Earlier today, the Subcommittee on Commerce, Trade and Consumer Protection approved H.R. 2309, the “Consumer Credit and Debt Protection Act” (the “Act”) which would give the Federal Trade Commission (FTC) flexibility in protecting consumers from credit debt schemes. In pertinent part, the Act has three primary objectives.

First, the Act would authorize the FTC to review the practices of providers of debt settlement services and impose rules to prevent unfair and deceptive acts or practices for providers of these services. Specifically, the FTC would consider adopting rules that:

  • prohibit the charging of fees to consumers prior to any debt settlement service being fully rendered and limit fees that may be charged once settlement with a creditor has been 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.

Second, the Act would permit the FTC to examine the practices of automobile dealers with respect to credit and lending. The FTC would specifically consider adopting rules that:

  • restrict post sale changes in financing terms;
  • require that automobile purchase agreements or sales contracts entered into between a consumer and an automobile dealer include a provision which permits the consumer to cancel the transaction within a specified period following the sale or receipt of final information concerning the terms of the sale or financing; and
  • limit the ability of automobile dealers to accept or solicit compensation that is based on interest rate, annual percentage rate or the amount financed in connection with the dealer arranging or the sale of the contract.

Third, the Act would to assess civil penalties against those who engage in certain acts in connection with consumer credit or debt with “actual knowledge” or “knowledge fairly implied” that the act is unfair or deceptive. It also gives state Attorneys General that have reason to believe that the interest of its residents is threatened the right to bring civil action.

Prior to the vote, an amendment, drafted Bobby Rush (D-IL), Subcommittee Chair and sponsor of the bill was adopted. The amendment, in part, gives the FTC the authority to investigate payday lending to determine whether rules are needed to prevent unfair and deceptive acts and practices, and to issue regulations related to mortgage foreclosure rescue and loan modification scams.

It is expected that the next steps will be full committee consideration.