The Federal Trade Commission could become more powerful with a provision tucked in the financial reform bill H.R. 4173, the “Wall Street Reform and Consumer Protection Act of 2009” that would expand its rule-making abilities, according to a Washington Post article of April 26, 2010.
Consumer protection groups support such a result, which has recently prompted the U.S. Chamber of Commerce, Consumer Data Industry Association, National Association of Professional Background Screeners (NAPBS) and 38 other trade group associations to protest the provision as the Senate argues a bill that would overhaul of the financial regulatory system. Investigative & Security Professionals for Legislative Action (ISPLA) shares their concerns. Not all national investigation associations have been heard on this issue, but one other association does support this profession’s regulation remain under the authority of the FTC in any final version of the bill.
In the Chamber’s April 22, letter to Senate leaders Harry Reid [D-NV] and Mitch McConnell [R-KY] the trade groups expressed their “opposition to the inclusion of provisions that would significantly expand the Federal Trade Commission’s rulemaking and enforcement authority over virtually every sector of the American economy.” They further wrote: “The financial troubles of the past year have not been laid at the FTC’s doorstep, and provisions to expand the commission’s authority are out of place in legislation to reform the financial system.”
Granting the FTC broad new authority has received scant attention during the debate about creating a new Consumer Financial Protection Agency (CFPA). The Chamber and group previously outlined in detail further concerns in a letter of January 19, which we share.
The provision would make it easier for the FTC to create regulations and step up its enforcement abilities. Presently, it acts as an enforcement agency for consumer protections and can create guidelines for business practices that affect many industries. The provision was included in the financial reform bill to strengthen the FTC’s oversight of the financial sector. But critics said it would greatly expand the agency’s ability to create new rules for other industries having nothing to do with the circumstances creating the present economic condition. Consumer groups support the bill.
The provisions in question, if passed, will:
1. Eliminate existing procedural safeguards – FTC authority extends to all “unfair or deceptive acts or practices in or affecting commerce”, including business to business interactions as well as conduct toward consumers. The procedures Congress requires, and remain law today, are reasonable – afford advance rulemaking notice to Congress and to the public, provide an informal hearing, issue a “Statement of Basis and Purpose” for any final rule , require transparency when Commissioners meet with outside parties about regulatory proceedings, and allow for robust judicial review to ensure that these procedures are followed.
2. Create Excessive Enforcement Authority – By removing existing checks on FTC enforcement powers the public interest will not be served. The current limits on FTC discretion are appropriate.
a) Civil Penalty Authority: Currently, the FTC proceeds by imposing an administrative order to change a company’s behavior or it seeks a court order to force the return of ill-gotten gains. It may then seek civil penalties if the order is violated.
b) “Substantial Assistance” Violation: HR 4173 would provide that any person that “knowingly or recklessly” provides “substantial assistance” to another in committing an unfair or deceptive act or practice can be punished as a primary perpetrator, even without actual knowledge of the violation. Such an expansion of FTC jurisdiction is neither reasonable nor necessary.
c) Independent Litigating Authority: HR 4173, as passed by the House, would allow the FTC to have independent litigating authority to seek civil penalties, thus eliminating the current requirement that it notify the Department of Justice when the FTC intends to seek such penalties. Consultation with the DOJ provides a critical check on FTC discretion and a more orderly access to the federal courts, particularly important when a company is exposed to excessive and damaging penalties.
Critics contend the FTC ran amok as a regulatory agency before Congress reformed it in 1975, when the agency was stripped of many of its regulatory abilities. Under current law, if the FTC wants to create a new industry-wide rule, it must hold hearings. Then it has to prepare a statement of basis and purpose that includes the economic impact of the rule and any potential harms that the rule might create. This is one of the reasons ISPLA continues to closely monitor hearings and rulings of the FTC, and maintain liaison with its staff.
The mission of ISPLA is to monitor and identify critical legislative and regulatory issues in order to provide a forum for debate and discussion within the investigative and security professions and to serve as an advocate and resource for these professions.
To learn more about what ISPLA has been doing for the investigative and security professions, click on www.ispla.org/achievements. To learn about joining ISPLA and voluntary contributions to the ISPLA Political Action Committee please click on www.ispla.org/faqisplapac. One may join and pay the $99 annual dues online or mail dues check or contributions in any amount to the address below.
Bruce Hulme
ISPLA Director of Government Affairs
Investigative & Security Professionals for Legislative Action
235 N. Pine Street, Lansing, MI 48933
Tel: (212) 962 4054
Email: brucehulme@yahoo.com