Senate Bill Would Undermine Independent Agencies, Harm Consumers

The Senate Committee on Homeland Security and Governmental Affairs is scheduled to mark up a bill (S. 3468) during the lame duck session that would impose onerous new cost-benefit analysis requirements on independent regulatory agencies and subject significant policies of these agencies to detailed review by the Office of Information and Regulatory Affairs (OIRA) of the Office of Management and Budget.  As a result, the bill – co-sponsored by Sen. Rob Portman (R-OH), Sen. Susan Collins (R-ME), and Sen. Mark Warner (D-VA) – would undermine the independence, efficiency and effectiveness of these important consumer protection agencies.

CFA legislative team members Rachel Weintraub, Legislative Director; Tom Feltner, Director of Financial Services; Susan Grant, Director of Consumer Protection; and Barbara Roper, Director of Investor Protection wrote to Committee members earlier this month opposing the bill.  “This bill would significantly curtail the ability of independent federal agencies such as the Consumer Financial Protection Bureau (CFPB), the Consumer Product Safety Commission (CPSC), the Securities and Exchange Commission (SEC), and the Federal Trade Commission (FTC) to protect consumers from abusive financial schemes, dangerous consumer products, fraud, and costly, anti-competitive and unfair practices,” the wrote.

Ironically, a bill that supporters say is needed to ensure that regulators give more careful consideration to the potential consequences of their actions is being rushed through Congress without any attention to its own potential harmful consequences or the concerns raised by current and former federal regulators.  In its letter, CFA urged: “At the very least, before you rush to mark up this bill, we urge you to conduct a legislative hearing to thoroughly examine the effect of the bill on the many crucial consumer protection efforts that independent agencies are currently undertaking.  We are convinced that a careful analysis of the legislation will make clear that this bill creates significant barriers to the effective promulgation of necessary consumer protections.”

As this issue of the newsletter went to press, no date for the legislative mark-up had yet been set, but it was not expected until after Thanksgiving.

State Regulators Urged to Protect Consumers from Excessive Post-Sandy Costs

In the wake of Superstorm Sandy, governors of nine affected states and the mayor of Washington, D.C. moved quickly to protect consumers from high insurance deductibles associated with wind damage claims related to the storm.  CFA warned that, in order to ensure that consumers receive appropriate protections from unjustified out-of-pocket costs, state insurance regulators must closely monitor how insurance companies determine claims deductibles.

Wind claims from designated hurricane activity are subject to considerably higher deductibles than standard, flat rate deductible claims.  After the storm, the governors of Connecticut, Delaware, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, and Rhode Island, as well as the mayor of Washington D.C. announced that claims filed as a result of Superstorm Sandy would be subject to standard, flat rate deductibles, rather than the much higher percentage of replacement costs normally applied to hurricane-related damage.  The decisions will result in millions of dollars in savings and will ensure that much-needed resources will remain with homeowners during the recovery in following weeks and months, said CFA Director of Insurance J. Robert Hunter.

In a letter to elected officials, Hunter warned that this determination alone may not be sufficient to ensure that consumers are treated fairly.  “State insurance departments need to ensure that this determination is implemented fairly and consistently,” he said.  He encouraged elected officials to work closely with state insurance regulators to see that this occurs.

Hunter also called on elected officials to block use of anti-concurrent-causation (ACC) clauses to avoid payment of legitimate claims, as was common after Hurricane Katrina.  ACC clauses say, according to insurers, that if your home is damaged by a risk they cover (e.g., wind) and, at relatively the same time, by a risk they don’t cover (e.g., flood) the policy covers neither.    “Storms such as Superstorm Sandy result in considerable wind and flood damage, and consumers who face property loss from both should be treated fairly in the claims process,” said Hunter.

McDonald’s Abandons Viral Marketing to Children

There was good news on the privacy front last month, when McDonald’s announced that it was abandoning its “forward-to-a-friend” feature, which encouraged children to email cards, links and photos to friends through the company’s HappyMeals.com website. In August, CFA and several other advocacy groups filed complaints with the Federal Trade Commission (FTC) alleging that McDonald’s and other companies were violating the Children’s Online Protection Act (COPPA) by engaging in this type of viral marketing program.

McDonald’s website invited a child to make a “music video” by uploading a picture or taking one using a webcam. The child’s photo was inserted onto the body of a cartoon character that dances along to music in the video. The child was then encouraged to “share” the video with up to five friends by entering in their names and email addresses. Each friend would receive an email with the subject line, “You’ve been tagged for fun by a friend! Check it out! It’s a Star in Video at the McDonald’s Happy Meal Website” and the email message would encourage the child to make their own video and share it.

COPPA prohibits websites that are directed at children from collecting personal information such as email addresses without notice and parental consent. The FTC is currently considering updating the definition of “personal information” in its rules under COPPA to include things such as photos and cookies, a proposal that CFA and consumer and privacy groups strongly support.

“We’re pleased that McDonald’s is taking this step and hope that the other companies whose marketing programs we’ve called into question will follow its lead,” said CFA Consumer Protection Director Susan Grant.

Program Set for CFA Financial Services Conference

When CFA holds its financial services conference in Washington, D.C. November 29-30, keynote speakers will include: Gary Gensler, Chairman of the Commodity Futures Trading Commission, David Vladeck, Director of the Bureau of Consumer Protection at the Federal Trade Commission, Steven Pearlstein, Business and Economics Columnist for The Washington Post, David Stevens, President and Chief Executive Officer of the Mortgage Bankers Association, and Frank Nothaft, Vice President and Chief Economist with Freddie Mac.  More information on the conference, including a complete program and an online registration form, is available here.