CFPA: Duplication, Not Consolidation

The CFPA will subject the vast majority of businesses under its jurisdiction to two separate—and entirely overlapping—layers of federal consumer protection regulation. 

In particular, the tens of thousands of non-bank businesses that would be regulated by the CFPA will also remain subject to the authority of the Federal Trade Commission (FTC).  Taken together with proposals to drastically expand the powers of the FTC, the result will be a duplicative, confusing, and burdensome new regulatory regime that will disproportionately fall on nonfinancial businesses.

Duplication of Existing Federal Regulation

• Although the CFPA is intended to consolidate federal consumer protection oversight, it will in fact impose a new, duplicative layer of regulation – particularly on those businesses already regulated by the FTC.
• The FTC would retain its current broad rulemaking authority under the FTC Act to prevent any business, other than a federally-regulated financial institution, “from using . . . unfair or deceptive acts or practices in or affecting commerce.”  That very broad authority can be used by the FTC to bring enforcement actions or to issue regulations.
• All of these businesses therefore will be vulnerable to regulations and enforcement actions by both the FTC and the CFPA and by state attorney’s general enforcing the CFPA provisions. 

Proposals to Drastically Expand FTC Powers In Addition to Unprecedented CFPA Authority

• The House bill (H.R. 4173) includes, and the Senate Commerce Committee is considering, proposals to drastically expand the powers of the FTC.  

Eliminating Statutory Protections That Assure a Fair Rulemaking Process

Because the FTC’s jurisdictional reach is so broad, Congress in the Magnuson-Moss Act adopted important procedural protections to ensure that FTC regulations target broad problems that could not be addressed through enforcement actions and that the Commission’s rulemaking processes are comprehensible and transparent.  The proposal to eliminate these protections would remove an important fairness guarantee—without any showing that the change is necessary.

Unfair Authority to Impose Civil Penalties Without Notice

Proposals to give the FTC authority to seek penalties not only for violations of FTC orders and rules, but also for violations of the statute’s vague “unfair or deceptive acts or practices” standard would have negative unintended consequences.  The FTC currently already has ample enforcement tools at its disposal.  Currently, the FTC issues an administrative order directing a company to change a specified practice or behavior, and may obtain civil penalties if the company does not comply.  This gives companies an incentive to reach an agreement with the FTC and improve their business practices instead of litigating against the Commission.   In contrast, the prospect of civil penalties would likely lead companies to take a more adversarial approach and vigorously defend themselves against FTC scrutiny.   Affected industries would be subject to these new civil penalties in addition to the CFPA’s authority to impose civil penalties. 

New Authority to Impose Civil Penalties on Third Parties

The FTC today has authority to prevent individuals or businesses from engaging in unfair or deceptive practices.  Creating new liability for anyone who “recklessly” provides “substantial assistance” to someone else who is violating the FTC Act is unnecessary and unfair.  It is unnecessary because the FTC has the power to target the actual wrongdoer.  It is unfair because the “substantial assistance” itself need not be unlawful and actual knowledge of the other person’s wrongdoing is not required.  The effect of this provision would be to impose liability for engaging in perfectly lawful conduct without knowing that the conduct is assisting someone else’s deceptive practice.  This would be in addition to the broad authority to impose such liability that would be granted to the CFPA and to state attorneys general enforcing the CFPA.

The Chamber stands ready to work with the Congress to advance more effective reforms that will protect investors and strengthen our capital markets without adding new layers of bureaucracy on top of the current system.