Holding mutual funds feet to the fire when it comes to excessive fees could get a good deal more difficult if legislation is approved by the House Financial Services Committee this week making it tougher for consumers to sue, the Consumer Federation of America (CFA) said in a letter sent to lawmakers this week.

The CFA is asking House Financial Services Committee Chairman Jeb Hensarling (R-TX) and committee members to vote “no” on “The Mutual Fund Litigation Reform Act (HR 4738),” which would increase the burden of proof required by investors suing a mutual fund company for excessive fees. The bill is scheduled for committee markup this week.

The bill “would make it virtually impossible for mutual fund shareholders to bring claims for excessive fees,” CFA Director of Barbara Roper said.

New requirements in the bill would “require plaintiffs to plead with particularity, before they have access to evidence that would enable them to do so,” Roper argued.

The bill would also raise the burden of proof for a plaintiff suing a fund company for excessive fees from a preponderance of evidence standard to a clear and convincing evidence standard.

“The effect would be to further immunize fund companies from accountability when they charge excessive fees,” said Roper.

T. Rowe Price is still battling a lawsuit brought by a group of investors in early 2016, accusing the fund company of charging $388 million in excessive fees.

T. Rowe Price said the federal civil lawsuit, which was filed in US District Court in Oakland, Calif., is "without merit” and the company is aggressively defending itself against the litigation.

The complaint accuses T. Rowe Price of charging investors significiantly more in management fees than it charges as a subadvisor on similar funds for other asset managers.

For instance, T. Rowe Price is accused of charging 69 percent more in management fees to investors in its Blue Chip Growth Fund than it charges as subadvisor for similar funds for advisors and other asset managers. 

The complaint states that T. Rowe Price “breached its fiduciary duty by receiving investment management fees from each fund that are so disproportionately large that they bear no reasonable relationship to the value of the services provided … and could not have been the product of arm’s length bargaining.”

Assets under management at the Blue Chip Growth Fund surged to more than $30 billion from about $12 billion, but its management fee rate declined by only 1 basis point, to 0.57 from 0.58 percent, between 2011 and 2015,  according to the lawsuit.

As a result of the growth, the fund’s annual management fees surged by about $81 million to $166 million, while the fund company passed on savings of just $2.3 million to investors, the lawsuit stated. As a result, the benefit to T. Rowe Price investment managers was more than 34.5 times greater than what the firm passed on to Blue Chip Growth Fund shareholders, the lawsuit alleged.

The fund industry and its association, the Investment Company Institute (ICI), meanwhile, are arguing the new limits on excessive fee litigation are needed to curtail “frivolous lawsuits” that can cost fund companies dearly.

In contrast, CFA argued that accountability on fees is more important than ever, given the fact that even S&P Index 500 mutual funds have such widely disparate fees -- despite fund companies like Vanguard which specialize in keeping costs low.

“If the market were functioning as intended, we would see narrow price differences among comparable funds, but this is not the case,” Roper said. “Instead we see large differences even among something as basic as S&P 500 index funds where keeping costs to a minimum is essential to their success in matching the performance of the index.”

“At a time when policymakers are concerned about improving Americans’ retirement security, Congress should be looking for ways to further discipline excessive fund costs, rather than further undermining the already inadequate protections against excessive fees,” Roper continued.

The CFA is also urging a “no” vote on “The American Customer Information Protection Act (HR 4758),” which is scheduled for committee markup this week.  The bill would limit the SEC from the retrieval and analysis of all personally identifiable information (PII) as part of its Consolidated Audit Trail (CAT) -- the online regulatory system the SEC uses to surveil markets and investing behavior.

“It is clear … that there is a concerted industry campaign underway to … leave the SEC in the dark,” Roper said.

The SEC should be given the opportunity that SEC Chairman Jay Clayton asked for to conduct its own careful evaluation and analysis on the CAT system and the retrieval of personally identifiable information (PII), so that the SEC maintains the ability to “quickly identify market disruptions, eliminate improper behavior and more thoughtfully create effective rules of the road,” Roper said.