Today, the Senate Commerce, Science and Transportation Committee held a hearing entitled "Consumer Protection and the Credit Crisis," to examine consumer protection and the credit crisis and enforcement against fraudulent credit repair schemes under the Credit Repair Organization Act (CROA). Testifying before the Committee were the following witnesses:
Pamela Jones Harbour, Commissioner, Federal Trade Commission (FTC)
Prentiss Cox, Associate Clinical Professor of Law, University of Minnesota Law School
Travis Plunkett, Legislative Director, Consumer Federation of America
Nancy Dix, Consumer
Bill Himpler, Executive Vice President, Federal Government Affairs, American Financial Services Association (AFSA)
Commissioner Harbor led off her testimony by stating that, given the current economic climate, many Americans are in financial distress with consumer debt at "historic levels." The Commissioner emphasized that the FTC aim's to "protect consumers from harmful acts and practices at every stage of the credit life cycle," and the FTC has taken various measures including increasing its focus on preventing harm to consumers who are already in debt, bringing law enforcement actions against those who engage in unfair or deceptive acts and practices in violation of the FTC Act, the Fair Debt Collection Practices Act (FDCPA) and the Credit Repair Organizations Act, creating and distributing extensive consumer education materials about debt collection and relief services, and conducting "cutting edge empirical research" on improving mortgage disclosures and developing policies related to debt collection and debt settlement. However, given the current economic crisis, Commissioner Harbor stressed to the Committee that to adequately protect consumers of financial services, "more needs to be done" including, among other things, enacting legislation that would:
- Permit the FTC to employ notice and comment rulemaking procedures to declare acts and practices related to financial services to be unfair or deceptive in violation of the FTC Act;
- Authorize the FTC to obtain civil money penalties for unfair or deceptive acts and practices related to financial services, and authorize the FTC to bring suit in federal court to obtain civil penalties;
- Authorize the FTC to promulgate rules to implement the FDCPA; and
- Provide additional resources to assist the FTC in increasing its law enforcement activities related to consumer financial services.
The remaining panel witnesses focused their testimony on what can be done about "[u]nscrupulous actors who exploit consumers' fears." In particular, Bill Himpler on behalf of AFSA suggested that states should be encouraged to enact the Uniform Debt-Management Services Act which would provide states with a universal means of "[a]dministration debt counseling and management in a fair and effective way." Similarly, Professor Cox recommended a "reform" of FTC rule-making authority to make enforcement of foreclosure rescue scams more flexible, prompt and "[a]llow for a stronger and more effective federal response. All the panel witnesses stressed the overarching concern related to the increase in reckless and fraudulent actions associated with predatory lending along with the exploitation of consumers in need of debt relief or facing mortgage foreclosure.