CFA News

CFAnews Update – June 23, 2020

Trump Nominee to Head CPSC Faces Strong, Bipartisan Opposition

Following a massive advocacy campaign by over 100 groups, public outrage online, and numerous hard-hitting questions by senators at her confirmation hearing, the nomination of Nancy Beck, the former chemical industry executive put forward by the Trump Administration to head the Consumer Product Safety Commission (CPSC), is now facing bipartisan opposition. A group of senators, including Shelley Capito Moore (R-WV), Tom Udall (D-NM), Susan Collins (R-ME), and Richard Blumenthal (D-CT), have announced their opposition to the nomination.

Earlier this month, over 100 environmental and consumer organizations, led by CFA, joined together to oppose Beck due to her extensive record placing the interests of big-business above that of the consumer.

Beck has been tapped to chair the CPSC, the agency responsible for protecting consumers from hazards posed by consumer products. The agency is tasked with ensuring that more than 15,000 products are safe, including toys, household products, furniture, cribs, and recreation equipment, including all-terrain vehicles. However, on chemicals from lead paint to flame retardants, and from toxic per- and poly-fluoroalkyl substances (PFAS) to asbestos, Ms. Beck has fought for years to weaken safeguards designed to protect public health.

In their letter, the groups highlight five areas in which Beck was behind numerous policies to undermine health protection from toxic chemicals, increasing risk to first responders, children, and vulnerable communities.

  • Beck’s Record on PFAS Is Troubling.

PFAS are a class of toxic chemicals that have been linked to testicular and kidney cancer, thyroid disease, decreased fertility, decreased response to vaccines, birth defects, immune system disorders, and other health effects. PFAS are found in many consumer products as well as firefighting foam that is used at military bases. PFAS chemicals, which are highly persistent and mobile, have contaminated drinking water throughout the United States. Nearly 99% of people have PFAS in their bodies.

While at EPA, Beck assisted in delaying the release of a government study which found that EPA’s current health standard for PFAS is too weak to protect the public. The White House deemed the report a “public relations nightmare.”

  • Beck’s Implementation of TSCA Has Been Rejected by Federal Courts and Scientific Peer Reviewers.

Beck has played the leading role in EPA’s implementation of the Toxic Substances Control Act (TSCA). One of Beck’s first actions at EPA was to block a proposed ban on the use of the dangerous solvent methylene chloride in paint strippers. Methylene chloride is known to pose a lethal risk to workers and consumers.

Beck also blocked proposed bans on some workplace and consumer uses of trichloroethylene (TCE), a cancer-causing solvent that has also been associated with structural cardiac defects in newborns resulting from in-utero exposures.

  • Beck’s Work Has Been Criticized for Distorting Science and Undermining Health Protections.

While Beck’s supporters tout her scientific education and training, her background as a scientist adds little value to the CPSC because her scientific work has repeatedly been criticized by independent experts. A peer review panel appointed by the Trump administration found that chemical evaluations produced under Beck’s oversight “strayed from basic risk assessment principles,” resulting in draft evaluations that were “unscientific,” “misleading,” riddled with “mistakes and inconsistencies,” and “generally lacking in [their] ability to present a coherent picture of” worker risks.

  • Beck Played a Role in Suppressing CDC Guidelines, Continuing a Career-Long Trend.

Beck recently contributed to suppressing detailed guidelines that the Centers for Disease Control and Prevention (CDC) sought to release to help the country reopen amid the COVID-19 pandemic.

  • CPSC Would Be Beck’s Biggest Perch to Weaken Safety Standards and Undermine Science.

Immediately prior to joining EPA, Beck was the Senior Director of Regulatory & Technical Affairs at the American Chemistry Council, a powerful chemical industry lobbying group. Confirming Beck to head the CPSC would leave a seasoned and aggressive fox guarding the henhouse – and responsible for the protection of children and consumers – for the next seven years. Consumers and children cannot afford a further erosion of the CPSC’s commitment to protect the public from dangerous products.

“Nancy Beck’s history of thwarting, obfuscating, and delaying necessary public health protections raises insurmountable red flags to her confirmation. She should not be the Chair or a Commissioner at the Consumer Product Safety Commission. Consumers depend on the leadership of the CPSC to protect them from the hazards posed by unsafe products. Beck has not demonstrated any commitment to the mission of the agency,” said Rachel Weintruab, CFA Legislative Director & General Counsel.

Groups Urge FCC to Implement TRACED Act in a Pro-Consumer Way

A coalition of consumer groups, including CFA, sent comments to the Federal Communication Commission (FCC) late last month urging it to implement the Telephone Robocall Abuse Criminal Enforcement and Deterrence (TRACED) Act in a way that is most effective and beneficial for consumers.

The TRACED Act, signed into law last year, attempts to halt the scourge of unwanted and illegal robocalls many consumers receive on a regular basis. It does this by imposing penalties for violations of the law, requiring caller ID authentication, allowing consumers to block calls and texts, and creating a Department of Justice working group to study these issues and report findings to Congress.

In their letter to the FCC, the groups highlight five areas in which they urged the FCC to fully implement the TRACED Act, calling on the FCC to:

  1. Prohibit line item charges for all call mitigation technology, including caller ID authentication and call-blocking, as set forth in the TRACED Act.

Consumers already pay enough for their phone service; they should not be charged an additional fee to block unwanted robocalls or to identify callers behind unknown numbers. The TRACED Act specifically stipulated that caller ID authentication must be provided at no additional line item charge and that call-blocking services must be provided at no additional cost as well. The groups further argue that “the FCC should further clarify that all line item charges for call mitigation technology are prohibited, and provide a non-exclusive list of examples of these charges.”

  1. Require phone companies to provide three levels of call blocking options: opt-out screening of scam calls, opt-in for more comprehensive technologies to stop spam calls, and personal blacklists of specific numbers to be blocked, all at no additional line item charge to subscribers.

It is not sufficient for caller ID authentication and associated services to simply indicate the accuracy of the caller ID information. Just as Caller ID has not stopped the scourge of robocalls, simply informing consumers that they are being called by a fake number will fail to address much of the harm associated with these robocalls. Consumers being harassed by scammers also need effective mechanisms to prevent these calls.

  1. Require all providers to register with the FCC, to participate in the traceback group, to know who is placing call traffic, to decline traffic from bad actors, and to keep records to allow the traceback efforts to be effective for a sufficient period of time.

To supplement call authentication strategies, the FCC should require that providers register with the agency, as US Telecom has suggested, and participate in a government-supervised traceback program. Since calls are typically routed through multiple phone companies before they reach the recipient, it has often taken months to trace a complaint about a call back to the originating carrier, as the enforcement agency has had to seek multiple subpoenas to obtain the necessary information.

Meaningful participation in the traceback program should require that providers keep records of the calls that are originated or terminated on their network, or that flow through their network. These records should be required to be kept by the providers for at least four years after the calls are made, to ensure that traceback efforts relating to older calls can be successful.

  1. The FCC should require providers to forward the STIR/SHAKEN attestation to intermediate providers, who should not be permitted to alter the attestation.

According to the FCC, STIR/SHAKEN is a framework of interconnected standards that “digitally validates the handoff of phone calls passing through the complex web of networks, allowing the phone company of the consumer receiving the call to verify that a call is in fact from the number displayed on Caller ID.”

The groups argue that “…originating carriers should be required to forward attestations to intermediate providers, who must be prohibited from altering the attestation as they forward the call along the call path, unless necessary for security or other legitimate reasons. This will help ensure that other intermediate providers and terminating providers are able to confirm the validity of the caller ID information.”

  1. For companies granted a delay in compliance with TRACED, the FCC should evaluate their efforts to become compliant regularly, at least on a yearly basis.

All phone companies must be required to comply with call authentication techniques, not just the major carriers. Small and rural carriers should be allowed appropriate flexibility with respect to meeting the deadlines; but the FCC should identify and take the steps necessary to enable full participation as quickly as practicable, and should reassess the impact of any allowances each year.

“Passing the TRACED Act was major victory for consumers, but it’s only the first step,” said Susan Grant, CFA Director of Consumer Protection and Privacy. “Now the law must be put into action to help prevent fraudulent and unwanted robocalls.”

Louisiana Governor Bans Auto Insurers’ Unfair “Patriot Penalty”

Earlier this month, Louisiana Governor John Bel Edwards signed legislation into law to prohibit the “Patriot Penalty,” the practice of charging higher auto insurance rates to military servicemembers if they drop their coverage during a deployment.

“It’s outrageous that any auto insurer would punish servicemembers, because they dropped coverage while deployed overseas,” said CFA insurance Expert Doug Heller. “While this Patriot Penalty is still allowed in many states, it has been ended in Louisiana, and Governor Edwards and Senator Luneau should be applauded for standing up for consumers and soldiers,” Heller added.

Earlier this year, investigative reporter Lee Zurik worked with CFA to uncover evidence that GEICO was imposing a penalty on service-members in 21 states. After the news came out, CFA sent a letter to all state insurance commissioners urging them to block this rating practice, or, if needed, support legislation to prohibit it. Since then, the Vermont insurance commissioner banned this discriminatory practice. Similarly, California has long-banned insurers from surcharging drivers based on a break in coverage, whether due to deployment or other reasons.

“Blocking the Patriot Penalty is an important consumer protection, but much more has to be done to stop insurance company discrimination and the high rates that unfair pricing produces for those least able to afford the coverage required by law,” said Heller.

Recognizing that the problems in auto insurance go well beyond the Patriot Penalty, CFA issued new research this week showing that structural racism is being maintained in auto insurance, making state-mandated auto coverage more expensive for African American drivers than white drivers. The pricing disparities are driven in part by the use of several socio-economic “factors” in premium setting that do not reflect personal driving history but are proxies for race. CFA said that regulators, policymakers, and insurance companies must acknowledge and address the fact that these socio-economic factors, which have nothing to do with driving, disproportionately harm African-Americans.

“In every state, unfair discrimination is illegal, yet, on average, African American drivers still pay more for the exact same insurance coverage as white drivers,” said CFA’s Insurance Director J. Robert Hunter. “As long as insurance companies continue to use these proxies for race when setting rates, the industry will remain a part of the problem as will the regulators who allow it.”

D.C. AG Challenges Predatory Rent-A-Bank Scheme Made to Evade Payday Loan Rate Caps

D.C. Attorney General Karl Racine filed a lawsuit earlier this month against online lender Elevate for selling short term loan products with interest rates between 99 and 251%, up to 42 times the legal limit in the District. In just two years, Elevate made 2,551 loans to District residents at well above the maximum interest rate of 24% for lenders that disclose their rate in contracts.

“While federal regulators are failing to take enforcement actions and failing to regulate, Attorney General Racine has stepped in to protect consumers and hold predatory lenders accountable for their harmful actions,” said Rachel Weintraub, CFA Legislative Director and General Counsel. “Interest rate caps are the most effective tool states have to protect their residents from predatory lenders, and companies should be held accountable for knowingly and deceptively evading those caps,” she added.

According to the lawsuit filed by AG Racine, Elevate tried to evade D.C.’s cap by partnering with two state chartered banks to originate the loans. While 45 states and the District of Columbia have interest rate caps on many types of small loans, banks are generally exempt from these caps. In recent years, high-cost lenders have taken advantage of this loophole by entering into “rent-a-bank” schemes. Through these schemes, the lenders launder their loans through banks, but then purchase back the loans or receivables to continue to charge exorbitant interest rates.

“This lawsuit should serve as a reminder for Attorneys General that they have the power to crack down on predatory high-cost lending and rent-a-bank schemes to enforce their states’ interest rate cap,” said Rachel Gittleman, CFA Financial Services Outreach Manager. “Especially during the current pandemic and financial crisis, it is critical that consumers are protected from the consequences of companies seeking to evade state laws to continue to prey on them with triple digit interest rates,” Gittleman added.

The Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) proposed rules, which the OCC recently finalized, to allow banks to sell, assign, or transfer a loan and let the interest rates permissible by the bank remain permissible after the transfer. This allows high-cost lenders to evade state interest rate caps. CFA, along with numerous other consumer, civil rights, small business organizations, and faith leaders strongly opposed the proposed rules. However, the lawsuit filed in the District of Columbia argues that Elevate is the true lender, as they fund the loan, reap the benefits, and take on the risk of the loan, an issue not addressed by OCC and FDIC.

“We commend AG Racine for stepping in to protect consumers and enforce the District’s interest rate cap, especially at a time when so many consumers are struggling in the midst of the COVID-19 economic crisis,” Weintraub concluded.

SEC Should Withdraw “Harmonization” Proposals

The Securities and Exchange Commission (SEC) has proposed sweeping changes to the regulatory framework for securities offerings that would expand the ability of companies to raise capital through offerings that are exempt from the federal securities laws requiring full and fair disclosure and expand retail investor “access” to those risky and opaque offerings. In a comment letter filed with the agency earlier this month, CFA Director of Investor Protection Barbara Roper and Financial Services Counsel Micah Hauptman urged the Commission to withdraw the proposals or risk doing unrepairable harm to both investors and the nation’s capital markets.

“Our public markets are in decline largely because it has become so easy for companies to raise capital in private markets, which lack the transparency and accountability of public markets,” Hauptman said. “The last thing we should be doing is making it even easier for companies to stay private, further denying investors of these critical safeguards,” he added.

Like the Commission’s earlier concept release on the exempt offering framework, the current proposals “reflect an ideologically driven approach to rulemaking in which meaningful economic analysis plays no role and investors’ concerns are treated as irrelevant,” Roper and Hauptman wrote. While the Commission has characterizes its proposed amendments as mere technical changes designed to “simplify, harmonize, and improve” the exempt offering framework, “the clear intent is to further expand the use of private offering exemptions, without regard to the impact on investor protection or the health of our public markets and without any evidence that doing so would promote healthy, sustainable capital formation,” they added.

Roper and Hauptman criticized the SEC for proceeding with the proposal “without bothering to conduct any serious analysis of how the existing framework and proposed changes to that framework would affect investors, market integrity, or capital formation. It is proceeding not based on an assessment of facts, but rather on a mix of anecdote and ideology,” they added.

“This proposal is evidence of an agency that has abandoned its investor protection mission and shirked its responsibility to protect the health and integrity of our capital markets. It should be withdrawn and the Commission should recommit itself to what it claims is its primary goal, to ‘promote a market environment that is worthy of the public’s trust,’” they concluded.

The SEC proposal is part of a broader effort by this administration to expand the ability of private issuers, including private equity firms, to sell their complex, opaque, illiquid, high-cost and difficult-to-value products to financially unsophisticated retail investors. Toward that end, the Department of Labor issued an information letter earlier this month clearing the way for funds that include exposure to private equity to be included in 401(k) plans.

Roper criticized the proposal for accepting without question the private equity industry’s questionable claims about the benefits of these investments while doing too little to address the potential risks. “Few plan sponsors and even fewer plan participants have the high level of investment sophistication needed to determine whether these investments are sound or represent a good value, but the DOL doesn’t seem to have taken that into account,” Roper said.

CFA Redoubles Commitment to Eliminating Marketplace Discrimination

In the wake of the George Floyd killing by a police officer in Minneapolis, CFA released the following statement.

The Consumer Federation of America acknowledges the pain, suffering, and outrage that has rippled across our country in response to the brutal murder of George Floyd.  This appalling incident has opened the wounds that too many Americans feel as a result of systemic discrimination that has gone on for too long.  This tragic event, and the equally outrageous deaths that have preceded the death of Mr. Floyd, is a poignant reminder to the Consumer Federation and its 250 national, state and local organizations, that there is an acute need to redouble our efforts to uncover and expose the discrimination that has been both painful and costly for far too many Americans.

While the public focus is rightfully on the racially motivated death of George Floyd, this is also a call for CFA, with its organizational focus on consumer issues, to redouble its efforts to stamp out the rampant discrimination in the marketplace.  It comes in the form of redlining in the housing, financial and insurance sectors, hidden behind algorithms and whitewashed proxies for race and ethnicity; auto loans priced according to the color of one’s skin; denying services due to sexual orientation; underpaying women; finding that “nothing is for sale” in certain neighborhoods; and, paying more for goods and services because of where you live.  These injustices have become institutionalized discrimination, and they must stop.  Such discrimination is a costly and unfair economic burden for too many and it creates the disillusionment, division, resentment, fear, and anger that comes when injustice is the norm.

While the Consumer Federation of America has fought for consumer justice for over 50 years, the need for our work has never been greater.  We, and our 250 member organizations, must significantly increase our efforts to protect the American public from unfair, costly, and crushing discrimination in our markets.  We are committed to exposing discriminatory practices in every market segment and ensuring that policymakers use that information to eliminate these practices.  They have existed for far too long.  Our goal: a marketplace free from discrimination and accessible to all.  We will use our expertise and passion for consumer rights to ensure that policymakers and corporations change the systemic economic discrimination that unfairly burdens so many of our brothers and sisters throughout the nation.  Americans should expect no less from the Consumer Federation of America and the tens of millions of citizens that its members represent.