Muftic – Lessons in consumer protection
In 1965, Ralph Nader wrote the book “Unsafe at Any Speed” that launched the modern consumer movement and inspired my 40-year-long career in consumer affairs and protection.
In his later years, he may have gone off the political rails, but he had followed the tradition of the muckrakers during the turn of the last century whose expose of unsanitary conditions of the meat packing industry resulted in government regulation and inspection.
Nader revealed the deadly dangers to consumers of the poor design of the Corsair. The result was government supervision of the safety standards of the automobile by a new agency, the National Highway Traffic Safety Administration. Reports of Toyota’s runaway cars reminded me of why NHTSA exists, the shortcomings of the agency, and the yin and yang of consumer protection since 1965.
This past week, Sen. Christopher Dodd passed consumer protection legislation out of the Senate committee. This one was the result of the wreck of the financial sector in the fall of 2008. Among provisions of the proposed legislation is the establishment of a consumer protection agency to protect investors from unfair and fraudulent practices.
Last week was D day for even more consumer protection legislation: The Health Insurance Reform Bill. This legislation would protect consumers from unfair health insurance company practices such as denying coverage to those with pre-existing conditions, dropping insurance while a customer is sick and imposing arbitrary caps on the amount of coverage.
There are lessons to be learned from the last 40-plus years of consumer protection.
Lesson number one: Not every practice harmful to consumers has been made illegal. It may be immoral or unethical, but buyer beware is still the best rule . However, buyers cannot always be knowledgeable enough to protect themselves because so much of commerce is invisible and unknown to all but the experts. Obscure lawyer language, new internet schemes, technology and trickily worded advertising make it very difficult. Who knew about Chinese drywall or asbestos insulation until the side effects became obvious? Did you read and understand the fine print in your health insurance policy or that credit agreement you signed? (Congress just passed legislation to make credit contracts legible and to stop certain egregious credit industry practices) .
Lesson number two: Even if there is a law against practices harmful to consumers or an agency regulating safety, it does not mean consumers are protected. How did the Toyota’s acceleration problem escape NHTSA’s regulators? You got sick from the veggie you ate? Wasn’t the FDA there to keep salmonella from tainting it? How were unsafe child cars seats allowed for so long? How did that toy I bought for my grandchild turn out to be toxic? Laws mean nothing unless the agency enforcing them is independent of the industry they regulate, is properly funded, and is given the wherewithal to carry out their responsibilities.
The Toyota mess is a case in point. While NHTSA is an independent agency, its staff is full of former auto industry personnel and it has no ability to test for the new electronic systems that may be the culprit in the acceleration problem. It must rely on the manufacturer to tell them if there is a problem and to provide the test. That is consumer protection by the fox guarding the hen house door.
The Food and Drug Administration is so underfunded and under staffed that we get warnings well after many have gotten sick. Manufacturers themselves are supposed to report their own failures to the agencies because there are not enough funds for government to hire sufficient numbers of inspectors. Until recently, the US Consumer Product Safety Administration’s laboratories have been smaller than those owned by the magazine Consumer Reports.
Why? Consumer protection depends upon who controls Congress or the White House since so much of the staffing and directors are administration appointees and subject to the policies of the President in power at the time and consumer protection is rarely a priority in tight budget years. When Ronald Reagan took government off the backs of business, he did great damage to consumer protection, and it has never recovered. Under both Democratic and Republican administrations, even though plenty of laws were on the books to protect investors from the likes of Bernie Madoff, attention to enforcement was intentionally neglected in the name of small government and the free market system.
The Dodd proposal for investor protection buries the agency in the Federal Reserve where its independence and power may be under the thumb of those friendly to the industry. We need to monitor the progress of this legislation very closely.
Felicia Muftic is author of the Colorado Consumer Handbook and a career as a regulator, enforcer, educator and advocate on behalf of consumers. See http://www.mufticforum.com for more about her background.
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