[DOCID: f:hr472p1.110]
From the House Reports Online via GPO Access
[wais.access.gpo.gov]
110th Congress Rept. 110-472
HOUSE OF REPRESENTATIVES
1st Session Part 1
======================================================================
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. Frank of Massachusetts, from the Committee on Financial Services,
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 Financial Services, 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 without amendment and recommend that the bill do pass.
CONTENTS
Page
Purpose and Summary.............................................. 1
Background and Need for Legislation.............................. 2
Hearings......................................................... 3
Committee Consideration.......................................... 4
Committee Votes.................................................. 4
Committee Oversight Findings..................................... 4
Performance Goals and Objectives................................. 4
New Budget Authority, Entitlement Authority, and Tax Expenditures 4
Committee Cost Estimate.......................................... 5
Congressional Budget Office Estimate............................. 5
Federal Mandates Statement....................................... 6
Advisory Committee Statement..................................... 6
Constitutional Authority Statement............................... 6
Applicability to Legislative Branch.............................. 6
Earmark Identification........................................... 6
Section-by-Section Analysis of the Legislation................... 6
Changes in Existing Law Made by the Bill, as Reported............ 7
Purpose and Summary
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,'' is
intended to provide financial consumers with additional
regulatory protections against unfair and deceptive trade
practices by expanding the range of financial regulators with
the authority to promulgate regulations identifying and
restricting such practices under the Federal Trade Commission
Act (``FTC Act''). H.R. 3526 expands the range of regulators
with promulgation authority (currently the Board of Governors
of the Federal Reserve, the Office of Thrift Supervision (as
successor to the Federal Home Loan Bank Board), and the
National Credit Union Administration) to include the other
federal bank regulators, namely the Federal Deposit Insurance
Corporation and the Office of the Comptroller of the Currency.
The legislation also states that regulations promulgated under
the relevant section of the FTC Act shall be prescribed
``jointly by such agencies to the extent practicable.''
Background and Need for Legislation
The Federal Trade Commission Act gives the Federal Trade
Commission the authority to write regulations and take other
actions against unfair and deceptive acts and practices in
commerce. However, Section 18(f)(1) of that Act provides an
exception for federally-regulated financial institutions,
giving the authority to write rules identifying and preventing
unfair and deceptive acts and practices for banks, savings and
loans and Federal credit unions to the Board of Governors of
the Federal Reserve, the Federal Home Loan Bank Board
(superseded by the Office of Thrift Supervision), and the
National Credit Union Administration, respectively.
Since this authority was granted in the 1970s, the three
named agencies have used it very sparingly. Despite a statutory
requirement (Section 18(f)(1) of the Act) that they ``shall
prescribe regulations'' identifying and preventing such acts
and practices, the agencies have issued only a handful of
rules, generally only acting following formal rulemakings by
the Federal Trade Commission. For example, in 1985 the agencies
issued equivalents of the FTC's Credit Practices Rule following
the FTC's action in 1984. There has been no major rulemaking
under this authority since, however. While the statute requires
the three banking agencies to act when the FTC does, their
authority (and mandate) to issue rules of their own is not
dependent upon FTC action.
This lack of clear rules has led to an absence of consumer
protections across a broad range of financial products and
services. Consumer advocates have identified many financial
practices--in areas ranging from checking account overdraft
fees to ``universal default'' credit card interest rate
increases--that can disadvantage consumers, yet few of these
have been addressed by an open, transparent regulatory process.
Regulators have claimed that their private examination
procedures and enforcement actions are designed to address many
unfair and deceptive practices, but neither the Committee nor
the public has the ability to evaluate the effectiveness of
these processes--they are by nature closed to public scrutiny.
In addition, such non-public enforcement, unlike a standard
rulemaking, provides no guidance either to other institutions
or to consumers about which practices are unfair or deceptive.
In a July 25, 2007 Financial Services Committee hearing,
consumer witnesses argued that consumers and financial
institutions alike would benefit substantially from
transparent, clear rules and enforcement. In a June 13, 2007
hearing, the Comptroller of the Currency and the Chairman of
the FDIC, two agencies that have taken independent enforcement
actions against unfair and deceptive practices but do not have
rulewriting authority under the FTC Act, recommended that the
Committee make these changes. FDIC Chairman Sheila Bair's
testimony stated:
In order to further strengthen the use of the FTC
Act's rulemaking provisions, the FDIC recommends that
Congress consider granting Section 5 rulemaking
authority to all federal banking regulators. By
limiting FTC rulemaking authority to the FRB, OTS and
NCUA, current law excludes participation by the primary
federal supervisors of about 7,000 banks. Including the
perspectives of the supervisor of some of the nation's
largest banks and the perspectives of the supervisor of
the largest number of banks, as well as the deposit
insurer, would provide valuable input and expertise to
the rulemaking process. As a practical matter, these
rulemakings would be done on an interagency basis and
would benefit from the input of all interested parties.
Comptroller John Dugan's testimony stated:
* * * [T]he OCC would support the extension of FTC
Act rulemaking authority to all of the federal banking
agencies, so that we could, as necessary, write joint
rules that define unfair or deceptive practices and
establish requirements that are designed to prevent
such acts or practices. Such authority would be helpful
to establish across-the-board rules to prohibit
especially egregious practices.
Hearings
The Committee on Financial Services held a hearing on June
13, 2007, entitled ``Improving Federal Consumer Protection in
Financial Services''. The following witnesses testified:
<bullet> The Honorable Randall S. Kroszner, Governor,
Federal Reserve Board
<bullet> The Honorable John C. Dugan, Comptroller of
the Currency, Office of the Comptroller of the Currency
<bullet> The Honorable Sheila C. Bair, Chairman,
Federal Deposit Insurance Corporation
<bullet> The Honorable Deborah Platt Majoras,
Chairman, Federal Trade Commission
<bullet> Mr. Scott M. Polakoff, Deputy Director and
Chief Operating Officer, Office of Thrift Supervision
<bullet> The Honorable Tom Miller, Attorney General,
State of Iowa
<bullet> Mr. Steven L. Antonakes, Commissioner of
Banks, Commonwealth of Massachusetts, on behalf of the
Conference of State Bank Supervisors
The Committee on Financial Services held a hearing on July
25, 2007 entitled ``Improving Federal Consumer Protection in
Financial Services-Consumer and Industry Perspectives''. The
following witnesses testified:
<bullet> Mr. Travis Plunkett, Legislative Director,
Consumer Federation of America
<bullet> Mr. Raul Gonzalez, Legislative Director,
National Council of La Raza
<bullet> Mr. George Gaberlavage, Director, Policy
Research & Development, Consumer and State Affairs,
Public Policy Institute, AARP
<bullet> Mr. Arthur Johnson, Vice President, American
Bankers Association, Chairman and Chief Executive
Officer of United Bank of Michigan
<bullet> Mr. Jim Sivon, Partner, Barnett, Sivon &
Natter PC
Committee Consideration
The Committee on Financial Services met in open session on
September 18, 2007, and ordered 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, favorably reported to the
House 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. No
record votes were taken in conjunction with the consideration
of this legislation. A motion by Mr. Frank to order the bill
reported to the House with a favorable recommendation was
agreed to by a voice vote.
Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the Committee has held hearings and
made findings that are reflected in this report.
Performance Goals and Objectives
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the Committee establishes the
following performance related goals and objectives for this
legislation:
H.R. 3526 is intended to provide financial consumers with
additional regulatory protections against unfair and deceptive
trade practices by expanding the range of financial regulators
with the authority to promulgate regulations identifying and
restricting such practices under the Federal Trade Commission
Act (``FTC Act'').
New Budget Authority, Entitlement Authority, and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee adopts as its
own the estimate of new budget authority, entitlement
authority, or tax expenditures or revenues contained in the
cost estimate prepared by the Director of the Congressional
Budget Office pursuant to section 402 of the Congressional
Budget Act of 1974.
Committee Cost Estimate
The Committee adopts as its own the cost estimate 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
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
October 3, 2007.
Hon. Barney Frank,
Chairman, Committee on Financial Services,
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.
Based on information from the affected agencies, CBO
expects that developing and implementing regulations would
result in direct spending of less than $500,000 a year. Any
additional direct spending by the OCC would be offset by income
from annual fees. Similarly, the FDIC would recover any added
costs when it adjusts the insurance premiums paid by insured
depository institutions. Thus, CBO estimates that enacting this
bill would have no significant impact on net 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.
The CBO staff contact for this estimate is Kathleen Gramp.
This estimate was approved by Theresa A. Gullo, Deputy
Assistant Director for Budget Analysis.
Federal Mandates Statement
The Committee adopts as its own the estimate of Federal
man- dates 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 this
legislation.
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 of Congress to enact this legislation
is provided by Article 1, section 8, clause 1 (relating to the
general welfare of the United States) and clause 3 (relating to
the power to regulate interstate commerce).
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.
Earmark Identification
H.R. 3526 does not contain any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in
clause 9 of rule XXI.
Section-by-Section Analysis of the Legislation
Section 1(a)(1) of the bill alters the authority to
promulgate unfair and deceptive practices rules for federally
regulated financial institutions under FTC Act. Existing
authority is granted to the Federal Reserve, the OTS
(succeeding the Federal Home Loan Bank Board) and the NCUA.
Under the legislation, each ``federal banking agency'' and the
NCUA will have the FTC Act authority and mandate to write rules
to identify and prevent unfair and deceptive practices ``with
respect to depository institutions'' they oversee.
Section 1(a)(2) states that regulations under this section
shall be prescribed ``jointly by such agencies to the extent
practicable.'' The Committee intends that regulations
promulgated pursuant to this section shall be promulgated
jointly through the Federal Financial Institutions Examination
Council to the extent practicable.
Section 2 of the bill makes technical and conforming
amendments to the Federal Trade Commission Act to effect the
purposes of the legislation.
Nothing in this legislation is intended to affect the scope
of the authority granted to the financial regulators under the
FTC Act, nor is the bill intended to affect in any way the
authority of the FTC. Nothing in the legislation is intended to
affect the applicability of state unfair and deceptive
practices laws to federally chartered institutions.
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) and the National Credit Union
Administration Board (with respect to Federal credit unions
described in paragraph (4)) shall prescribe regulations, which
shall be prescribed jointly by such agencies to the extent
practicable, 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. 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.
* * * * * * *
<all>