Financial Agency Bill Inches Closer to Law

Legislation creating a new Consumer Financial Protection Agency is one step closer to passing, which has ad industry trade groups just a little bit more worried. In addition to potentially layering on an additional set of regulations for financial advertisers to navigate, the Consumer Financial Protection Act of 2009 could strengthen the Federal Trade Commission, even as it strips it of its authority over financial product and service firms.

As ad industry representatives urge advertisers to contact Congress and oppose the bill, the FTC chairman suggested the bill would only give the commission “modest new authority.”

After passing the House Financial Services Committee late last week, the bill has now passed the House Energy and Commerce Committee. A House floor vote is expected.

The FTC will lose its authority over financial firms if the bill passes into law, but the bill could be a blessing in disguise for the commission. The FTC would no longer be encumbered by certain restrictions that have typically prevented it from making rules without Congress’s go-ahead.

The FTC is concerned that it will be weakened by the establishment of a new agency. So the bill’s streamlining of the rulemaking process can be considered a big bone thrown to the FTC in the hopes of gaining its support. Such streamlining is something the FTC has pushed for in the past.

And the easing of the FTC’s rulemaking procedures would affect its authority over all industries. So, while its powers over financial firms would be clipped, it could more readily spread its wings over other sectors.

FTC Chairman Jon Leibowitz somewhat downplayed the impact of the Energy and Commerce Committee’s action. �Americans are still experiencing a period of extreme financial distress, and the modest new authority given to our agency will help ensure that we have the tools necessary to fight fraud and go after those who perpetrate it,” he said in a statement yesterday.

“We tried to convince the House Energy and Commerce Committee to either uphold the [current rulemaking procedure] provisions or keep some of the procedural safeguards in the Act,” said a statement from the Association of National Advertisers today. The industry group is concerned that without these safeguards, the new process could result in the establishment of wide-reaching rules based on a single violation rather than prevalent bad behavior.

“It is critical that Congress hears more forcefully from the business community about the impact these changes would have on your companies,” continued the ANA in its letter to members. “Please contact the members of Congress where you have operations or employees to let them know about the problems with this bill.”

Industry groups are also concerned that the latest version of the bill also would allow the FTC to impose civil penalties and penalize companies assisting in violations. So, in the case of advertising, media firms could be affected.

Trade groups like the Interactive Advertising Bureau and the Association of National Advertisers are fighting these potential FTC rulemaking changes tooth and nail.

Thus far, the two House committee’s votes were primarily along party lines. Unless Republicans can convince several Democrats to vote against the bill when it reaches the floor, we can probably expect it to pass the House.

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