The Interactive Advertising Bureau and other ad industry groups got their wish earlier this week after asking a House Committee to delay progress on a bill establishing a new Consumer Financial Protection Agency. As Congress hunkers down on healthcare, the proposed law will not see action until after the August recess. However, assuming the legislation does again see the light of day, a new agency could complicate matters for online ad industry representatives navigating government regulation.
“The scope of the legislation is very broad, granting unprecedented power and authority to a new agency with very few checks on that agency’s power,” states the July 20 missive, sent to House Committee on Financial Services Chairman Barney Frank, Committee Ranking Member Spencer Bachus, and other Members of the House of Representatives. It was signed by the IAB, Direct Marketing Association, American Association of Advertising Agencies, Association of National Advertisers, the National Business Coalition on E-Commerce and Privacy, U.S. Chamber of Commerce, and other trade associations.
The U.S. Chamber of Commerce played a large role in crafting the letter. As the organization and other groups analyzed the agency proposal, “We recognized that there was no way this was just going to affect the financial services industry,” said Chris Merida, director of Congressional public affairs for the Chamber. Among the concerns is that a new agency would be able to penalize advertisers and media outlets associated with products deemed unfair or deceptive.
The Obama administration is pushing for the creation of the new agency, arguing it would more effectively monitor providers of financial products such as credit cards, mortgages, and other loans. Although he recently announced his intentions to fast-track the bill by working on it this month, Frank reportedly said Tuesday that he will stall working on the legislation until Congress returns in September.
Some believe that the letter implies the IAB’s opposition to the establishment of a Consumer Financial Protection Agency. However, Mike Zaneis, the IAB’s VP of Public Policy, said the letter simply asked for some extra time. “We don’t have an official position,” he said of the IAB regarding the bill. “We signed on to the letter because we hadn’t taken a substantive position on the proposal,” he told ClickZ News. “We just don’t want to see a major overhaul of the consumer protection laws rammed through before we have an opportunity to analyze the potential impact to the online advertising space.”
In addition to suggesting that there are unanswered questions about which types of business activities would be affected by the proposal, the letter contends that its benefits to consumers are not clear. “Both of these shortcomings raise a very real probability that there will be significant dangerous, unintended consequences if the legislation is enacted in its current form,” the letter states.
Center for Digital Democracy Executive Director Jeff Chester, a frequent critic of the online ad industry, thinks that by signing the letter, the IAB has indicated its aim to help “derail the bill.” As noted on his Digital Destiny blog today, Chester contends the IAB is “concerned about the creation of a new powerful consumer financial watchdog” because the organization “benefits from the hundreds of millions spent [each year] on interactive ads for financially-related services.”
The IAB and several online ad industry players have become accustomed to working closely with the Federal Trade Commission — and the House Committee on Energy and Commerce which has jurisdiction over it — when it comes to the federal government’s regulation of online ad practices. The FTC deals with issues relating to unfair or deceptive practices as they affect financial services advertisers, as well as advertisers of any other type of product or service.
Not only could a separate consumer protection agency for financial products potentially create more work for industry representatives in Washington, and potentially add a new layer of regulations to follow, it could piggyback on the FTC’s own extensive activity in the online ad industry.
According to the bill’s current language, “All consumer financial protection functions of the Federal Trade Commission are transferred to the [Consumer Financial Protection] Agency.”
Indeed, a new agency could lessen the commission’s clout, said Merida. “Clearly the proposal strips the FTC of some of its current responsibilities,” he said. If a new agency is created, however, the FTC may be awarded with a more streamlined rulemaking process, and the ability to slap civil penalties on businesses engaging in alleged deceptive or unfair practices.