Consumer Protection

Bank Robbery

For the past few years, it was easy to get the impression that Wells Fargo was an outlier when it came to the mistreatment of customers. That bank paid billions in penalties for the creation of bogus fee-generating accounts and the application of various other types of illegitimate charges.

Now it turns out that Bank of America belongs in the same category. The Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency have just announced that BofA is being fined $150 million for similar unsavory behavior.

CFPB and OCC cite abuses of three main types. First, BofA is said to have engaged in the practice that made Wells Fargo notorious: the illegal enrollment of customers in accounts without their knowledge or consent. In order to do this, BofA improperly accessed consumer credit reports.

Second, BofA deployed what the regulators call a double-dipping scheme to harvest junk fees, which included charging a customer more than once for the same declined transaction. Finally, the bank is accused of luring credit card customers with special offers of cash and points, only to renege on those promises.

Regulators were not the first to bring these swindles to light. For years, BofA was sued repeatedly in class action lawsuits brought on behalf of customers. Just last month, I reported that in a compilation of consumer-related lawsuits dating back to 2000 prepared for inclusion in Violation Tracker, BofA had paid out more in settlements and damages–$3.2 billion—than any other corporation. These payouts came in 29 different class actions, a number also higher than any other company.

It will be interesting to see if the BofA revelations generate as much controversy as did those involving Wells Fargo, which not only faced criminal as well as civil charges but also received the unusual punishment of being barred by the Federal Reserve from growing in size until it improved its compliance record. The Fed also forced out several members of the bank’s board of directors.

The consequences for BofA may be less dire. I fear that these banking abuses may be losing the ability to shock the conscience. There was, for example, little uproar last year when CFPB accused U.S. Bank of engaging in the bogus account scam and fined it $37.5 million.

BofA, for its part, may just brush off the $150 million penalty it is paying to CFPB and OCC. After all, that sum may seem insignificant to a corporation that has accumulated an astounding $87 billion in fines and settlements since 2000. That total is far and away the largest among all corporations. As shown in Violation Tracker, it is more than twice as much as has been paid by second-ranking JPMorgan Chase and it makes Wells Fargo’s $27 billion total seem puny in comparison.

Even if BofA treats this new case as no big deal, the rest of us should not become blasé about the bank’s abysmal record.

Consumer Deception

Large companies like to give the impression they put customer satisfaction above all else. They constantly tout their rankings in surveys such as those conducted by J.D. Power.

Yet it also turns out they are frequently sued by groups of customers for deceptive practices. Over the past two decades, major companies have paid out over $25 billion in damages and settlements in class action and multi-district consumer protection lawsuits filed throughout the United States. Some corporations have been involved in multiple cases, and a few have had total payouts of more than $1 billion.

These findings come from a compilation of consumer protection lawsuits prepared for inclusion in Violation Tracker. Using court records, we have documented more than 600 successful legal actions dating back to the beginning of 2000. These are only cases in which a company was accused of cheating its customers by overcharging for goods and services or engaging in false advertising. This list does not include cases involving issues such as product safety or privacy violations, which were previously added to Violation Tracker. It also does not include cases brought by government agencies, which were also already in the database.

One thing jumps out from the new list of cases: banks, insurance companies and other players in the financial services sector account for a far larger portion of the penalties than any other part of the economy: over $14 billion in 249 cases. This is more than 55 percent of the penalty total and 40 percent of the cases.

Half of Big Finance’s penalty total comes from a handful of companies. Bank of America paid out over $3 billion in 29 cases. JPMorgan Chase racked up $2.3 billion in penalties in 26 cases. Wells Fargo’s penalty total is $1.3 billion from 21 cases. State Farm Insurance ranks next with $669 million from six cases.

Here are just a few of the abuses Bank of America has been accused of committing: imposing excessive overdraft fees on checking accounts; charging military customers interest rates above federally mandated limits; enrolling customers in credit protection plans without their consent; applying late fees on credit card customers who actually paid on time; and forcing home mortgage customers to purchase excessive amounts of flood insurance;

Outside the financial sector, the biggest penalty totals belong to Dominion Energy ($2.5 billion), Western Union ($508 million), Apple Inc. ($462 million), BP ($414 million) and General Motors ($389 million). Apple’s alleged transgressions ranged from distributing iPhone software updates that slowed the device’s performance to the renewal of app subscriptions without customer consent.

While most of the cases on the list involve prices, fees and other monetary practices, about 100 relate to the quality of the goods and services being sold. Over $1 billion has been paid out by companies accused of false or deceptive advertising and marketing. The single biggest penalty of this type is linked to Acer America, which paid an estimated $280 million to resolve allegations that it misled customers about the Windows operating system installed on its laptop computers.

Behr and its parent Masco paid over $100 million to settle claims that they falsely advertised their wood sealants as protecting against mildew damage. Many of the smaller settlements involved allegations that producers of food and personal-care products falsely advertised their products as organic or natural.

While many of the corporate defendants in these cases will insist they settled out of expedience, it seems clear that many large companies have a tendency to engage in dubious practices. If they are truly concerned about customer satisfaction, putting an end to these practices is a good way to begin.

Wells Fargo Pays More for Its Sins

When the Consumer Financial Protection Bureau announced in 2016 that it was fining Wells Fargo $100 million for creating fee-generating customer accounts without permission, bank executives may have thought they could simply pay the penalty and move on.

Instead, Wells has had to contend with a series of regulatory and legal consequences. The latest is a $1 billion settlement the bank has just agreed to pay to resolve a class action lawsuit brought by shareholders accusing it of misrepresenting the progress it had made in improving its internal controls and compliance practices. The deal ranks among the largest securities settlements of all time.

In between the initial CFPB action and the new lawsuit resolution, Wells confronted the following:

In 2018 the Federal Reserve forced out several board members and took the unusual step of barring Wells from growing in size until it improved its compliance. It is telling that the asset cap is still in place.
That same year, Wells paid $575 million to settle litigation over the bogus accounts brought by state attorneys general.
In 2020 the U.S. Justice Department announced that Wells would pay $3 billion to resolve potential criminal and civil liability, but the bank was allowed to enter into a deferred prosecution agreement rather than having to plead guilty. The Trump DOJ also declined to bring charges against any individual executives.

While the monetary penalties paid by Wells are not trivial, they are far from punishing for an institution with nearly $2 trillion in assets and $13 billion in annual profits. They also do not seem to have had much of a deterrent effect.

In 2022 the CFPB took new action against the bank, compelling it to pay a $1.7 billion penalty and provide $2 billion in redress to customers to resolve allegations that it engaged in a variety of new misconduct. Wells was found to have repeatedly misapplied loan payments, wrongfully foreclosed on homes, improperly repossessed vehicles, and incorrectly assessed interest and fees, including surprise overdraft charges. Some 16 million customer accounts were said to have been cheated one way or another.

That 2020 deferred prosecution agreement means that Wells has in effect been on probation. Why, in light of the CFPB case, has the bank not been found to be in violation of that agreement? Is it simply because Wells is now focusing its alleged misconduct on real accounts rather than the fake ones it had been creating? That would be like letting a mugger off the hook for using a knife rather than gun.

Not only should Wells have its probation revoked, but it should undergo something analogous to what the FDIC does when a bank is in financial disarray. Federal regulators should find Wells to be in ethical disarray and take it over while fundamental changes are made to bring it back to some semblance of compliance.

The alternative is letting a rogue institution continue to prey on its customers in any way it can.

Rogue Rescuer

Once again federal regulators have turned to JPMorgan Chase to rescue a failing smaller bank. For the moment, the customers of First Republic Bank may be pleased that their accounts are being taken over by a larger and more stable institution.

Yet they may not be quite so happy to learn that their savior has a much worse record when it comes to compliance with laws and regulations. As shown in Violation Tracker, First Republic was named in only a handful of enforcement actions and paid penalties of less than $4 million. JPMorgan, on the other hand, has 236 Violation Tracker entries and has paid over $36 billion in fines and settlements.

The contrast with First Republic is partly a matter of size. JPM’s vast operations give it many more opportunities to get into trouble. Those operations have included the marketing of residential mortgage-backed securities which turned out to be toxic and which resulted in legal actions that cost the company billions. Some of these entanglements were inherited by JPM when it took over Bear Stearns and Washington Mutual in 2008.

Yet JPM has also had problems when it comes to the treatment of its own customers in the course of routine banking functions. This has become clear to me in the course of assembling data for the latest category of class action litigation to be added to Violation Tracker: consumer protection lawsuits.

The collection is not yet done, but I have already identified more than a dozen settlements in which JPM has paid out hundreds of millions of dollars. Among these are the following:

* In 2012 JPM agreed to pay $100 million to settle litigation alleging it improperly raised interest rates on loan balances transferred to credit cards.

* In 2020 JPM agreed to pay more than $60 million to settle litigation alleging it overcharged customers serving in the military, in violation of the Servicemembers Civil Relief Act.

* In 2014 JPM agreed to pay $300 million to settle litigation alleging it pushed mortgage borrowers into force-placed insurance coverage whose cost was inflated due to kickbacks.

* In 2012 JPM agreed to pay $110 million to settle litigation concerning improper overdraft fees resulting from the way that debit-card transactions were processed.

* In 2011 JPM agreed to pay up to $7.8 million to settle litigation alleging it charged credit card customers hidden fees after deceptively marketing special deals on balance transfers and short-term check loans.

* In 2014 JPM and several subsidiaries agreed to pay more than $18 million to settle litigation alleging the use of misleading loan documents to steer borrowers to adjustable-rate mortgages.

* In 2018 JPM agreed to pay over $11 million to settle litigation alleging it improperly charged interest on Federal Housing Administration-insured mortgages that were already paid off.

These were all cases brought by private plaintiffs. JPM also paid hundreds of millions more in consumer protection fines and settlements to federal and state agencies. Among these was a 2013 case brought by the Consumer Financial Protection Bureau in which JPM paid a $20 million penalty to the agency and over $300 million in refunds to two million customers for what were said to be illegal credit card practices.

There is widespread concern that rescue deals are allowing a too-big-to-fail bank like JPM to grow even larger. Yet we should also worry that more and more of the population is being forced to do business with megabanks that seem to regard themselves as too big to have to comply with laws that protect consumers.

Policing the Grid

State public utility commissions are most frequently in the news in connection with their role in setting rates for electricity, gas and other regulated services. Yet they have another responsibility: protecting the interests of utility customers by monitoring the safety and consumer protection practices of the corporations under their jurisdiction.

As part of the latest expansion of Violation Tracker, the Corporate Research Project has collected data on more than 2,000 enforcement actions brought by PUCs around the country over the past two decades in which a penalty of at least $5,000 was imposed. Policing the Grid, a new report authored by freelancer Adam Warner and myself, analyzes what we discovered in those cases.

We found that a total of $13 billion in fines and settlements have been collected since 2000 by the PUCs and by state attorneys general in related cases brought against regulated companies. This amount is not evenly distributed among the states.

California has by far the latest share, $8 billion, or well over half of the national total. This is largely the result of cases brought against Pacific Gas & Electric, which has been hit with $5 billion in penalties, primarily for the role its poor power-line maintenance has played in causing devastating wildfires in the state. Southern California Edison has paid $842 million in wildfire cases as well as for other offenses such as submitting falsified data to the California Public Utilities Commission.

New York ranks second in penalties, with a total of $896 million. More than half of that figure is linked to Consolidated Edison, which has paid $528 million for offenses such as failing to prepare adequately for severe storms.

Five other states—Missouri, Massachusetts, West Virginia, Arizona and Illinois—have penalty totals in excess of $100 million. Texas has the largest number of cases, at 365, but it has collected only $67 million. Another $2.9 billion in penalties resulted from joint actions brought by groups of state attorneys general.

Other states have done much less in the way of utility safety and consumer protection enforcement. Twenty-nine states collected less than $10 million in penalties since 2000, including four– Alabama, Alaska, South Carolina and Wyoming—for which no cases with penalties of at least $5,000 could be found.

Some large corporations paid penalties in multiple states. For example, power generator NRG Energy, which ranks third among the parent companies with $1.2 billion in fines and settlements, faced cases in five states along with a multistate attorneys general lawsuit. AT&T has paid penalties in 20 states and the District of Columbia, along with five multistate AG cases.

The Spanish energy company Iberdrola has, through its U.S. subsidiaries in the Northeast, faced the most enforcement actions (96), but most of the fines were relatively modest in size, keeping its penalty total to $27 million.

With the new utility cases, Violation Tracker now contains 512,000 entries from more than 400 federal, state and local agencies with total penalties of $786 billion.

SCOTUS Boosts Crooked Corporations

The U.S. Supreme Court has given a boost to crooked corporations in a ruling that restricts the powers of one of the federal government’s oldest regulatory agencies, the Federal Trade Commission, which has been operating since 1914. The Justices ruled unanimously that the FTC does not have the authority to go to court and win redress for unfair and deceptive business conduct. It must first go through a cumbersome administrative process.

Since the 1970s the FTC has been obtaining court injunctions against rogue companies and compelling them to provide monetary relief to consumers. In Violation Tracker we document nearly 500 cases brought by the agency since 2000, with total fines and payouts of more than $14 billion. More than a dozen of those cost companies more than $100 million.

Just the other day, the FTC announced it was sending more than $59 million collected on behalf of consumers who were victims of an allegedly deceptive scheme by Reckitt Benckiser Group and Indivior Inc. to thwart lower-priced generic competition with the branded drug Suboxone. Many of these enforcement actions may no longer be possible.

The high court ruling may prompt Congress to revise the law to allow the FTC to go back to using court injunctions. Yet for now the regulatory landscape is in flux. Corporations embroiled in disputes with the FTC, such as Facebook, are claiming that the agency lacks the authority to proceed. Facebook is still smarting from a previous FTC case from 2019 in which it paid a $5 billion penalty for privacy violations.

Given the similarities between the FTC Act and the law governing the Food and Drug Administration, there may be challenges to the FDA’s use of injunctions. The ruling is even being cited in disputes not involving federal agencies. A group of generic drug manufacturers being sued by state attorneys general for price-fixing is claiming that the ruling should also bar actions seeking injunctive relief under Section 16 of the Clayton Act.

On the other hand, there are indications that the FTC may choose to partner with state AGs on consumer protection actions in areas other than antitrust, relying on their power to seek relief from corporations over issues such as unlawful debt collection and privacy violations.

Legal observers also believe that the Consumer Financial Protection Bureau may help fill the gap created by SCOTUS, as least in financial sector cases, given that its authorizing legislation, the Dodd-Frank Act, explicitly allows it to sue for restitution and other relief without first going through lengthy administrative proceedings. It can also do so against a broader range of misconduct.

Nonetheless, it is disappointing to see the FTC and possibly other agencies lose the ability to bring prompt action against corporate miscreants. Business misconduct shows no signs of abating, so regulators need as many tools as possible to end the abuses and force corporations to compensate those who have been adversely affected.

Regulation is Not Dead Yet

Donald Trump tries to give the impression that his crusade against business regulation is moving ahead rapidly. While several rules have been rescinded and more are threatened, it turns out that for now the enforcement systems at most agencies are functioning normally.

In preparing a forthcoming update of the Violation Tracker database, I’ve found that since the inauguration federal regulatory agencies have announced more than 160 case resolutions with fines and settlements totaling more than $1.6 billion. This two-month dollar amount does not compare to the $20 billion collected by the Obama Administration during its final tens weeks in office. Yet it does show that the so-called administrative state is not dead yet.

A large portion of the Trump collections come from enforcement actions against a single company that are in line with the new president’s views. The Chinese telecommunications company ZTE was penalized $1.2 billion for violating economic sanctions against Iran and North Korea by supplying them with prohibited items. The Commerce Department’s Bureau of Industry and Security imposed a $661 million civil penalty and the Treasury’s Office of Foreign Assets Control collected another $106 million while the Justice Department got ZTE to plead guilty and pay $430 million in fines and criminal forfeiture.

The remaining $422 million was collected in cases brought by 21 different agencies and four divisions of the Justice Department. Among the larger actions:

The Commodity Futures Trading Commission reached an $85 million settlement with the Royal Bank of Scotland to resolve allegations that it attempted to manipulate interest-rate benchmarks.
The Federal Energy Regulatory Commission reached an $81 million settlement with GDF Suez to resolve allegations that it manipulated energy markets.
TeamHealth Holdings agreed to pay $60 million to settle Justice Department allegations that its subsidiary IPC Healthcare Inc. violated the False Claims Act by overbilling Medicare, Medicaid, the Defense Health Agency and the Federal Employees Health Benefits Program.
Offshore oil driller Wood Group PSN was ordered to pay a total of $9.5 million to resolve criminal charges that it falsely reported over several years that its personnel had performed safety inspections on offshore facilities and that it negligently discharged oil into the Gulf of Mexico.
Keurig Green Mountain agreed to pay $5.8 million to settle allegations by the Consumer Product Safety Commission that it failed to report a defect in its Mini Plus Brewing System that had caused scores of serious burn injuries.
The Consumer Financial Protection Bureau imposed a $3 million penalty on Experian for deceptively marketing credit scores.

The list also includes: 14 settlements with the Equal Employment Opportunity Commission by employers in cases involving gender, pregnancy and disability discrimination; six cases in which private sponsors of Medicare Advantage plans violated consumer protection rules; two cases in which companies were charged with violating the Controlled Substances Act by failing to properly monitor opioid prescriptions; and much more.

On the other hand, the situation remains puzzling at the Labor Department, where agencies such as OSHA have not announced a single enforcement action since Trump took office. [UPDATE: It’s been pointed out to me that despite the absence of OSHA press releases the agency is still posting enforcement actions on its website on this page, which shows numerous cases since Inauguration Day.]

It is likely that most of the 160 cases were initiated while the Obama Administration was in office, but it is heartening that they have gotten resolved under the new management. The career officials in the various agencies should be commended for continuing to do their job in difficult circumstances. Let’s hope they can convince their new bosses that there is a value to protecting consumers, workers and the public against corporate misconduct in its many forms.

Fighting for the Right to Be a Weak Regulator

The conservatives fulminating about the Consumer Financial Protection Bureau and President Obama’s recess appointment of Richard Cordray to head it may feel outmaneuvered at the moment. But if history is any guide, the bureau will not be too big a threat to the financial powers that be.

The federal government is filled with regulatory agencies whose main mission seems to be to protect the interests of the largest companies they are charged with regulating. There’s always the possibility that the CFPB will be the exception to the rule of regulatory capture, but the fledgling entity would have to clear some high hurdles.

Cordray and his colleagues would do well to study the track record of the federal agency that has supposedly served as a financial watchdog for the past seven decades: the U.S. Securities and Exchange Commission. The CFPB is getting off the ground just as the SEC is embroiled in a dispute that reveals its cozy relationship with the big banks and its feckless approach to enforcement.

Back in October, as part of its belated and half-hearted response to the chicanery that led to the financial meltdown of 2008, the SEC announced that giant Citigroup had agreed to pay $285 million to settle charges that it had misled investors about a $1 billion issuance of housing-related collateralized debt obligations that Citi knew to be of dubious value and had bet against with its own money. As is typical in such SEC cases, Citi neither admitted nor denied doing any wrong.

That would have been the end of a typical case if the judge overseeing the matter, Jed Rakoff the Southern District of New York, had not done something remarkable. He declined to rubberstamp the settlement and raised a host of questions about the size of the settlement—which was well below the estimated $700 million lost by investors—and the failure of the SEC to get Citi to admit guilt.

Rakoff (illustration), who had questioned settlements in several other SEC cases, rejected the deal the agency made with Citi and ordered a trial on the matter. In his November 28 order (which I retrieved, along with other case documents, from the PACER subscription database), Judge Rakoff called the amount of the settlement “pocket change to any entity as large as Citigroup” and said it would have little deterrent effect. He also pointed out that the SEC’s decision to charge Citi with mere negligence and allow it to avoid admitting guilt “deals a double blow to any assistance the defrauded investors might seek to derive from the S.E.C. litigation in attempting to recoup their losses through private litigation, since private investors not only cannot bring securities claims based on negligence.” In other words, Rakoff was accusing the agency of protecting the interests of the big bank.

Calling the deal “neither reasonable, nor fair, nor adequate, nor in the public interest,” Rakoff thundered:

An application of judicial power that does not rest on facts is worse than mindless, it is inherently dangerous. The injunctive power of the judiciary is not a free roving remedy to be invoked at the whim of a regulatory agency, even with the consent of the regulated. If its deployment does not rest on facts – cold, hard solid facts, established by admissions or by trials -it serves no lawful or moral purpose and is simply an engine of oppression.

Finally, in any case like this that touches on the transparency of financial markets whose gyrations have so depressed our economy and debilitated our lives, there is an overriding public interest in knowing the truth. In much of the world, propaganda reigns, and truth is confined to secretive, fearful whispers. Even in our nation, apologists for suppressing or obscuring the truth may always be found. But the S.E.C., of all agencies, has a duty, inherent in its statutory mission, to see that the truth emerges; and if fails to do so, this Court must not, in the name of deference or convenience, grant judicial enforcement to the agency’s contrivances.

Instead of using Rakoff’s powerful order as leverage to extract a larger settlement from Citi, the SEC went on the attack against the judge. It appealed Rakoff’s order to the federal court of appeals, arguing that its enforcement process would be crippled if it had to hold out for admissions of guilt. Rakoff fired back with a charge that the agency had misled the appeals court and had withheld key information from him.

As the pissing match continues, one could only imagine the satisfaction felt by Citi at being able to sit on the sidelines and watch its regulator do battle with the judiciary to preserve its ability to handle financial misconduct with kid gloves. The SEC has suddenly become aggressive—not in fighting fraud but in defending its right to be a weak regulator. Richard Cordray, take heed.

The People’s Regulator

Government regulation of business is looking pretty lame these days. After 29 workers were killed in an explosion at a Massey Energy mine in West Virginia, it came to light that the facility had accumulated more than 1,300 safety violations over the past five years but was not shut down by the Mine Safety and Health Administration – an agency labeled a “meek watchdog” in a recent New York Times headline.

It has also been revealed that Toyota managed to keep critical information about faulty gas pedals from federal regulators in an ultimately unsuccessful effort to avoid a massive recall of its vehicles. A pair of recent reports show that regulatory oversight of Citigroup was deficient both before and after the banking giant had to be bailed out by taxpayers. Again and again, it’s the same old story: aggressive corporations riding roughshod over feckless regulators.

Compare this to what recently happened when Consumer Reports issued a “don’t buy recommendation” for a Lexus sport-utility vehicle because its testing had shown a risk of rollovers. Within hours after the warning was issued, Toyota, the parent company of Lexus, announced that it would suspend sales of the GX 460. A company official stated: “We are taking the situation with the GX 460 very seriously and are determined to identify and correct the issue Consumer Reports identified.”

Toyota’s quick response was undoubtedly part of its effort to control the damage to its reputation from the sudden-acceleration controversy, but it also demonstrates the power of Consumer Reports. More than a magazine, it is a bulwark against shoddy manufacturing and dishonest practices that threaten the physical and financial well-being of the public. It is the people’s regulator.

The potency of Consumer Reports stems from its rock-solid integrity and its complete independence from the companies it is monitoring. While the magazine is often taken for granted these days, CR and its non-profit parent Consumers Union have not always been revered during their 70-plus years of existence.

The challenges Consumers Union (CU) faced in its early decades are documented in the work of Norman Silber, who wrote a dissertation on the subject in 1978 (available via the Dissertations & Theses database) which became the 1983 book Test and Protest.

CU was established in 1936 by a group of engineers, researchers, writers and editors who were unabashedly leftwing and saw their work as complementary to the growing labor movement. The organization’s mission was, Silber notes, threatening not only to manufacturers but also to the commercial media, which saw its independent product ratings as “an unfair and subversive attack upon legitimate advertising.” Many major magazines and newspapers refused to let CU advertise Consumer Reports in their pages.

CU was also an early target of the House Un-American Activities Committee, though the scrupulously non-partisan content of Consumer Reports saved the organization from serious persecution. During the anti-communist hysteria of the 1950s, Silber recounts, CU suspended its reporting on labor conditions in the industries whose products it rated. Its own staff remained unionized, though it switched from the leftist Book and Magazine Guild to the more mainstream Newspaper Guild.

CU did nothing to dilute its assessment of business practices. During the late 1950s it was especially critical of the tobacco industry for engaging in misleading advertising and for selling a dangerous product. CU also took on the dairy industry over the issue of milk contamination caused by radioactive fallout. And it began arguing for improved auto safety starting well before Ralph Nader appeared on the scene. In the 1970s CU successfully pressured federal regulators to improve standards for microwave ovens to address radiation leakage.

CU also did not flinch when the recipients of poor product ratings decided to take the organization to court. It fought companies such as Bose audio and Suzuki Motor up to the Supreme Court to protect its right to offer candid assessments.

This is not to say that CU is completely above reproach. Critics have charged over the years that the organization’s preoccupation with product testing comes at the expense of broader consumer advocacy (this is what Nader said when he quit CU’s board in 1975). And in 2007 the organization suffered a black eye when it botched its testing of infant car seats and had to issue an unprecedented apology. Nonetheless, its overall track record, up through its reprimand of Lexus, is pretty impressive.

A private organization without formal enforcement powers is no substitute for government regulatory agencies, but CU does have something to teach those agencies – above all, that a watchdog can be truly effective only when it is completely uninfluenced by the companies it is monitoring.

It also helps to be able to issue definitive pronouncements about corporate misbehavior. CU’s statement about the dangers of the GX 460 was not tentative and was not subject to time-consuming appeals.

Once official regulators show as much spunk as the likes of Consumers Union, corporations may finally start to clean up their act.