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The Federal Trade Commission today presented testimony before the U.S. House Committee on Appropriations, Subcommittee on Financial Services and General Government, discussing how the Commission protects consumers at every stage of the consumer credit life cycle, from the advertising and marketing of financial products to debt collection and debt relief.

Lydia B. Parnes, Director of the FTC’s Bureau of Consumer Protection, told the subcommittee about the Commission’s efforts to protect subprime and other mortgage borrowers, as well as consumers of other financial services such as payday loans and payment cards, and its work to help financially distressed consumers. The agency enforces Section 5 of the FTC Act, which prohibits unfair or deceptive business practices, and statutes that address specific aspects of lending practices. Banks, thrifts, and federal credit unions are exempt from the FTC’s jurisdiction, which extends to nonbank financial companies, including nonbank mortgage companies, mortgage brokers, and finance companies. The agency also helps protect consumers by working with federal agencies, state attorneys general, and state banking departments, the testimony stated.

The testimony described FTC enforcement actions in the mortgage lending industry, and its particular focus on the subprime market. The Commission has brought 21 actions focused on the mortgage lending industry, which collectively have returned more than $320 million to consumers. In September 2007, the FTC warned more than 200 mortgage brokers and lenders, and media outlets that carry their advertisements for home mortgages, that their advertising claims may violate federal law. The Commission has ongoing investigations of mortgage advertisers and is continuing to monitor mortgage advertising claims.

The testimony discussed the agency’s intensified efforts to protect consumers from mortgage foreclosure rescue scams, including through several FTC actions filed recently in this area. The Commission also is working with seven federal-state-local task forces across the country to fight foreclosure fraud.

To empower consumers to better protect themselves from potentially harmful conduct, the FTC also engages in extensive consumer education related to mortgage lending. New educational materials in English and Spanish provide information about deceptive mortgage advertisements, mortgage foreclosure rescue scams, buying a home, and steps borrowers can take to avoid foreclosure. The testimony also described the agency’s research and advocacy for policies fostering informed mortgage borrowing, such as comments to federal banking agencies based on FTC findings that better mortgage disclosures would benefit consumers.

In describing Commission law enforcement and consumer education efforts concerning unsecured consumer credit, the testimony referred to yesterday’s announced settlements with three payday lenders for allegedly failing to fully disclose loan terms, and an action announced earlier this week against BlueHippo Funding and BlueHippo Capital, which will pay up to $5 million for consumer redress to settle charges that they violated federal law while offering credit for electronics purchases.

The testimony also described enforcement actions against deceptive marketers of debit and credit cards, and gift cards, as well as related consumer education efforts. In addition, the testimony mentioned actions against merchants who use deception to obtain consumers’ account numbers, and against payment processors acting on their behalf, noting the FTC’s related consumer protection work with trade associations and bank regulators, and hearings to learn about changing technology and develop policy responses.

The testimony described agency actions to stop violations of the Fair Debt Collection Practices Act, some of which resulted in substantial monetary judgments and bans on collecting debts. The testimony also mentioned related consumer outreach, education materials, and research and policy initiatives, including last year’s FTC workshop to examine technological, economic, and legal developments in debt collection and their impact on consumers and businesses. In addition, the testimony described efforts against debt negotiation, credit repair, and debt reduction companies engaged in deceptive practices, and related consumer education efforts.

The Commission’s budget request for FY2009 contains additional funding to support this work, as well as the other important work of the agency. The Commission is requesting $256.2 million and 1,102 full-time employees to accomplish the agency’s competition and consumer protection missions in FY 2009. The request represents an increase of $12.3 million and 18 full-time employees from the FTC’s FY 2008 budget appropriations level.

The Commission vote authorizing the presentation of the testimony and its inclusion in
the formal record was 5-0.

Copies of the testimony are available from the FTC’s Web site at and from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint in English or Spanish or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to more than 1,600 civil and criminal law enforcement agencies in the U.S. and abroad.

Contact Information

Frank Dorman
Office of Public Affairs