CFPA Bill Passes House Financial Services Committee

On a largely party-line vote of 39-29, the House Financial Services Committee today approved the "Consumer Financial Protection Agency Act" (H.R.3126).  That bill would create a new federal agency with sweeping new powers and could radically transform and impact the Federal Trade Commission (FTC).  The House Energy and Commerce Committee is expected to review the bill in the next few weeks and may offer more changes in the regulatory authority of the FTC.  House leadership hopes to have the bill ready to go to the floor this fall.

We need your input on this legislation.

We have been actively lobbying this issue with a particular focus on how this legislation affects the FTC.  The original bill would have transferred virtually all of the FTC's regulatory authority in the financial marketing area to the new CFPA.  Much of the FTC staff working in these areas would have been transferred as well.  This almost certainly would have severely disabled the Commission. 

The bill approved today by the Committee still moves various financial regulatory authority from the Commission to the CFPA, but it provides for a greater residuary responsibility for the FTC.  The Commission can act in these financial areas after notifying the CFPA and waiting for 30 days.  There no longer is a requirement of personnel transfer so how this plays out is ambiguous.  In our view, if there is not a major transfer of personnel from the FTC to the CFPA, then the CFPA will have to hire a whole new cadre of experts as the agency with primary jurisdiction in the financial marketing area.

H.R.3216 would give the states concurrent authority to enforce regulations adopted by the CFPA and give them the green light to adopt consumer protection laws that are even stricter than the federal laws.  Thus, it is possible that advertisers in the financial sector will face regulation from the CFPA, the FTC and the states.  This will certainly balkanize regulation of financial marketing and undermine the goal of consistent and coherent national regulation.

The bill also would give the CFPA broad "unfairness" rulemaking authority that goes far beyond the current authority for the FTC.  "Unfairness" is a highly elusive and amorphous concept so Congress put important limitations on the rulemaking powers of the FTC.  Those limits are missing in this bill, so the CFPA would have nearly unfettered discretion to issue broad rules regulating the marketing of financial products and services based on "unfairness."

In addition, the CFPA bill contains provisions that would alter long standing procedures at the FTC.  The bill would allow the Commission to carry out rapid across the board industry wide notice and comment rulemakings rather than having to use the more rigorous Magnuson-Moss rulemaking procedures.  Also, the Commission would have expanded "aiding and abetting" provisions that would implicate the ad agencies and media.

We have tried to convince the House Energy and Commerce Committee to either uphold the Magnuson-Moss provisions or keep some of the procedural safeguards in the Act.  These safeguards include: the requirement that the Commission must identify a pattern of activity - a prevalence, as opposed to one instance -- before engaging in a rulemaking; the requirement that a rule may be overturned by the courts if it is not supported by substantial evidence taken as a whole; the requirement that the Commission provide a statement as to the economic effect of the rule.  All of these protections are presently being abrogated in the bill.

The marketing community is facing a much more activist FTC.  These procedural safeguards would provide some protection in the event the FTC decides to initiate major rulemakings in various controversial areas, such as children's advertising, green marketing or online behavioral advertising.

The House Energy and Commerce Committee is likely to hold a mark up on this bill within the next couple of weeks and unless they hear from the business community more forcefully, these changes will be ratified.  In addition, we have been told by some Hill staff that the Committee may add provisions including the imposition for the first time of immediate civil penalties for violations of the FTC Act.

Prior to the Financial Services Committee markup, ANA sent a letter expressing our serious concerns about several changes the legislation would make in the jurisdiction and regulatory powers of the Commission as well as expanded powers for the new CFPA. 

We have also been holding meetings with members of the Senate to discuss these issues.  Senate Banking Committee Chairman Chris Dodd is working to develop legislation but no companion bill to H.R.3126 has been introduced in the Senate. 

We need your input.  If you have any questions or comments about the impact of the CFPA on the marketing community, please contact Dan Jaffe ( or Keith Scarborough ( in ANA's Washington, DC office at (202) 296-1883.