Proposed Consumer Financial Protection Agency Would Take on Some FTC Duties

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

All consumer financial protection functions of the Federal Trade Commission would be transferred to a newly created federal agency, as part of the Obama Administration’s regulatory reform agenda.

The president’s proposal for a new consumer financial protection agency was released and sent to Congress on June 30.

The Consumer Financial Protection Agency would be established as an independent agency in the executive branch to regulate the provision of consumer financial products or services and consumer financial laws.

Consumer Financial Protection Functions

“Consumer financial protection functions” are defined in the proposal as “research, rulemaking, issuance of orders or guidance, supervision, examination, and enforcement activities, powers, and duties relating to the provision of consumer financial products or services, including the authority to assess and collect fees for those purposes.”

The plan calls for amendments to the Fair Credit Reporting Act, the Gramm-Leach-Bliley Act, and other laws to specify that they will be enforced by the new Consumer Financial Protection Agency.

It is unclear how the new agency would impact FTC enforcement actions targeting unfair and deceptive conduct against non-financial institutions under Sec. 5 of the FTC Act that implicate financial consumer protection.

With respect to pending actions that fall in the new agency’s jurisdiction, the new agency would be substituted for the FTC as a party to any related proceeding as of the transfer date.

Presumably, the Division of Financial Practices within the FTC Bureau of Consumer Protection would be moved to the new agency. The proposal specifically addresses the transfer of employees from the FTC to the new agency. It would provide for protections in the short term.

Administrative Procedures Act Rulemaking

As part of the proposal, the FTC would also be granted permission to conduct streamlined rulemaking under the Administrative Procedures Act (APA). The APA procedures would be much less time-consuming than procedures under the agency's current Magnuson-Moss authority.

The proposal is available here on the Department of Treasury website.