Expanded Federal Trade Commission Authority Missing from Financial Reform Bill

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

In coming to a consensus on a broad overhaul of financial regulation, House and Senate lawmakers decided on June 25 to exclude from the reform legislation provisions that would have expanded the authority to the Federal Trade Commission.

The proposed “Dodd-Frank Wall Street Reform and Consumer Protection Act” does not include language, which appeared in the House-approved “Wall Street Reform and Consumer Protection Act,” that would have streamlined FTC rulemaking procedures and enabled the agency to pursue civil penalties in court actions for FTC Act violations. The bill passed by the Senate did not include similar amendments to the FTC Act.

The House proposal would have granted the FTC the authority to promulgate rules using Administrative Procedure Act (APA) “notice and comment” rulemaking procedures. The new APA procedures would have replaced the FTC's current Magnuson-Moss rulemaking procedures, which are far more time-consuming.

In addition, the bill would have made it an unfair or deceptive act or practice to knowingly or recklessly provide substantial assistance to another in violating unfair or deceptive acts or practices prohibitions of the FTC Act.

The reform bill also does not include a provision that would have authorized the FTC to seek civil penalties in federal court actions for violations of Sec. 5 of the FTC Act. Currently, the agency must first present actions seeking civil penalties for violations of Sec. 5 of the FTC Act to the Department of Justice so that it can decide whether to file the suit.

Consumer Financial Protection Bureau

The legislation would establish a new Consumer Financial Protection Bureau. The bureau would be housed within the Federal Reserve and would examine and enforce regulations for banks and credit unions with assets in excess of $10 billion. It would consolidate authority that had been dispersed over a number of federal agencies, including the FTC.

Auto dealers pushed hard to be exempt from bureau oversight. They will remain under the jurisdiction of the FTC.

Text of the Conference report appears here.