D.J. Powers is increasing the availability and affordability of basic economic services to low-income and minority Americans by shining a spotlight on the practices–and abuses–of state administrative agencies and the industries they regulate. With a unique blend of high-level legal, economic, and media expertise, D.J. is correcting the imbalance of consumer representation at state agencies and opening previously unexamined industries to public scrutiny and debate.
The New Idea
D.J. Powers is fighting poverty. But you won't find him at a food shelter, or a job training center–or even in the communities for which he is working.
Instead, you will find him at home poring over thick reports of insurance coverage data. Or in a courtroom, well into the third day of a rate-setting case that traditionally lasts less than two hours. But his work impacts thousands and has the potential to impact millions more.
D.J. is attacking, in a highly leveraged way, the sad reality that prevents millions of impoverished and minority individuals from pulling themselves out of poverty–their inability to obtain affordable insurance, utilities, and credit. He is doing this by focusing exclusively on the institutions that have the ability to make these tools affordable and accessible–state administrative agencies. D.J. analyzes their decisions, regulations, and choices with an eye to demonstrating their impact on the poor. He then intervenes, by issuing reports, proposing rules, and using the courts and press as necessary. He picks his cases strategically, focusing on what he terms "low hanging fruit"–where the impact per effort is high, and where the results set a precedent for similar changes in other states.
Although a handful of other organizations around the country advocate for consumers of similar services, they focus on all consumers, rather than specifically representing the poor. Yet industry spokespersons are masters at demonstrating benefits for all without revealing the costs for a few. Moreover, other groups tend to focus on individual lawsuits or at the legislative level. This limits their impact, as legislatures tend to gloss over the needs of a populace that lacks political influence. In contrast, D.J. is focused exclusively on low-income and minority individuals as a class and bringing sophisticated economic and legal expertise to bear on the actions of administrative agencies. D.J. is also open to working with regulators and industries in ways that traditional activists are not.
Success also distinguishes D.J. In the four years since he launched his project in Austin, Texas, he has secured a $240 million savings in the cost of credit for poor Texans, repeal of a rule that denied basic telephone services to 600,000 Texas homes, and a 27% rate decrease for mandatory auto insurance for victims of redlining.
D.J. wants to spread his model to every state in the union and has a plan to do so. He sees, very clearly, a time when low-income residents around the country have individuals representing and advocating for their interests in these matters and when administrative agencies and industries–knowing they are being watched or simply that the tools to watch them exist–respond.
For the working poor to achieve economic self-sufficiency, the basic economic tools–tools like credit, insurance, and telephone service–must be available and affordable. Imagine, for instance, the prospects of someone without a telephone number to leave with prospective employers. Or a family that is unable to obtain the credit necessary to buy a home–and avoid its throwing money away on rent.
Yet sellers refuse to sell to the poor or charge them significantly higher rates. For example, D.J.'s national study of credit insurance in 1998 found that sellers were overcharging consumers (the majority of whom are low-income) by over $2 billion per year. In a 1995 study, he found that Texan insurers refused to sell auto insurance to at least 680,000 good drivers who lived in poor or minority neighborhoods. Given that auto insurance is mandatory, these drivers were subsequently assigned to a "high-risk" pool and charged higher rates. A study conducted by the Lyndon B. Johnson School of Public Affairs at the University of Texas at Austin found that 600,000 homes (predominantly in low-income areas) were denied local telephone service because they owed a debt for long-distance services even if they were able and willing to pay for basic services.
Contributing factors for these discrepancies include lack of competition, a tendency for smaller corporations to blindly follow the practices of larger groups (e.g., State Farm), and historical discrimination. Sometimes the rationale is even less rational. In trying to determine why certain firms were denying auto insurance to individuals with poor credit, D.J. was referred to an influential article in an insurance industry publication describing a correlation between individuals with poor credit and those who had traffic accidents. The article, based on sketchy data, was written by a credit rating agency (which has a vested interest in selling its services.)
State regulatory agencies determine the rates charged for and rules of access to most basic economic tools. Although they could make these tools available and affordable to the poor, they do not. The problem is a structural one and lies in the imbalance of representation at the agency. Regulated industries spend enormous amounts of money and resources to affect the outcome of agency decisions. The poor have no representation. Since agencies see only one side of the argument, and feel no political, legal, or media pressure from the poor, their decisions tend to favor industry at the expense of the poor. Moreover, most administrators tend to come from or return to industry and often have little incentive to "rock the boat." According to D.J., the problem will only continue to worsen as deregulation brings even greater freedom to industry to restrict access to their products.
The problem has been difficult to solve and the few organizations around the country that might address it have not been successful. While legal aid offices have traditionally represented the poor, they represent individuals (rather than a segment of the population) and do not focus on broad structural change. The handful of state public counsel offices represent all consumers and in fact are prohibited from singling out the interests of any one group. They also depend on state funding, which is often cut if they do well. Finally, the well-known "Consumers Union" lacks the resources and expertise to engage in litigation and perform solid economic analysis on behalf of low-income consumers.
Beginning in 1996, when he launched the Center for Economic Justice, D.J. has pursued a single-minded strategy–achieving big wins for low-income and minority consumers. He and his colleague Birny Birnbaum, an economist who is recognized across the country as one of the top consumer advocates on insurance, focus on identifying "low-hanging fruit," opportunities to achieve large gains with minimal effort.
The core of D.J.'s strategy–and his chief innovation–is his focus on administrative agencies, organizations with the most power to impact access and affordability. As D.J. sees it, agency administrators do not necessarily wish to approve actions that will hurt the poor, but often do not have the resources (nor motivation) to unpack the claims of industry.
This is D.J.'s role. Monitoring the actions, decisions, and choices of the administrative agencies, he picks his interventions strategically. When he sees an opportunity–a pending rate increase or the possibility of "redlining,"–he strikes with research, publications, briefs, motions, and attendance at administrative hearings. He also targets the press and has enjoyed tremendous coverage in local, state, and national publications. Happily, he has discovered that agency administrators are quick to consider (or reconsider) their decisions when faced with a media expose. Unlike legislators, agency heads cannot hide.
While focusing on short-term gains (rate decreases or the full disclosure of industry information), D.J. has always operated with an eye to the future–and to replication. In evaluating choices for intervention, he considers the potential that his work could be useful for other advocates. He often spends hours adding to briefs and reports to make them helpful guides to fighting similar battles in other states.
One example of D.J.'s forward-thinking was his blistering, two-day, cross-examination of an credit insurance "expert." Although D.J. had his case won after his several hours, he kept going for two days (it was not a jury trial) to capture, on the record, admissions of deceit on more than 50 additional issues. The strategy was three-fold: to win the case, to give the expert a thrashing he would remember, and to create a concise record of material that could help advocates in other states defeat disingenuous claims.
While D.J. often finds himself at odds with regulators and regulated industry, he also knows how to work with them. For example, he cut a deal with one major insurance company - Nationwide Insurance - in his fight against insurance redlining. The entire insurance industry had sued to stop D.J. from obtaining updated data that he used in the past to show that auto insurers were refusing to sell, or charging higher rates, to poor and minority consumers. D.J. identified Nationwide as a potential partner in his fight. He quickly cut a deal with Nationwide in which the company agreed to the release of all of its data in exchange for D.J.'s positive praise in the press for their willingness to make their data public. In another example, D.J. wrote an opinion-editorial praising then-Governor Bush's appointees to the Public Utility Commission for working with him to repeal a rule that prevented poor Texans from obtaining basic telephone service.
D.J. is now poised to begin bringing the same legal, economic, and media expertise to bear on state administrative agencies across the country. He will start with credit insurance, a deeply troubling industry that consistently gouges the poor. He plans to spend six months developing a database of state rating laws and regulations on credit insurance, which will be the only one of its kind for consumer advocates. He will then analyze insurer data to target a handful of states where the rates are significantly excessive and which have the most favorable laws and regulators for deep rate cuts. He will then petition and litigate for rate cuts in those states. Eventually, D.J. will institute his telephone, data, and insurance redlining projects in other states.
D.J. does not presume to think that he can wage and fund these battles himself. Instead, he and Birny intend to identify local advocates in each state and train them in the process of successfully advocating administrative agencies. He believes strongly that such actors will be eager to replicate his success. And by educating and training individuals already working in other states, he will not need to support their efforts financially.
D.J. has already demonstrated how he can successfully wage these battles in other states and bring about significant benefits. Working with local advocates and relying on data from his 1999 study on the credit insurance industry, D.J. and others have secured a reduction in rates by $187.5 million per year. Given that credit rates are usually in effect for a minimum of 3 years, that means a savings of over $550 million for poor consumers who are the victims of these overcharges.
D.J. Powers was born on March 1, 1963 and has felt like an outsider ever since. His highly refined social conscience and concern for justice put him at odds with his conservative family and the Texas community in which he grew up. As he puts it, "I had to develop a thick skin to survive." In high school, he was asked to resign from the newspaper when he penned an editorial criticizing American atrocities against Iran and questioning U.S. outrage at their taking hostages in retaliation.
Fueled by his commitment to ethics and social justice, D.J. went on to study philosophy and law at the University of Texas at Austin, graduating with honors despite working 20 to 30 hours per week. Knowing that he wanted to use his law degree to change the world, but without knowing exactly how, D.J. worked for three years at a local law firm in complex consumer and utility litigation, where he learned of abuses and discrimination against minority and low-income consumers as well as the potential gains to be held by targeting administrative agencies. He then left to take a position at the Texas Office of Public Insurance Counsel where he honed his technical skills in complex actuarial, economic, and social issues. Despite drafting, negotiating and arguing for numerous administrative rate proposals, D.J. was frustrated by the lack of freedom the office had to create structural change. "Our funding came from the legislature," he explains, "and they didn't like us openly criticizing some of their largest campaign contributors." He knew that to achieve the gains he wanted, he would need to be independent.
After two more years as General Counsel to the Texas Insurance Commissioner, D.J. founded the Center for Economic Justice. Over the past four years, he has worked nearly full-time on his idea, needing–unfortunately–to consult with lead counsel on pending class action lawsuits in order to make ends meet. He has also provided awareness and sensitivity training to families and teachers around the state about Tourette Syndrome.