WASHINGTON — A House panel approved two bills Wednesday that would expand the power of the Federal Trade Commission and state attorneys general, fueling bankers' concerns that consumer protection could be headed for enforcement outside of the traditional banking agencies.
The bills, which were approved by the House Energy and Commerce subcommittee on commerce, trade and consumer protection, were aimed at closing consumer protection gaps in consumer credit and data security.
Though their sponsor, panel Chairman Rep. Bobby Rush, said that neither bill is meant to cover insured depository institutions, industry representatives said Wednesday that the legislative language was ambiguous and would create a problem if enacted.
They said the bills are the latest attempt by Congress to sever consumer protection from the banking agencies' purview as they seek ways to revamp the regulatory structure.
"You are seeing a resurrection of consumer issues that have been around for some time," said Oliver Ireland, a partner with the law firm Morrison & Foerster and a former Federal Reserve Board lawyer.
The bill on consumer credit and debt, which passed 16 to 9 along party lines, would give the FTC expedited rulemaking authority to target unfair or deceptive acts or practices and to obtain civil penalties, which state attorneys general could enforce.
The data security bill, which passed by voice vote, would require the FTC to issue data-protection and breach-notification requirements that it and state attorneys general could enforce.
During the vote, Rush sought to dispel industry fears that the bills would encroach on current federal regulations for banks. "The manager's amendment ensures that other federal laws are applicable to companies and their data products where appropriate," he said. "Stakeholders raised concerns that laws such as the Gramm-Leach-Bliley Act and the Fair Credit Reporting Act were being subverted by this bill. The manager's amendment erases any room for overlapping, dual regulations on those entities that are already complying under GLB, FCRA and other applicable federal laws."
Still, industry lobbyists said the bills' definitions were vague and did not explicitly carve out banks.
"What we are concerned about is having new requirements apply to those who are already regulated and examined," said Floyd Stoner, the chief lobbyist for the American Bankers Association. "We just want clarity that those that are regulated and examined would not be subject to new requirements."
The legislation may have broader political implications as various congressional committees battle for a slice of the regulatory restructuring pie.
The administration is expected to release more details on its regulatory restructuring plan later this month, with an emphasis on how best to improve consumer protection. Lawmakers could seek to create a separate financial product safety commission or augment the role of existing regulators like the FTC. Several financial services trade groups argued that either result could amount to regulatory overkill.
Bill Himpler, the executive vice president of the American Financial Services Association, which opposes the unfair-practices bill, said the House Energy and Commerce subcommittee's action may be a sign it wants to weigh in on regulatory restructuring. Instead of creating a new consumer protection agency for banks, lawmakers may want to give the FTC power over banks and thrifts.
"I view this as part of the bigger picture of Energy and Commerce in the House and Commerce in the Senate not wanting to cede any ground in the regulatory restructuring debate," he said.
