[House Report 110-472]
[From the U.S. Government Publishing Office]
110th Congress Rept. 110-472
HOUSE OF REPRESENTATIVES
1st Session Part 2
======================================================================
TO INCLUDE ALL BANKING AGENCIES WITHIN THE EXISTING REGULATORY
AUTHORITY UNDER THE FEDERAL TRADE COMMISSION ACT WITH RESPECT TO
DEPOSITORY INSTITUTIONS, AND FOR OTHER PURPOSES
_______
December 5, 2007.--Ordered to be printed
_______
Mr. Dingell, from the Committee on Energy and Commerce, submitted the
following
R E P O R T
[To accompany H.R. 3526]
[Including cost estimate of the Congressional Budget Office]
The Committee on Energy and Commerce, to whom was referred
the bill (H.R. 3526) to include all banking agencies within the
existing regulatory authority under the Federal Trade
Commission Act with respect to depository institutions, and for
other purposes, having considered the same, report favorably
thereon with an amendment and recommend that the bill as
amended do pass.
CONTENTS
Page
Amendment........................................................ 1
Purpose and Summary.............................................. 2
Background and Need for Legislation.............................. 3
Hearings......................................................... 4
Committee Consideration.......................................... 5
Committee Votes.................................................. 5
Committee Oversight Findings..................................... 5
Statement of General Performance Goals and Objectives............ 5
New Budget Authority, Entitlement Authority, and Tax Expenditures 5
Earmarks and Tax and Tariff Benefits............................. 5
Committee Cost Estimate.......................................... 5
Congressional Budget Office Estimate............................. 6
Federal Mandates Statement....................................... 7
Advisory Committee Statement..................................... 7
Constitutional Authority Statement............................... 7
Applicability to Legislative Branch.............................. 7
Section-by-Section Analysis of the Legislation................... 7
Appendix......................................................... 9
Changes in Existing Law Made by the Bill, as Reported............ 11
Amendment
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. INCLUSION OF ALL BANKING AGENCIES.
(a) In General.--The second sentence of section 18(f)(1) of the
Federal Trade Commission Act (15 U.S.C. 57a(f)(1)) is amended--
(1) by striking ``The Board of Governors of the Federal
Reserve System (with respect to banks) and the Federal Home
Loan Bank Board (with respect to savings and loan institutions
described in paragraph (3))'' and inserting ``Each Federal
banking agency (with respect to depository institutions), in
consultation with the Commission,''; and
(2) by inserting ``in consultation with the Commission''
after ``shall prescribe regulations''.
(b) FTC Concurrent Rulemaking.--Section 18(f) of such Act is
further amended by inserting after the second sentence the following:
``Such regulations shall be prescribed jointly by such agencies to the
extent practicable. Notwithstanding any other provision of this
section, whenever such agencies commence such a rulemaking proceeding,
the Commission, with respect to the entities within its jurisdiction
under this Act, may commence a rulemaking proceeding and prescribe
regulations in accordance with section 553 of title 5, United States
Code. If the Commission commences such a rulemaking proceeding, the
Commission, the Federal banking agencies, and the National Credit Union
Administration Board shall consult and coordinate with each other so
that the regulations prescribed by each such agency are consistent with
and comparable to the regulations prescribed by each other such agency
to the extent practicable.''.
(c) GAO Study and Report.--Not later than 18 months after the date
of enactment of this Act, the Comptroller General shall transmit to
Congress a report on the status of regulations of the Federal banking
agencies and the National Credit Union Administration regarding unfair
and deceptive acts or practices by the depository institutions.
(d) Technical and Conforming Amendments.--Section 18(f) of the
Federal Trade Commission Act (15 U.S.C. 57a(f)) is amended--
(1) in the first sentence of paragraph (1)--
(A) by striking ``banks or savings and loan
institutions described in paragraph (3), each agency
specified in paragraph (2) or (3)'' and inserting
``depository institutions, the Federal banking agencies
and the National Credit Union Administration Board'';
(2) in the third sentence of paragraph (1)--
(A) by striking ``each such Board'' and inserting
``each such banking agency and the National Credit
Union Administration Board'';
(B) by striking ``banks or savings and loan
institutions described in paragraph (3)'' each place
such term appears and inserting ``depository
institutions''; and
(C) by striking ``with respect to banks, savings
and loan institutions'' and inserting ``with respect to
depository institutions'';
(3) by adding at the end of paragraph (1) the following new
sentence: ``For purposes of this subsection, the terms `Federal
banking agency' and `depository institution' have the same
meaning as in section 3 of the Federal Deposit Insurance
Act.'';
(4) in paragraph (3), by inserting ``by the Director of the
Office of Thrift Supervision'' before the period at the end;
(5) in paragraph (4), by inserting ``by the National Credit
Union Administration'' before the period at the end; and
(6) in paragraph (6), by striking ``the Board of Governors
of the Federal Reserve System'' and inserting ``any Federal
banking agency or the National Credit Union Administration
Board''.
Purpose and Summary
H.R. 3526, entitled ``A bill to include all banking
agencies within the existing regulatory authority under the
Federal Trade Commission Act with respect to depository
institutions,'' is intended to provide financial consumers with
additional protections against unfair or deceptive acts or
practices in or affecting commerce by expanding the range of
financial regulators with the authority to promulgate
regulations defining with specificity and containing
requirements for the purpose of preventing such acts or
practices under the Federal Trade Commission Act (FTC Act).
H.R. 3526 expands the range of regulators with promulgation
authority under Section 18(f) of the FTC Act (currently the
Board of Governors of the Federal Reserve with respect to
banks, the Office of Thrift Supervision with respect to savings
and loan institutions, and the National Credit Union
Administration (NCUA) with respect to Federal credit unions) to
include the other Federal banking regulators, namely the
Federal Deposit Insurance Corporation and the Office of the
Comptroller of the Currency with respect to institutions that
they regulate.
The legislation requires these entities to prescribe any
such regulations in consultation with the Federal Trade
Commission (FTC), and that such regulations shall be prescribed
jointly by such agencies to the extent practicable. The
legislation also provides that, whenever the Federal banking
agencies and NCUA commence rulemaking under the FTC Act for the
entities that they regulate, the FTC may promulgate consistent
and comparable rules for the entities that it regulates. The
legislation allows the FTC, in those instances, to use standard
notice and comment rulemaking procedures under the
Administrative Procedure Act. Finally, the bill requires the
Comptroller General to conduct a study and report to Congress
on the status of regulations of the Federal banking agencies
and the NCUA regarding unfair or deceptive acts or practices by
depository institutions.
Background and Need for Legislation
Section 5(a)(1) of the FTC Act declares unlawful ``unfair
or deceptive acts or practices in or affecting commerce.''
Section 5(a)(2) authorizes and directs the Federal Trade
Commission (FTC) to prevent persons, partnerships, or
corporations, ``except banks, savings and loan institutions
described in section 18(f)(3), [and] Federal credit unions
described in section 18(f)(4)'' from using unfair or deceptive
acts or practices in or affecting commerce. Section 18(a)(1)(B)
authorizes the FTC to prescribe rules which define with
specificity acts or practices in or affecting commerce within
the meaning of Section 5(a)(1).
Section 18 (f) of the FTC Act addresses the rulemaking
authority for certain entities excepted from the FTC's
rulemaking authority. It contains three general requirements.
First, each agency specified in paragraph (2) or (3) of this
subsection must establish a separate division of consumer
affairs to receive and take appropriate action upon complaints
with respect to such acts or practices by banks or savings and
loan institutions. Second, the Board of Governors of the
Federal Reserve System, the Office of Thrift Supervision (as
successor to the Federal Home Loan Bank Board), and the
National Credit Union Administration are required to prescribe
regulations defining with specificity such unfair or deceptive
acts or practices, and containing requirements prescribed for
the purpose of preventing such acts or practices. Third,
whenever the FTC prescribes a rule under subsection (a)(1)(B)
of this section, then within 60 days after such rule takes
effect, each specified depository institution regulator must
promulgate substantially similar regulations imposing
substantially similar requirements, unless (1) they find that
the acts or practices ``are not unfair or deceptive'' or (2)
the Federal Reserve Board finds that implementation of similar
regulations ``would seriously conflict with essential monetary
and payments systems policies'' of the Board, and publishes any
such findings and the reasons therefore in the Federal
Register.
Since these authorities were granted in the 1970s, they
have been sparsely implemented and certainly underutilized. The
record indicates that the three named agencies have acted only
in the wake of FTC rulemaking. For example, in 1985 the
agencies issued equivalents of the FTC's Credit Practices Rule
following the FTC's action in 1984. The Committee is unaware of
any major rulemaking under section 18(f) since then. The FTC,
by contrast, has been an aggressive regulator and enforcer, in
accordance with a substantial body of jurisprudence, of the
prohibition against unfair or deceptive acts or practices under
the FTC Act across nearly all industries in the United States,
including in the financial services area. The lack of clear and
consistent rules and enforcement in this area has left
consumers unprotected from a range of abuses across myriad
areas including subprime lending, credit card interest rate
practices, checking account overdraft fees, and the like.
On May 11, 2007, Rep. Barney Frank, Chairman of the
Committee on Financial Services, and Rep. John D. Dingell,
Chairman of the Committee on Energy and Commerce, wrote to the
heads of the Federal Reserve Board, Office of the Comptroller
of the Currency, Office of Thrift Supervision, Federal Deposit
Insurance Corporation, and the Federal Trade Commission,
expressing concerns about this failure, and asking for
aggressive use of the regulators' authorities under the FTC Act
to address unfair or deceptive acts or practices (see
Appendix). The Committee is unable to find that any meaningful
actions have ensued as a result of this shot across the bow.
The Committee on Financial Services held hearings on June
13, 2007, and July 25, 2007, entitled ``Improving Federal
Consumer Protection in Financial Services.'' Consumer witnesses
argued for meaningful and clear rules and enforcement for the
benefit both of consumers and the relevant industries. The
Comptroller of the Currency and the Chairman of the FDIC both
testified that they would support, and use, an extension of FTC
Act rulemaking authority to all of the Federal banking
agencies. The Committee is not convinced that this reform goes
far enough, but is willing to give it a fair opportunity to
produce significant results. It has added strengthening
amendments to the version reported by our sister committee, and
intends to conduct oversight hearings on the implementation of
this legislation and the operation of Section 18(f).
Hearings
The Subcommittee on Commerce, Trade, and Consumer
Protection held a hearing on Tuesday, October 23, 2007,
entitled ``Enhancing FTC Consumer Protection in Financial
Dealings, with Telemarketers, and on the Internet,'' which
examined three bills: H.R. 2601, H.R. 3461, and H.R. 3526.
Testimony was received from Ms. Lydia B. Parnes, Director,
Bureau of Consumer Protection, U.S. Federal Trade Commission.
Committee Consideration
On Tuesday, October 23, 2007, the Subcommittee on Commerce,
Trade, and Consumer Protection met in open markup session and
favorably forwarded H.R. 3526, amended, to the full Committee
for consideration, by a voice vote. On Tuesday, October 30,
2007, the full Committee met in open markup session and ordered
H.R. 3526 favorably reported to the House, amended, by a voice
vote.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto.
There were no record votes taken on amendments or in connection
with ordering H.R. 3526 reported. A motion by Mr. Dingell to
order H.R. 3526 favorably reported to the House, amended, was
agreed to by a voice vote.
Committee Oversight Findings
Regarding clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the oversight findings of the
Committee regarding H.R. 3526 are reflected in this report.
Statement of General Performance Goals and Objectives
The purpose of H.R. 3526 is to reduce the harm to
individuals from unfair or deceptive acts or practices by
expanding the range of regulators authorized to promulgate
regulations identifying and prohibiting such practices under
the FTC Act with respect to depository institutions within
their respective jurisdictions.
New Budget Authority, Entitlement Authority, and Tax Expenditures
Regarding compliance with clause 3(c)(2) of rule XXI of the
Rules of the House of Representatives, the Committee adopts as
its own the estimate of budget authority and revenues regarding
H.R. 3526 prepared by the Director of the Congressional Budget
Office pursuant to section 402 of the Congressional Budget Act
of 1974. The Committee finds that H.R. 3526 would result in no
new or increased entitlement authority or tax expenditures.
Earmarks and Tax and Tariff Benefits
Regarding compliance with clause 9 of rule XXI of the Rules
of the House of Representatives, H.R. 3526 does not contain any
Congressional earmarks, limited tax benefits, or limited tariff
benefits as defined in clause 9(d), 9(e), or 9(f) of rule XXI.
Committee Cost Estimate
The Committee adopts as its own the cost estimate on H.R.
3526 prepared by the Director of the Congressional Budget
Office pursuant to section 402 of the Congressional Budget Act
of 1974.
Congressional Budget Office Estimate
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate on
H.R. 3526 provided by the Congressional Budget Office pursuant
to section 402 of the Congressional Budget Act of 1974:
December 4, 2007.
Hon. John D. Dingell,
Chairman, Committee on Energy and Commerce,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 3526, a bill to
include all banking agencies within the existing regulatory
authority under the Federal Trade Commission Act with respect
to depository institutions, and for other purposes.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Kathleen
Gramp.
Sincerely,
Peter R. Orszag.
Enclosure.
H.R. 3526--A bill to include all banking agencies within the existing
regulatory authority under the Federal Trade Commission Act
with respect to depository institutions, and for other purposes
H.R. 3526 would increase the number of federal agencies
authorized to issue regulations regarding unfair and deceptive
financial practices under the Federal Trade Commission Act.
Enacting this bill would allow the Federal Deposit Insurance
Corporation (FDIC) and the Office of the Comptroller of the
Currency (OCC) to issue such rules for institutions under their
jurisdiction. Under current law, such rules may only be issued
by the Board of Governors of the Federal Reserve, the National
Credit Union Administration, and the Federal Home Loan Bank
Board. The bill also would require that such regulations be
developed in consultation with the Federal Trade Commission
(FTC).
CBO estimates that implementing H.R. 3526 would have no
significant net impact on federal spending. Based on
information from the affected agencies, CBO estimates that the
activities required by the bill would increase discretionary
costs for the FTC by less than $500,000 a year. Additional
costs incurred by the OCC and FDIC would affect direct
spending, but such expenditures would be offset by income from
annual fees and deposit insurance premiums, respectively. Thus,
CBO estimates that enacting this bill would have a negligible
net effect on direct spending and would have no effect on
revenues.
H.R. 3526 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act and
would not directly affect the budgets of state, local, or
tribal governments.
On October 3, 2007, CBO transmitted a cost estimate for
H.R. 3526 as ordered reported by the House Committee on
Financial Services. That version of the legislation did not
require consultation with the FTC in developing these
regulations; neither version of the bill would have any
significant budgetary impact.
The CBO staff contact for this estimate is Kathleen Gramp.
This estimate was approved by Peter H. Fontaine, Assistant
Director for Budget Analysis.
Federal Mandates Statement
The Committee adopts as its own the estimate of Federal
mandates regarding H.R. 3526 prepared by the Director of the
Congressional Budget Office pursuant to section 423 of the
Unfunded Mandates Reform Act.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by H.R.
3526.
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds that the
Constitutional authority for this legislation is provided in
article I, section 8, clause 3, which grants Congress the power
to regulate commerce with foreign nations, among the several
States, and with the Indian tribes.
Applicability to Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act of 1995.
Section-by-Section Analysis of the Legislation
Section 1. Inclusion of all banking agencies
Section 1(a) amends the rulemaking authority under Section
18(f)(1) of the FTC Act by deleting the current references to
the Board of Governors of the Federal Reserve Board (with
respect to banks) and the Federal Home Loan Bank Board (with
respect to savings and loan institutions) and instead
authorizes each Federal banking agency (with respect to
depository institutions) to adopt rules, in consultation with
the Federal Trade Commission (FTC).
Section 1(b) further amends Section 18(f) to require that
such regulations be prescribed jointly by such agencies to the
extent practicable. The legislation also provides that,
whenever these agencies commence a rulemaking under the FTC
Act, the FTC, with respect to entities within its jurisdiction,
may commence a rulemaking proceeding and prescribe regulations
in accordance with section 553 of title 5, United States Code.
This authority does not limit the FTC's ability to issue rules
independently pursuant to Section 18(a) of the FTC Act. It is
solely meant to put these regulators on equal footing with
respect to use of the notice and comment procedures of the
Administrative Procedure Act with respect to coordinated
rulemakings under this provision in order to avoid application
of inconsistent standards, as well as to improve interagency
coordination on rulemakings.
If the FTC commences such a rulemaking proceeding, the
legislation directs the FTC, the Federal banking agencies, and
the National Credit Union Administration (NCUA) to consult and
coordinate with each other so that the regulations prescribed
are consistent and comparable to the maximum extent
practicable.
The authority provided to the banking agencies and the NCUA
is not to be construed as limiting the jurisdiction or
authority of the FTC in any way. In particular, the
substitution of ``depository institutions'' as defined in
section 3 of the Federal Deposit Insurance Act (that is, ``any
bank or savings association''), in lieu of the prior ``banks or
savings and loan institutions described in paragraph (3)'' is
simply a technical change to adopt a shorter phrase.
The Committee expects adherence to the legislation's
consultation requirements. The FTC is the expert agency
responsible for ensuring appropriate and consistent
interpretation and application, in accordance with a
substantial body of jurisprudence, of the prohibition against
unfair or deceptive practices in the FTC Act across nearly all
industries in the United States, including financial services.
For example, the FTC has targeted unfair or deceptive practices
in mortgage lending, from advertising and marketing through
loan servicing. In the past decade, the FTC has brought 21 such
actions, focusing in particular on the subprime market,
resulting in courts collectively having ordered more than $320
million to be returned to consumers. The Committee recognizes
that supervisors of depository institutions have specialized
expertise as to the institutions that they supervise, but the
Committee believes, particularly given the record before it,
that it is essential that regulations for depository
institutions be in harmony with the broad principles of the
statute and its implementation by the FTC.
Section 1(c) requires the Comptroller General to submit to
Congress, not later than 18 months after date of enactment of
this Act, a report on the status of regulations of the Federal
banking agencies and the NCUA regarding unfair or deceptive
acts or practices by depository institutions. The Committee
expects to conduct vigorous oversight of this area to ensure
that consumers of financial services are receiving needed
protections against unfair or deceptive trade practices.
Section 1(d) adopts a number of technical and conforming
amendments.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
FEDERAL TRADE COMMISSION ACT
* * * * * * *
Sec. 18. (a) * * *
* * * * * * *
(f)(1) In order to prevent unfair or deceptive acts or
practices in or affecting commerce (including acts or practices
which are unfair or deceptive to consumers) by [banks or
savings and loan institutions described in paragraph (3), each
agency specified in paragraph (2) or (3)] depository
institutions, the Federal banking agencies and the National
Credit Union Administration Board of this subsection shall
establish a separate division of consumer affairs which shall
receive and take appropriate action upon complaints with
respect to such acts or practices by banks or savings and loan
institutions described in paragraph (3), subject to its
jurisdiction. [The Board of Governors of the Federal Reserve
System (with respect to banks) and the Federal Home Loan Bank
Board (with respect to savings and loan institutions described
in paragraph (3))] Each Federal banking agency (with respect to
depository institutions), in consultation with the Commission,
and the National Credit Union Administration Board (with
respect to Federal credit unions described in paragraph (4))
shall prescribe regulations in consultation with the Commission
to carry out the purposes of this section, including
regulations defining with specificity such unfair or deceptive
acts or practices, and containing requirements prescribed for
the purpose of preventing such acts or practices. Such
regulations shall be prescribed jointly by such agencies to the
extent practicable. Notwithstanding any other provision of this
section, whenever such agencies commence such a rulemaking
proceeding, the Commission, with respect to the entities within
its jurisdiction under this Act, may commence a rulemaking
proceeding and prescribe regulations in accordance with section
553 of title 5, United States Code. If the Commission commences
such a rulemaking proceeding, the Commission, the Federal
banking agencies, and the National Credit Union Administration
Board shall consult and coordinate with each other so that the
regulations prescribed by each such agency are consistent with
and comparable to the regulations prescribed by each other such
agency to the extent practicable. Whenever the Commission
prescribes a rule under subsection (a)(1)(B) of this section,
then within 60 days after such rule takes effect [each such
Board] each such banking agency and the National Credit Union
Administration Board shall promulgate substantially similar
regulations prohibiting acts or practices of [banks or savings
and loan institutions described in paragraph (3)] depository
institutions, or Federal credit unions described in paragraph
(4), as the case may be, which are substantially similar to
those prohibited by rules of the Commission and which impose
substantially similar requirements, unless (A) any such Board
finds that such acts or practices of [banks or savings and loan
institutions described in paragraph (3)] depository
institutions, as the case may be, are not unfair or deceptive,
or (B) the Board of Governors of the Federal Reserve System
finds that implementation of similar regulations [with respect
to banks, savings and loan institutions] with respect to
depository institutions or Federal credit unions would
seriously conflict with essential monetary and payments systems
policies of such Board, and publishes any such finding and the
reasons therefor, in the Federal Register. For purposes of this
subsection, the terms ``Federal banking agency'' and
``depository institution'' have the same meaning as in section
3 of the Federal Deposit Insurance Act.
* * * * * * *
(3) Compliance with regulations prescribed under this
subsection shall be enforced under section 8 of the Federal
Deposit Insurance Act with respect to savings associations as
defined in section 3 of the Federal Deposit Insurance Act by
the Director of the Office of Thrift Supervision.
(4) Compliance with regulations prescribed under this
subsection shall be enforced with respect to Federal credit
unions under sections 120 and 206 of the Federal Credit Union
Act (12 U.S.C. 1766 and 1786) by the National Credit Union
Administration.
* * * * * * *
(6) The authority of [the Board of Governors of the Federal
Reserve System] any Federal banking agency or the National
Credit Union Administration Board to issue regulations under
this subsection does not impair the authority of any other
agency designated in this subsection to make rules respecting
its own procedures in enforcing compliance with regulations
prescribed under this subsection.
* * * * * * *