CFA News Update- September 5, 2012

Obama Administration Raises Fuel Economy Standard

The Obama Administration announced last week that it would adopt a federal fuel economy standard of 54.5 mpg for passenger vehicles by the year 2025.  “This is not only a big win for consumers, it is vital to the U.S. auto industry and the single most important thing we can do to end America’s addiction to oil … and to improve our national energy security,” said CFA Research Director Mark Cooper in a news release responding to the announcement. “The many benefits of this policy are so clear that is has garnered widespread support from the public, automakers, auto workers, national security experts, public health advocates and environmentalists.”

According to CFA analysis, for the typical consumer who finances a new vehicle purchase with an auto loan, the savings in gasoline expenditures exceeds any increase in loan payments from the first month. Over the life of the vehicle, higher fuel economy puts thousands of dollars into consumers’ pockets, which will boost the economy and stimulate job growth.   “Having spent a record $2,850 on gasoline last year, the average American household today simply cannot afford to invest in a gas-guzzler. The best way to insulate American families from volatile gasoline prices is to create a passenger vehicle fleet that gets more miles to the gallon,” said CFA Public Affairs Director Jack Gillis.  “The 54.5-mpg standard is a win for both consumers and automakers because it creates a clear pathway for automakers to meet the needs of consumers today and in the coming years.”

USDA Urged To Approve Labeling of Mechanically Tenderized Meat Products

Members of the Safe Food Coalition wrote to Agriculture Secretary Tom Vilsack last month urging him to approve a proposal to label mechanically tenderized beef products. The proposal must be approved by the Secretary before it is sent to the Office of Management and Budget for review.  Often used on less expensive cuts of meat to increase tenderness, mechanical tenderization is a process by which small needles or blades are repeatedly inserted into the product.  These needles or blades pierce the surface of the product, increasing the risk that any pathogens, such as E. coli or Salmonella, located on the surface of the product can be transferred to the interior.

“In order to kill pathogens which may be located on the interior of these products, consumers must cook these products differently than they would intact steaks and roasts,” Chris Waldrop, Director of CFA’s Food Policy Institute, said in a press statement. “Without labeling to identify these products as mechanically tenderized and non-intact products, and information on how to properly cook these products, consumers may be unknowingly at risk for foodborne illness. Labeling of mechanically tenderized products would allow consumers to identify these products in the supermarket.”

In addition to urging USDA to approve the label, the groups are calling for USDA to develop and implement a sampling program for the detection of pathogens in non-intact beef products and to implement an educational outreach campaign to inform the public and food service meat purchasers about the proper cooking and handling procedures necessary to reduce the risk of foodborne illness from mechanically tenderized beef products.

SEC Issues JOBS Act Rule Proposal Without Any Investor Protections

The Securities and Exchange Commission (SEC) voted 4-1 last week to propose a rule to permit the mass marketing of private offerings – including private stock offerings and sales of hedge funds and private equity funds – without including any provisions in the proposal to protect against the expected increase in fraud and abusive practices.  Only Commissioner Luis Aguilar voted against the rule proposal, saying he did so “because it presents a framework that is not balanced and fails to address the acknowledged increased vulnerability of investors.”

“The rule proposal is completely unacceptable,” said CFA Director of Investor Protection Barbara Roper.  “While the SEC is required under the JOBS Act to lift the ban on general solicitation in private offerings, it remains responsible for ensuring that investors are protected.  A number of suggestions have been submitted for how to implement the proposal in a way that offers investor protections.  However, none were included in the proposal.  Moreover, because the proposing release doesn’t seek comment on any of these alternatives, it would not be possible to arrive at an even minimally acceptable final rule based on this release.  The only solution is for the Commission to re-propose a rule that incorporates enhanced investor protections.”

CFA and Americans for Financial Reform outlined the basic deficiencies in the rule proposal in a press statement on the agency vote.  Along with the deficiencies in the rule proposal itself, Roper noted significant deficiencies in the economic analysis used to justify the rule.  That economic analysis assumes that additional investor protections are not needed because the “accredited investors” to whom private offerings are sold are able to protect their own interests, even though the Commission is on record elsewhere questioning that basic assumption. (Among the suggestions put forward is revision of the accredited investor definition to incorporate some measure of financial sophistication.) The economic analysis does not even acknowledge the Commission’s past experience with lifting the marketing ban in the 1990s, which resulted in such a dramatic upsurge in fraud that the Commission voted to reinstate the ban.

“For months the Commission has been paralyzed by the onerous requirements for economic analysis it has assumed it must meet to justify rulemaking required by the Dodd-Frank Wall Street Reform and Consumer Protection Act,” Roper said.  “If the SEC is allowed to get away with this double standard, in which rules to strengthen investor and market protection are tied up in red tape but rules to roll back investor protections can be rushed through with no meaningful analysis of their harmful impact on investor protection and market integrity, then the agency might as well shut its doors.  Its credibility as an investor protection agency and a market regulator will be gone.”

Guide to Filing Successful Insurance Claim Could Benefit Holiday Drivers

As Americans return from Labor Day driving excursions, CFA reminded consumers of the availability of its guide containing insiders’ advice on how drivers who get into accidents can file successful auto insurance claims and collect fair settlements. CFA estimates that, during the Labor Day weekend holiday travel period, over 125,000 auto accidents occurred, resulting in 75,000 to 100,000 auto insurance claims filed with the nation’s auto insurance companies. The guide, Navigating the Auto Claims’ Maze: Getting the Settlement You Deserve, was written by Mark Romano, who spent more than 28 years as a top claims’ official and injury evaluation software expert at major, national insurance companies.

“Most people are intimidated when they file an auto insurance claim, perhaps because they have never done it before or worry about getting less than they deserve for personal injuries or damages to their car,” said Mark Romano, CFA’s Director of Insurance Claims’ Projects. “Unfortunately, some insurance companies have begun using practices in recent years – such as computerized systems that don’t adequately consider the individual circumstances of each claim – that can result in an unfairly low settlement for consumers. This guide walks drivers step-by-step through the claims’ process and helps them avoid mistakes and traps that can lead to an unfair settlement.”