CFA News

CFAnews Update – September 4, 2018

Autonomous Vehicle Bill Lacks Meaningful Consumer Protections

Legislation to regulate the autonomous vehicle (AV) market, the AV START Act (S. 1885), lacks meaningful consumer protections when it comes to issues of privacy, data availability, government oversight, and transparency, CFA Executive Director Jack Gillis warned at a press conference earlier this summer.

“Autonomous vehicles have the potential to be a technological vaccine that could dramatically reduce the tragic toll that autos take on our society. However, like any successful vaccine, they need to be thoroughly tested to specific standards before they are made available to the public,” Gillis said. “The current version of the AV START Act falls woefully short on the protections needed to ensure the safe introduction of the autonomous vehicle.”

The tracking and monitoring of AVs raises privacy concerns, and regulations are needed to ensure that this information remains the private property of the consumer, noted Gillis. Furthermore, he warned, because of the bandwidth being allocated to AV communications, it’s possible that much of the bandwidth will be used for commercialization, which will not only seriously annoy consumers, but also increase the already growing problem of distracted driving.

The AV START Act also fails to address how AV technical and performance data will be handled, and whether this vital information will be open to independent analysis. “It’s critical that this information be made publicly available so independent experts can assess AV capabilities,” Gillis said, and so consumers can make informed purchase decisions.

Gillis pointed out that one of the best ways to educate consumers about this new technology is to make safety information about driverless cars easily available online. The Department of Transportation’s (DOT) database currently provides vehicle safety information and the ability to look up recall information by VIN. AV manufacturers should be required to submit AV feature information to DOT by VIN, so it can reside in this already created system.

“This will enable the over 50 million Americans who buy new and used cars to precisely determine the features of a particular AV, and the public exposure will serve to stimulate competition in developing the very best AV features,” explained Gillis. “As the government and industry attempts to roll out AVs without any type of standards or consistent nomenclature, basic, comparative information about AV features is an absolute minimum.”

Finally, Gillis said, for there to be proper government oversight of these extraordinarily complex and highly technical products, Congress must mandate, and provide funding for, the National Highway Traffic Safety Administration to establish an AV oversight division within the agency staffed with the technical know-how needed to both understand and monitor this new technology. “Without such an effort, the car and tech companies pushing AVs onto American roadways will set their own standards,” he warned. “Given the serious recalls by the car companies and the data breaches by the tech companies, this is a recipe for disaster.

“For AVs to reach their full potential as a lifesaving addition to America’s highways, there must be thoughtful and effective regulatory oversight. As currently written, the AV START Act fails do to that on a number of fronts,” concluded Gillis.

Consumer Groups Urge FCC to Explore Additional Means of Addressing the Robocall Problem

In comments filed with the Federal Communications Commission (FCC) last month, CFA, Consumers Union, and National Consumer Law Center outlined the scope of the robocall problem and what needs to be done to protect consumers.

Consumers need more, not fewer, protections against unwanted robocalls from legitimate companies as well as scam robocalls, the groups wrote. In addition, the calling industry and the phone companies should provide more complete information about the robocall problem, and the FCC should work with the phone companies to explore additional means of addressing robocalls.

The groups countered the arguments of several commenters who, in an attempt to weaken robocall laws and the Telephone Consumer Protection Act (TCPA), have maintained, with little evidence, that scam robocalls, not unwanted telemarketing or debt collection calls from legitimate companies, are the sole problem warranting attention.

On the contrary, the groups noted that consumers have reported that unwanted automated calls – from legitimate companies or not – interfere with important incoming and outbound calls, interrupt night shift workers when they are trying to sleep during the day, and can be costly, particularly to consumers with limited-minute cell phone plans. They therefore called on the FCC to reject efforts to weaken the TCPA.

The groups also urged the FCC to reject the calling industry’s request to narrow the FCC’s definition of “robocall,” a Trojan Horse that would undermine the TCPA rules. The industry wants “robocall” be defined as a call featuring a pre-recorded message, but it is the autodialed nature of the robocall that makes it so easy to use to harass consumers. The FCC should continue to define “robocall” in accordance with the TCPA and accompanying rules, the consumer groups argued.

The groups also said that  phone companies should be required to provide free, advanced call-blocking and caller ID authentication services, implemented along consumer-friendly principles, they wrote. Major phone companies have made progress in providing consumers with free and advanced robocall-blocking tools, particularly to wireless customers and those with advanced-technology landlines (Voice over Internet Protocol, or “VoIP”). However, traditional landline consumers in general still lack affordable and effective call-blocking options.

All consumers should have access to effective anti-robocall technology, at no charge, the groups insisted, and phone companies should explore new ways to make consumers aware of their call-blocking options.

Finally, in order to handle mistakenly blocked calls, the groups urged the FCC to create a consumer-friendly system to manage unblocking requests. It should be paid for by callers who seek to use it (similar to the Do Not Call Registry), never override consumer preferences, and only allow through legal calls with authenticated Caller ID information, to ensure that callers do not inappropriately circumvent blocks, they wrote.

“Despite progress in the expansion of call-mitigation tools and in developing caller ID authentication technology, consumers are still plagued with robocalls. We encourage the FCC to continue to explore new ways to address robocalls, particularly as scammers have shown that they are adept at avoiding current roadblocks,” the comments concluded.

Bill Would Severely Weaken the Federal Insurance Office

In a July letter to members of Congress, CFA expressed opposition to H.R. 3861, the “Federal Insurance Office Reform Act of 2018,” which seeks to severely weaken the Federal Insurance Office (FIO). The bill was reported out of the House Financial Services Committee in June on largely partisan lines, but it has so far not been brought to the House floor for a vote.

FIO was created in the wake of the financial crisis to provide a resource for federal policymakers and the public regarding insurance markets and to assess the affordability and availability of insurance for American consumers.

“H.R. 3861 would entirely eliminate FIO’s domestic responsibilities. For consumers generally, and low-income and minority communities in particular, FIO’s domestic mandate is its most valuable responsibility,” wrote CFA’s Director of Insurance J. Robert Hunter.

Under this mandate, the Office in 2016 concluded a two-year process of developing a working definition of affordability for the auto insurance market, with input from a variety of stakeholders, including consumer, civil rights and community groups and the insurance industry. In 2017, FIO issued its first “Study on the Affordability of Personal Automobile Insurance,” which found that 18.6 million Americans live in ZIP codes where auto insurance is unaffordable, the first-ever analysis of this nature and scope.

“FIO’s role of providing relevant data and analysis is extremely important and should maintained in order to help improve the economic conditions in struggling communities across the country,” Hunter said. “Under H.R. 3861, however, this role of evaluating the fairness and efficacy of the domestic insurance market is removed. Eliminating FIO’s domestic work does not improve insurance markets; it does not save significant taxpayer money; it does not help consumers,” he said.

Consumer and Worker Groups Oppose Industry Petition to Increase Slaughter Line Speeds

CFA joined organizations representing poultry workers, occupational safety experts, workers’ rights advocates, and other consumer groups in opposing three requests made by chicken processors to USDA’s Food Safety and Inspection Service (FSIS) that would allow the companies to increase line speeds at slaughter to up to 175 birds per minute.

The industry petitions seek an exemption from the current line speed caps pursuant to USDA regulations that provide for temporary regulatory waivers. The regulatory waivers are meant “to permit experimentation so that new procedures, equipment, and processing techniques, may be tested to facilitate definite improvements.” Yet none of the petitions refer to new procedures, equipment, or processing techniques, nor explain how the requested increase in line speeds might “facilitate definite improvements” in food safety.

“These petitions are utterly disconnected from the requirements for the regulatory exemption they seek to obtain,” said CFA’s Food Policy Director Thomas Gremillion. “They do not even bother to claim that they are doing something in connection with the increased line speeds to improve food safety, and they completely ignore the worker safety component, which is critical. Unsafe workers make unsafe food. Sadly, these deficient petitions come at the behest of federal regulators.”

Earlier this year, FSIS announced in its Constituent Update newsletter that it will consider waiver requests from individual young chicken plants to permit these establishments to operate at faster line speeds than permitted under current Department regulations. The agency outlined “criteria,” such as that plants not be in violation of Salmonella performance standards, that it has said will factor into decisions of whether to grant a waiver request. The agency’s “criteria,” however, are less comprehensive than the underlying regulatory requirements they purportedly interpret. Granting line speed waivers under the criteria would therefore violate the Administrative Procedures Act, according to the groups.

The waiver requests by the three companies “meets none of the waiver requirements under the Poultry Products Inspection Act and must be rejected,” the groups wrote. “The companies are not asking for a time limited waiver; there is no public health emergency; the request contains no mention of a new procedure, equipment or processing technique; and there is no data or other mention of ‘definite improvements.’”

“Further, there is absolutely no mention of the impact on the safety and health of workers in the plant due to the line speed up and the increased work load demands this will place on workers who already suffer very high injury and illness rates,” they added. “Overwhelming evidence supports the conclusion that allowing poultry processing establishments to operate with faster line speed limitations would dramatically worsen the already unsafe worker conditions in poultry plants.”

CFA Urges SEC to Oppose Mandatory Shareholder Arbitration

CFA submitted a white paper to Securities and Exchange Commission (SEC) Chairman Jay Clayton in August detailing why it would be both contrary to the securities laws and bad public policy to permit public companies to adopt forced arbitration agreements.

While forced arbitration clauses are permitted in brokerage contracts, the SEC has long defended shareholders’ right to participate in class action lawsuits against public companies for accounting and other forms of securities fraud, arguing that such suits are necessary to compensate the victims of fraud and provide an important supplement to the Commission’s own enforcement actions.

Under the new administration, however, the Commission’s commitment to that decades-old policy has been called into question, when then Acting Chairman Michael Piwowar invited companies going public to include a forced arbitration clause in their offering documents with the expectation that they would receive Commission approval to do so. More recently, Commissioner Hester Peirce told a reporter that she “absolutely” believes companies should have that right.

While Chairman Clayton has said the issue is not a priority for him, and has pledged to conduct a deliberative process should the issue arise in the context of an IPO, he has failed to make the kind of clear statement in support of preserving shareholders’ rights necessary to put the issue to rest. Last April, in a letter to Rep. Carolyn Maloney (D-NY), Clayton “encouraged those with strong views to support their position with robust, legal and data driven analysis.”

The White Paper was written in response to that invitation, persuade the Commission to reaffirm the position the SEC has maintained for many decades – under Democratic and Republican leadership alike – that private lawsuits serve as an essential supplement to the SEC’s own enforcement efforts and that efforts to deprive investors of their right to bring such actions are illegal under the securities laws and bad public policy.

Participating in a news briefing to release the report, CFA Director of Investor Protection Barbara Roper stated that, “the question is not whether investors’ fraud claims should be heard in court or in arbitration. The question is whether these claims will be allowed to proceed at all. If you eliminate investors’ ability to band together to bring their claims in class actions,” she added, “you will make it unaffordable for any but the largest investors to bring a claim. And even for large investors, claims will often not be economically viable.”

She noted that, when it comes to compensating the victims of fraud, the SEC has neither the resources nor, in some areas, the authority to fill this gap.  “We hope the SEC’s commitment to this long-held policy will remain untested. But it would be foolish to assume that will be the case,” Roper concluded. “Should the issue arise, in whatever context, we expect the Commission to respond as it has repeatedly done in the past: that measures that deprive defrauded investors of their right to pursue private claims in court violate the securities laws, are bad for investors, and are bad for the markets.”