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CU’s 2002 California Legislative Review

Wednesday, October 2, 2002

Important Gains Won for Consumers on Accounting and Arbitration Reform, Auto Emissions Standards, and Herbal Supplement Safety
Legislature Fails to Enact Financial Privacy Protections, Tight Budget Hurts Efforts to Expand Health Insurance Coverage

SACRAMENTO, CA – As the dust settles on the 2002 California legislative session, consumer advocates are praising lawmakers and Governor Gray Davis for supporting accounting and arbitration reforms, as well as tougher auto emissions standards and a ban on ephedra supplement sales to minors. But at the same time, the legislature’s record on consumer issues was marred by the defeat of financial privacy protection and the state’s dire budget situation, which hurt efforts to expand health coverage to the uninsured.
“Lawmakers and the Governor deserve kudos for enacting a number of reform measures that will help protect consumers from abuses in the marketplace,” said Betsy Imholz, Director of Consumers Union’s West Coast Regional Office. “New laws enacted this session will complement federal accounting industry reforms, help level the arbitration playing field for consumers, ban the sale of dangerous ephedra products to minors, and promote cleaner air through tougher auto emissions standards.”
California has become the first state in the country where consumers will be able to obtain information about arbitration provider organizations, including the number of disputes handled for a particular company and the outcomes of those arbitrations (AB 2656). State lawmakers and the Governor supported a package of accounting industry reforms, including legislation that creates a public majority on the California Board of Accountancy and enhances its enforcement capabilities (AB 270). Manufacturers of herbal supplements containing ephedra will be required to include a clear and conspicuous warning label on their products and will be barred from selling them to minors (SB 1884). And California enacted a far-reaching statute that will curb air pollution by requiring the state to set auto emission standards for cars and light trucks sold here and manufactured in or after 2009.
Other noteworthy measures adopted this year include new laws that subject payday lenders to the same kind of auditing and reporting requirements that apply to other small lenders (SB 898); mandate greater disclosure by phone card companies about the fees and surcharges they require consumers to pay (AB 2244); require companies entering bankruptcy to honor gift certificates as long as they remain open for business (AB 2473); and authorize and restrict the fees that can be charged by credit counselors (AB 2293).
Consumers will benefit from new health-related laws, including measures that require HMOs to provide more timely service to enrollees (AB 2179); make it easier for the medically uninsurable to obtain health coverage (AB 1401); require eye care providers to give consumers a copy of their contact lens prescription (AB 2020); and improve public disclosure of medical malpractice settlements (SB 1950).
The defeat of Senator Jackie Speier’s SB 773, which would have given consumers greater control over whether their personal financial information is shared or sold, was the biggest loss for consumers this year. “Despite widespread public support for financial privacy protection, lawmakers voted to side with the interests of big banks, insurance companies, and investment firms over the interests of consumers,” said Imholz.
Powerful agribusiness interests blocked an effort to require food companies to label the trans fat content of their products despite the health risks associated with such foods (SB 1610). Governor Davis vetoed a bill that reformed the money transmission industry, which immigrants rely on to support families in their native countries. The financial industry convinced Davis to veto a measure that would have held corporations and their managers accountable for knowing about and failing to report accounting and financial fraud with their companies (SB 783). And while the Governor signed a number of arbitration reform measures, he vetoed an important bill that would have required arbitration providers to disclose other business relationships, such as consulting, they have with the companies that are parties to an arbitration (AB 3029).
In the face of an estimated $24 billion budget deficit, efforts to expand state health insurance coverage were defeated and existing programs suffered funding cuts. California secured a special waiver from the federal government to expand its Healthy Families program to the parents of eligible children, but that effort was shelved because of budget shortfalls. State funding for Medi-Cal and Healthy Families outreach was severely cut. And Davis slashed funding for Healthy Start, a successful state program that helps vulnerable children succeed by supporting school-based educational, health and social service programs. Fortunately, state lawmakers defeated other proposals offered by Davis that would have imposed stricter eligibility requirements and onerous reporting burdens for those already on Medi-Cal. An effort to increase income taxes on the wealthy in order to limit budget cuts for social programs was defeated.
“California is facing another very tough budget next year, which puts many of the state’s critical safety net programs at risk,” said Imholz. “With an estimated nineteen percent of the state’s population lacking health insurance, lawmakers in Sacramento need to think creatively about how they can expand coverage to more Californians.”

Consumers Union
Consumers Union, publisher of Consumer Reports, is a nonprofit testing and information organization serving only the consumer. We are a comprehensive source of unbiased advice about products and services, personal finance, health, nutrition, and other consumer concerns. Since 1936, our mission has been to test products, inform the public, and protect consumers.