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Consumer/Investor Protection


ESG Retirement Plan Fiduciary Rule

Congress passed legislation (March 2) to force nullification of a Labor Department rule finalized in November pertaining to the use of environmental, social, and governance (ESG) factors in retirement plan investing. The Senate vote was 50-46 and the House vote was 216-204. 

President Biden, however, vetoed the legislation (March 20). The House failed to overcome the veto with a vote of 219 to 200, with 15 members of the House not voting. A two-thirds majority was needed.

Labor's rule enables fiduciaries to consider ESG factors when making investment decisions. This is a significant shift from Trump Administration requirements, when fiduciaries were permitted to invest only based on financial considerations.

The rule also clarifies that the economic effects of ESG factors can be used in risk/return analysis if sponsors "reasonably" determine that those impacts are relevant. They may also consider participant investment preferences when developing a set of prudent investment options for participant-directed plans.

There was concern in the retirement planning community with language in the proposed version of the rule suggesting that ESG considerations would be required in retirement planning, but problematic language was removed in the final version of the rule.

In addition, a lawsuit was filed (February 1) against the rule. The lawsuit, which includes 25 state Attorneys General, argues that the rule undermines key protections for retirement savings and oversteps the department’s statutory authority under the 1974 Employee Retirement Income Security Act.

(updated: 3-31-23)


Junk Fees Plan & Actions

President Biden, in his State of the Union Address (February 7), reiterated his call for Congress to enact legislation to address consumer “junk fees,” fees that the Administration believes are designed either to confuse or deceive consumers, or to take advantage of situational market power.

Calling the proposal a “Junk Fees Prevention Act,” the President is seeking Congressional legislative action to ban resort and airline family seating fees, eliminate early termination fees for internet and phone services, and “crack down” on excessive fees and other practices that drive up ticket prices (which presumably targets perceived anti-competitive/antitrust practices of Ticketmaster.)

Earlier in February, the Consumer Financial Protection Bureau (CFPB) announced (February 1) a rule intended to curb credit card late fees. Among other things, the CFPB rule establishes that a late fee of just $8 is sufficient for most issuers to cover collection costs incurred as a result of late payments, and therefore sets “immunity” (where the fee  generally faces no regulatory scrutiny) at that amount. Companies would be able to charge above the immunity provision so long as they could prove the higher fee is necessary to cover incurred collection costs. Late fee costs/fees would be capped at 25% of the required minimum payment. Current rules permit a card issuer to potentially charge a late fee that is 100% of the minimum payment owed by the cardholder.

The Department of Transportation (DOT) previously issued a proposed rule (December) requiring airlines and online search sites to disclose up front any fees to choose seats including to sit next to one’s child, for baggage, and for changes or cancellations.

While CFPB and DOT rulemaking can proceed without legislative actions, there is no indication at this time that Congres will consider measures to further address the junk fees.

(posted: 2-8-23)


Magnet Standards

The Consumer Product Safety Commission (CPSC) finalized a rule (September 7) a new safety standard for high-powered magnets. The standard requires loose or separable magnets in certain magnet products to be either too large to swallow, or weak enough to reduce the risk of internal injuries when swallowed.

The new rule applies to consumer products designed, marketed, or intended to be used for entertainment, jewelry (including children’s jewelry), mental stimulation, stress relief, or a combination of these purposes, and that contains one or more loose or separable magnets. The rule does not apply to products sold and/or distributed solely to school educators, researchers, professionals, and/or commercial or industrial users exclusively for educational, research, professional, commercial, and/or industrial purposes.

In addition, the standard does not apply to toys for children under 14 years old, as a toy standards for magnets are included within a separate rule.

(updated: 9-19-22)


Auto Warranty Robocalls

The Federal Communications Commission (FCC) announced (July 21st) that it has ordered phone companies to stop carrying traffic regarding a known robocall scam marketing auto warranties. All U.S. voice service providers must now take all necessary steps to avoid carrying this robocall traffic.

The FCC says that auto warranty scam robocalls resulted in more consumer complaints to the FCC than any other unwanted call category each of the last two years. These usually claim an insurance or warranty is about to expire, and they often use real consumer information to appear legitimate. These calls may be seeking consumers’ personal or financial information in order to defraud them, hoping to initiate a payment, and/or garnering information about active phones.

(updated: 7-22-22)


Greenwashing Rules

The Securities and Exchange Commission is proposing new rules intended to address the practice of “greenwashing,” which is when an organization spends more time and money on marketing itself as environmentally friendly than on actually minimizing its environmental impact.

From the context of the investing community, the SEC is concerned about companies selling investments under the environmental, social, and governance (ESG) label without investors having the ability to know if the investments actually advance ESG goals.

Among other things, the proposed SEC rules would require funds and advisers to provide more specific disclosures in fund prospectuses, annual reports, and adviser brochures based on the ESG strategies they pursue. Funds focused on the consideration of environmental factors generally would be required to disclose the greenhouse gas emissions associated with their portfolio investments. Funds claiming to achieve a specific ESG impact would be required to describe the specific impact(s) they seek to achieve and summarize their progress on achieving those impacts.

As reported by The Hill (November 9) a panel of experts produced a report for the United Nations in advance of COP27 recommending international standards to prevent greenwashing. In addition, a recent Accenture report estimates that 93% of companies around the world are expected to miss net-zero emissions targets, though just 34% of Accenture2000 companies actually have such targets in the first place (these are companies that Accenture determined are the top 2,000 public and private companies in the world by revenue.)

(updated: 11-9-22)


Corporate Climate Change Disclosures

The Securities and Exchange Commission announced (March 21, 2022) the issuance of a proposed rule for public companies regarding the disclosure of climate-related risks that could impact their business, the results of operations, and the company’s financial condition.

Specifically, the proposed rule requires the disclosure of information about:

  • Governance of climate-related risks and relevant risk management processes.

  • How climate-related risks have had, or are likely to have, a material impact on its business and consolidated financial statements.

  • How identified climate-related risks have affected, or are likely to affect, strategy, the company’s business model and outlook.

  • The impact of climate-related events and transition activities on the line items of  consolidated financial statements, as well as on the financial estimates and assumptions used in the financial statements.

  • Direct greenhouse gas (GHG) emissions (i.e., “Scope 1”) and indirect emissions (i.e., “Scope 2”) from purchased electricity or other forms of energy.

  • GHG emissions from upstream and downstream activities (i.e., “Scope 3” emissions) in its value chain if material or if the registrant has set a GHG emissions target or goal that includes emissions.

The SEC says that proposals on GHS emissions disclosures are intended “to provide investors with decision-useful information to assess exposure to, and management of, climate-related risks, and in particular transition risks.” And, that these are similar to those that many companies already provide based on broadly accepted disclosure frameworks, such as the Task Force on Climate-Related Financial Disclosures and the Greenhouse Gas Protocol.

The requirements under the proposed rule would be phased in over the next several years, with the first reporting starting in 2024 covering 2023 results. Increases of assurance from “limited,” to “reasonable,” would also be phased in where a large public company would need to provide at least limited assurance for 2024 results and reasonable assurance for 2028 results.

(updated: 3-22-22)


Household Debt Growing at a Record Pace

The New York Federal Reserve (NYFED) released its quarterly report (Q4 of 2021) on household debt. The report found a total household debt increase of $1 trillion during 2021, $1.4 trillion higher than at the end of 2019. In nominal terms, this is the largest annual debt increase since 2007. The increase was driven primarily by mortgage debt, which rose by $887 billion, followed by auto debt which rose by $84 billion.

While mortgage debt is growing, the good news is that the level of mortgage balances 90+ days past due is at 0.5%, a historic low. Perhaps on the downside, credit card balances increased by $52 billion during Q4 of FY 2021, representing the largest quarterly increase observed in the 22-year history of the data. Even so, total credit card balances remain $71 billion lower than at the end of 2019.

(updated: 3-22-22)


Buy Now/Pay Later Lenders

The Consumer Financial Protection Bureau (CFPB) announced that it has begun an inquiry into companies offering "buy now/pay later" credit lines. Buy now, pay later credit is a type of deferred payment option that generally allows a consumer to split a purchase into smaller installments, typically four or less, often with a down payment of 25 percent due at checkout. CFPB is seeking the information from five companies in this space including PayPal, Affirm, Afterpay, Klarna, and Zip. CFPB says it is concerned "about accumulating debt, regulatory arbitrage, and data harvesting in a consumer credit market already quickly changing with technology." The agency says that it expects to publish insights and findings derived from this inquiry, though no timetable is provided.

(updated: 2-2-22)


Addressing Shell Companies

The Financial Crimes Enforcement Network (FinCEN) announced (December 2021) that it has issued a Notice of Proposed Rulemaking (NPRM) to implement certain "beneficial ownership" ownership reporting requirements. A beneficial owner is a person who enjoys the benefits of ownership even though the title to some form of property is in another name. The NPRM describes who is required to file a report, the information that must be provided, and when the reporting is due. FinCEN believes that this type reporting will increase information for law enforcement and financial institutions to "diminish the ability of malign actors to hid, move, and enjoy the proceeds of illicit activities." This action is a key component of the Biden Administration's U.S. Strategy on Countering Corruption.

(updated: 2-2-22)


Special Purpose Acquisition Companies (SPAC) Disclosures

In draft recommendations (August 2021), the Securities and Exchange Commission Advisory Committee recommended certain disclosure requirements that should be implmented for SPACs. The disclosure requirements, among other things relate to the SPAC's sponsor, to include potential conflicts of interest; SPAC processes including the basis and processes behind company acquisitions, risk, and ground rules; and the economics of participation in the SPAC for a retail investor versus the sponsors and related persons. SEC Chairman Gary Gensler called on the SEC staff to develop new proposed rules by spring 2022 and expressed support for additional avenues for private litigation against SPAC “gatekeepers."

(updated: 2-2-22)


Connected Policies


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Hearing Aids Rule
Hearing Aids Rule

This Final Rule was published (August 18th) by the FDA permits over-the-counter sales of hearing aids that are approved for use prior to October 17, 2022 (also the effective date of the rule), and streamlines the regulatory regime of future hearing aids.

Big Tech Information Collection / Competition EO
Big Tech Information Collection / Competition EO

Executive Order (14036), the Biden Administration EO on "Competition" includes a provision that "encourages" the FTC to establish rules on surveillance and the accumulation of personal and other related data.

Status: this EO was published on July 14, 2021.

Beneficial Ownership Rule
Beneficial Ownership Rule

This is a proposed rule of the Financial Crimes Enforcement Network (FinCEN) of the U.S. Treasury Department that is intended to help address money laundering and other crimes through anonymously-owned businesses (a.k.a, "shell companies"). The rule requires entities to report so-called "beneficial ownership" information to FinCEN consistent with the Corporate Transparency Act.

Status: this proposed rule was published in the Federal Register on December 8, 2021.


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