FTC Testifies on Proposed Consumer Financial Protection Agency

The Federal Trade Commission today told the U.S. House Subcommittee on Commerce, Trade, and Consumer Protection of the Committee on Energy and Commerce that the FTC will continue to vigorously enforce consumer protection laws as Congress considers the Administration’s proposal to protect consumers of financial services, including the creation of a Consumer Financial Protection Agency (CFPA).

The testimony presented by FTC Chairman Jon Leibowitz briefly described the Commission’s authority and activities regarding financial services, its priorities in this time of economic distress, and some preliminary comments on the impact of the Administration’s proposal on the FTC.

As stated in the testimony, the FTC agrees with the fundamental objective of the proposal: to improve the effectiveness of the current government system for protecting consumers of financial services. The Commission also appreciates the proposal’s recognition of the FTC’s role as the nation’s consumer protection agency and agrees that the Administration’s recommendations to provide additional resources and authority to the FTC would enhance the FTC’s effectiveness.

The Administration’s proposal also would create the CFPA, which would have exclusive authority to issue rules for consumer financial products and services, and primary authority to enforce the consumer protection laws covering financial products and services that the FTC currently enforces. The Commission is carefully evaluating the proposal, including its implications for the FTC’s consumer protection mission. In assessing the proposal, the Commission has identified some issues that warrant consideration, such as whether certain definitions in draft legislation could limit the FTC’s ability to protect consumers outside the context of traditional financial services, and whether the proposal’s structure of law enforcement cooperation is as efficient as it could be.

The Commission believes that the goal of improving the overall regulatory, supervisory, and enforcement system for protecting consumers of financial services is a worthy one, the testimony stated. It will be critical that the agency or agencies charged with financial consumer protection act vigorously and effectively to protect consumers.

The Commission vote authorizing the testimony was 3-0-1, with Commissioner J. Thomas Rosch not participating. Commissioner Kovacic dissents from that portion of the testimony that seeks across-the-board authority for the Commission to use, for promulgating all rules respecting unfair or deceptive acts or practices under the Federal Trade Commission Act, the notice and comment procedures of the Administrative Procedure Act, although he would be willing to consider whether all the procedures currently required to issue, repeal, or amend these rules are necessary. Commissioner Kovacic also dissents from the Commission's endorsement of across-the-board civil penalty authority, expressing concern that the routine availability of civil penalties, even if subject to a scienter requirement, would risk constraining the development of doctrine, much as judicial concerns about the availability of private litigation with mandatory treble damages appear to be constraining the development of antitrust doctrine.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.