CFA News

CFAnews Update – November 9, 2017

Senate Votes To Protect Financial Firms from Class Action Lawsuits

In a devastating blow to consumers, the Senate voted late last month to repeal a common sense consumer protection which would have allowed consumers to join together in class action lawsuits against bad actors in the financial services industry. President Trump signed the measure into law a week later.

“The Senate has taken away a critically important right, leaving consumers to fend for themselves when they are faced with crises in the financial services industry ranging from the Wells Fargo scandal to the Equifax scandal,” said CFA Director of Advocacy Outreach Michael Best.

Years in the making, the rule was the result of a comprehensive and voluminous study by the Consumer Financial Protection Bureau (CFPB) that showed that forcing consumers out of courts and into arbitration was not good for consumers.

During the floor debate, senators supporting the rule noted the many representative organizations that wanted to maintain access to the courts. These included the American Legion, whose Legislative Director sent a letter stating that “a vote to overturn the Consumer Financial Protection Bureau arbitration rule is a vote against our military and veterans.”  Ignoring the pleas of representatives of consumers and military families, 50 senators voted to overturn the mandatory arbitration rule, with Vice President Mike Pence providing the tiebreaking vote.

A number of advocates attempted to persuade President Trump to veto the measure, including CFPB Director Richard Cordray. Despite these pleas, the President stood alongside representatives of big banks and signed the resolution, taking away Americans’ right to join together and access the court system when they have been taken advantage of.

“When consumers can join together they put powerful interests on notice that they will be held accountable for their actions. When consumers are forced to stand alone, the powerful are able to do them wrong without accountability,” concluded Best.


CFA Urges State Regulators to Repair a Broken Auto Insurance Rate System

CFA today issued a research paper last month that identifies wide variations among large, standard insurance companies in the premiums charged to identical drivers, raising serious questions about both the actuarial soundness of auto insurance rates being charged throughout the country and the effectiveness of market competition in disciplining those rates.

“Auto insurance rates throughout the country make no sense,” said CFA Director of Insurance J. Robert Hunter in a press statement. “Not only are many rates clearly not actuarially sound, the extreme dispersion of prices for identical risks means that market competition is not working to assure prices are reasonable.”

In the paper, CFA analyzed two sets of auto insurance premium data. The first set was premium quotes for drivers in 15 cities gathered online by CFA researchers from the five largest auto insurers in America. The second data set was 293,010 quotes from 64 preferred and standard affiliates of Allstate, Farmers, GEICO, Progressive and State Farm in 29,664 ZIP codes (representing 99.4 percent of the U.S. population).

“The data detailed in this study are substantial but more study is needed to fix this broken system,” Hunter said. “Expanding the research would require using data on rates, claims, and losses that are not, generally, available to the public. Such research is clearly the responsibility of state insurance departments, which are compelled by state law to ensure actuarial soundness and prohibit excessive and unfairly discriminatory pricing in their state’s auto insurance market.”

CFA sent requests to every state insurance commissioner that each state’s Department of Insurance  undertake an actuarial review of the issues raised in our paper.  CFA also sent the paper to the Federal Insurance Office, requesting that it consider these data as it researches why auto insurance prices are often unaffordable for low- and moderate-income Americans, since these odd price disparities particularly impact this group of Americans.


National Retailers Receive Mixed Grades on LED Light Bulb Display and Signage

Many consumers have limited knowledge regarding the potential cost savings associated with LED light bulbs, and that lack of knowledge affects their purchase decisions, according to a national survey released this week by CFA. The survey results, along with an assessment of the way national retailers display and provide information about low-cost LED light bulbs, are included in a report, The Potential for Consumer Cost Savings Through Retail Display of and Signage About LED Light Bulbs.

About half (51%) of consumers who responded to the survey correctly identified LEDs as “the type of light bulb that lasts the longest and uses the least electricity.” More than two-thirds (69%) of those consumers knowledgeable about low LED costs said they intended to replace burned-out bulbs with LEDs, whereas about one-quarter (26%) of consumers without this knowledge said they would replace burned-out bulbs with LEDs.

Additionally, the report found that sixteen national retailers selling light bulbs – supermarkets, drugstores, discounters, and large general retailers – received grades ranging from “A-” (Home Depot) to “D+” (Food Lion and Dollar Tree) related to the prominence they gave and the information they provided about LEDs. Signage from Safeway and Home Depot was especially informative about lower LED costs.

“National retailers differ considerably in the extent to which they help their customers save money on light bulbs,” said CFA Director of Energy Programs Mel Hall-Crawford in a press release.  “We urge all those retailers with lower grades to make a greater effort to prominently display LEDs and provide informative signage,” she added.

CFA visited 52 stores in five states and the District of Columbia to research light bulb availability, display, and signage by 16 national retailers.  Almost all stores for each retailer had similar displays and signage in the stores visited.

“Display and signage are essential to helping many consumers understand and realize the cost savings of LED light bulbs,” said CFA Executive Director Stephen Brobeck.  “Through prominent display and informative signage, some retailers are facilitating light bulb purchases that can save consumers hundreds of dollars in several years,” he added.


Off-Highway Vehicle Safety Recalls Hit New High

A Consumer Federation of America (CFA) analysis of off highway vehicle (OHV) recalls found that in the past eight years, there have been 68 OHV recalls, and the number of recalls has increased from two recalls in 2010 to 20 recalls in 2017 (as of October 31, 2017). The 68 recalls involved at least 61 injuries and at least two deaths.

CFA’s analysis of U.S. Consumer Product Safety Commission (CPSC) OHV recall reports since 2010 found that the highest number of recalls occurred during the past three years, from January 1, 2015 through October 31, 2017. To date, 2017 has the most recalls of all the years analyzed despite the fact that two months remain in the calendar year. OHVs include all-terrain vehicles (ATVs), recreational off-highway vehicles (ROVs), and utility task vehicles (UTVs).

“We did this analysis to understand whether there were more OHV recalls more recently and why these recalls are occurring,” stated CFA Legislative Director Rachel Weintraub in a press statement. “We found that more OHV recalls have been occurring more recently.”

The CFA analysis found that in 2017 there were a total of 20 recalls—the highest number of recalls in a single year during the period analyzed. In 2016, there were 14 recalls, and in 2015 there were 10 recalls, the second and third highest number of recalls in a single year during the period analyzed. In total, CFA identified 68 recalls in the period studied.

While OHVs have been recalled for numerous reasons, CFA identified some patterns. For example, looking at the entire period, the top three hazards responsible for the recalls were broadly related to fuel, steering, and throttle issues. These three hazards represent nearly half of all hazards (47%) that led to recalls.

“We urge the CPSC to investigate why the number of OHV recalls are increasing and take steps, along with OHV manufacturers, to prevent these tragedies and improve the safety of these vehicles,” Weintraub said.