On May 7, 2009, the Consumer Credit and Debt Protection Act (H.R. 2309) was introduced in the U.S. House of Representatives to provide authority to the Federal Trade Commission (“FTC” or the “Commission”) to conduct rulemakings on an expedited basis concerning consumer credit or debt, specifically directing the Commission to promulgate rules with regard to debt settlement (broadly defined). The bill also would expand the FTC’s enforcement powers by allowing it to seek civil penalties in connection with unfair and deceptive acts or practices relating to consumer credit or debt.
A hearing on the bill by the House Energy and Commerce Subcommittee on Commerce, Trade and Consumer Protection is scheduled for May 12, 2009. The bill is authored by Subcommittee Chairman Rep. Bobby Rush (D-IL), who previously held a hearing on this topic in March 2009. 
Over the last several months, the FTC and others have requested that Congress provide the Commission with expanded rulemaking authority and enforcement powers related to consumer credit and debt, as provided for in this bill. The bill does not, however, specifically direct the Commission to consider regulations for any specific consumer credit and debt-related products or services – other than debt settlement services and automobile sales.
In its present form, the bill would have a significant impact on the debt settlement industry and providers of other forms of consumer financial services, including credit counseling agencies that offer less-than-full balance repayment plans.
Moreover, the bill would enable the Commission to play a greater role in the oversight of consumer financial services related to consumer credit or debt. The Commission would be permitted to use this expedited rulemaking authority to issue rules covering the entire range of consumer financial products and services within its jurisdiction, either directed at consumer financial products/services in general or specific industry subsets (e.g., payday lending, mortgage servicing, credit counseling agencies, credit card marketers and advertisers, and credit repair companies). In addition, the bill would enhance the Commission’s ability to prosecute cases against such companies.
The Consumer Credit and Debt Protection Act contains several specific provisions of interest to providers of consumer financial products and services, including:
- Permitting the FTC to employ notice and comment procedures to establish rules pursuant to the Federal Trade Commission Act that set forth unfair or deceptive acts and practices relating to consumer credit or debt, rather than rulemaking processes that are more burdensome on the Commission.
- Directing the FTC to examine the practices of “debt settlement service” providers and to establish such rules as the Commission determines necessary to prevent unfair and deceptive acts or practices of such providers. The bill also requires the Commission to consider adopting rules that specifically:
- “prohibit the charging of fees to consumers prior to any debt settlement service being fully rendered and limiting fees that may be charged after a settlement with a creditor is reached”; and
- “require disclosures before a contract is signed regarding the fee structure, expected time frames for a successful settlement, success rate of debtors in settling their debts, information about creditor participation in settlement plans, and the potential impact on a consumer’s credit score.”
- Defining the term “debt settlement service” (broadly) as “a commercial service provided to assist consumers in managing and repaying consumer debt, including the offering of advice or acting as an intermediary between a debtor and one or more of the debtor’s creditors, where the primary purpose of the advice or action is to obtain a settlement for less than the full amount of debt owed.”
- Requiring that the specified required rulemakings be commenced within six months of the date of enactment of this bill.
- Authorizing the FTC to obtain civil penalties for unfair or deceptive acts or practices relating to consumer credit and debt, and providing authority for the FTC to bring suit in its own right in federal court to obtain civil penalties.
- Authorizing States to initiate civil action on behalf of their residents to enforce the provisions of the FTC Act (or any other Act enforced by the FTC) to obtain penalties and relief provided under such laws, whenever the attorney general of the State has reason to believe that the interests of the residents of the State have been or are being threatened or adversely affected by a violation of a FTC rule relating to consumer credit or debt.