03:00 PM Russell Senate Office Building 253
WASHINGTON, D.C. – The U.S. Senate Committee on Commerce, Science, and Transportation announces the following Consumer Protection, Product Safety, and Insurance Subcommittee hearing on Financial Services and Products: The Role of the Federal Trade Commission on Protecting Consumers, Part II*.
*This hearing follows another Commerce Committee hearing held in February, 2010 titled Financial Services and Products: The Role of the Federal Trade Commission in Protecting Consumers, Part I.
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Chairman John D. (Jay) Rockefeller IVU.S. Senate Committee on Commerce, Science, and Transportation
WASHINGTON, D.C.—Today’s hearing reflects the Commerce Committee’s ongoing commitment to consumer financial protection and the important role of the Federal Trade Commission (FTC). It is an important follow-up to the full committee hearing we held on February 4th when we heard from FTC Chairman Jon Leibowitz.
Today, members of the subcommittee will hear a wider array of viewpoints on proposed reforms to the FTC and its authorizing statute, the Federal Trade Commission Act. I want to thank Senator Pryor for presiding and for his excellent work as Chairman of the Subcommittee on Consumer Protection.
As I said last month, we cannot forget how we got here: many of the enormous economic problems we face today are a direct result of weak consumer protections in the financial sector.
We have to do better for the American consumer. With family budgets stretched thin, foreclosures up and unemployment still sky-high, unscrupulous business practices continue to target consumers directly when they can least afford it. The American people need to know there is someone out there they can trust to stand up against those bad actors.
The Federal Trade Commission is our nation’s premier consumer protection agency. When credit repair companies defraud consumers, it is the FTC that steps in to stop the scams and provide relief to victims. When people are sold products or services under false pretenses, billed for services they do not want, or have their identity stolen, it is the FTC that takes action. Only the FTC has the experience and expertise to regulate consumer protection across a broad swath of the U.S. economy.
The Commission’s core consumer protection mission embodied under Section 5 of the FTC Act is to prevent and enforce against “unfair or deceptive acts or practices in or affecting interstate commerce.” This broad prohibition has served as the bedrock of consumer protection law in the United States for over 70 years. Throughout its history, the FTC has used its authority to enforce and regulate against unfair or deceptive acts or practices to address a wide range of commercial abuses – from abusive credit practices, to fraudulent debt relief scams, to deceptive advertisements and marketing schemes.
Whenever and however the Senate addresses financial regulatory reform and consumer protection in the coming weeks and months, I believe this well-established authority must be kept firmly intact. We cannot afford to compromise the FTC’s core consumer protection mission that has served the American public well.
What is more, we may need further reforms to the FTC and its underlying statute, to ensure the Commission can fulfill its mission as effectively as possible. During the full committee hearing we discussed a number of long-sought reforms. Consumer advocates believe we need to liberate the FTC from statutory limitations that have shackled the Commission from aggressively and effectively addressing abusive commercial practices.
At the top of the list: granting the FTC normal rulemaking authority set forth under the Administrative Procedures Act. Currently, the Commission must follow cumbersome Magnuson-Moss rulemaking procedures, so difficult to navigate that it can take the FTC, literally, 10 years to promulgate a rule involving any controversy. The rulemaking process is so burdensome the Commission no longer devotes any time or resources to it.
Critics argue that Magnuson-Moss’s procedural hurdles are necessary given the broad scope of “unfair or deceptive acts or practices.” And they point to alleged Commission abuses of the past, specifically during the late 1970s. But the statutory and regulatory landscape has changed significantly since the turbulent 70s, and I am not sure the criticism still stands.
Other proposed reforms include granting the Commission authority to:
- Independently seek civil penalties without approval from the Justice Department;
- Enforce against those who aid and abet unfair or deceptive acts or practices and;
- Seek civil penalties for general violations of the FTC Act.
All of these reforms were included in the House-passed version of consumer financial protection legislation, and they deserve to be considered in our Committee as well.
We can bring much-needed transparency to financial services by fully preserving the FTC’s enormously important role in protecting consumers from unfair or deceptive practices and strengthening that authority through legislative reforms. As Chairman of the Commerce Committee with a fundamental commitment to consumer protection, I fully intend to pursue the legislative options that best serve this goal.
Again, I want to thank Senator Pryor for presiding over this important hearing. And I want to thank our witnesses for testifying today. As the Committee continues to focus on consumer financial protection, we will continue to call on their expertise and perspective.
Senator Kay Bailey HutchisonRanking MemberU.S. Senate Committee on Commerce, Science, and Transportation
STATEMENT OF SENATOR KAY BAILEY HUTCHISON
COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
SUBCOMMITTEE ON CONSUMER PROTECTION, PRODUCT SAFETY, AND INSURANCE
MARCH 18, 2009
Thank you, Mr. Chairman, for scheduling this second hearing this year to review the Federal Trade Commission (FTC) and the role it plays in protecting consumers.
Last month, FTC Chairman John Leibowitz appeared before the Committee and outlined a request for new authorities for the Commission. Chairman Leibowitz stated that the significant expansions of authority and jurisdiction are necessary in his judgment to protect consumers. I look forward to working with my colleagues to consider this request and to making sure that the FTC has the resources and authorities that it needs to execute its vital consumer protection mission. I would be remiss, however, if I did not say that I am concerned about the potential for a significant increase in the agency’s regulatory footprint given the extremely broad jurisdiction it has.
As we continue our work on consumer protection as it relates to the FTC, I believe we need to remain mindful of the costs associated with complying with new regulations and the difficult economic circumstances of the country. Protecting consumers is a key responsibility of the FTC and of this Committee, and we can stay true, in my judgment, to that goal while not complicating the efforts of thousands of businesses to create new jobs by dramatically increasing their legal and operational costs.
In evaluating whether, and how, to change the scope and extent of FTC regulatory authority, I believe we must first ask whether there is a particular exigency, or area of consumer harm, that is so pervasive that the FTC’s existing enforcement capabilities and rulemaking processes are not sufficient to address the issue. Second, if there is such an exigency, is the proposed legislative change broadly applied, resulting in greater regulatory burdens across a wide range of industries, or is it appropriately narrow to provide the FTC greater ability to develop rules and carry out enforcement actions directly relevant to that exigency. Third, we need to consider whether the FTC has sufficient personnel in key areas of its responsibility to carry out its enforcement and consumer protection mandates. Finally, we should consider whether there are areas, such as Internet-based commerce where the FTC lacks technical proficiency and experience such that we should require it to proceed carefully through traditionally deliberative rulemaking proceedings that allow extensive comment from the public and the relevant industries.
This framework is how I will be looking at any potential reauthorization of the FTC. I am pleased that this hearing will provide concerned entities and knowledgeable parties the opportunity to express their views on what could be a substantial variation of authority for an already powerful federal agency. I do wish, however, that we could hear from more of the stakeholders and a broader segment of the public interest community.
When Chairman Leibowitz testified before this Committee last month, he specifically requested the ability to use streamlined Administrative Procedure Act-style rulemaking across the entirety of the Commission’s broad jurisdiction. He also requested the ability to collect civil penalties for violations of the FTC Act, the authority to litigate independently when seeking civil penalties, and the ability to pursue parties the FTC believes “aided or abetted” violators of the FTC Act. While I appreciate the Chairman’s position, I will say at the outset that I have very strong concerns about these requests, particularly permitting the FTC to promulgate rules using the procedures outlined in the Administrative Procedure Act (APA). We must not forget the reasons why the more deliberative rulemaking process was established for the FTC in the first place, it’s rules apply to a significant range of the nation’s economy and the impact of hastily crafted rules has the potential for substantial, and costly, unintended consequences. Congress expressed a desire for the FTC to proceed through additional steps that allow for extensive comment and input to avoid these unintended consequences.
Mr. Chairman, we all share the desire to ensure that the FTC has all of the tools that it needs to protect consumers, particularly during a difficult economic climate where some have sought to prey upon vulnerable consumers. The key point, however, is to ensure the agency has the authority it actually needs. I have not seen an indication that the FTC actually needs these new authorities to address any existing or ongoing activity. I will be looking for that demonstration as we move forward and will apply the framework for evaluating the FTC’s appropriate structure and authority that I outlined earlier. I hope that we will proceed carefully with potential legislation.
Thank you again, Mr. Chairman.
The Honorable Thomas RoschCommissionerthe Federal Trade Commission
Witness Panel 2
Mr. Edmund MierzwinskiDirector, Consumer ProgramU.S. PIRG, The Federation of State Public Interest Research Groups
The Honorable Timothy MurisFormer Chairman of the Federal Trade CommissionFoundation Professor, George Mason University School of Law, and Of Counsel, O’Melveny & Myers LLP
Ms. Dee PridgenAssociate Dean and Professor of LawUniversity of Wyoming College of Law
Ms. Linda A. WoolleyExecutive Vice President, Government Affairsthe Direct Marketing Association