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[House Report 110-472]
[From the U.S. Government Publishing Office]

110th Congress                                            Rept. 110-472
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     Part 2

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    TO INCLUDE ALL BANKING AGENCIES WITHIN THE EXISTING REGULATORY 
   AUTHORITY UNDER THE FEDERAL TRADE COMMISSION ACT WITH RESPECT TO 
            DEPOSITORY INSTITUTIONS, AND FOR OTHER PURPOSES

                                _______
                                

                December 5, 2007.--Ordered to be printed

                                _______
                                

 Mr. Dingell, from the Committee on Energy and Commerce, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 3526]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Energy and Commerce, to whom was referred 
the bill (H.R. 3526) to include all banking agencies within the 
existing regulatory authority under the Federal Trade 
Commission Act with respect to depository institutions, and for 
other purposes, having considered the same, report favorably 
thereon with an amendment and recommend that the bill as 
amended do pass.

                                CONTENTS

                                                                   Page
Amendment........................................................     1
Purpose and Summary..............................................     2
Background and Need for Legislation..............................     3
Hearings.........................................................     4
Committee Consideration..........................................     5
Committee Votes..................................................     5
Committee Oversight Findings.....................................     5
Statement of General Performance Goals and Objectives............     5
New Budget Authority, Entitlement Authority, and Tax Expenditures     5
Earmarks and Tax and Tariff Benefits.............................     5
Committee Cost Estimate..........................................     5
Congressional Budget Office Estimate.............................     6
Federal Mandates Statement.......................................     7
Advisory Committee Statement.....................................     7
Constitutional Authority Statement...............................     7
Applicability to Legislative Branch..............................     7
Section-by-Section Analysis of the Legislation...................     7
Appendix.........................................................     9
Changes in Existing Law Made by the Bill, as Reported............    11

                               Amendment

    The amendment is as follows:
    Strike all after the enacting clause and insert the 
following:

SECTION 1. INCLUSION OF ALL BANKING AGENCIES.

    (a) In General.--The second sentence of section 18(f)(1) of the 
Federal Trade Commission Act (15 U.S.C. 57a(f)(1)) is amended--
            (1) by striking ``The Board of Governors of the Federal 
        Reserve System (with respect to banks) and the Federal Home 
        Loan Bank Board (with respect to savings and loan institutions 
        described in paragraph (3))'' and inserting ``Each Federal 
        banking agency (with respect to depository institutions), in 
        consultation with the Commission,''; and
            (2) by inserting ``in consultation with the Commission'' 
        after ``shall prescribe regulations''.
    (b) FTC Concurrent Rulemaking.--Section 18(f) of such Act is 
further amended by inserting after the second sentence the following: 
``Such regulations shall be prescribed jointly by such agencies to the 
extent practicable. Notwithstanding any other provision of this 
section, whenever such agencies commence such a rulemaking proceeding, 
the Commission, with respect to the entities within its jurisdiction 
under this Act, may commence a rulemaking proceeding and prescribe 
regulations in accordance with section 553 of title 5, United States 
Code. If the Commission commences such a rulemaking proceeding, the 
Commission, the Federal banking agencies, and the National Credit Union 
Administration Board shall consult and coordinate with each other so 
that the regulations prescribed by each such agency are consistent with 
and comparable to the regulations prescribed by each other such agency 
to the extent practicable.''.
    (c) GAO Study and Report.--Not later than 18 months after the date 
of enactment of this Act, the Comptroller General shall transmit to 
Congress a report on the status of regulations of the Federal banking 
agencies and the National Credit Union Administration regarding unfair 
and deceptive acts or practices by the depository institutions.
    (d) Technical and Conforming Amendments.--Section 18(f) of the 
Federal Trade Commission Act (15 U.S.C. 57a(f)) is amended--
            (1) in the first sentence of paragraph (1)--
                    (A) by striking ``banks or savings and loan 
                institutions described in paragraph (3), each agency 
                specified in paragraph (2) or (3)'' and inserting 
                ``depository institutions, the Federal banking agencies 
                and the National Credit Union Administration Board'';
            (2) in the third sentence of paragraph (1)--
                    (A) by striking ``each such Board'' and inserting 
                ``each such banking agency and the National Credit 
                Union Administration Board'';
                    (B) by striking ``banks or savings and loan 
                institutions described in paragraph (3)'' each place 
                such term appears and inserting ``depository 
                institutions''; and
                    (C) by striking ``with respect to banks, savings 
                and loan institutions'' and inserting ``with respect to 
                depository institutions'';
            (3) by adding at the end of paragraph (1) the following new 
        sentence: ``For purposes of this subsection, the terms `Federal 
        banking agency' and `depository institution' have the same 
        meaning as in section 3 of the Federal Deposit Insurance 
        Act.'';
            (4) in paragraph (3), by inserting ``by the Director of the 
        Office of Thrift Supervision'' before the period at the end;
            (5) in paragraph (4), by inserting ``by the National Credit 
        Union Administration'' before the period at the end; and
            (6) in paragraph (6), by striking ``the Board of Governors 
        of the Federal Reserve System'' and inserting ``any Federal 
        banking agency or the National Credit Union Administration 
        Board''.

                          Purpose and Summary

    H.R. 3526, entitled ``A bill to include all banking 
agencies within the existing regulatory authority under the 
Federal Trade Commission Act with respect to depository 
institutions,'' is intended to provide financial consumers with 
additional protections against unfair or deceptive acts or 
practices in or affecting commerce by expanding the range of 
financial regulators with the authority to promulgate 
regulations defining with specificity and containing 
requirements for the purpose of preventing such acts or 
practices under the Federal Trade Commission Act (FTC Act). 
H.R. 3526 expands the range of regulators with promulgation 
authority under Section 18(f) of the FTC Act (currently the 
Board of Governors of the Federal Reserve with respect to 
banks, the Office of Thrift Supervision with respect to savings 
and loan institutions, and the National Credit Union 
Administration (NCUA) with respect to Federal credit unions) to 
include the other Federal banking regulators, namely the 
Federal Deposit Insurance Corporation and the Office of the 
Comptroller of the Currency with respect to institutions that 
they regulate.
    The legislation requires these entities to prescribe any 
such regulations in consultation with the Federal Trade 
Commission (FTC), and that such regulations shall be prescribed 
jointly by such agencies to the extent practicable. The 
legislation also provides that, whenever the Federal banking 
agencies and NCUA commence rulemaking under the FTC Act for the 
entities that they regulate, the FTC may promulgate consistent 
and comparable rules for the entities that it regulates. The 
legislation allows the FTC, in those instances, to use standard 
notice and comment rulemaking procedures under the 
Administrative Procedure Act. Finally, the bill requires the 
Comptroller General to conduct a study and report to Congress 
on the status of regulations of the Federal banking agencies 
and the NCUA regarding unfair or deceptive acts or practices by 
depository institutions.

                  Background and Need for Legislation

    Section 5(a)(1) of the FTC Act declares unlawful ``unfair 
or deceptive acts or practices in or affecting commerce.'' 
Section 5(a)(2) authorizes and directs the Federal Trade 
Commission (FTC) to prevent persons, partnerships, or 
corporations, ``except banks, savings and loan institutions 
described in section 18(f)(3), [and] Federal credit unions 
described in section 18(f)(4)'' from using unfair or deceptive 
acts or practices in or affecting commerce. Section 18(a)(1)(B) 
authorizes the FTC to prescribe rules which define with 
specificity acts or practices in or affecting commerce within 
the meaning of Section 5(a)(1).
    Section 18 (f) of the FTC Act addresses the rulemaking 
authority for certain entities excepted from the FTC's 
rulemaking authority. It contains three general requirements. 
First, each agency specified in paragraph (2) or (3) of this 
subsection must establish a separate division of consumer 
affairs to receive and take appropriate action upon complaints 
with respect to such acts or practices by banks or savings and 
loan institutions. Second, the Board of Governors of the 
Federal Reserve System, the Office of Thrift Supervision (as 
successor to the Federal Home Loan Bank Board), and the 
National Credit Union Administration are required to prescribe 
regulations defining with specificity such unfair or deceptive 
acts or practices, and containing requirements prescribed for 
the purpose of preventing such acts or practices. Third, 
whenever the FTC prescribes a rule under subsection (a)(1)(B) 
of this section, then within 60 days after such rule takes 
effect, each specified depository institution regulator must 
promulgate substantially similar regulations imposing 
substantially similar requirements, unless (1) they find that 
the acts or practices ``are not unfair or deceptive'' or (2) 
the Federal Reserve Board finds that implementation of similar 
regulations ``would seriously conflict with essential monetary 
and payments systems policies'' of the Board, and publishes any 
such findings and the reasons therefore in the Federal 
Register.
    Since these authorities were granted in the 1970s, they 
have been sparsely implemented and certainly underutilized. The 
record indicates that the three named agencies have acted only 
in the wake of FTC rulemaking. For example, in 1985 the 
agencies issued equivalents of the FTC's Credit Practices Rule 
following the FTC's action in 1984. The Committee is unaware of 
any major rulemaking under section 18(f) since then. The FTC, 
by contrast, has been an aggressive regulator and enforcer, in 
accordance with a substantial body of jurisprudence, of the 
prohibition against unfair or deceptive acts or practices under 
the FTC Act across nearly all industries in the United States, 
including in the financial services area. The lack of clear and 
consistent rules and enforcement in this area has left 
consumers unprotected from a range of abuses across myriad 
areas including subprime lending, credit card interest rate 
practices, checking account overdraft fees, and the like.
    On May 11, 2007, Rep. Barney Frank, Chairman of the 
Committee on Financial Services, and Rep. John D. Dingell, 
Chairman of the Committee on Energy and Commerce, wrote to the 
heads of the Federal Reserve Board, Office of the Comptroller 
of the Currency, Office of Thrift Supervision, Federal Deposit 
Insurance Corporation, and the Federal Trade Commission, 
expressing concerns about this failure, and asking for 
aggressive use of the regulators' authorities under the FTC Act 
to address unfair or deceptive acts or practices (see 
Appendix). The Committee is unable to find that any meaningful 
actions have ensued as a result of this shot across the bow.
    The Committee on Financial Services held hearings on June 
13, 2007, and July 25, 2007, entitled ``Improving Federal 
Consumer Protection in Financial Services.'' Consumer witnesses 
argued for meaningful and clear rules and enforcement for the 
benefit both of consumers and the relevant industries. The 
Comptroller of the Currency and the Chairman of the FDIC both 
testified that they would support, and use, an extension of FTC 
Act rulemaking authority to all of the Federal banking 
agencies. The Committee is not convinced that this reform goes 
far enough, but is willing to give it a fair opportunity to 
produce significant results. It has added strengthening 
amendments to the version reported by our sister committee, and 
intends to conduct oversight hearings on the implementation of 
this legislation and the operation of Section 18(f).

                                Hearings

    The Subcommittee on Commerce, Trade, and Consumer 
Protection held a hearing on Tuesday, October 23, 2007, 
entitled ``Enhancing FTC Consumer Protection in Financial 
Dealings, with Telemarketers, and on the Internet,'' which 
examined three bills: H.R. 2601, H.R. 3461, and H.R. 3526. 
Testimony was received from Ms. Lydia B. Parnes, Director, 
Bureau of Consumer Protection, U.S. Federal Trade Commission.

                        Committee Consideration

    On Tuesday, October 23, 2007, the Subcommittee on Commerce, 
Trade, and Consumer Protection met in open markup session and 
favorably forwarded H.R. 3526, amended, to the full Committee 
for consideration, by a voice vote. On Tuesday, October 30, 
2007, the full Committee met in open markup session and ordered 
H.R. 3526 favorably reported to the House, amended, by a voice 
vote.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. 
There were no record votes taken on amendments or in connection 
with ordering H.R. 3526 reported. A motion by Mr. Dingell to 
order H.R. 3526 favorably reported to the House, amended, was 
agreed to by a voice vote.

                      Committee Oversight Findings

    Regarding clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the oversight findings of the 
Committee regarding H.R. 3526 are reflected in this report.

         Statement of General Performance Goals and Objectives

    The purpose of H.R. 3526 is to reduce the harm to 
individuals from unfair or deceptive acts or practices by 
expanding the range of regulators authorized to promulgate 
regulations identifying and prohibiting such practices under 
the FTC Act with respect to depository institutions within 
their respective jurisdictions.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    Regarding compliance with clause 3(c)(2) of rule XXI of the 
Rules of the House of Representatives, the Committee adopts as 
its own the estimate of budget authority and revenues regarding 
H.R. 3526 prepared by the Director of the Congressional Budget 
Office pursuant to section 402 of the Congressional Budget Act 
of 1974. The Committee finds that H.R. 3526 would result in no 
new or increased entitlement authority or tax expenditures.

                  Earmarks and Tax and Tariff Benefits

    Regarding compliance with clause 9 of rule XXI of the Rules 
of the House of Representatives, H.R. 3526 does not contain any 
Congressional earmarks, limited tax benefits, or limited tariff 
benefits as defined in clause 9(d), 9(e), or 9(f) of rule XXI.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate on H.R. 
3526 prepared by the Director of the Congressional Budget 
Office pursuant to section 402 of the Congressional Budget Act 
of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate on 
H.R. 3526 provided by the Congressional Budget Office pursuant 
to section 402 of the Congressional Budget Act of 1974:

                                                  December 4, 2007.
Hon. John D. Dingell,
Chairman, Committee on Energy and Commerce,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3526, a bill to 
include all banking agencies within the existing regulatory 
authority under the Federal Trade Commission Act with respect 
to depository institutions, and for other purposes.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Kathleen 
Gramp.
            Sincerely,
                                                   Peter R. Orszag.
    Enclosure.

H.R. 3526--A bill to include all banking agencies within the existing 
        regulatory authority under the Federal Trade Commission Act 
        with respect to depository institutions, and for other purposes

    H.R. 3526 would increase the number of federal agencies 
authorized to issue regulations regarding unfair and deceptive 
financial practices under the Federal Trade Commission Act. 
Enacting this bill would allow the Federal Deposit Insurance 
Corporation (FDIC) and the Office of the Comptroller of the 
Currency (OCC) to issue such rules for institutions under their 
jurisdiction. Under current law, such rules may only be issued 
by the Board of Governors of the Federal Reserve, the National 
Credit Union Administration, and the Federal Home Loan Bank 
Board. The bill also would require that such regulations be 
developed in consultation with the Federal Trade Commission 
(FTC).
    CBO estimates that implementing H.R. 3526 would have no 
significant net impact on federal spending. Based on 
information from the affected agencies, CBO estimates that the 
activities required by the bill would increase discretionary 
costs for the FTC by less than $500,000 a year. Additional 
costs incurred by the OCC and FDIC would affect direct 
spending, but such expenditures would be offset by income from 
annual fees and deposit insurance premiums, respectively. Thus, 
CBO estimates that enacting this bill would have a negligible 
net effect on direct spending and would have no effect on 
revenues.
    H.R. 3526 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not directly affect the budgets of state, local, or 
tribal governments.
    On October 3, 2007, CBO transmitted a cost estimate for 
H.R. 3526 as ordered reported by the House Committee on 
Financial Services. That version of the legislation did not 
require consultation with the FTC in developing these 
regulations; neither version of the bill would have any 
significant budgetary impact.
    The CBO staff contact for this estimate is Kathleen Gramp. 
This estimate was approved by Peter H. Fontaine, Assistant 
Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates regarding H.R. 3526 prepared by the Director of the 
Congressional Budget Office pursuant to section 423 of the 
Unfunded Mandates Reform Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by H.R. 
3526.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional authority for this legislation is provided in 
article I, section 8, clause 3, which grants Congress the power 
to regulate commerce with foreign nations, among the several 
States, and with the Indian tribes.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act of 1995.

             Section-by-Section Analysis of the Legislation

Section 1. Inclusion of all banking agencies

    Section 1(a) amends the rulemaking authority under Section 
18(f)(1) of the FTC Act by deleting the current references to 
the Board of Governors of the Federal Reserve Board (with 
respect to banks) and the Federal Home Loan Bank Board (with 
respect to savings and loan institutions) and instead 
authorizes each Federal banking agency (with respect to 
depository institutions) to adopt rules, in consultation with 
the Federal Trade Commission (FTC).
    Section 1(b) further amends Section 18(f) to require that 
such regulations be prescribed jointly by such agencies to the 
extent practicable. The legislation also provides that, 
whenever these agencies commence a rulemaking under the FTC 
Act, the FTC, with respect to entities within its jurisdiction, 
may commence a rulemaking proceeding and prescribe regulations 
in accordance with section 553 of title 5, United States Code. 
This authority does not limit the FTC's ability to issue rules 
independently pursuant to Section 18(a) of the FTC Act. It is 
solely meant to put these regulators on equal footing with 
respect to use of the notice and comment procedures of the 
Administrative Procedure Act with respect to coordinated 
rulemakings under this provision in order to avoid application 
of inconsistent standards, as well as to improve interagency 
coordination on rulemakings.
    If the FTC commences such a rulemaking proceeding, the 
legislation directs the FTC, the Federal banking agencies, and 
the National Credit Union Administration (NCUA) to consult and 
coordinate with each other so that the regulations prescribed 
are consistent and comparable to the maximum extent 
practicable.
    The authority provided to the banking agencies and the NCUA 
is not to be construed as limiting the jurisdiction or 
authority of the FTC in any way. In particular, the 
substitution of ``depository institutions'' as defined in 
section 3 of the Federal Deposit Insurance Act (that is, ``any 
bank or savings association''), in lieu of the prior ``banks or 
savings and loan institutions described in paragraph (3)'' is 
simply a technical change to adopt a shorter phrase.
    The Committee expects adherence to the legislation's 
consultation requirements. The FTC is the expert agency 
responsible for ensuring appropriate and consistent 
interpretation and application, in accordance with a 
substantial body of jurisprudence, of the prohibition against 
unfair or deceptive practices in the FTC Act across nearly all 
industries in the United States, including financial services. 
For example, the FTC has targeted unfair or deceptive practices 
in mortgage lending, from advertising and marketing through 
loan servicing. In the past decade, the FTC has brought 21 such 
actions, focusing in particular on the subprime market, 
resulting in courts collectively having ordered more than $320 
million to be returned to consumers. The Committee recognizes 
that supervisors of depository institutions have specialized 
expertise as to the institutions that they supervise, but the 
Committee believes, particularly given the record before it, 
that it is essential that regulations for depository 
institutions be in harmony with the broad principles of the 
statute and its implementation by the FTC.
    Section 1(c) requires the Comptroller General to submit to 
Congress, not later than 18 months after date of enactment of 
this Act, a report on the status of regulations of the Federal 
banking agencies and the NCUA regarding unfair or deceptive 
acts or practices by depository institutions. The Committee 
expects to conduct vigorous oversight of this area to ensure 
that consumers of financial services are receiving needed 
protections against unfair or deceptive trade practices.
    Section 1(d) adopts a number of technical and conforming 
amendments.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

                      FEDERAL TRADE COMMISSION ACT

           *       *       *       *       *       *       *
  Sec. 18. (a) * * *

           *       *       *       *       *       *       *

  (f)(1) In order to prevent unfair or deceptive acts or 
practices in or affecting commerce (including acts or practices 
which are unfair or deceptive to consumers) by [banks or 
savings and loan institutions described in paragraph (3), each 
agency specified in paragraph (2) or (3)] depository 
institutions, the Federal banking agencies and the National 
Credit Union Administration Board of this subsection shall 
establish a separate division of consumer affairs which shall 
receive and take appropriate action upon complaints with 
respect to such acts or practices by banks or savings and loan 
institutions described in paragraph (3), subject to its 
jurisdiction. [The Board of Governors of the Federal Reserve 
System (with respect to banks) and the Federal Home Loan Bank 
Board (with respect to savings and loan institutions described 
in paragraph (3))] Each Federal banking agency (with respect to 
depository institutions), in consultation with the Commission, 
and the National Credit Union Administration Board (with 
respect to Federal credit unions described in paragraph (4)) 
shall prescribe regulations in consultation with the Commission 
to carry out the purposes of this section, including 
regulations defining with specificity such unfair or deceptive 
acts or practices, and containing requirements prescribed for 
the purpose of preventing such acts or practices. Such 
regulations shall be prescribed jointly by such agencies to the 
extent practicable. Notwithstanding any other provision of this 
section, whenever such agencies commence such a rulemaking 
proceeding, the Commission, with respect to the entities within 
its jurisdiction under this Act, may commence a rulemaking 
proceeding and prescribe regulations in accordance with section 
553 of title 5, United States Code. If the Commission commences 
such a rulemaking proceeding, the Commission, the Federal 
banking agencies, and the National Credit Union Administration 
Board shall consult and coordinate with each other so that the 
regulations prescribed by each such agency are consistent with 
and comparable to the regulations prescribed by each other such 
agency to the extent practicable. Whenever the Commission 
prescribes a rule under subsection (a)(1)(B) of this section, 
then within 60 days after such rule takes effect [each such 
Board] each such banking agency and the National Credit Union 
Administration Board shall promulgate substantially similar 
regulations prohibiting acts or practices of [banks or savings 
and loan institutions described in paragraph (3)] depository 
institutions, or Federal credit unions described in paragraph 
(4), as the case may be, which are substantially similar to 
those prohibited by rules of the Commission and which impose 
substantially similar requirements, unless (A) any such Board 
finds that such acts or practices of [banks or savings and loan 
institutions described in paragraph (3)] depository 
institutions, as the case may be, are not unfair or deceptive, 
or (B) the Board of Governors of the Federal Reserve System 
finds that implementation of similar regulations [with respect 
to banks, savings and loan institutions] with respect to 
depository institutions or Federal credit unions would 
seriously conflict with essential monetary and payments systems 
policies of such Board, and publishes any such finding and the 
reasons therefor, in the Federal Register. For purposes of this 
subsection, the terms ``Federal banking agency'' and 
``depository institution'' have the same meaning as in section 
3 of the Federal Deposit Insurance Act.

           *       *       *       *       *       *       *

  (3) Compliance with regulations prescribed under this 
subsection shall be enforced under section 8 of the Federal 
Deposit Insurance Act with respect to savings associations as 
defined in section 3 of the Federal Deposit Insurance Act by 
the Director of the Office of Thrift Supervision.
  (4) Compliance with regulations prescribed under this 
subsection shall be enforced with respect to Federal credit 
unions under sections 120 and 206 of the Federal Credit Union 
Act (12 U.S.C. 1766 and 1786) by the National Credit Union 
Administration.

           *       *       *       *       *       *       *

  (6) The authority of [the Board of Governors of the Federal 
Reserve System] any Federal banking agency or the National 
Credit Union Administration Board to issue regulations under 
this subsection does not impair the authority of any other 
agency designated in this subsection to make rules respecting 
its own procedures in enforcing compliance with regulations 
prescribed under this subsection.

           *       *       *       *       *       *       *

                                  
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