Section 5 of the Federal Trade Commission Act prohibits unfair or deceptive acts or practices. The FTC also has the authority to promulgate rules to prohibit deceptive or unfair practices and enforces a number of other consumer protection statutes. In light of the economic crisis, the FTC is focused on law enforcement, consumer and business education to protect consumers of financial services. Despite the many legitimate, lawfully-operating companies that assist consumers in debt, the FTC continues to focus its efforts on policing this marketplace.
On March 24, 2009, the U.S. House Committee on Energy and Commerce Subcommittee on Commerce, Trade, and Consumer Protection held a hearing on the subject of the role of the Federal Trade Commission ("FTC") in protecting the public, specifically in the area of consumer credit and debt. This hearing came in wake of the FTC's testimony to the Senate Commerce Committee in February. [1]
Newly-appointed FTC Chairman Jon Leibowitz testified before the Subcommittee, reiterating virtually all of the same points that Commissioner Harbour made during her testimony for the FTC before the Senate Commerce Committee several weeks ago. Chairman Leibowitz highlighted the FTC's intent to be more aggressive in pursuing unfair and deceptive practices in the areas of mortgage loan modification and foreclosure rescue consultants, debt negotiation, payday loan lenders, credit repair companies, and debt collection - pointing to several recent enforcement actions targeting these industries. [2]
Chairman Leibowitz also stated that the FTC is in the process of reviving the Executive Working Group, a task force consisting of the FTC, state Attorneys General, and the U.S. Justice Department. The Working Group would allow for increased coordination and cooperation between theses federal and state agencies.
The Chairman's testimony also highlighted the FTC's enforcement "wish list" - a list of expanded enforcement privileges that the FTC believes will help to make the Commission more effective in its response to the constantly evolving unfair and deceptive practices in the area of consumer credit and debt. The list includes expanded rulemaking authority, the authority to obtain civil penalties, and increased resources.
In particular, the Chairman highlighted that the FTC has been given expanded rulemaking authority to initiate a rulemaking proceeding with respect to the entire lifecycle of a mortgage loan. This authority was granted under the Omnibus Appropriations Act and Chairman Leibowitz indicated that this is exemplary of the type of rulemaking authority that the FTC would like generally.
Other witnesses that testified at the hearing included a representative from the National State Attorneys General Program, a law professor, a consumer advocate, and a representative from the American Financial Services Association ("AFSA"). The AFSA representative was the only witness who felt that the FTC had done an effective job in the past few years in enforcement. The other witnesses all called for a more aggressive, coordinated approach to the problem of unfair and deceptive consumer credit and debt practices.
The testimony makes clear that the FTC is committed to and focused on the goal of stepping up enforcement in areas of loan modification, foreclosure rescue, debt negotiation, and other consumer credit and debt practices. The Subcommittee's chairman, Congressman Bobby Rush, also stated that he is currently working on legislation to address abusive credit practices.
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[1] See FTC, Congress and States Focus on Initiatives and New Legislation to Protect Consumers in Financial Distress: Foreclosure Consultants, Credit Counseling, and Debt Settlement under Scrutiny, available at: http://www.venable.com/ftc-congress-and-states-focus-on-initiatives-and-new-legislation-to-protect-consumers-in-financial-distress-foreclosure-consultants-credit-counseling-and-debt-settlement-under-scrutiny-03-11-2009/.
[2] See also, A Legal Issues Primer for Credit Counseling Agencies, Debt Management Plan Providers, and Debt Settlement Companies, available at: http://www.Venable.com/a-legal-issues-primer-for-credit-counseling-agencies-debt-management-plan-providers-and-debt-settlement-companies-10-16-2008/.
For more information on credit counseling, debt settlement, loan modification, credit repair, and related legal topics, contact Jonathan Pompan at 202.344.4383 or jlpompan@Venable.com.
To view Venable's index of articles and PowerPoint presentations on credit counseling, debt settlement, and related legal topics, see www.venable.com/ccds/publications.
This article is not intended to provide legal advice or opinion and should not be relied on as such. Legal advice can only be provided in response to specific fact situations.