No More Delays for DOL Fiduciary Rule
In a significant victory for retirement savers, Secretary of Labor Alexander Acosta announced late last month that implementation of the Department of Labor’s fiduciary rule would begin as scheduled June 9. As a result core provisions of the rule – closing loopholes in the definition governing who is considered a fiduciary and requiring all financial professionals to act in their customers’ best interests – will take effect as scheduled while the Department conducts its ongoing reconsideration of the rule.
CFA issued a statement applauding the decision. “Since taking office, Secretary Acosta has been under relentless pressure from industry lobbyists to freeze implementation of the rule while the Department conducts the ongoing reconsideration required by the Presidential Memorandum,” said CFA Financial Counsel Micah Hauptman. “That would have been a clear violation of the Administrative Procedure Act and would have subjected the Department to legal challenge. We applaud Secretary Acosta for recognizing that respect for the rule of law demands that implementation of the rule be allowed to go forward without further delay.”
But the fight to protect the rule from weakening amendments is far from over, warned CFA Director of Investor Protection Barbara Roper. “Unfortunately, Secretary Acosta’s comments on the substance of the rule simply repeat propaganda from the financial interests with most to gain from a return to a system that allows them to profit unfairly at their customers’ expense,” Roper said.
The Department is expected to take several months – possibly through the end of the year – to conduct its reconsideration of the rule before recommending any amendments. As the Department moves forward with its reconsideration, Roper urged Secretary Acosta to “stand up to the industry lobbyists who want a fiduciary standard in name only” and to proceed with implementation of a rule “that puts real teeth into the best interest standard by making it legally enforceable and by reining in practices that encourage and reward advice that is not in customers’ best interests. That is what Americans saving for retirement expect and deserve,” she said.
Good Drivers Previously Insured by Non-Standard Insurers Face Higher Costs
Auto insurance giants Allstate, Farmers, and American Family often charge premiums to good drivers previously insured by smaller, “non-standard” insurers that are nine to fifteen percent higher than the premiums they charge drivers who had coverage from State Farm or other primary competitors, according to new research by Consumer Federation of America (CFA).
“This practice especially penalizes motorists in lower-income communities where competition from large insurers for auto insurance is weak, leaving people living there much more likely to be placed in lesser-known and often higher-priced non-standard insurance companies,” said CFA Director of Insurance and former Texas Insurance Commissioner J. Robert Hunter. “While non-standard insurance companies often do sell coverage to higher-risk customers, the many good drivers who have been placed with these smaller market players because of where they live should not be penalized later when they finally get insured by a large national insurer.”
Using company websites, CFA tested whether premium quotes from seven of the nation’s largest insurers in 20 cities differed if customers switched from small, non-standard insurers rather than from State Farm or another large insurer. CFA only sought quotes for a customer who had a perfect driving record, regardless of their prior carrier. In the majority of cities where quotes were available, three of the companies – Allstate, Farmers, and American Family – used a customer’s prior insurance company as a factor in determining the premium charged. In those cities:
- Allstate charged 15 percent ($235) more on average to good drivers previously covered by non-standard auto insurers, such as Safe Auto Insurance and Equity Insurance Co., than if they had been previously insured by State Farm.
- Farmers charged nine percent ($260) more on average to customers coming from non-standard companies, including Titan Insurance and Access Insurance Company, than those switching from State Farm policies.
- American Family Insurance, the nation’s ninth largest auto insurer, charged nine percent ($166) more on average to customers previously with non-standard carriers, such as Direct General and Safeway Insurance.
CFA urged state insurance commissioners to immediately take regulatory action to disapprove and thus end certain insurers’ practice of hiking rates based on someone’s prior company rather than their driving record. “This report, and several other recent reports concerning the affordability of auto insurance particularly in underserved communities, makes clear that good-driving lower-income Americans can’t afford state-required auto insurance. We urge state policymakers to investigate unfair rating factor pricing practices of insurers which starkly raise the cost of coverage for lower-income residents and act to remove all unfair rating factors that target the poor for rate hikes,” said Hunter. “States should also consider creation of a low-income, good driver auto insurance plan modeled after that of California. There, the unsubsidized plan charges low-income good drivers low rates throughout the state, the highest price is in Los Angeles and it is only $470.”
CFA Calls on Facebook to Release Information on Psychological Profiling of Youth
According to a recent report by The Australian, Facebook is capable of collecting and analyzing psychological information on high school students, college students, and young users who use the social media platform, and then utilizing the information about their emotional states for advertising purposes.
Facebook’s psychological profiling of youth raises a number of health, legal, and ethical concerns, according to CFA and other public interest groups, who sent a letter to Facebook CEO Mark Zuckerberg urging him to provide additional information on these practices. These concerns include how this information might be used by marketers and others to take advantage of young people, tapping into their emotions and unique developmental vulnerabilities for profit. In their letter, the groups called on Facebook to release the full internal document, reported in The Australian, describing how Facebook collected and analyzed psychological information regarding young user’s emotions and “mood shifts.” Facebook reportedly presented their research on psychological profiling to an advertiser, detailing how Facebook can analyze sensitive user data in real time to determine how young users are communicating emotion, and at which points during the week they are doing so. This research was conducted without users’ knowledge.
“We are aware that Facebook has released a statement to the effect that this research deviated from Facebook’s protocols and that the company does not engage in the kind of targeting reported by The Australian,” the letter stated. “Yet Facebook’s statement on the matter does not resolve issues of concern about the commissioned analysis, its purpose and what it says about Facebook’s actual advertising practices.”
Despite Facebook’s denials about continued use of the psychological profiling laid out in their internal document, questions about Facebook’s intentions and actual practices abound, the groups wrote. “For example, in what ways does Facebook use sentiment mining tools to gather and analyze communications by and among its adolescent and young adult users? In what ways does Facebook work with its advertiser clients to provide research data for marketing to youth? How do expressed moods correlate with responsiveness to advertising?”
The groups contend that these and other questions necessitate the release of the internal document, especially considering the way in which Facebook has become a powerful cultural and social force in young peoples’ lives. They concluded, “The practices revealed in this report suggest that Facebook and its advertisers are taking unfair advantage of teens. The company owes a full explanation to the public about its practices.”
CFA to Honor Outstanding Consumer Service
CFA will hold its 47th annual Awards Dinner at the Capitol Hilton Hotel in Washington, D.C. on Wednesday, June 14. Awards are to be presented to Representative Bobby Rush (D-IL), Federal Deposit Insurance Corporation Chairman Martin Gruenberg, Center for Digital Democracy Executive Director Jeffrey Chester, National Cooperative Bank President and CEO Charles Snyder, and Susan Antilla, Reporting Fellow for the Investigative Fund at The Nation Institute. Tickets for the event are available here.