DOT Enables Carmakers to Bypass Safety Rules

Under a change formalized last month, the National Highway Traffic Safety Administration (NHTSA) will no longer require companies seeking federal safety standard exemptions to provide timely, complete information on their requests prior to posting them for public comment.

This move comes on the heels of NHTSA’s denial of a petition by consumer and safety advocacy groups, including CFA, expressing strong opposition to the Agency’s plan. Former NHTSA Administrator and former Public Citizen President, Joan Claybrook, said NHTSA’s new approach “will put the public at a distinct disadvantage because it will not be possible for consumer and safety advocates to provide well-informed input if the information associated with a requested regulatory change is incomplete… This is akin to asking a doctor to make a diagnosis without providing a complete medical history.”

Public opinion is decidedly in favor of the federal government maintaining its long-held role and responsibility for ensuring the safety of motor vehicles, especially when it comes to autonomous vehicles. However, as a result of this decision, NHTSA is placing industry interests above public safety. With the agency moving quickly to exempt driverless cars from current safety standards, the safety and consumer advocates agreed that now is not the time to lower the bar on transparency and accountability.

CFA Executive Director Jack Gillis commented on the NHTSA move, stating: “The responsibility for overseeing the safe introduction of likely the most profound change in our nation’s transportation system is enormous. DOT’s decision to operate in the dark, outside of public oversight, will doom the safe introduction of autonomous vehicles. Sunshine opens doors to success; darkness only serves to cover up problems and shortcomings. NHTSA was set up to serve the public and oversee the industry; this latest effort is just the opposite and needs to be reversed for the safety of the motoring public.”

CPSC Unanimously Proposes to Remove Padded Crib Bumpers from the Market

In a move that earned them praise from consumer safety advocates, the U.S. Consumer Product Safety Commission (CPSC) voted unanimously earlier this spring to move forward with a strong proposal to keep infants safe from the hazards posed by crib bumper pads. As the advocates pointed out previously, evidence shows that crib bumpers are unnecessary decorative items that offer no protection from serious injury, and are linked to dozens of infant deaths from suffocation and even sudden unexpected infant death (SUID).

The proposed standard follows more than a decade of warnings by pediatricians and safety experts against using crib bumper pads. Multiple studies have concluded that crib bumpers pose a serious risk to infants, and the American Academy of Pediatrics recommends that infants sleep alone in their own space on a firm, flat surface, with no extra bedding.

“Crib bumpers appear to be common and harmless nursery items, but in reality, due to the strong crib safety standard, the utility of crib bumpers is limited, while the risks are significant. These products are not necessary,” said Rachel Weintraub, CFA Legislative Director and General Counsel. “The CPSC’s crib bumper standard is a critical step to eliminating this hazardous product from the marketplace. We applaud this effort,” she added.

Advocates ask Congress to Act to Ensure Healthy, Safe, and Affordable Food

While the recent COVID-19 stimulus bill does much to provide important assistance to food banks, school nutrition programs, and farmers and restaurants forced to close, advocates say it still lacks critical protections for our nation’s food system.

In a letter sent early last month, 25 groups including CFA called on Congressional leadership to provide these critical protections. In the letter, the groups call for eight protections needed to ensure that healthy, safe and affordable food is available to all, and to minimize the challenges facing farmers, food workers, and farmworkers who are risking their own health to keep our food system going.

• Protect food and farm workers

The Occupational Safety and Health Administration (OSHA) needs to issue and strongly enforce an Emergency Temporary Standard to mandate that employers offer adequate protections for front-line food-chain workers and others at risk. Additionally, the U.S. Department of Agriculture (USDA) should issue food and worker safety guidance to school food service workers, operators and volunteers, and provide them with personal protective equipment (PPE).

• Expand food and farm worker benefits

Congress should do more to support newly unemployed food and farm workers by expanding the number of weeks that workers are eligible for unemployment benefits, providing hazard pay, and designating food and farmworkers as first responders so they are eligible to receive state benefits such as childcare, overtime, premium pay, and have the right to organize.

• Expand paid leave

Congress should provide free COVID-19 testing, universal paid sick days, paid family and medical leave, and should expand health care coverage by paying for medical treatment related to COVID-19.

• Support farmers in need

Congress should place a moratorium on farm foreclosures and should expand grant and loan programs.

• Enforce food safety laws

Congress should ensure that the USDA, the Environmental Protection Agency and the Food and Drug Administration enforce laws that keep our food supply safe, especially environmental laws that protect farm workers from pesticides and protect our drinking water supplies.

• Support families facing hunger

Congress should increase the SNAP benefit by 15%, raise the minimum monthly benefit to $30, suspend rules that limit benefits, suspend the public charge rule, and take other steps to prohibit discrimination in anti-hunger programs. USDA should also use its authority to make it easier to provide meals to low-income families during school closures, many of whom are food and farm workers, by issuing a nationwide waiver for area eligibility.

• Support elderly people and families

Congress should immediately expand the definition of “homebound” in the Meals on Wheels program to include all seniors. This will help reduce the threat the virus poses to the most susceptible Americans.

• Support food vendors

Congress should do much more to support independent restaurants, including street vendors, by providing grants, reforming loan forgiveness standards and expanding zero-interest loans, and by extending loan periods.

The letter makes the point that as more workers become sick and job losses grow, our nation’s food system will be tested. It advocates for getting ahead of these challenges with proactive measures rather than playing catch-up later, and urges Congress to do much more to provide the resources and policies we need to protect workers and to ensure that healthy, affordable food is available to all.

“Congress must do much more to ensure all people in United States have access to safe, nutritious food,” said Thomas Gremillion, CFA Director of Food Policy. “The proposed measures represent critical investments in public health that we cannot afford to ignore.”

Scheme to Privatize Beef Slaughter Inspection Opposed by Food Safety Advocates

The U.S. Department of Agriculture (USDA) approved a waiver late last month, paving the way more lax food safety regulation and causing great concern among safety advocates. Last summer, Tyson Foods requested a regulatory wavier that would allow it to rely on company employees, rather than government inspectors, to conduct postmortem inspection activities, including identifying and trimming “isolated defects” and identifying conditions that would require additional disposition by a government public health veterinarian.

Thomas Gremillion, CFA Director of Food Policy, stated that the USDA Food Safety and Inspection Service (FSIS) “appears to be using the global pandemic as an excuse to rush through this ill-conceived deregulatory plan.”

When consumer advocates requested a copy of the waiver petition, USDA disclosed a heavily redacted document that gave little indication that the waiver would actually improve food safety. Consumer advocates also raised concerns that granting waivers on a piecemeal basis would thwart any attempt to measure the impact of these “modernization” reforms.

The approval of this waiver goes against prior advocacy from CFA in which Gremillion voiced concerns over hog inspection line speeds as well as the proposed reduction in government inspectors. The approval also runs counter to public opinion. A poll from Hart Research Associates found that an overwhelming 73% of respondents opposed reducing Government inspectors in meat facilities.

“Now is the time to shore up our food safety protections, not experiment with secretive, untested and unpopular privatization schemes,” said Gremillion.

SEC Continues to Push an Anti-Investor Agenda

Even as COVID-19 has disrupted the markets and made participation in the regulatory process more challenging, the Securities and Exchange Commission (SEC) has continued to press ahead with an aggressive regulatory agenda aimed primarily at weakening regulations that are essential to market integrity and investor protection.

In response, CFA has filed a series of comment letters in recent months challenging SEC proposals that would: weaken proposed regulations regarding mutual funds’ use of derivatives, expand investor access to loosely regulated private markets, and undermine the independence of public company audits.

Mutual Funds’ Use of Derivatives: Despite extensive evidence that some mutual funds are using derivatives in ways that are excessively speculative or operating without sufficient assets to cover potential derivatives-related losses, the SEC has proposed a regulatory approach that “would not meaningfully protect” against these risks, CFA Financial Services Counsel Micah Hauptman warned in a March comment letter.

Hauptman criticized the Commission for proposing “a largely permissive approach that defers to funds to assess their own derivatives-related risks and decide how to address them.” As a result, he wrote, the proposal will likely “amount to little more than a paperwork exercise for funds, whereby they won’t adequately assess or control their own derivatives-related risks, and investors will be left holding the bag.” He urged the Commission to “go back to the drawing board and propose a regulatory solution that adequately protects investors, rather than the deferential, ‘industry knows best approach’ it has proposed here.”

Accredited Investor: In another move putting industry interests over investor protection, the Commission has proposed to further expand an already vastly over-inclusive definition of “accredited investor” by enabling investors who do not meet the financial thresholds in the definition to qualify based on their supposed financial sophistication. That definition plays a critical role in determining to whom issuers of securities can sell without providing full and fair disclosure of the essential facts regarding the investment.

In a March comment letter, CFA Director of Investor Protection Barbara Roper and Hauptman once again criticized the Commission for its failure to conduct a careful analysis of the current definition’s effectiveness, including the “shockingly superficial” analysis on which the Commission has based its decision not to adjust income and net worth thresholds in the definition to reflect inflation. While CFA acknowledged that including a financial sophistication requirement in the accredited investor definition is theoretically sound, they said the Commission’s proposal is deeply flawed.

“Had the Commission based its proposal on a more robust analysis, the proposed changes would not remotely resemble the proposals we have before us in this Release,” Roper and Hauptman wrote. “First and foremost, the Commission would have been forced to seriously consider the impact that inflation has had and continues to have on a definition that relies on financial thresholds that are not indexed to inflation. Second, it would have had to consider the potentially harmful impact on Americans’ retirement security of encouraging the marketing of private securities to retirement savers who qualify as accredited investors based on savings they must rely on for income throughout several decades of retirement. Third, it would have had to consider the risks to the economy posed by a huge and rapidly growing private market about which the Commission lacks even the most basic information regarding who invests, how and why they invest, how those investments fare, and what the long-term impact is on sustainable job creation and capital formation. Unfortunately, this proposal fails to address any of those serious concerns.”

“At a moment when evidence suggests our public markets are in serious decline, the Commission should be promoting carefully thought out policies to restore an appropriate balance between public and private markets. That is essential, not just to ensure that investors are adequately protected, but to promote productive, sustainable capital formation and the overall health of our economy. Instead, the Commission continues to advance policies, such as this, that promote private markets at our public markets’ expense,” they concluded.

Auditor Independence: Instead of addressing extensive evidence that audit firms frequently violate well-established auditor independence rules, the SEC has proposed revisions to those rules that place undue reliance on firms’ ability to exercise judgment in complying with the independence standards and dramatically weaken the independence rules that apply when private companies engage in an IPO.

In a May comment letter, Roper detailed a pattern of auditor independence violations “over a period of several decades and across a variety of firms, large and small,” which she said “suggests at the very least that enforcement of the standards and sanctions for violations are not sufficient to deter misconduct.” In response to that evidence, she urged the Commission to “withdraw much of the current proposal and instead focus its attention on making the rules more enforceable, increasing accountability within firms for independence failures, and encouraging competition based on audit quality, which should indirectly help to enhance auditor independence.”

“Even as it acknowledges that auditor independence plays a critical role in promoting investor protection and confidence, this proposal undermines key aspects of the auditor independence rules,” Roper concluded. “Instead of weakening the independence rules, the Commission should be looking to address persistent failures among audit firms to live up to their independence obligations. Its failure to do so threatens to undermine market integrity and transparency, putting both investors and capital formation at risk.”

Virtual Consumer Assembly 2020

Responding to the COVID-19 pandemic, CFA hosted its annual Consumer Assembly in May as an online only event. Rather than cancelling the event, CFA decided to turn it into a two-day event with an abbreviated schedule.

The program included keynote speeches from Rep. Rosa DeLauro (D-CT), Sen. Sherrod Brown (D-OH), California Attorney General Xavier Becerra, and District of Columbia Attorney General Karl Racine. It also featured two panels with experts from Congress, consumer groups, academia, and industry:

Turbulent Skies: A panel focused on the impacts of COVID-19 on airlines and how to expand consumer rights on airlines.

Weaponizing Behavioral Psychology in the Cyber Era: A panel focused on how websites and individuals can use “dark patterns” to manipulate users into preforming specific actions.

With the success of Virtual Consumer Assembly, as well as our two recent COVID-related Issue Briefings for CFA members recently, CFA expects to continue to develop more web-based content for our members.

We look forward to seeing you all (hopefully in-person) at next year’s Consumer Assembly.

Below are a selection of screenshots from Virtual Consumer Assembly 2020.