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“Airlines handle sensitive data for millions of individuals on a regular basis, and the vast majority of travelers do not know that their information is bought, sold and used over and over again,” said Erin Witte, Director of Consumer Protection at Consumer Federation of America. “We are encouraged to see Secretary Buttigieg taking a major step toward protecting the privacy of air travel consumers.”  

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The CARS Rule is under attack from powerful special interest groups. Advocates have an important voice and will be a critical part of protecting this Rule in the coming months. Below is a link to our impactful and informative webinar about the CARS Rule, where experts from national consumer organizations break down what the CARS Rule does (and does not do), what challenges the FTC will face, and how attendees can support the CARS Rule.

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Read the February 8th Letter

Read the February 22nd Letter

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“Junk fees are not only annoying, they are deceptive and can push vulnerable people into poverty and a crushing cycle of debt,” said Erin Witte, Director of Consumer Protection at Consumer Federation of America. “Being honest about the price is not complicated and getting the FTC’s rule across the finish line will level the playing field for consumers.” 

“Whether it’s in rental housing or concert tickets, junk fees have artificially increased prices across the economy, disadvantaging honest businesses’ ability to compete,” said Erik Peinert, Research Manager and Editor at the American Economic Liberties Project. “The FTC’s proposed rule is a strong and simple one: require sellers to disclose the total price up front. Consumers will know how much they’re paying at the outset and be able to compare between competing sellers.” 

“Junk fees, added on top of sky-high rent, put safe and decent rental housing further out of reach for low-income renters,” said Ariel Nelson, staff attorney at the National Consumer Law Center. “An FTC rule that requires landlords to be honest about the total price of an apartment and the purpose of the fees they charge will go a long way toward helping renters to effectively budget and stay in their homes. It will also benefit landlords who, with the help of certain rental housing listing platforms, are already advertising the total price of rent up front.”

“Consumers have been getting nickel and dimed – or dollared and 20 dollared – by deceptive fees for too many years. We welcome an end to junk fees,” said Teresa Murray, Consumer Watchdog Director for U.S. PIRG.

“Junk fees are creeping into nearly every purchase we make, misleading consumers about the true cost of products. The FTC’s common-sense rule simply tells sellers to give consumers the full price up front—without burying the fees or misrepresenting them,” says Ruth Susswein Director of Consumer Protection at Consumer Action.

“Americans are fed up with hidden junk fees that can really add up and cause financial hardship for families living on tight budgets,” said Chuck Bell, advocacy program director for Consumer Reports. “The FTC’s proposed ban on hidden junk fees will create greater transparency and accountability around pricing that will help consumers find better deals and foster more competition in the marketplace.”

“No consumer likes getting tricked into paying higher prices,” said Eden Iscil, Public Policy Manager at the National Consumers League. “These junk fees throw off household budgeting and make comparison shopping nearly impossible. The FTC is doing critical work and cracking down on this problem.”

The FTC’s proposed rule seeks to eliminate “hidden and bogus” junk fees that are added to the price over the course of a purchase, hiding the real price, preventing consumers from comparing between different sellers. Junk fees distort competition and allow deceptive sellers to increase prices. It creates an uneven playing field where businesses who do not hide their prices in this way are at a disadvantage, because their prices look higher by comparison. The rule would ensure that sellers disclose all mandatory fees up front, facilitating easier price comparison for consumers, and prohibit bait-and-switch pricing tactics. Furthermore, businesses will not be able to misrepresent fees or be vague about their purpose. 

 The coalition comment also urges the FTC to strengthen several provisions in the proposed rule to prevent companies from using alternative deceptive pricing tactics to get around the rule. In particular, the coalition supports stronger rules around price disclosures for optional fees, prohibiting default selection for optional purchases, and using the well-established “reasonable consumer standard” to enforce the rule: if a reasonable consumer would expect something to be included in the purchase, it should be.  

Read the full comment here.

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Earlier this month, the Supreme Court heard oral argument in connection with the cases Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. Department of Commerce, which challenged the Chevron deference doctrine. Based on the nature of their inquiries and remarks, the Supreme Court’s six conservative justices indicated that they may very well upend Chevron deference. Such a ruling would hamper federal agencies from continuing to do their important work, give corporations the ability to effectively gridlock policymaking, and ultimately, eliminate important safeguards for American consumers. 

This blog provides some examples of how overturning Chevron deference could adversely impact each key issue area that the Consumer Federation of America focuses on. We aim to shed light on the potential challenges and setbacks in advocacy and policy enforcement and emphasize the critical role that Chevron deference plays in supporting the work of federal agencies.  These potential impacts underscore the importance of maintaining Chevron deference for the continued protection and promotion of consumer interests and well-being. 

Food Safety  

Food safety advocates understand all too well that consumers face a gauntlet of preventable harms in the food system not so much because federal regulators enact bad policies, but because they do not take any action at all. Cronobacter in infant formula, dangerous Salmonella in poultry, literally thousands of chemicals in food with unexamined safety records, alcoholic beverage labels that fail to disclose ingredients, allergens and other basic facts—all of these problems and more require new rulemaking, which regulated industry may challenge in court. Despite Chevron deference, the industry and its throngs of well-paid lawyers often prevail, and years of work can go down the drain. Decades of regulatory dysfunction may follow, as has happened in the wake of a federal court of appeals ruling that invalidated the Department of Agriculture’s rules on Salmonella in meat and poultry in 2001. Indeed, USDA’s failure to protect consumers from foodborne illness has become so dire that several large companies have joined consumer groups in support of reform. Many factors undoubtedly contribute to regulatory inertia—a conflicted mission at USDA, a culture of timidity at the U.S. Food and Drug Administration, the revolving door between industry and regulatory agencies in general, the list goes on. However, should the U.S. Supreme Court rule that regulatory agencies are even more susceptible to second-guessing from the courts, the tendency to use litigation risk as an excuse for inaction will grow, and consumers will pay the price.   – Thomas Gremillion

Investor Protection 

A potential U.S. Supreme Court decision in Loper Bright to unravel the Chevron doctrine poses a significant threat to the Securities and Exchange Commission’s (SEC’s) ability to protect investors from bad actors, promote market integrity and fairness, and ensure investors have the information they need to make informed decisions.  At a time when markets, technology, and financial risks are evolving rapidly—perhaps unprecedentedly so given the rise of artificial intelligence, the risks of climate change, and the growth of cryptocurrencies—it is imperative that the SEC keeps pace. Upending Chevron would fundamentally jeopardize the SEC’s ability to do so. 

Even now, the SEC’s investor protection efforts continually face the threat of litigation from industry opponents. If the Court tips the scales even further by limiting the SEC’s authority to interpret and apply the securities laws, then the prospects for strong, lasting investor protections would only get worse.  Policing our markets and protecting investors from misconduct demands a level of expertise and precision that only the SEC possesses, and that neither courts nor Congress can match. Limiting the SEC’s ability to exercise its authority would only serve to harm investors, diminish market integrity, and destabilize our financial system. – Micah Hauptman / Dylan Bruce

Housing 

The overruling on Chevron deference would have far-reaching consequences for the ways Americans are housed. Over the last forty years, this jurisprudence has supported the ability of federal agencies to effectively regulate American corporations and protect consumers. Within housing this includes the ability of agencies to implement federally- mandated rental protections and housing counseling, offer fair housing oversight, enforce federal emission and building standards, and protect homeowners against exploitative mortgage products. For example, in 2023, after years of collaboration between three federal banking agencies (the FDIC, Federal Reserve Board, and OCC) and several rounds of vigorous public input, new, modernized rules interpreting the 1977 Community Reinvestment Act were released: a deeply collaborative product that responds to the unique realities of banking and community development today.

The overruling of Chevron risks making these types of rulemakings all but impossible and allows the worst acting corporations and their trade groups to gridlock policymaking by tying decisions up in courts. By contrast, federal agencies are led by politically appointed leaders, are accountable to Congress, and staffed by policy experts who often bring decades of experience. It is essential that we allow federal agencies to continue to do their important work and make sure that American consumers live in safe and affordable homes, are protected against housing discrimination, and can rely on fair and transparent mortgage products. – Sharon Cornelissen

Product Safety  

The U.S. Supreme Court’s decisions in Loper Bright Enterprises v. Raimondo and Relentless v. Department of Commerce could undermine consumer safety and health.  The potential safety ramifications are enormous and could implicate vehicle safety standards, phthalates concentrations in children’s toys, drugs, medical devices, and so much more. The federal agencies tasked with ensuring public health and safety rely on their agencies’ vast technical and scientific expertise. Subject matter experts can include engineers, epidemiologists, chemists, and other complex fields. Neither Congress nor judges have access to the expansive technical expertise of federal agencies. Unlike the judicial system, federal agencies provide the public with the chance to comment on proposed regulation. As such, health and safety agencies can utilize critical information from product safety professionals and safety advocates. The foundational principle of Chevron enables agencies to keep consumers safe and healthy. – Courtney Griffin 

Consumer Protection 

The Chevron doctrine correctly defers to subject matter experts at agencies like the Federal Trade Commission who live and breathe consumer protection on a daily basis and who are accountable to the public through legislative oversight and extensive transparency requirements. If the Supreme Court strikes down Chevron, inexperienced and uninformed political appointee judges can freely question regulatory interpretations and create harmful case law that is difficult to overturn. Such a decision will inevitably erode longstanding, strong safeguards that keep Americans safe, healthy, and shielded from predatory and fraudulent practices. – Erin Witte  

Financial Services  

Without Chevron deference, the current practice of permitting regulators to interpret regulatory ambiguities in consumer financial protection law will make consumers vulnerable to discrimination and undermine innovation in the marketplace. 

In almost every facet of our economy, technology is disrupting business practices and permitting new risks to consumers. Since the 19th century, commercial banking has been understood to consist of lending money, taking deposits, and paying checks. A judge with experience in banking law should readily grasp the meanings of those activities and their implications for our economy. On the other hand, emerging technologies require policy professionals with a deep understanding of highly technical topics. Federal regulatory agencies employ these experts. Their wisdom benefits policymaking. 

Addressing discrimination in artificial intelligence is among the developments likely to require deep understanding as a precondition for successful regulatory implementation of existing banking laws. Even an attorney with a career of experience in fair lending law would be challenged to evaluate the fairness of an AI-driven algorithm, for example. The Equal Credit Opportunity Act (ECOA), the Fair Housing Act (FHA), the Fair Credit Reporting Act (FCRA) and the Federal Trade Commission Act (FTCA) are among the laws whose fairness standards can be applied to algorithmic decision-making in lending and lending-adjacent activities. 

 Inaction by the institution with authority for AI governance, be it a regulator or the Courts, will lead to problems for all affected stakeholders. Consumers will be vulnerable to discrimination and without regulatory clarity, lenders will be anxious to try AI out of fear of legal jeopardy. Markets need clarity on how fairness is defined and measured and even on how to identify protected class status when lenders are prohibited from soliciting demographic information directly. The Supreme Court must uphold the principle of Chevron deference. – Adam Rust   

The post What’s at Stake for Consumers if the Supreme Court Overturns “Chevron Deference” appeared first on Consumer Federation of America.

This is part three of a three-part blog series which will cover the major changes to the Rule, what the FTC declined to address in this rulemaking, and the major components of the CARS Rule. CFA has been a strong advocate for this rulemaking and looks forward to continuing its support to ensure that the CARS Rule becomes law.

The CARS Rule is largely the same as the original proposal (see part 1 of this blog series for a detailed description of the changes), targeting price transparency and add-on products and services. Here are the primary components of the CARS Rule, with links to the corresponding provisions in the lengthy Federal Register notice:

Pricing Transparency

Offering Price Disclosure. The Offering Price is defined as the full cash price for which the dealer will sell the vehicle, excluding only government taxes. The FTC has made clear that this includes all mandatory fees, including fees for pre-installed and mandatory add-on goods and services.

WHEN – Dealers must disclose the Offering Price in any advertisement and/or communications that reference a specific vehicle or that reference a monetary or financing term for a specific vehicle. In any communications, the Offering Price must be included in the first response regarding a specific vehicle.

HOW – These disclosures must be made clearly and conspicuously, and if the communication is in writing, then the Offering Price must be in writing.

Total of Payments. Rather than solely focusing on misleading monthly payment amounts, dealers must disclose the total amount that a consumer will pay for the vehicle, after all installment payments are made. Many add-on’s look innocuous and less expensive when they appear to cost a few dollars a month, but the FTC is requiring dealers to be more up front with consumers about the true, total cost of purchasing a vehicle.

WHEN – Dealers must disclose the Total of Payments whenever they make a representation about monthly payments for a vehicle.

HOW – These disclosures must be made clearly and conspicuously, and if the communication is in writing, then the Offering Price must be in writing.

Monthly Payments Comparison. The FTC is also requiring dealers to provide a simple, clear explanation that decreasing a monthly payment will increase the total cost of the vehicle if this is the case. Many consumers misunderstand the fundamental concept that lowering a monthly payment corresponds to a longer payment term and higher finance charges and total cost.

WHEN – Dealers must provide the Monthly Payments Comparison whenever comparing a lower monthly payment option.

HOW – These disclosures must be made clearly and conspicuously, and if the communication is in writing, then the Offering Price must be in writing.

Add-on Products

Prohibiting Worthless Products. The CARS Rule explicitly prohibits the sale of any add-on product or services “if the consumer would not benefit from” the product. It includes the examples of “nitrogen-filled tires” and GAP products that do not provide coverage or are duplicative of existing insurance coverage.

Optional Add-ons. The CARS Rule also requires dealers to explicitly state that optional add-ons are not required, and the vehicle can be purchased without them if this is true. Dealers must provide this disclosure whenever make any representation about add-ons, and it must be in writing if the representations about add-ons are made in writing.

Express Informed Consent. The CARS Rule requires dealers to obtain consumers’ “express informed consent” when charging for any item, including add-ons. The FTC defines this as “an affirmative act communicating unambiguous assent to be charged” which states what the charge is for and the amount of the charge, including all fee and costs. The definition also makes clear that dealers cannot use prechecked boxes or use a method that subverts or impairs consumer choice to satisfy this requirement.

Prohibited Practices

The CARS Rule includes a list of 16 prohibited misrepresentations that address many common deceptive practices in the auto marketplace. Notably, unless the FTC includes these provisions in a rule, it is precluded from obtaining refunds for consumers when this misconduct occurs. In 2021, the Supreme Court ruled in AMG Capital that the FTC cannot use its traditional UDAP authority to obtain refunds, and the FTC must instead pursue rule violations to make consumers whole.

Recordkeeping

Dealers will be required to maintain records of all documents pertaining to rule compliance for two years from the date they are created.

The post FTC CARS Rule Part 3: What Does the Final Rule Say? appeared first on Consumer Federation of America.

This is part two of a three-part blog series which will cover the major changes to the Rule, what the FTC declined to address in this rulemaking, and the major components of the CARS Rule. CFA has been a strong advocate for this rulemaking and looks forward to continuing its support to ensure that the CARS Rule becomes law.

What did the FTC decline to do in the CARS Rule?

CFA and over 100 other groups commented on the July 2022 NPRM, asking the FTC to go further in the Rule itself and to address many other issues plaguing auto sales and financing. The FTC largely declined to adopt the changes requested, citing their intent to “continue to monitor the marketplace.” Here are the top areas of concern consumer groups asked the FTC to address:

Yo-yo sales. After a consumer has signed a financing contract and left the dealership with a vehicle, some dealers subsequently claim that the deal “fell through” and tell the consumer that they need to sign a new financing contract with terms that are worse than previously agreed to. The CARS Rule and the July 2022 NPRM prohibit dealers from making misrepresentations about this conduct, but do not prohibit yo-yo sales. Advocates have separately petitioned the FTC to ban this practice primarily because disclosure is an ineffective tool to curb this egregious fraud. In the CARS Rule Notice, the FTC says it will address the petition separately.

Cooling off period for add-ons. Part 1 of this blog series describes the FTC’s approach to add-ons and what changed from July 2022 to the final CARS Rule. In our comment, advocates asked for a clearer, better solution to nefarious add-ons: a 30-day cooling off period which would permit consumers to review and cancel their add-ons for a full refund. The FTC declined to make this change but left open the possibility that it would reconsider this in the future “based on actual stakeholder experience” with the CARS Rule.

Translating documents. Advocates asked the FTC to require dealers to translate major contractual documents into the language in which the sale was negotiated. Many dealers solicit non-English speaking consumers and employ salespersons who are fluent in other languages. Consumers are then baffled when that trusted salesperson disappears, and they are presented with all-English documents by English-speaking finance managers. The FTC declined to require translated contracts but notes that the CARS Rule requires “express informed consent” for each item charged. It then explains that a consumer who does not speak English and signs an English language document “is in no position to give unambiguous assent to the charges described therein.” Interestingly, this seems to call into question whether such contracts would be enforceable.

Safety and defects. Advocates asked the FTC to prohibit dealers from representing that vehicles are safe or “certified” when they have open recalls, and to prohibit many other misrepresentations about safety, recall repair availability, mileage, and eligible for service contract coverage. The FTC declined to adopt any of these provisions, claiming that much of this conduct is already prohibited and that it would continue to monitor the marketplace. The reality is that dealers often claim that vehicles with open recalls are safe and without a clear statement from the FTC about this particular problem, it is often not actionable by a consumer.

Electronic repossessions. Advocates asked the FTC to prohibit the electronic disablement of vehicles as a means of repossession. Creditors can use kill switch devices to remotely disable vehicles when they believe a consumer is late in their payments, leading to a host of dangerous outcomes. The CARS Rule prohibits misrepresentations about “whether or under what circumstances a vehicle may be repossessed,” but the FTC declined to prohibit their use altogether. Therefore, as long as dealers do not lie about their use of these dangerous devices, they remain permissible.

It is clear that the number and scope of issues that plague auto sales and financing are numerous and complex. While advocates urged the FTC to go further, we are encouraged by the strong steps taken by the FTC to date to rein in some of the worst problems in this marketplace and look forward to future opportunities to support efforts to empower car buyers.

The post The FTC CARS Rule Part 2: Where did the FTC decline to go further? appeared first on Consumer Federation of America.

This is part one of a three-part blog series which will cover the major changes to the Rule, what the FTC declined to address in this rulemaking, and the major components of the CARS Rule. CFA has been a strong advocate for this rulemaking and looks forward to continuing its support to ensure that the CARS Rule becomes law.

Changes from 2022 Proposed Rule:

The CARS Rule includes two major changes from the NPRM to its requirements about add-ons and the scope of the Rule, and several other, smaller changes.

Add-on Selection Requirements. In both the July 2022 NPRM and the CARS Rule, the FTC details a well-founded litany of problems with the way dealers advertise and sell add-on products to consumers. Many consumers do not know they are being charged for add-ons, dealers misrepresent to consumers that add-ons are mandatory, and dealers’ use of complex paperwork and deceptive conduct often obscures consumers’ understanding of the cost of add-ons and their impact on financing.

The July 2022 NPRM proposed adding safeguards into this process, including (1) requiring dealers to disclose a list of available add-ons and their prices, and (2) adding a particularized multi-step consent process for add-ons, whereby dealers would be required to calculate the price of the car with and without the add-ons and itemize the add-ons, all before the final purchase and with the consumer’s clear understanding that these add-ons were not mandatory.  The FTC declined to adopt these provisions in the final CARS Rule, citing commenter concerns about ineffectiveness and inserting more documents into an already complex and document-heavy process. The FTC maintained its prohibitions against the sale of worthless add-ons, prohibiting dealers from misrepresenting that add-ons are mandatory, and requiring express informed consent to purchase an add-on.

Add-ons are a major problem for car buyers. The FTC clearly wants dealers to provide more information to consumers to make a better-informed decision about add-ons, and advocates are hopeful that the FTC will undertake future action to create a better solution to this problem. Regardless, it is evident that the FTC thoughtfully considered the tens of thousands of comments it received when making these changes, underscoring the power of public participation in agency rulemaking.

Definition of a Covered Vehicle. The second major change reduces the scope of application of the CARS Rule itself to the sale of certain cars instead of all motor vehicles. The July 2022 NPRM expansively defined “motor vehicle,” but the CARS Rule scales back the definition of “covered vehicle” to exclude recreational boats, motorcycles, scooters, electric bicycles, motor homes and golf carts. The FTC also limited the definition to refer only to vehicles designed for use on a public roadway. This means that the CARS Rule will not apply to the sale of these excluded vehicles.

To be clear, the abuses described by the FTC occur in the sale of all types of vehicles, but it is likely that the vast majority of comments received by the Commission pertained to cars, prompting its decision to narrow the CARS Rule scope. The FTC states that it will monitor the market to determine whether broadening the scope of the CARS rule as originally proposed is appropriate.

Other Changes. The FTC made several other smaller changes, including:

• A requirement that each of the prohibited misrepresentations pertain to “material information,” which means “likely to affect a person’s choice of, or conduct regarding, goods or services.”
• Including a phrase in the definition of “covered dealer” that explicitly provides that it applies to individuals and
• Changing the definition of “offering price” to clarify that dealers “may, but need not, exclude required government charges.”

The post The FTC CARS Rule Part 1: What Changed? appeared first on Consumer Federation of America.

After a decade of attempts to fix a broken auto marketplace, the FTC announced in July 2022 that it was pursuing an auto dealer rule aimed at ending bait and switch pricing tactics and junk fees in the form of worthless add-on products and services. After receiving over 25,000 comments from the public and widespread support for addressing auto dealer misconduct, the FTC has published its final rule, summarizing the comments and laying out its plan for the CARS rule.

“The time is long overdue for the FTC to level the playing field for car buyers and honest dealers,” said Erin Witte, Director of Consumer Protection at Consumer Federation of America. “The CARS Rule will bring some improvements to the auto market, and we look forward to working with the FTC to ensure that all consumers, especially those in vulnerable populations, are prioritized throughout the process.” 

The CARS Rule prohibits misrepresentations about key information, like price and cost, and requires dealers to provide the offering price, tell consumers add-ons are optional, and give information about the total payment when discussing monthly payments. The rule also prohibits dealers from charging for any add-on that has no benefit to the consumer.

“We applaud the FTC’s efforts to help millions of Americans through the use of its rulemaking authority to bring a level of transparency to auto sales,” said John Van Alst, senior attorney at the National Consumer Law Center and Director of its Working Cars for Working Families Project. “We look forward to continuing to work with state and federal policymakers to address discriminatory practices and bring transparency to the car sales and finance markets.”

The Rule also includes clear protections for members of the military and their families who are targeted with deceptive information about whether dealers are affiliated with the military and face other issues specific to servicemembers.

“The FTC has taken the courageous step of addressing the top consumer complaint in the country: auto sales,” said Rosemary Shahan, President of Consumers for Auto Reliability and Safety. “This rule should benefit both consumers and honest car dealers, who wrote in support of the proposed rule and complained about being at a competitive disadvantage because of unscrupulous car dealers who lure car buyers with false promises of low prices, then jack them up using sneaky tactics.”

“Consumers are beyond frustrated with the deceptive practices some unscrupulous dealers use to jack up the price of cars,” said Chuck Bell, advocacy programs director for Consumer Reports. “The FTC’s new rule will protect consumers from shady bait and switch sales tactics and help ensure that car dealers provide fair and accurate prices for vehicle purchases.” 

The CARS Rule will take effect on July 30, 2024. The FTC has created new guidance for consumers to help them understand their rights when they buy a vehicle as well as guidance for auto dealers with advice to help them prepare for the rule to go into effect.

“We know all too well how car buyers across the country are ripped off by unscrupulous auto dealer sales and financing tactics,” said Christine Hines, legislative director at National Association of Consumer Advocates. “We appreciate that the FTC has taken action to provide protections for consumers in this market.” 

“We are thrilled that the Federal Trade Commission has issued its CARS rule today bringing some badly needed consumer protections to Americans looking to buy or lease a vehicle,” said Mitria Spotser, vice president and director of federal policy at the Center for Responsible Lending. “This rule will help curb dishonest sales and financing practices in the industry.  The steep rise in automobile prices over the past few decades means we need to be doubly vigilant of junk charges and financing scams, especially given current interest rates.”

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DOWNLOAD HOUSE ENERGY & COMMERCE LETTER

DOWNLOAD SENATE COMMERCE LETTER

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“It is clear that Americans across party lines are tired of being scammed and forced into paying worthless junk fees,” said Erin Witte, Director of Consumer Protection at Consumer Federation of America. “Junk fees disproportionately impact low-income consumers and communities of color, and we fully support the efforts of each of these agencies to put an end to these practices.”

The post Federal Agencies Continue the Fight Against Junk Fees appeared first on Consumer Federation of America.

Funeral pricing transparency and fair practices will benefit all consumers. Evidence shows that a large and growing majority of consumers expect funeral price information to be available online and that a significant and growing minority of funeral consumers, despite the lack of current price transparency, are searching for funeral prices. Today, it is particularly difficult for the elderly, disabled, transport poor, and out-of town funeral planners to compare prices, especially on the short timeline inherent to funeral planning. Online price disclosures should also be prominently placed and easily accessible.

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Life Hack for Saving Time: Pass the FTC’s Auto Dealer Rule

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CFA Report Shows That Real Estate Agent Glut Harms Both Industry and Consumers

Tips for Saving Money on Your Auto Insurance

By: Michael Delong, Research and Advocacy Associate

Auto insurance is an interesting product: we are all required to have it if we own a car, but we hope never to have to use it, and we try not to think about it. But as insurance premiums continue to skyrocket, it has probably been on your mind more.  Even though we can face stiff penalties for driving without insurance, many drivers struggle to keep up with the rate increases.  In addition to the price pain, the insurance product itself can be kind of bewildering:  what are all these different “coverages,” which do I need, and (of course) why do they cost so much?

Consumer Federation of America (CFA) and America Saves are here to help. At its most basic, auto insurance covers damage or injury you cause to another car or person while you are driving.  Depending upon your state and the coverage you choose, your insurance policy may also cover your medical bills or damage to your car when you cause a crash, when you are hit by an uninsured driver, or when your car is stolen or crushed by a tree branch.

Every state except New Hampshire requires drivers to have auto insurance—and New Hampshire still requires financial responsibility if you cause an accident, so the overwhelming majority of people there have auto insurance. If you do not have auto insurance, you are breaking the law. And if you are caught you may be fined, have your license suspended and have to pay a fee to recover it, and possibly even face jail time.

Over the next several weeks CFA and America Saves are partnering on a series of articles on auto insurance—how to save money, what consumers should know, and several myths about auto insurance. Please note that these tips are general in nature and may not reflect every reader’s personal needs and situation; you should consult financial advisors and insurance professionals as you make decisions.

You can save money on your auto insurance with these tips:

1. Shop around—and shop around using multiple options. Auto insurers use a variety of driving and non-driving socio-economic rating factors to set your premiums. Driving-related factors include your driver safety record, the number of miles driven, and whether you have been in any accidents or filed any claims. Non-driving related factors include your gender and marital status, your credit score, your education level, your job or occupation, whether and how much insurance you’ve had in the past, and whether you own a home or rent. Insurers also place a lot of emphasis on where you live, often based on your ZIP code and even on which block you live in your neighborhood.

Each auto insurer calculates these factors and their impact on your premium in different ways – some rely heavily on your credit history and never consider your job title or educational history, while others may weigh several aspects of socio-economic status when calculating your premium. It is well worth your time to sit down and get quotes from different insurance companies. If one company charges you $120 per month and you find another company that only charges you $90 per month, that $30 savings per month will add up to $360 saved per year.

Consumers can compare quotes in several different ways:

• Online: You can go to different auto insurer websites, fill out your information, and get the quotes, and you can use comparison websites such as the Zebra, Bankrate, or ValuePenguin. These websites enable you to compare a few quotes more quickly and easily. It is important to note that these companies do not scan the whole market for you, and they get paid by insurance companies.
• Through an agency. You can contact licensed insurance agents to get additional quotes and guidance about insurance generally. There are some agents – known as “exclusive” or “captive” agents who only sell one insurance brand and may have deep knowledge about the offerings of their company. Others, known as “independent” agents and brokers, can scan several insurers’ offerings for you, including some that may not be available online.

We recommend that people shop around through each of these methods to get the best set of options and find the best price.  One note, some insurance sellers, known as “brokers” may charge an additional “broker fee” if you work with them. Unless you have a particularly unique situation – such as a very bad driving record or a very expensive or custom vehicle – we recommend against purchasing auto insurance from brokers who charge a fee.

     2. Consider whether you still need comprehensive and collision coverage. These options on an insurance policy will pay to repair or replace your car if it is damaged by you (such as accidentally crashing into a pole while parking), some natural event like a falling tree branch, or if it is stolen. If you have a car loan or lease your vehicle, these coverages are required, but if you own your car outright, they are optional. “Comp and Collision” are particularly helpful if your car value is still pretty high, but if your car is not worth much anymore, it may be time to consider dropping Comp and Collision. Since these coverages usually come with a deductible – typically $500 – that you have to pay first before any insurance payments kicks in, it may be better to try and set aside a little money each month just in case you damage the vehicle, rather than pay hundreds of dollars in premiums each year for a car worth only a few thousand dollars. As a thumbnail rule, if your car value is less than ten times what you pay for Comp and Collision, you might consider dropping it. That is, if your car is worth $10,000, it might not be worth it to spend more than $1,000 a year on Comp and Collision; if it’s only worth $3,000, think twice about a policy costing more than $300 for those coverages.

     3. Check your credit score for errors and try to improve it as well. We hate to make this recommendation, because it is ridiculous that this should impact your insurance premium. But, until politicians stand up to insurance companies and stop this practice (it is already prohibited in California, Hawaii, and Massachusetts), it is one of the biggest drivers of your auto insurance premium. Our research indicates that consumers with a perfect driving record and poor credit scores pay on average at least twice as much for auto insurance compared to consumers with a poor driving record and excellent credit scores.

The first thing you can do is examine your credit report for errors, which are unfortunately quite common, and demand that any errors be corrected. You can get a copy of your credit report at this link. If you find errors, contact your insurer and demand that they re-run your “credit-based insurance score,” re-price your policy if appropriate, and refund any excess they charged by using a faulty score. Over time, you can work on improving your credit score by following the credit score improvement strategies described here.

CFA is fighting to ban auto insurers from charging consumers more based on their credit; if you are interested in learning more or getting involved, email us at mdelong@consumerfed.org.

     4. Make sure your insurer knows how much you drive. Many companies charge lower prices to low-mileage drivers. If you are driving less (because you are working from home, out-of-work, or retired) than you used to, you may be paying more than you should. Find out how many annual miles the insurer is estimating for you when they set your premium and correct them if they are rating you based on out-of-date information.

     5. Improve your driving by taking a driving improvement course. Auto insurance companies charge far higher premiums if they believe you are a risky driver, since that increases the chances of your being in a crash and the insurance company having to pay a claim. If your driving record is checkered or you would like to save on your insurance, some auto insurers will offer you a discount if you take a defensive driving course. Check with your insurance company or agent to see if you qualify for a discount if you take this course, some of which can even be taken online.

     6. Pay your auto insurance premium in full instead of monthly. If you’re struggling to cover the cost of insurance, then you are probably paying in installments. It may be hard to imagine paying it all at once, but it’s worth calling your company and asking how much you would save if you did. With some companies it can be 5-8% or even as much as 12%. If you are on a six-month policy (where the pay-in-full amount is much less than an annual policy), and you pay a significant installment fee, consider paying all at once.

     7. Look for additional discounts. Many auto insurers offer further discounts if you meet certain conditions. Possible benefits include: discounts for having a paperless policy, a student discount, a discount if your car gets an anti-theft device, an automatic payments discount, or a discount for veterans/members of the military.

Auto insurance is required in most states, and it is also a crucial tool for financial security and economic mobility (as well as actual mobility in most places). Some of the reasons for high prices have to do with unfairness in the marketplace and company greed – CFA is working on improving laws and regulations to better protect consumers from these problems – but being a savvy insurance shopper and consumer can help. We hope that this will help you save on your auto insurance.

Life Hack for Saving Time: Pass the FTC’s Auto Dealer Rule

By: Erin Witte, Director of Consumer Protection

The Federal Trade Commission sells its Motor Vehicle Dealer Rule short when it estimates that consumers will only save $30 billion over ten years. The $30 billion number is the dollar equivalent of the time savings (on average: 3 hours per transaction) for consumers because the rule would prohibit dealers from advertising deals that are not available, and from wasting consumers’ time by making them call or physically go to a dealership to haggle over the price of the car. It is hard to imagine that anyone will be unhappy about having to spend less time at a car dealership – $30 billion is just icing on the cake.

But time savings, significant as they are, are only one small fraction of the ways consumers would save money with this rule. Dealers would not be able to sell worthless add-on products or deceive consumers into buying them. If the FTC’s cases against Passport and Napleton are any indicator, the cost savings here will well exceed the $30 billion estimate. Napleton alone allegedly charged over $70 million in deceptive and unauthorized add-ons. With over 45,000 dealers in the U.S. generating hundreds of thousands of complaints to government regulators, it is safe to assume that Napleton and Passport are not simply “bad apples.” Implementing safeguards to help prevent these and other deplorable practices will only put more money back in consumers’ pockets, stimulate competition, and make the process of buying a car slightly less painful.

Enter the lobbying powerhouse National Automobile Dealers Association (NADA), smelling blood in the water for dealers’ substantial profits, and predictably dipping into its well-funded coffers to generate a fearmongering survey and report about the FTC’s rule. Before asking a single question, the survey spends three pages striking fear in the hearts of dealers about expanded liability, exposure to significant monetary penalties, and “increase[d] consumer confusion and frustration.” It is no surprise that this “representative sample” of 40 dealers (out of “roughly 60,” handpicked by NADA) who managed to fully complete the survey (and “nearly fifteen” who were interviewed) want us to believe that the rule will cost consumers more than it saves. This simply is not true.

Perhaps it’s time we asked the people who rely on and pay increasingly high amounts for cars what they would like to see. Thousands of consumers responded to the FTC’s rulemaking, sharing horror stories and pleading for its passage. The least we can give them is a measly 3 hours and $30 billion back.

Department of Labor ERISA Council Must Protect Retirees and Workers Pensions

By: Micah Hauptman, Director of Investor Protection

On July 18^th, CFA’s Director of Investor Protection Micah Hauptman testified before the Department of Labor’s Advisory Council on Employee Welfare and Pension Benefit Plans, known as the ERISA Advisory Council. The purpose of the hearing was to help the Department determine whether it should update its longstanding guidance for pension plan fiduciaries in order to ensure that their decisions to transfer worker and retiree pensions to annuity providers are in the sole interests of workers and retirees.

Hauptman stated that in recent years many of the largest companies in the U.S. have transferred their pension obligations to insurance companies that provide annuities to workers and retirees. When companies do this, they shift risks onto insurance companies that, if not carefully controlled for, could undermine insurance companies’ abilities to fully pay those annuities to workers and retirees.

At the same time, insurance companies’ business models are evolving in ways that may increase risks for insurers, Hauptman stated. For example, private equity firms have become increasingly involved in insurance markets, introducing new sources of risk, complexity, and opacity to insurers’ businesses — risks that may undermine insurance companies’ ability to pay annuities to workers and retirees.

While state-based insurance guarantees may offer a partial backstop against the risk that insurance companies may not pay their annuity obligations, those guarantees are not as robust as the insurance guarantees that are provided under federal law by the Pension Benefit Guaranty Corporation (PBGC), Hauptman stated. Thus, the workers and retirees whose pensions are transferred to annuities are at risk of losing valuable benefits if the insurance company providing their annuity were to fail.

Given these heightened risks to workers and retirees arising from pension risk transfers to annuity providers, Hauptman urged the Department to preserve the protections in the current guidance for pension plan fiduciaries and offered several suggestions for the Department to consider to strengthen the guidance so as to ensure that any pension risk transfer arrangements do not leave workers or retirees worse off than they would be if they stayed in the defined benefit pension.  These included:

• Preserving the requirement for fiduciaries to select the safest annuity available;
• Requiring fiduciaries to select annuities that are independently reinsured; and
• Not permitting fiduciaries to satisfy their obligations by providing disclosures about the risks associated with the transfer or by accepting written representations by an insurance company that it is complying with state insurance laws.

Hauptman reminded the Department that workers and retirees have earned their pensions and depend on them for a secure retirement. Accordingly, the Department must ensure that those benefits and the protections afforded to workers and retirees are not compromised.

CFA Report Shows That Real Estate Agent Glut Harms Both Industry and Consumers

Earlier this month CFA released a new report – “A Surfeit of Real Estate Agents: Industry and Consumer Impacts” – revealing with industry data that there are too many residential real estate agents compared to the amount of homes available for sale. The report also found that this imbalance burdens consumers with higher commission costs and leaves them vulnerable to inexperienced real estate agents.

There are more than 1.5 million residential agents who belong to the National Association of Realtors and compete for home sales, with costs totaling between $5 to $6 million annually. The costs include:

• economic inefficiencies including an inordinate time spent by agents finding clients,
• relatively low incomes of many full-time agents,
• frustration by these agents and by many consumers who must deal with inexperienced agents,
• reinforcement of relatively high and uniform commission rates, and
• damage to the reputation of the industry.

“A large majority of practicing real estate agents have recently received their license or work part-time,” said Stephen Brobeck, a senior fellow at CFA and author of the report. “These agents usually charge the same commission rates as experienced, full-time agents yet in general offer worse service and deprive experienced agents of needed clients.”

Marginal agents with fewer than five sales a year receive an estimated 25-30 percent of commission income. The report found that the median net income of all sales agents was approximately $25,000, and the median net income of sales agents with less than two years of experience was $7,800. For all brokers and associate brokers, the net median income was $57,100.

“Without 5-6 percent commission rates, even fewer agents would survive financially in today’s marketplace,” said Brobeck.  “Ironically, relatively high rates attract new entrants into the industry, increasing competition for clients and reducing individual income for all.”

A future CFA report will explore the ease with which people can obtain a real estate license compared to the difficulty for most licensees to learn how to succeed as realtors.

“To protect consumers and experienced realtors, the industry should discourage unqualified and insufficiently committed people from obtaining a license,” said Brobeck. “The industry should prioritize making it easier for capable, hard-working licensees to succeed. We look forward to expanding on this suggestion in a future report.”

The post CFAnews Update – July 27, 2023 appeared first on Consumer Federation of America.