CFPB Pauses Anti-Consumer Reorganization Plan

In the wake of the election and pushback from Senate Banking Committee Ranking Member Sherrod Brown, consumer groups, and even agency staff members, the Consumer Financial Protection Bureau (CFPB) announced earlier this week that it would pause a plan to reorganize the Division of Supervision, Enforcement, and Fair Lending (SEFL) that, if adopted, would leave consumers vulnerable and defenseless.

More than 80 advocacy groups, including CFA, had submitted comments to the Bureau earlier this month in which they argued that the SEFL Division should be strengthened rather than reorganized. Criticism did not come from advocates alone. Arent Fox LLP, an industry law firm, said that “the change amounts to the single most effective effort by the CFPB to weaken its own Enforcement arm since the Trump administration took over. It cuts across all industries and products overseen by the Bureau.”

In their comments, the consumer groups wrote that “the proposed SEFL reorganization undermines the vast enforcement authority granted by the landmark Dodd-Frank Act to enforce federal consumer financial law and bring legal action against companies that violate that law.” The proposal would do this in a number of ways.

First, the proposal would disband Enforcement’s Policy and Strategy Team, which provides support to Enforcement attorneys and determines Enforcement’s overall policy and strategy, and would reassign team members to various Institution Product Line teams. The reorganization would also require Enforcement attorneys to get approval from another office before opening new investigations. Further, it would leave the question of whether federal consumer financial law should be resolved through supervisory exams or through an enforcement action to another office. “These drastic changes will eliminate the Enforcement office’s independence, strip its authority to open new research matters, and remove Enforcement’s critical, expert voice from the SEFL decision making process,” the groups stated.

In addition, the proposal would “dramatically weaken the CFPB’s ability to hold small financial firms accountable for violating the law, especially payday lenders and debt collectors. Because CFPB supervisors do not conduct examinations of these non-bank firms, violations by these institutions could go undetected,” the groups wrote.

With COVID-19 numbers rising nationally and consumers reeling from the current financial crisis, this reorganization could not come at a worse time, the groups argued. Enforcement actions under the current administration have plummeted even as complaints are on the rise. Since the pandemic broke out, the CFPB has seen record-setting numbers of consumer complaints each month.

“In March-June 2020, complaint levels were up by 50% over complaint levels during the same period of the previous year, with complaint volume increasing each consecutive month. The sheer number of complaints received by the CFPB illustrates how much consumers are struggling in the current financial crisis, and the proposed reorganization would leave consumers with less effective recourse in the face of lawbreaking financial institutions,” the groups stated.

“We are pleased that the CFPB has heeded our warning and paused the reorganization of the Division of Supervision, Enforcement, and Fair Lending,” said Rachel Gittleman, CFA’s Financial Services Outreach Manager. “We urge the CFPB to fully abandon this proposed reorganization as it would further diminish the CFPB’s enforcement efforts which have already plummeted under the current administration.”

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DOE Sued for Failure to Update Efficiency Standards

Six consumer and environmental groups, including CFA, sued the Department of Energy late last month for failing to review and update energy efficiency standards for more than two dozen categories of consumer and commercial appliances and equipment, including large energy users like refrigerators and water heaters. The 25 overdue standards—the most under any administration—could cost U.S. consumers and businesses billions of dollars in lost energy savings and significantly increase climate pollution, the groups warned.

Updating these standards is not only required by the Energy Policy Conservation Act (EPCA) of 1975, but it would also save American households and businesses at least $22 billion annually on their utility bills and would prevent more than 80 million metric tons of carbon pollution every year by 2035, an amount equal to the annual tailpipe emissions from more than 17 million cars.

The product efficiency standards that DOE has failed to review include, but are not limited to standards for:

• Clothes dryers and washers,
• Commercial air conditioners,
• Dishwashers,
• Microwave ovens,
• Refrigerators and freezers, and
• Water heaters.

The groups formally notified DOE Secretary Dan Brouillette in August that they would sue if the agency did not come into compliance with its duties to review and update efficiency standards under EPCA, but DOE ignored this warning.

“Since its launch, the national efficiency standards program has quietly saved Americans billions of dollars on their utility bills—$500 per household, on average, every year—and is projected to save, in total, $2 trillion and help the U.S. avoid 7 billion tons of carbon pollution by 2030,” the groups stated. Under President Trump, however, DOE has failed to review more standards than any other presidential administration, denying Americans billions in energy bill savings and adding millions of tons of pollution to the air.

“Appliance efficiency standards have consistently proven they provide sizable direct benefits to consumers in the form of lower utility bills, as well as significant macroeconomic benefits for the entire country. It is unconscionable that the Trump administration has abdicated its responsibility and repeatedly missed legal deadlines to take up efficiency standards for consumer products,” said Mel Hall-Crawford, CFA Director of Energy Programs. “Now more than ever consumers can use additional pocketbook savings that efficiency standards can deliver. We have been forced to seek remedy in the court to have the Department of Energy meet its obligation, but are hopeful that the future Biden administration will take prompt action to address these missed deadlines so that consumers can have access to more energy-efficient products,” she added.

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Report Documents Foodborne Illness “Poverty Penalty”

A new report released by CFA earlier this month, Foodborne Illness: Another Way the Poor Pay More, shines a light on the disparate impact wrought by lax food safety policy. The report explores research showing that being in poverty puts consumers, particularly those under five years of age, at higher risk of infection from foodborne pathogens such as Campylobacter, Salmonella, and Shigella.

Each year, Salmonella alone causes an estimated 1.35 million illnesses, 26,500 hospitalizations, and 420 deaths in the United States, at an estimated cost of $3.7 billion in medical bills. Despite this high cost, progress on reducing foodborne illness has largely stalled in recent years, with the last four years of CDC data showing an upward trend in reported foodborne illnesses.

As noted in the report, research on foodborne illness and poverty has been beset by measurement challenges, in particular because so many foodborne illnesses are not reported. Reports of foodborne illness provide a key feedback mechanism to curb foodborne pathogens. However, consumers may not provide specimen samples for testing, may receive an incorrect diagnosis, or may simply not seek medical care. As a result, CDC researchers estimate that, for every reported case of Salmonella infection, another 29 go unreported.

Compounding the uncertainty, the best dataset available in the United States, the Centers for Disease Control and Prevention’s (CDC) Foodborne Diseases Active Surveillance Network, or FoodNet, does not include key data on foodborne illness victims. The state and local public health partners that contribute to FoodNet do not track income or other indicators of socioeconomic status in their reporting. In addition to not tracking these economic markers, the FoodNet “catchment area was not chosen to equally represent all racial and ethnic groups, and even in the expanded FoodNet population, Hispanics and those living below the poverty level are underrepresented when compared to the general American population (6% vs. 12%, and 11 vs. 14%, respectively).”

Despite this uncertainty, recent research provides a clear indication that living in poverty is an important risk factor for acquiring a foodborne illness. By using location data for reported cases, researchers have analyzed whether living in zip codes with higher rates of poverty makes a person more likely to report a foodborne illness. Their studies strongly suggest that poverty puts consumers, particularly those under five years of age, at higher risk of infection from certain foodborne pathogens, including Campylobacter, Salmonella, and Shigella. However, due in part to the measurement challenges, determining why poverty increases one’s risk for foodborne illness is difficult.

While some cultural practices, such as the consumption of chitterlings or fresh Mexican style cheeses, may contribute to more foodborne illness among poor consumers, the harsh reality is that living in poverty itself represents a risk factor for a wide range of health problems, including foodborne illness. “Over 23 million U.S. consumers, about half of whom are ‘low-income,’ live in a food desert. While this may translate into fewer foodborne illness cases attributable to fresh produce, it likely increases the burden of foodborne illness overall, because poor nutrition makes individuals more vulnerable to foodborne illness,” according to the report.

The dynamics behind this increased vulnerability are straightforward. Researchers have noted that poor nutrition is “well understood to impair immune function,” in part because it tends to “impair the production and activity of immune cells and antibodies.” A weakened or compromised immune system can, in turn, increase one’s risk for infection, including from foodborne illness. Studies have shown, for example, that poor nutrition leads to reduced gut health, which in turn stymies the body’s ability to fight off Salmonella infections. As a result of these factors, consumers struggling with the stresses of scarcity tend to be the least equipped to fend off foodborne pathogens that pose a threat to all consumers.

CFA’s report provides five action steps to help protect the poor from foodborne illness:

1. Protect consumers from meat and poultry adulterated with virulent Salmonella

Through the use of vaccines, close monitoring, and data transparency, regulators could make significant progress in reducing the toll of salmonellosis.

2. Make fresh produce safer

To avoid future outbreaks, federal regulators should follow through on rules requiring sanitization of agricultural water and should consider incentives for cattle producers to vaccinate cattle against E.coli.

3. Slow the rise of superbugs

Widespread use of antibiotics creates antibiotic resistant bugs. While a comprehensive response from Congress is needed, a good start would be to create a system to collect data on how antibiotics are used on-farm, including information on quantities of antibiotics used and the specific indications for use.

4. Promote a culture of food safety in the workplace

Food workers are on the front lines of the fight to prevent foodborne illness. Yet workers that lack basic workplace safety protections, including paid sick leave, cannot be expected to contribute to the attitudes, values and beliefs that make a successful culture of food safety possible.

5. Create a single, independent food safety agency

15 different federal agencies currently divvy up responsibility for ensuring the safety of the food supply. The Safe Food Act would consolidate federal food safety activities into one independent food safety agency, with broad jurisdiction to address food safety hazards wherever they may emerge.

“Too often foodborne illness is characterized as a minor nuisance, and food safety a luxury that we can afford to cut back on,” said Thomas Gremillion, Director of Food Policy at CFA. “This report shows that investing in food safety isn’t just good for public health, it’s a matter of social justice.”

“The burden of foodborne illness on our most vulnerable communities is alarming,” said Nick Roper, CFA Administrative and Advocacy Associate. “Policymakers should take steps to better understand this problem and direct the resources necessary to eliminate this additional poverty penalty.”

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Groups Issue Blueprint for Robust Privacy Protections

As President-Elect Biden begins the transition to a new administration, 10 advocacy groups, including CFA, issued a blueprint outlining the steps the new administration and Congress should take to put in place robust privacy and data justice protections, beginning with executive actions on day one.

While acknowledging that the current Congress has made progress towards crafting effective federal privacy legislation and has reached bipartisan agreement on the need for a federal privacy law, the groups called on the Biden administration to swiftly put in place robust privacy and data justice protections. These include:

• Appointing privacy, consumer, and civil rights experts to key government positions;
• Passing a baseline, comprehensive federal privacy law that sets up a new federal data protection agency and does not pre-empt state laws;
• Limiting government surveillance and access to personal data, and protecting health data for all Americans;
• Protecting children and teens from corporate surveillance and predatory marketing;
• Recognizing that privacy, digital surveillance and corporate concentration are racial justice issues and ending the systemic surveillance of Black and Brown communities;
• Setting up sound practices and oversight for algorithms and data management;
• Ensuring that antitrust regulators account for privacy, civil rights and digital rights impacts in the merger review process; and
• Empowering the Federal Trade Commission and Federal Communications Commission to robustly enforce privacy protections.

Enhancing and improving privacy and data security protections is also in line with public opinion. Recent polling from the Pew Research Center found that three out of four Americans want more government regulation of what companies do with their data. In another poll from Morning Consult, 79% of voters said they want Congress to craft a bill that improves privacy rights.

“The new administration should lead the way to achieving strong privacy and digital rights, which are essential to advance opportunity and fair treatment for everyone in the United States,” stated Susan Grant, CFA Director of Consumer Protection and Privacy.

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Credit Reporting Agencies Urged to Provide Reports in Other Languages

Many Limited English Proficient (LEP) consumers are unable to access their credit reports, or are significantly hampered in doing so, because credit reports are not provided in their native language. As a result, CFA and 17 other organizations joined together to urge the three major credit providers, Equifax, Experian, and TransUnion, to provide credit reports in Spanish and the other seven languages most frequently spoken by LEP households as determined by the U.S. Census Bureau.

This request builds on a similar request from 2016. However, this time, the motivation is due in part to the economic upheaval caused by the COVID-19 pandemic.

In their letter to the credit reporting agencies and the Consumer Financial Protection Bureau (CFPB), the groups noted that, while they strongly support the decision to provide free weekly credit reports to all consumers due to the “unprecedented times” we face, LEP consumers’ need to access reports may be even greater. LEP consumers have been disproportionately affected by this pandemic due to the fact that many of them are essential workers.

“At a minimum, reports should be available in Spanish and the other seven most frequently spoken languages by LEP households as determined by the U.S. Census Bureau (Chinese, Vietnamese, Korean, Tagalog, Russian, Arabic, and Haitian Creole). This is not just an issue of consumer fairness, it’s an issue of racial justice for the many Latinx, Asian, and Black essential workers who have been hard hit medically and financially by COVID-19,” the groups stated.

“In the response from the Consumer Data Industry Association (CDIA), they argued that this was not the responsibility of the credit bureaus, but rather that of community groups,” said Rachel Gittleman, CFA Financial Services Outreach Manager. “This is not just a consumer issue, but a racial justice issue, and we urge the Biden Administration to increase language access for LEP consumers by requiring credit reports be provided in multiple languages.”

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NAIC Urged to Combat Systemic Racism

Earlier this year, the National Association of Insurance Commissioners (NAIC) announced the formation of a special committee focused on race and insurance. This month, CFA and 17 other advocacy groups sent comments urging that committee to forego “debates about the existence of systemic racism, [and] instead to move quickly to identify the places it appears and develop the strategies needed to address it.”

“For decades, consumer stakeholders have called upon the NAIC to take action to address unfair underwriting, pricing, and other practices that have disproportionately harmed communities of color. Insurers and their trade associations have often made the false claim that companies cannot be discriminating on the basis of race or ethnicity if they do not explicitly consider race in their practices. That, of course, entirely misunderstands the notion of disparate impact and the way systemic racism insinuates itself into so many aspects of economic life,” the groups wrote.

The letter highlights three specific strategies the Committee can work on to begin tackling the issue of systemic racism in insurance:

1. Require insurers to examine every aspect of their operations – marketing, underwriting, pricing, claims settlement, and antifraud – for proxy discrimination against protected classes.

“There is no dispute that systemic racism affects certain insurer practices… One of the first activities of the line of business work-streams should be to develop guidance for how insurers test for disparate impact and report those findings to regulators and the public.” The line of business work-streams should prioritize the practices that most obviously implicate systemic racism, including: customer lifetime value scores; consumer credit information and scores; and education, occupation, and household composition information and scores, among others.

2. Develop a more robust and detailed program of data collection for market regulation.

“The inadequacy of insurance market regulation data collection has long been criticized by consumer stakeholders and academics for the inability of regulators and stakeholders to assess insurance consumer market outcomes… Any serious effort by insurance regulators to address systemic racism in insurance should include dramatic improvements in reporting by insurers of consumer market outcomes at a granular detail sufficient to analyze the impact of race on insurance outcomes – whether those outcomes are marketing, underwriting, pricing, claims settlement or antifraud.”

3. Demonstrate a commitment to this work by directing as many, or more, resources toward addressing systemic racism in insurance as the NAIC does for other priority projects.

“Following the murder of George Floyd, NAIC leadership offered strong words regarding regulators’ commitment to address systemic racism in insurance. Those words must be supported with a commitment of resources and time to this project. As is often said, a budget is a reflection of the values of an organization, and we believe that focusing significant resources on solutions to systemic racism in insurance, such as the two priorities we set out above, is critical if the NAIC is to meet the demands of this moment.”

“Structural racism and systemic biases impact the auto insurance market and the auto insurance companies, in turn, reinforce these biases, leaving people of color to face discriminatory practices and increased prices for a product everyone is required to purchase,” said Michael DeLong, CFA Insurance Advocate. “NAIC needs to provide the tools and resources to help regulators and companies dismantle these oppressive systems and make auto insurance affordable for all. Talk is cheap – Commissioners need to act as soon as possible.”