’s failure in leadership, CFA argued in a comment letter in support of the proposal. “If adopted without weakening amendments, your proposal would not only improve protections for the citizens of Massachusetts, it would provide a model that other states could follow to extend these protections to their own citizens. We greatly appreciate your willingness to lead that effort and strongly support the proposed rule,” the letter states.

Modeled on Section 913 of the Dodd-Frank Act, the Massachusetts proposal would require both broker-dealers and investment advisers to act in the best interests of their customers, without regard to their own conflicting interests. In addition to proposing a standard that is both stronger than Reg BI and offers the uniformity that Reg BI lacks, Massachusetts would make it more difficult for brokers to market themselves as being engaged in ongoing advisory relationships without providing the ongoing account monitoring and oversight appropriate to that role.

“Massachusetts has shown it is possible to adopt a strong uniform standard that is workable for brokers and advisers alike, just as Congress intended,” said CFA Director of Investor Protection Barbara Roper. “It promises not only to reduce investor confusion, but also to reduce the harmful impact of conflicts of interest that are all too common in the delivery of investment advice and recommendations.”

Rep. Rush Introduces Critical Product Safety Legislation

Rep. Bobby Rush (D-IL) introduced a critically important safety bill earlier this month, titled the Safety Hazard and Recall Efficiency Information Act (H.R. 5565). CFA and other advocacy groups applauded Congressman Rush for introducing the bill, which would amend Section 6(b) of the Consumer Product Safety Act (CPSA) in order to remove obstacles preventing the Consumer Product Safety Commission (CPSC) from communicating vital health and safety information to the public.

The bill, also called the SHARE Information Act, would also increase civil penalties for entities that do not comply with transparency rules or continue to sell unsafe products to consumers. “Section 6(b) is thwarting the CPSC’s ability to share critical information that impacts the health and safety of American consumers. This bill will remedy this dangerous information gap that keeps consumers in the dark,” said CFA Legislative Director and General Counsel Rachel Weintraub.

Product safety advocates have long voiced the concern that Section 6(b) stifles the CPSC in its mission to protect consumers from unreasonable injury and death. For example:

• The CPSC has conducted safety testing on over 200 clothing storage units for stability. Dozens failed that testing, and yet CPSC cannot release those names to the public while working to convince the companies to issue a recall.
• CPSC was unable to name specific infant inclined sleep products that were linked to injuries and deaths. Their first weak warning referred only to “infant inclined sleep products” and indicated that improper use was the cause of incidents. Once recalls were finally issued, too many parents, relying on the earlier warning had stressed the danger was only with improper use, did not realize they were using a dangerous product and failed to heed the recall notice.

In addition, a recent report by Public Citizen found that 6(b)’s restrictions are time-consuming for the agency and waste money that could be better spent keeping consumers safe.

“We applaud Congressman Rush for introducing this incredibly important bill. The SHARE Information Act is vitally necessary to ensure that life-saving safety information about consumer products is communicated to the public,” Weintraub said.

Intuit Shareholders Defeat Forced Arbitration Measure

Shareholders in financial software company Intuit resoundingly defeated a measure designed to strip them of their ability to hold corporate managers accountable in court when the company violates securities laws. The vote came last week on a proposal by activist shareholder Hal Scott that would have prevented shareholders from banding together in class actions and would instead have required all such disputes to be brought individually in arbitration.

“This would have effectively ended shareholders’ ability to pursue securities fraud claims, since the costs for expert witnesses, depositions and the like make it unaffordable for any but the very largest institutional investors to even consider bringing such claims individually,” said CFA Director of Investor Protection Barbara Roper. “As a result, this isn’t a debate about whether claims should be brought in court or in arbitration. It is a debate about whether they will be brought at all. Fortunately, Intuit shareholders recognized this proposal for the anti-investor measure it is and soundly rejected it.”

CFA joined with 53 other members of the Secure Our Savings coalition in writing to members of the Intuit board of directors prior to the vote voicing their opposition to the measure. While the board allowed the measure to be placed on the proxy ballot, it recommended a no vote.

The letter states, “This shareholder proposal would deprive all Intuit investors and customers of their rights to hold Intuit publicly accountable in a court of law, at a time when Intuit’s TurboTax program is currently facing investigations and litigation, after disturbing allegations emerged that the tax preparer defrauded consumers into paying to file their taxes when they were eligible to file for free … Additionally, Intuit’s cyber security protocols and its ability to protect sensitive consumer data have been called into serious question. These allegations and actions could have been be hidden from investors with few repercussions if all shareholders’ disputes were forced into individual, private arbitration.”

This is Scott’s second attempt to get a forced arbitration bylaw change adopted by a public company through the proxy process. When he attempted the same maneuver last year at Johnson & Johnson, the company sought and received Securities and Exchange Commission approval to exclude the measure from the proxy ballot after the New Jersey Attorney General issued an opinion stating that the measure was inconsistent with state law. Scott challenged the company’s decision to exclude the measure, and that case is still being litigated.

“While we are, of course, pleased with the outcome of this vote, we have no doubt that Hal Scott will continue to push these anti-investor proposals,” Roper said. “That’s one more reason why passage of legislation banning forced arbitration, such as the FAIR Act (H.R. 1423), remains a high priority.”

Consumers Warned to Stop Using the SwaddleMe By Your Bed Sleeper

The Consumer Product Safety Commission (CPSC) warned earlier this month that an inclined sleep product, the SwaddleMe By Your Bed Sleeper, puts infants at risk of suffocation. Unfortunately, the CPSC and Sumr Brands (the maker of the sleeper) have not yet agreed on recalling the product.

While a recall has yet to be announced, CFA and other safety advocacy groups alerted parents and caregivers to the hazard and urged them to immediately stop using the SwaddleMe By Your Bed Sleeper.

The coalition of consumer groups made the following joint statement:

“Inclined sleepers are not safe for infant sleep. If you have the SwaddleMe By Your Bed Sleeper, stop using it right away and do not place your baby in it. We urge retailers and online sellers to remove the SwaddleMe By Your Bed Sleeper and all infant inclined sleepers from their offerings if they haven’t yet done so. We thank the CPSC for today’s announcement. Parents and caregivers deserve to know if a product puts their baby at risk. At the same time, we hope that additional actions – including recalls – are forthcoming for this product and other infant inclined sleepers still on the market. It’s unconscionable for Sumr Brands to fail to recall this product when our country’s preeminent safety experts have concluded it is unsafe.”

This CPSC announcement follows previous warnings from the agency and consumer groups about the dangers of infant inclined sleep products, as well as several recalls. While over five million inclined sleep products have been recalled, including the Fisher-Price Rock ‘n Play Sleeper, safety advocates have documented that many inclined sleepers remain for sale and in use, putting infants at risk.

There have been at least 73 infant deaths related to inclined sleepers and a CPSC commissioned report found the products unsafe for infant sleep.

Real Estate Disclosures Often Lack Key Information, Are Too Complex, and Are Not Timely

Real estate agent disclosures are often complex, legalistic, lack important information, are not timely, and are not understood by many home sellers and buyers, a new report released by CFA earlier this month found.

“Not knowing whether your real estate agent represents your interests or those of the other party can be costly,” said Stephen Brobeck, CFA Senior Fellow and report author. “An agent working for the other party could, and may be legally required to, pass on compromising information such as the purchase price you’re prepared to sell for or spend. And this agent would have no obligation to help you find the right buyer or the right house at the right price,” he added. Indeed, a 2018 survey commissioned by CFA found that two-thirds of respondents mistakenly said that real estate agents are “always” or “almost always” required to represent the interests of the home buyer or seller with whom they are working.

The report also identified six different types of barriers to effective disclosures on agent representation:

• No disclosure or awareness of disclosure: According to a 2017 survey of recent home buyers, 40% said they did not receive the disclosure or did not know whether they had.
• No timely disclosure: Only 16 states require agency disclosure at the first contact or first substantive contact. Eight states allow disclosure fairly late in the sales process.
• Complexity of agent roles: Depending on some state limitations, an agent can play any one of seven different roles, each with different levels of obligation to the customer.
• Complexity and diversity of state agency laws: These laws use over 50 different terms to identify agent roles.
• Long, legal, and poorly presented disclosure forms: Only 31 states have developed a disclosure form that agents are required to use. In other states, agents can use a disclosure form developed by their state realtor association.
• Failure to include important information about the agency: In only five states do disclosures mention the possibility of an agent’s switching from single to dual agency or transaction brokerage.

CFA recommends that all states take steps to improve their agency disclosures. Essential information about representation should be prominently, briefly, and simply communicated by agents at first contact with customers. Most importantly, those early disclosures should make clear that the agent does not represent the customer and, if the case, that the agent represents another party. Only home sellers and buyers with a signed agreement from a fiduciary agent can expect complete loyalty from that agent.

The report further recommends that the agent’s relationship to seller or buyer be defined in terms of loyalty – total, partial, or none. While the term “representative” connotes loyalty to customers, in some states it is used to describe dual agency. The report also recommends that the disclosure be:

• in writing,
• presented at first contact without distractions,
• short, written in plain language with user-friendly format and type size,
• required and written by states not the industry,
• and, include the agent’s name and the date.

“State legislatures and regulators need to work together to ensure that home sellers and buyers understand whose interests their real estate agent actually represent,” concluded Brobeck.