FTC Asks Congress For Enhanced Rulemaking and Enforcement Powers To Curb Abuses in Financial Industry

On Tuesday, March 24, 2009, FTC Chairman Jon Liebowitz testified before the U.S. House Subcommittee on Commerce, Trade and Consumer Protection seeking enhanced legal powers "[t]o allow the FTC to perform a greater and more effective role in protecting consumers." The prepared text of his testimony is available here (.pdf). Of particular note, the FTC is asking Congress to:

  1. Permit the FTC to use "notice and comment" rulemaking to declare business practices used in the financial industry to be unfair and deceptive acts in violation of the FTC Act — a process that, according to Chairman Liebowitz, could shorten the time taken to put new regulations in place from 3-10 years under the current system to 1 year under a "notice and comment" system; and
     
  2. Authorize the FTC to bring civil lawsuits in federal court and to obtain civil penalties for unfair and deceptive practices.

The FTC’s statements mirror growing public concern that the global economic meltdown requires immediate action to curb abuses in the financial industry and specifically in consumer lending and credit services.  In a section entitled "Tough Enforcement of Existing and New Laws," Chairman Liebowitz states:

Given the current state of the economy and consumers’ financial situation, the FTC has increased its emphasis on protecting consumers who are delinquent or in default on their debts from unlawful acts and practices. The FTC’s future law enforcement efforts will continue to focus on protecting consumers in financial distress from illegal harmful practices.

This testimony reinforces signals we have been receiving from the FTC that the Commission will be aggressively enforcing consumer facing federal regulations to respond to the financial crisis.  While the Chairman’s comments are focused on the financial industry, this may impact a variety of businesses as we have seen with federal Red Flags Rules, which the FTC appears ready to enforce far beyond the traditional financial industry, as we have discussed here and here.

 Links:

  • The FTC press release is available here
  • The text of Chairman Liebowtiz’s prepared comments are available here (.pdf) or from the FTC’s website here (.pdf)

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