A 2009 Consumer Review, New Laws Going into Effect, and the Challenge Ahead
by Zack Kaldveer, Consumer Federation of California, California Progress Report
Every year the Consumer Federation of California monitors dozens of consumer rights related bills – supporting legislation that protects the public interest and opposing corporate attempts to maximize profit at the consumer’s expense. Each year, many of these bills are "killed" in the legislature while many others reach the Governor’s desk to either be signed into law or vetoed.
Some of the most important consumer protection laws – which CFC actively supported – going into effect on January 1st, 2010, include:
AB 260 (Lieu) will help rein in mortgage brokers by restricting subprime option adjustable rate mortgages, prohibiting steering of borrowers into loan products that cost more than another product that they qualify for, and explicitly creating a fiduciary duty on the part of brokers that calls for them to put their borrowers’ economic interests above their own.
As with so many bills in Sacramento, this legislation was steadily weakened as it made its way through the minefield that is the State Senate and Assembly. Particularly frustrating was the bill’s failure to provide victims with the right to sue, and the likewise opportunity to be vindicated in a court of law.
CFC is always concerned, and even skeptical of precedents that establish consumer protection rights without the necessary enforcement mechanisms. In the end though, while this bill may lack the kind of regulatory teeth it should, and could have been far more useful if enacted two or three years ago, this will alleviate some of the most nightmarish aspects of our lending system for consumers.
AB 1094 (Conway) will require businesses to dispose of documents containing personal identifying information in a manner to protect the privacy of individuals. Businesses often throw out documents without shredding or otherwise protecting the privacy of customers even if these records contain personal information of its employees such as social security numbers.
AB 1094 will address this problem by requiring a business to treat abandoned records containing employee information with as much care as those records of consumers. An employer would have to ensure that all personal information is made unreadable before disposal.
The bill also creates incentives for entities such as storage facilities to also dispose of records containing personal information in a manner that is designed to protect a person’s privacy.
SB 95 (Corbett) will make it more difficult for auto dealers with shaky finances to sell cars by boosting the bond amount they’d have to pay to operate, and requiring them to pay off liens on traded-in used cars before reselling them. Often dealers facing bankruptcy fail to pay the balance back to the lender on traded-in vehicles in a timely fashion – resulting in a default on a loan on a car the consumer no longer owns and the subsequent negative damage that causes to their credit scores.
While it is unfortunate that so many dealers are going out of business, that is the reality we face. The challenge we have is to limit the damage and restore consumers’ confidence.
Other Consumer Protection Laws Going Into Late 2010, Early 2011
There of course were some other bright spots found in laws signed that won’t go into effect yet, but will be of benefit to the consumer come late 2010, and early 2011. SB 340 (Yee) will stop false advertising of "free samples" that consumers sign up for, only to find that they were tricked into a renewing subscription that shows up each month on their credit card bill.
One aspect of the mortgage crisis that has garnered little attention from the press or elected officials is the plight of tenants – who through no fault of their own – are being abruptly displaced from their units and even having their water shut off because the financially troubled owner has not paid the bill.
SB 120 (Lowenthal) will help clarify that banks are responsible for returning security deposits. This is especially important to protect tenants who might otherwise be unable to recover their deposits after the lender takes over the property from a defaulting landlord. The bill also strengthens protections for tenants facing utility shutoffs.
And AB 1160 (Fong) will help protect limited English speaking consumers from "bait and switch" tactics by requiring home loan documents be printed in the same language used to sell the loan. That way, the consumer can make sure that what they were told is the same as what they are signing.
2009: A Year to Forget for the Consumer
These were the bright spots in an otherwise pretty dismal year for consumers. The most far reaching, pro-consumer legislation failed to even pass the legislature. Of the 14 bills we identified as most important that did reach the Governor’s desk, he took the side of the consumer in only six instances.
As perhaps should be expected, the Governor consistently sided with big business interests and against consumers ‘ turning a deaf ear to the public interest on key food safety, automobile insurance and financial privacy proposals.
Notable Legislative Disappointments
Among the years deepest disappointments included legislation that CFC co-sponsored (SB 772 – Leno) that would change a uniquely misguided California regulation that has loaded California furniture with highly toxic brominated chemicals. These chemicals degrade into the dust in household air we breathe. As a result, Californians’ blood streams have among the world’s highest concentration of these toxic chemicals.
These chemicals are especially harmful for young children, and are linked to reproductive harm, impaired brain development and cancer. Despite our efforts, and an impressive coalition that includes scientists, environmental groups and public health advocates, chemical industry lobbyists have succeeded in bottling up this bill – for now.
The bill withstood six separate attempts by chemical lobbyists to kill it in 2009, but a renewed push is underway to move this important toxics bill through its final committee and floor vote in 2010.
SB 797 (Pavley) would have addressed the growing evidence that bisphenol A (BPA) should no longer be contained in products that we use to eat or drink. This is especially true where children are concerned because of the potential for greater negative health impacts.
In late 2008 the NIH’s National Toxicology Program declared its concern about the effects of low levels of BPAs on brain development, behavior, and the male reproductive systems of infants and children. Also late last year, the FDA’s Advisory Science Board found that the FDA’s safety assessment for BPA was seriously flawed.
The bill – defeated in the Assembly by a vote of 35 to 32 (bill needed 41 votes to pass) – would have removed this toxic chemical from baby bottles, sippy cups, and infant formula cans, specifically those designed for children three years or younger.
We also sponsored (AB 1512 ‘ Lieu), which would have banned retailers from selling expired infant formula, baby food and over the counter medications. The expiration date is the manufacturer’s guarantee that the food will be nutritious or the medicine safe and effective until that date.
In an undercover shopping operation, we found 40% of the California outlets that we visited of the nation’s third largest retail pharmacy chain had expired drugs and baby food for sale. We displayed these expired products that we had purchased at an October 2009 press conference.
Despite building a coalition that included pediatricians, senior citizen groups, food safety experts, nurses and children’s advocates, the governor listened to grocery and pharmacy chain lobbyists and vetoed our bill.
AB 943 (Mendoza), another bill vetoed by the Governor, would have prohibited a prospective employer from using consumer credit reports in the hiring process (unless directly applicable to the job). An employer should not have any right to obtain confidential information that is not germane to a prospective employee’s job.
Credit reports do not have predictive value in determining a worker’s ability to perform job duties, but a bad credit report might unfairly influence a hiring employer’s attitude toward a job applicant.
Democracy in Crisis
The year’s legislative disappointments are too long to list here today, but looking back at 2009 what remains abundantly clear is that the inherently un-democratic and unsustainable political equation in Sacramento has only worsened. The fact is that each time CFC campaigns for better consumer laws, an armada of highly paid corporate lobbyists stand ready with checkbooks open to lavish contributions on politicians of both parties.
The reality that money still talks louder than the public interest in Sacramento ‘ irregardless of the facts or the effect a given law would actually have on people – demands a response that will strike at the heart of our current ‘corporations first’ paradigm.
Public Financing of Elections’And a Re-Doubled Effort from Progressives
In 2008, California made a breakthrough on "clean election" public financing with the passage of AB 583 (Hancock) ‘ The California Fair Elections Act. The notion is a simple one: elected officials should be accountable to the voters, not donors and special interests.
Authored by Sen. Loni Hancock, D-Berkeley, and surprising everyone, signed by Gov. Arnold Schwarzenegger, the measure asks voters on the June 2010 ballot to establish a voluntary pilot project for California’s Secretary of State races in 2014 and 2018, allowing candidates to qualify for public financing if they agree to strict spending prohibitions and show they have a broad base of support by raising a large number of $5 contributions from Californians.
A victory would represent more than just an opportunity to protect the integrity of our elections; it would also demonstrate to voters that public financing is a model system for all elected offices, as it reduces the influence of corporate lobbyists and campaign contributions, allows candidates to spend more time on issues and less time fundraising, increases voters’ confidence in government, and gives good people with new ideas a chance to run and win because there’s a level playing field.
Better yet, the pilot program would be funded primarily by fees on lobbyists, lobbying firms and lobbyist employers, rather than the public that keeps getting fleeced by them in Sacramento.
California voters understand it’s no coincidence that the industries that happen to be the largest donors to campaign committees controlled by elected officials and candidates for office also happen to be those that win the overwhelming majority of battles with consumers, no matter how common sense the law or how overwhelming the public support.
In one of the most egregious examples of Sacramento’s pay-to-play rules, the governor stymied his own proposal for an oil extraction tax – a proposal widely supported by voters – after Chevron Corp. donated $500,000 to his special election committee.
Examples such as these beg the question: What kinds of publicly supported consumer protections could be enacted if the more than $120 million given to California legislative candidates in the 2008 election cycle was eliminated? Instead, we’re going backwards, as new data shows that during the first nine months of the year, interest groups spent $206 million lobbying state government.
The California Fair Elections Act is based on proven and successful election reforms in seven states and two cities. Nearly 400 candidates were elected using only fair elections funding in their 2008 campaigns, and the programs enjoy popular support across party lines. Elections in those states are far more competitive – unlike California, where the median winning candidate outspent the median losing candidate in 2008 by a startling 28-1.
This is the kind of structural change voters want and the reform California so badly needs.
2010 and Beyond
Our challenge this coming year will be no less daunting than the one before. 2010 will be difficult for consumers struggling with skyrocketing credit card interest rates, tuition hikes for college students, high unemployment, and inadequate health care "reform" proposals.
In addition to reforming our pay-to-play campaign finance system, we progressives must redouble our efforts if we expect to pose any kind of challenge to the moneyed interests that dominate the state capitol. Our winning equation: start putting the needs of people above those of the corporation and its undeserved "right" to maximize profit at the public’s expense.
Here’s a toast to the coming fight!