CFA News

CFAnews Update – June 29, 2021

Groups Support the Used Car Safety Recall Repair Act

CFA has joined with 14 other public interest, legal services, financial reform, and safety organizations in supporting legislation to place regulations on car dealers who fail to complete free repairs to fix deadly safety recall defects before selling used cars to used car buyers at retail.

The organizations wrote to members of the Senate Committee on Commerce this month to urge them to vote yes for S. 1835, the “Used Car Safety Recall Repair Act,” which was introduced in May by Senators Richard Blumenthal (D-CT), Edward J. Markey (D-MA), and Elizabeth Warren (D-MA). The bill would prohibit the sale, lease, or loan of used motor vehicles with open recalls to consumers by auto dealers.

“This lifesaving Act is long overdue,” the organizations wrote in the letter. “A decade ago, in the wake of the Toyota sudden acceleration debacle, Congress directed the Government Accountability Office (GAO) to investigate the status of motor vehicle safety recalls and make recommendations to Congress.”

Based on its investigation, GAO reported that the National Highway Traffic Safety Administration (NHTSA) is not able to require either used-car dealers or franchised dealerships that sell used vehicles to get the defects remedied prior to sale and that “…this could pose a significant risk to the safety of millions of vehicle drivers and may have a negative impact on recall completion rates.”

“Unnecessary delays in granting NHTSA the authority called for by the GAO have already cost too many precious lives, and caused too many serious and debilitating injuries,” the organizations wrote in support of the legislation. “Yet another GAO study, instead of a prohibition, would be a death sentence for vulnerable American used car buyers and their families. Delays cost lives.”

The approach outlined in the legislation also has the support of the public. A Public Policy Poll conducted in numerous states, including in Florida, Massachusetts, Maryland, Tennessee, and New Jersey, reported that over 90% of likely voters oppose allowing car dealers to sell used vehicles with unrepaired recalled safety defects.

“Three out of four car buyers buy used vehicles,” said CFA Executive Director and CEO Jack Gillis. “Thanks to Senators Blumenthal, Markey, and Warren, these consumers, who may not be able to afford to buy new, will be protected from vehicles with dangerous recalls. No product should be sold with a known defect, especially an automobile, and Senator Blumenthal’s Used Car Safety Recall Act will save lives.”


CFA Urges Overhaul of Antitrust Oversight to Recalibrate Regulations for a Digital Age

House legislation to impose some regulatory oversight on the actions of the dominant big tech companies that sell products and services that are integral to the interests of America’s consumers has engendered strong opposition from the industry. In a letter sent earlier this month to members of the House Antitrust Subcommittee, CFA rebutted industry claims that “any constraint on their actions will end the digital revolution and dramatically increase costs for consumers.”

The legislation empowers the antitrust oversight agencies to do their job, including close examination of anticompetitive acquisitions,” CFA wrote. “It enhances consumer protection and demands interconnection and interoperability on non-discriminatory rates, terms and conditions for access to consumers by those who innovate to better serve their needs.” Critically, the legislation also shifts the burden of proof onto the operators of dominant platforms to show that their practices serve the interest of consumers, not the interest of the platform operators.

Digital communications platforms have a history of abusing their market power, according to the letter. The resulting “lack of competition and immense market power of the dominant platforms have made it clear that their abuses cannot be solved in the market. Antitrust oversight is critically necessary and strongly supported by the public, but it must be carefully crafted to address abuses,” the letter states.

The introduced legislation for antitrust reform is a first step, but this alone is not enough to fix the anticompetitive issues within the market, CFA Research Director Mark Cooper warned in April testimony before the Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights. “Regulation of day-to-day practices to limit abuse and rapid response to abuses are also necessary to preserve competition and consumer protection in digital communications,” he said.

Ultimately, Cooper warned Congress against trying to pick winners, “when they are just as likely to pick losers. Instead,” he said, “all the remedies on the table empower antitrust and regulatory experts to use their judgement, based on the clear goals defined by Congress, to build adequate consumer protections in the world of big data.”

FDA Urged to Work with Stakeholders to Improve Food Safety Inspections

Organizations representing consumers, the food industry, and state and local food safety regulators sent a letter to the U.S. Food and Drug Administration (FDA) earlier this month proposing a collaborative approach to addressing the inspection challenges and opportunities outlined in the FDA’s recently released report, “Resiliency Roadmap for FDA Inspectional Oversight.

The Safe Food Coalition, the Consumer Brands Association, and the Association of Food and Drug Officials urged FDA to “build on its Inspection Roadmap and New Era initiatives by leading a stakeholder engagement process to explore ways to meet the domestic inspection frequency mandates in FSMA and better protect public health through modernizing inspection.” They requested “a seat at the table to discuss inspection modernization with FDA and how to most effectively leverage technology and state regulatory resources.”

While they applauded FDA’s “innovative approaches to providing oversight of food facilities during the pandemic and the focus on inspection modernization in ‘New Era of Smarter Food Safety – FDA’s Blueprint for the Future,’” they voiced concern about FDA’s suggestion in its roadmap document “that Congress should revisit and possibly modify or repeal the FSMA inspection frequency mandate for domestic food facilities.”

“We support having a risk-based inspection strategy, but we see no conflict between such a strategy and the FSMA domestic inspection mandate, which establishes a baseline frequency of domestic facility inspection and gives FDA broad discretion to tier inspections based on the agency’s assessment of risk,” the groups wrote. “Indeed, we see the inspection mandate as a critical component of managing foodborne illness risk, and for that reason, oppose weakening this important provision of FSMA.”

They noted, moreover, that “the FSMA frequencies are minimum inspection frequencies, not mere goals and not ceilings. They must be treated as such.” Instead of reducing the number of inspections, they called on FDA to “leverage states that can perform FDA-audited equivalent inspections and expand the FDA workforce in those areas where states do not have the needed capacity … With better work planning and inventory coordination between the FDA and state agencies, FDA and the states can ensure that FDA is not only meeting but exceeding the domestic inspectional frequency mandates of FSMA.”

“Inspections serve a vital role in protecting the public and assuring that companies abide by food safety regulations,” said Thomas Gremillion, CFA Director of Food Policy. “While new technologies can help to improve inspections, they cannot replace them. FDA should not shirk the congressional mandate to perform a minimum number of inspections each year.”

Consumer Product Safety Commission Needs a Funding Boost, Groups Agree

CFA joined two dozen consumer organizations, environmental groups, testing laboratories, manufacturers and retailers of consumer products in writing to key leaders in the House and Senate earlier this month urging them to increase funding for the Consumer Product Safety Commission (CPSC). “We have differences of opinion as it relates to the workings of and statutory provisions relevant to the CPSC, but nonetheless strongly and uniformly agree on the need for an effective and functioning agency,” they wrote.

CPSC stakeholders have found that the agency is significantly underfunded and short-staffed compared to other federal health and safety regulatory agencies. The current budget for the CPSC is the smallest among federal health and safety regulatory agencies. This is despite the fact that the agency has a broad mandate, with jurisdiction over roughly 15,000 different types of consumer products used by 330 million American consumers in everyday life.

“This is a historic letter, as it represents the first time that diverse stakeholders from the consumer advocacy and manufacturer communities have come together to support a significant budget increase for the Consumer Product Safety Commission. It is an important and notable effort and I hope that it will encourage and result in a sizable budget increase for the agency,” stated Rachel Weintraub, CFA Legislative Director and General Counsel.

CPSC Acts to Protect Nation’s Infants

In a major and long-sought win for consumers, the U.S. Consumer Product Safety Commission (CPSC) voted 3 to 1 earlier this month to adopt a mandatory safety standard that would regulate products marketed or intended to be sleep products for infants up to five months old. Currently, these products are unregulated and have led to at least 94 infant deaths.

Beginning in mid-2022, products that are intended or marketed for infant sleep will be required to meet a federal safety standard, according to a CPSC press release. Affected products include sleepers, in-bed sleepers, and travel and compact bassinets.

The CPSC estimates that one in three families own one or more of the items that would have been regulated by the rule. There have been several “inclined sleep products” that have been recalled over the years, with these products being linked to dozens of infant deaths. CFA and other safety advocates have for many years urged the Commission to act to address the hazard in a comprehensive fashion.

“We applaud the passage of this commonsense rule that will unequivocally save lives and prevent injuries,” stated Rachel Weintraub, CFA Legislative Director and General Counsel. “This rule takes major and significant steps to ensure that infants in the United States will not remain at risk in products intended for sleep.”

SEC Moves to Improve Companies’ Climate Risk Disclosures

The Securities and Exchange Commission (SEC) has begun consideration of rulemaking to require companies to provide improved disclosures with regard to their climate change risks and other environmental, social, and governance (ESG) factors. CFA submitted a comment letter earlier this month in strong support of the initiative.

“Expanding the information that companies are required to provide about ESG issues, and improving the quality of that information, has been a high and growing priority for investors of all types and sizes for several years,” the letter states. “Yet, while other countries have begun to take meaningful steps to respond to investor demand – and despite growing evidence regarding the threat issues such as climate change, racial injustice, and income inequality pose to the economy – the Commission has failed to act.”

The letter outlines evidence of investor demand for improved disclosures related to a range of ESG issues, including climate risks, broader environmental concerns, diversity and inclusion, and human capital management. It argues that improved disclosure in this area are not only well within the Commission’s authority, but imperative for it to fulfill its mission to protect investors, promote fair and orderly markets, and facilitate capital formation. And it outlines specific recommendations regarding the content and format of the disclosures, the best mechanism for updating them over time, and other aspects of the securities markets in need of repair to make the disclosures effective.

“The Commission has an opportunity to bring the federal securities law disclosure framework into the 21st century by incorporating the information about climate change and other ESG factors that retail and institutional investors alike are increasingly demanding,” said Barbara Roper, CFA Director of Investor Protection. “We look forward to working with the Commission to achieve that goal.”

“Climate change and other ESG issues are already impacting issuers’ businesses, but under current disclosure requirements, investors often lack the information necessary to assess, manage, or avoid these risks,” said CFA Financial Services Counsel Dylan Bruce. “The SEC is well-positioned to help close that information gap and support better investor decision making.”

For the ESG disclosures to achieve their full potential, however, additional changes are needed to repair the nation’s broken financial reporting infrastructure, Roper warned

CFA was among more than 30 organizations and individuals – including former SEC officials, investor advocates, asset managers, and academics – who wrote to SEC Chair Gary Gensler earlier this month urging him to make it a priority to fix our capital markets’ broken financial reporting infrastructure, including the Financial Accounting Standards Board (FASB), the Public Company Accounting Oversight Board (PCAOB), and the SEC’s Office of Chief Accountant (OCA).

“Two decades after a wave of major accounting scandals swept U.S. markets and Congress responded with passage of the Sarbanes-Oxley Act (SOX), many of the root causes of that crisis – deeply flawed and outdated accounting standards, weak and ineffective auditor oversight, and auditors who lack both independence and professional skepticism – have reemerged as pressing issues,” the letter warns. It calls on the SEC to:

  • Reconstitute FASB and the Financial Accounting Foundation to include a majority of investor members with expertise in the use of financial reports and knowledge of the accounting standard-setting process;
  • Undertake a top-to-bottom housecleaning at the PCAOB, including changing its leadership, increasing its budget, restoring the expertise of its staff, increasing the frequency and rigor of inspections, backing them up with strong enforcement, and reinvigorating the standard-setting process; and
  • Appoint investor representatives as SEC Chief and Deputy Chief Accountants in order to refocus that office on its investor protection mission.

“Market integrity, investor confidence, and the efficient allocation of capital all depend on complete, accurate, and comparable financial reporting. Currently, however, the institutions that make up the financial reporting infrastructure – FASB, PCAOB, and the SEC Office of Chief Accountant – are in a state of serious disrepair. … We look forward to working with you to restore these entities to their appropriate role of ensuring that financial reports are complete, accurate, and comparable – to the benefit of investors, the markets, and the health of our economy,” the letter concludes.