CFPB Could Help FTC Get Back Consumer Enforcement Tool

The Federal Trade Commission (FTC) on Friday (June 3) released on its annual report to the Consumer Financial Protection Bureau (CFPB) on its enforcement and rulemaking activities in 2021 regarding financial acts. The CFPB will use this report to prepare its own annual report for Congress and depending on which parts the Bureau decides to include, it could help the FTC to recover some consumer enforcement tools lost in 2021.

While most of the regulatory and enforcement activities aimed at protecting consumers regarding financial acts are carried out by the CFPB, the FTC also has enforcement authority to apply the Truth in Lending Act (TILA), the Consumer Leasing Act and the Electronic Fund Transfer Act (EFTA) to the entities that it supervises, which include most providers of financial services that are not banks or federal credit unions.

The FTC has a consumer protection unit which focuses mostly on scams and deceptive practices that cause harm to consumers. On the same day of this report, the FTC reported that since 2021 crypto scam losses top $1 billion. The 2021 report highlights some of the enforcement activities and advocacy efforts regarding these three regulations in three areas:

• Automobile purchase and financing: the report notes two cases. The first one against the owner of four auto dealers, for falsifying consumers’ information on financing applications and misrepresenting financial terms in advertisements. The FTC settled with the owner, who has to pay $450.000 for consumer redress. The second case, against Traffic Jam Events for sending consumers deceptive mailers about potential prize winnings and violating the TILA. The FTC’s order bans the company from the auto industry, prohibits misrepresentations regarding financial assistance from the government, and requires compliance with TILA.
• Payday lending: the report highlights the FTC’s settlement against Harvest Moon Financial for overcharging consumers millions of dollars, deceiving them about the terms of their loans and failing to make required loan disclosures.
• Credit repair and debt relief: The report contains a few examples of advocacy in this space, with several publications to educate consumers about the different credit cards and different types of credit available. On the enforcement front, the report discusses the FTC’s settlement with the operators of a student loan debt relief scheme that promised consumers the company could lower or eliminate student loan balances, but it was imposing upfront fees for credit repair services and signing consumers up for high-interest loans in violation of TILA.

One interesting point raised by the FTC in the report is that since April 2021, when the U.S. Supreme Court issued a decision in AMG Capital Management, LLC v. FTC, the FTC cannot seek monetary redress when enforcing some of these cases. The case involved violations of the FTC Act, the TILA and Regulation Z, and the Court found that the FTC did not have the authority under Section 13(b) of the FTC Act to seek equitable monetary relief. The FTC has asked Congress to amend the FTC Act to enable the Commission to obtain monetary relief for injured consumers under Section 13(b).2. The report also highlights the importance of this tool to provide adequate consumer protection and compensation. Given the CFPB director’s precedents advocating for more enforcement actions from his agency and others, the CFPB could include this FTC request in its report to Congress to help the FTC to recover this power to seek monetary relief from wrongdoers.

CFPB Leads Other Enforcers 

This report comes just a few days after the Bureau announced it was launching a new initiative to ensure that other agencies with consumer financial protection responsibilities apply the rules in a consistent manner. The CFPB will issue Consumer Financial Protection Circulars to government agencies and other enforcers where it will explain how the CFPB intends to enforce federal consumer financial law.

The CFPB is concerned that given the broad variety of agencies responsible for enforcing federal consumer financial law, there is a risk that companies might encounter inconsistent enforcement strategies and approaches. “Consistency is also imperative to creating a level playing field between companies that compete in the same market but are subject to the jurisdiction of different enforcers,” CFPB Director Rohit Chopra said in a blog post.

The agency also noted that it is “beginning to identify” a number of issues that would benefit from more consistent enforcement, but it stopped short of saying which areas.

Additionally, the CFPB also issued on May 19 a new interpretative rule seeking to bolster the states’ enforcement actions to protect consumers. By clarifying the scope of state enforcement under the Consumer Financial Protection Act of 2010 (CFPA), the bureau expects states to take a more active role in protecting consumers “from financial fraud, scams, and other wrongdoings.”

Read more: CFPB Calls on States To Expand Enforcement Efforts