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67–816 2012

CONSUMER CREDIT AND DEBT: THE ROLE OF 

THE FEDERAL TRADE COMMISSION IN PROTECTING THE PUBLIC 

HEARING 

BEFORE THE

SUBCOMMITTEE ON COMMERCE, TRADE, 

AND CONSUMER PROTECTION 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

MARCH 24, 2009 

Serial No. 111–19 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 


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COMMITTEE ON ENERGY AND COMMERCE 

HENRY A. WAXMAN, California, Chairman 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

EDWARD J. MARKEY, Massachusetts 

RICK BOUCHER, Virginia 

FRANK PALLONE, JR., New Jersey 

BART GORDON, Tennessee 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

BART STUPAK, Michigan 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

Vice Chairman 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANE HARMAN, California 

TOM ALLEN, Maine 

JAN SCHAKOWSKY, Illinois 

HILDA L. SOLIS, California 

CHARLES A. GONZALEZ, Texas 

JAY INSLEE, Washington 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

ANTHONY D. WEINER, New York 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

CHARLIE MELANCON, Louisiana 

JOHN BARROW, Georgia 

BARON P. HILL, Indiana 

DORIS O. MATSUI, California 

DONNA CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

CHRISTOPHER MURPHY, Connecticut 

ZACHARY T. SPACE, Ohio 

JERRY MCNERNEY, California 

BETTY SUTTON, Ohio 

BRUCE BRALEY, Iowa 

PETER WELCH, Vermont 

JOE BARTON, Texas 

Ranking Member 

RALPH M. HALL, Texas 

FRED UPTON, Michigan 

CLIFF STEARNS, Florida 

NATHAN DEAL, Georgia 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOHN B. SHADEGG, Arizona 

ROY BLUNT, Missouri 

STEVE BUYER, Indiana 

GEORGE RADANOVICH, California 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO MACK, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

PARKER GRIFFITH, Alabama 

ROBERT E. LATTA, Ohio 

(II) 


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(III) 

SUBCOMMITTEE ON COMMERCE, TRADE, AND CONSUMER PROTECTION

BOBBY L. RUSH, Illinois 

Chairman 

JAN SCHAKOWSKY, Illinois 

Vice Chair 

JOHN SARBANES, Maryland 

BETTY SUTTON, Ohio 

FRANK PALLONE, New Jersey 

BART GORDON, Tennessee 

BART STUPAK, Michigan 

GENE GREEN, Texas 

CHARLES A. GONZALEZ, Texas 

ANTHONY D. WEINER, New York 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

KATHY CASTOR, Florida 

ZACHARY T. SPACE, Ohio 

BRUCE BRALEY, Iowa 

DIANA DEGETTE, Colorado 

JOHN D. DINGELL, Michigan (ex officio) 

CLIFF STEARNS, Florida 

Ranking Member 

RALPH M. HALL, Texas 

DENNIS HASTERT, Illinois 

ED WHITFIELD, Kentucky 

CHARLES W. ‘‘CHIP’’ PICKERING, 

Mississippi 

GEORGE RADANOVICH, California 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO MACK, California 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

MICHAEL C. BURGESS, Texas 


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C O N T E N T S 

Page 

Hon. Bobby L. Rush, a Representative in Congress from the State of Illinois, 

opening statement ................................................................................................ 1 

Prepared statement .......................................................................................... 3 

Hon. George Radanovich, a Representative in Congress from the State of 

California, opening statement ............................................................................. 5 

Hon. Henry A. Waxman, a Representative in Congress from the State of 

California, opening statement ............................................................................. 6 

Hon. Joseph R. Pitts, a Representative in Congress from the Commonwealth 

of Pennsylvania, opening statement ................................................................... 7 

Hon. Doris O. Matsui, a Representative in Congress from the State of California, opening statement .................................................................................... 8 

Prepared statement .......................................................................................... 9 

Hon. Joe Barton, a Representative in Congress from the State of Texas, 

opening statement ................................................................................................ 10 

Hon. Janice D. Schakowsky, a Representative in Congress from the State 

of Illinois, opening statement .............................................................................. 11 

Hon. Phil Gingrey, a Representative in Congress from the State of Georgia, 

opening statement ................................................................................................ 12 

Hon. Betty Sutton, a Representative in Congress from the State of Ohio, 

opening statement ................................................................................................ 12 

Hon. Steve Scalise, a Representative in Congress from the State of Louisiana, 

opening statement ................................................................................................ 13 

Hon. Gene Green, a Representative in Congress from the State of Texas, 

opening statement ................................................................................................ 14 

Hon. Cliff Stearns, a Representative in Congress from the State of Florida, 

opening statement ................................................................................................ 15 

Hon. John D. Dingell, a Representative in Congress from the State of Michigan, prepared statement ...................................................................................... 123 

WITNESSES

Jon Leibowitz, Chairman, Federal Trade Commission ........................................ 16 

Prepared statement .......................................................................................... 18 

James Tierney, Lecturer-in-Law, Columbia Law School ...................................... 65 

Prepared statement .......................................................................................... 68 

Christopher Peterson, Professor of Law, S.J. Quinny College of Law ................ 83 

Prepared statement .......................................................................................... 85 

Ira Rheingold, Executive Director, National Association of Consumer Advocates ...................................................................................................................... 99 

Prepared statement .......................................................................................... 101 

Nathan Benson, Chief Executive Officer, Tidewater Finance Company, Inc., 

for The American Financial Services Association ............................................. 109 

Prepared statement .......................................................................................... 111 


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(1) 

CONSUMER CREDIT AND DEBT: THE ROLE OF 

THE FEDERAL TRADE COMMISSION IN PROTECTING THE PUBLIC 

TUESDAY, MARCH 24, 2009 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON COMMERCE, TRADE, 

AND CONSUMER PROTECTION, 

COMMITTEE ON ENERGY AND COMMERCE, 

Washington, DC. 

The subcommittee met, pursuant to call, at 10:07 a.m., in Room 

2123 of the Rayburn House Office Building, Hon. Bobby L. Rush 

(chairman) presiding. 

Members present: Representatives Rush, Schakowsky, Sutton, 

Stupak, Green, Barrow, Matsui, Waxman (ex officio), Radanovich, 

Stearns, Whitfield, Pitts, Terry, Myrick, Gingrey, Scalise, and Barton (ex officio). 

Staff present: Anna Laitin, Professional Staff; Christian Fjeld, 

Counsel; Michelle Ash, CTCP Chief Counsel; Valerie Baron, Legislative Clerk; Brian McCullough, Minority Senior Professional Staff; 

Will Carty, Minority Professional Staff; Sharon Weinberg, Minority 

Counsel; and Sam Costello, Minority Legislative Analyst. 

OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS 

Mr. RUSH. The Subcommittee on Commerce, Trade and Consumer Protection will come to order. Today’s hearing is a hearing 

that we are anxiously awaiting to conduct. It is a hearing on Consumer Credit and Debt, the Role of the Federal Trade Commission 

in Protecting the Public. The chair would yield himself 5 minutes 

for the purposes of a opening statement. Three weeks ago, the Subcommittee on Commerce, Trade, and Consumer Protection held a 

hearing on abusive credit practices in the used-car industry. Today, 

I want to expand our inquiry into the world of consumer credit and 

debt in general. For the past decade, if not longer, American consumers, particularly low-income Americans, have been swimming 

in shark-infested waters. 

Whether it is sub-prime mortgages, auto loans, or pay-day loans, 

too many companies have had a free reign to saddle Americans 

with debts they simply cannot afford. They sold their snake oil by 

taking advantage of the people’s circumstances, or with outright 

deception. Unfortunately, there wasn’t a strong enforcement or regulatory authority at the federal level protecting consumers from 


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these abusive practices. The result has been a wrecked economy, 

and, I might add, wrecked lives. 

The purpose of today’s hearing is twofold. First, I want us to examine the actions taken by the Federal Trade Commission in 

cracking down on abusive credit practices. The FTC has broad authority under the FTC Act to enforce against ‘‘unfair or deceptive 

acts of practices.’’ How was this broad authority exercised is one 

question that we may ask. If the Commission took insufficient action in the past, then why was that the case is another looming 

question. Was it political will or was it because the Commission 

lacks sufficient statutory authority and resources is the third question that we should explore. 

Second, in this hearing, I want members of the subcommittee to 

deliberate on reforms that Congress can initiate to make the FTC 

as effective as possible in protecting consumers from abusive credit 

and debt practices in the marketplace. I am working on legislation 

that will better equip the Commission to aggressively address abusive lending practices. How can we utilize the Commission’s historical authority to prohibit and enforce against unfair or deceptive 

acts or practices to our advantage? The FTC is America’s foremost 

consumer protection agency, and we need to take advantage of its 

historical authority by enhancing the Commission’s underlying regulatory and enforcement powers. 

I believe the basic cornerstones of the Consumer Credit Protection Agency are already in place but some reforms are more than 

likely necessary. Does the Commission need more resources? 

Should the Commission be given regulatory or rulemaking authority under the Administrative Procedures Act to replace its current, 

burdensome rulemaking process under Magnusson-Moss? Should 

the Commission be given additional civil penalty authority? If the 

FTC has one hand tied behind its back, I believe that we should 

untie that one hand, but if we do so, we must be assured that the 

Commission will aggressively utilize these tools to protect consumers to the fullest extent. 

Today, I want to explore how the FTC can be equipped to adequately deal with not only today’s abusive practices, such as subprime mortgages and pay-day loans, but also tomorrow’s unforeseen snake oil that will be sold to consumers in the future. I want 

to congratulate and welcome the new chairman of the FTC, Mr. 

Jon Leibowitz. I have had the opportunity to meet with him, and 

I find him an outstanding and fine gentleman and a dedicated public servant. And this is his first appearance on Capitol Hill as 

chairman of the FTC. And I hope that this hearing today will be 

first in a series of constructive hearings. As chairman of this subcommittee, I want to have a constructive relationship with Chairman Leibowitz and with our friends at the Commission to ensure 

that both Congress and the FTC are doing everything we can to 

protect the American consumers, particularly poor American consumers, from the unfair, deceptive, and abusive practices that are 

far too prevalent in the American economy. With that, I yield back 

the balance of my time. 

[The prepared statement of Mr. Rush follows:] 


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Mr. RUSH. And now I recognize my friend, the ranking member 

of this subcommittee, the gentleman from Georgia, Mr. Radanovich, for 5 minutes for the purposes of an opening statement. 

OPENING STATEMENT OF HON. GEORGE RADANOVICH, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. RADANOVICH. Thank you, Mr. Chairman. I want to thank 

you so much for holding today’s hearing on the FTC’s role in financial consumer protection. Given the current economic downturn 

and the slow thawing freeze in the credit markets, this discussion 

is particularly timely. Abuses must have the disinfectant of sunlight shone brightly on them, and it is our responsibility as representatives of our constituents to examine the protections afforded 

to consumers by the law. Any credit scam that takes advantage of 

innocent consumers is deplorable and we must have our regulators 

pursue all those responsible for this kind of despicable crime behavior with vigor. 

My district is located in California San Joaquin Valley, which is 

suffering from one of the Nation’s highest foreclosure rates due to 

the easy availability of credit, unfortunately, so the easy money 

was available to consumers because of deception and fraud. These 

were cases of mortgage fraud, appraisal fraud, and income fraud 

that all played a part in creating the current mess that we are in. 

It is reprehensible that people who may have been taken advantage of when they bought their house could now be victims in their 

time of need. Today, we focus on the Federal Trade Commission’s 

efforts. The FTC deals with matters that affect the economic life 

of all our constituents. The Commission’s consumer protection mission is to ensure consumers are protected from unfair and deceptive practices in or affecting commerce. That Herculean task puts 

the Commission in the position of overlooking a multitude of industries, and the Commission’s responsibility to protect consumers of 

financial service products are a critical part of this work. 

The Commission helps to protect consumers at every stage of the 

consumer credit market from the advertising and the marketing of 

financial products to debt collection and debt relief. However, the 

Commission’s legal authority does not extend to all entities that 

provide financial services to consumers. The FTC Act and the statutes the Commission enforces specifically exempt banks, thrifts, 

and federal credit unions. The FTC, however, had jurisdiction over 

non-bank financial companies including non-bank mortgage companies, mortgage brokers, and finance companies. 

As the lead consumer protection agency, it has the expertise and 

the experience that was recognized by our colleagues on the House 

Financial Services Committee last Congress. They developed legislation to improve the existing framework of the consumer protection regulations to better coordinate banking regulators 

rulemakings with those of the Commission, and while avoiding duplicative efforts in the government this coordinated approach to 

protect consumers of financial services is essential. The same rule 

should apply regardless of what entity sells the product. I am anxious to hear about the FTC’s recent activity in this area, the coopVerDate Mar 15 2010 23:44 Mar 23, 2012 Jkt 067816 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 E:\HR\OC\A816.XXX A816

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erative efforts among agencies, and whether these efforts are effective. 

I do have concerns about some of the reforms that have been discussed over the years that would change how the Commission operates. As I mentioned, the FTC’s jurisdiction is enormous. Except for 

the few exempted entities, the Commission’s authority to promulgate regulations impacts nearly our entire economic spectrum. Unlike some other agencies who promulgate rules using the procedures of the Administrative Procedures Act, the FTC’s rulemaking 

process is laid out in the Magnusson-Moss FTC Improvement Act. 

Congress established the Magnusson-Moss rulemaking procedures 

in the 1970’s specifically to be more rigorous than the APA process, 

in part, to provide affected industries the opportunity to present arguments in an evidentiary hearing. 

The FTC must base any rule on that hearing record and substantial evidence must be presented to justify it. I am concerned that 

any significant change to this process would not allow for such 

careful consideration before rules are finalized. Congress set up the 

Magnusson-Moss process to be intentionally deliberative, but Congress also has been highly effective in enacting consumer protection 

legislation on specific issues and providing the Commission with 

APA rulemaking authority in those cases where it is warranted, 

such as the Do Not Call Act. 

I want to thank all our witnesses for being here today, and I look 

forward to their insight and expertise on how consumers can be 

best protected. I am particularly interested in hearing if there are 

any holes in the current law which prevent the FTC from pursuing 

bad actors and whether or not additional regulations would be effective in deterring unscrupulous lenders and others. If the testimony and the evidence we receive lead to the conclusion that the 

Commission should be doing more, including regulating entities 

that it currently does not, I stand ready to work with you, Mr. 

Chairman, to develop the appropriate legislation. Thank you, Mr. 

Chairman, and I yield back. 

Mr. RUSH. The chair thanks the gentleman. Now it is my privilege to recognize the chairman of the full committee for 5 minutes 

for the purposes of opening statements, the gentleman from California, Chairman Waxman. 

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. WAXMAN. Thank you very much, Mr. Chairman. I want to 

commend you for holding this hearing, and the fact that your subcommittee is taking a close look at consumer protection in the area 

of credit and debt. This committee has an important role in ensuring that consumers are protected from unfair, abusive, and deceptive practices throughout the marketplace, including the credit 

market, and I am pleased to join you in welcoming the chairman, 

the new chairman, of the Federal Trade Commission, Jon 

Leibowitz. Congratulations on your appointment. I look forward to 

working with you on this and other issues before our committee. 

The current financial crisis has brought to light a host of 

schemes that have hurt both individual consumers and the econVerDate Mar 15 2010 23:44 Mar 23, 2012 Jkt 067816 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 E:\HR\OC\A816.XXX A816

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omy as a whole, mortgages have required no money down and no 

proof of income or assets, pay-day lenders who charge 500 percent 

interest for a short-term loan, companies that take money from individuals based on false offers or they offer to fix a credit report 

or save a home from foreclosure. These are schemes, and they are 

allowed to happen because of a fierce anti-regulatory ideology that 

was prevailing at least in the last 8 years. The philosophy was the 

government was the source of the problem, that it posed obstacles 

to success and that it should be slashed wherever feasible. This 

was the ideology that led to FEMA’s failure during Hurricane 

Katrina, billons of dollars of contracting abuse at the Defense Department, and a food safety system that could not keep unsafe peanuts and spinach off the grocery shelves. 

The agencies of government responsible for protecting our financial system and Americans’ hard-earned assets also suffered under 

this ideology. There was a feeling that government should step 

aside and markets should be allowed to work with little or no regulatory intervention. Now we have an opportunity to move beyond 

the flawed system of the previous 8 years and strengthen consumer 

protections across the financial system. Today’s hearing focuses on 

the Federal Trade Commission which plays an essential role in 

overseeing consumer credit. An aggressive and rejuvenated FTC 

could prevent unfair and deceptive practices before they become 

commonplace, and it could use its enforcement authority to deter 

fraudulent schemes. 

I look forward to working with you, Mr. Chairman, and the members of this committee to making sure that the FTC has the authority, the resources, and the will to be an aggressive consumer 

protection agency. I yield back the balance of my time. 

Mr. RUSH. The chair thanks the chairman, and now recognizes 

the gentleman from Pennsylvania for 2 minutes for the purposes 

of opening statement, Mr. Pitts from Pennsylvania. 

OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH 

OF PENNSYLVANIA 

Mr. PITTS. Thank you, Mr. Chairman. Thank you for holding this 

important hearing on the role of the Federal Trade Commission 

and protecting consumers of credit and debt. I think we all agree 

that we need to ensure that strong consumer protection measures 

are in place. The recent housing and the credit crises our country 

has faced has made that abundantly clear. We must do this prudently though, avoiding duplicity and jeopardizing processes that 

work well, and this is why we should examine legislation already 

in place to see if it has been successful in protecting consumers. 

While there may be room for improvements in our consumer protection laws, we should also consider that a complete overhauling 

of legislation may actually force negative and overly burdensome 

requirements on those who are being truthful and honest. 

Again, we all desire effective and efficient enforcement of consumer protection laws, and it is my hope that this committee 

moves forward in a wise, careful, and deliberative manner, and I 

look forward to hearing our distinguished witnesses today. Thank 

you, and yield back. 


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Mr. RUSH. The chair thanks the gentleman. And the chair now 

recognizes the gentlelady from California, my friend, Ms. Matsui, 

for 2 minutes for the purposes of opening statement. 

OPENING STATEMENT OF HON. DORIS O. MATSUI, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Ms. MATSUI. Thank you, Mr. Chairman. Thank you very much 

for calling today’s hearing. I applaud your leadership on this issue. 

I would also like to thank Chairman Leibowitz for being here today 

with us and congratulate him also. In today’s economic recession, 

many families in my home district of Sacramento are really struggling to make ends meet. I have heard countless stories about people struggling to keep their homes, their jobs, and their way of life. 

As we all know, the housing crisis has had an unprecedented effect 

on our economy. The rising unemployment will cause even more 

Americans to face foreclosure. California, and in particular my 

home district of Sacramento, has been greatly impacted by the foreclosure crisis. Many of my constituents were victims of predatory 

lending and were steered into high cost, bad loans. Now many of 

these homeowners are seeking assistance in modifying their loans 

to more affordable loan terms. 

However, that has been a serious issue for many. In some cases, 

their original loan company is not a business or in some cases their 

lenders or services are not being responsive leaving struggling 

homeowners feeling desperate to save their homes. As a result, 

many have been tricked into contacting scam artists posing as socalled foreclosure consultants or the so-called agencies to save their 

homes. These scams are costing thousands of dollars and false 

promises to struggling homeowners. 

I am a member of the Sacramento District Attorney’s Foreclosure 

Task Force, which is charged with cracking down on mortgage 

fraud. Many of these unfortunate scams have been well documented in my district. It is clear that consumers are not being 

properly protected from these shameful, unacceptable practices. We 

are here today to determine what more the government can and 

should do to stop these abuses from occurring today and in the future. I think you once again, Mr. Chairman, for holding this important hearing today, and I yield back the balance of my time. 

[The prepared statement of Ms. Matsui follows:] 


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Mr. RUSH. The chair thanks the gentlelady. The chair now recognizes the ranking member of the full committee, my friend from 

Texas, Mr. Barton, for 5 minutes for the purposes of opening statements. 

Mr. BARTON. Thank you. And I haven’t forgotten about that cowboy hat, Mr. Chairman. 

Mr. RUSH. I thank you very much. 

Mr. BARTON. It is on order. 

Mr. RUSH. All right. 

Mr. BARTON. The hat is in the mail. 

Mr. RUSH. The hat is in the mail. All right. 

OPENING STATEMENT OF HON. JOE BARTON, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. BARTON. Thank you for this hearing today, Mr. Chairman. 

Its title, Consumer Credit and Debt: The Role of the Federal Trade 

Commission in Protecting the Public, is an important one. As you 

know, the subcommittee in the past has explored a multitude of 

consumer protection issues. We have looked into data security, 

spyware, spam, and children’s on line privacy. We have inquired 

about how Social Security numbers are abused. We have investigated calling cards and also telemarketing. These areas are important and it is fitting that today we are considering consumer 

protection particularly given our current economic environment. 

The fraud in consumer credit is considerable, its ramifications 

beyond those suffered by the victims. The fall out often damages 

the businesses with whom the consumer interacts and it nearly always harms consumers at large. Losses reach into the millions of 

dollars every year and the cost is borne by all of us. We know that 

the FTC is a strong advocate for consumers policing that activity 

of those fraudsters who seek to take advantage of consumers in a 

most repugnant way. I am interested today to learn what the chairman, Mr. Leibowitz, has to say about the tools that his agency has 

in its toolbox, how it complements the actions of sister agencies 

with similar authority and the state attorneys general and what 

additional tools, if any, the Commission needs. 

Let me add a cautionary note, however. I support efforts to 

strengthen the Commission’s authority where necessary. I am 

aware too that several stakeholders believe the Commission’s authority must be strengthened by eliminating the rulemaking requirements of the Magnusson-Moss Act in 1975 in favor of the Administrative Procedures Act. As we move forward in this debate, I 

would ask yourself, Mr. Chairman, and the members of this subcommittee, to remember the reasons that Congress imposed the 

Magnusson-Moss requirements in the first place. The FTC oversees 

an enormous jurisdiction. Its rules reach into enumerable industries and affect every commercial main street in the country. Given 

the breadth of that impact, Congress believes that the Commission 

should take more than 180 days so that it could carefully consider 

its broad sweeping rulemakings and the comments generated by 

that consideration. We still have the power here to permit the FTC 

to side step the Magnusson-Moss Act when necessary and permit 

rulemaking under APA where it is appropriate and necessary. 


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This is an ability this committee has never had a problem utilizing when we found a situation that warrants it. Again, thank 

you, Mr. Chairman, for holding the hearing. I want to thank our 

witnesses, and I look forward to reviewing their testimony. 

Mr. RUSH. The chair thanks the ranking member. Now the chair 

recognizes the gentleman from Georgia for 2 minutes for the purposes of opening statement of Mr. Barrow. 

Mr. BARROW. I thank the chair. I will waive an opening. 

Mr. RUSH. The gentleman desires 2 minutes in addition to the 

5 minutes that he is granted for questioning. So granted. The chair 

now recognizes my friend and vice-chair of the subcommittee, the 

gentle woman from Illinois, Ms. Schakowsky, for 2 minutes for the 

purposes of opening statement. 

OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS 

Ms. SCHAKOWSKY. Thank you, Mr. Chairman, for holding this 

hearing. And congratulations to you, Mr. Leibowitz. We are glad to 

have you here. The repercussions of years of irresponsible mortgage 

lending continued to unfold. According to the Center for Responsible Lending, there have been nearly 550,000 new foreclosure filings since 2009 began, 6,600 each day or 1 every 13 seconds. We 

were trying to calculate how many since this hearing began. It is 

more than 100, in every 13 seconds yet another. In my State of Illinois more than 100,000 families are projected to lose their homes 

to foreclosure this year, and this Administration and this Congress 

are obviously taking steps to mitigate this crisis and ensure it 

never happens again. 

But to do that, I really think we have to ask how did we get 

here. We are here not just because the banks were a problem, and 

it is not just bank lending that is responsible for billions of dollars 

worth of bad loans that now must be dealt with in order to put our 

economy back on track. Lending by non-bank entities has exploded 

in recent years and a major factor in today’s financial crisis Country Wide and other non-bank mortgage lenders are responsible for 

40 percent of the home loans made in 2007 and 55 percent of the 

sub prime loans. It was the Federal Trade Commission’s responsibility to exercise oversight of these mortgages where abusive practices have hurt consumers. Clearly, they missed something. 

The FTC’s authority extends to, it is my understanding, auto 

loans, pay-day loans, car title loans, and other non-traditional 

forms of credit that often flows to non-bank entities and currency 

exchanges. We have those in Chicago big time. It is a vital role of 

this subcommittee to exercise oversight over FTC and its rulemaking enforcement actions over non-bank lenders, and I look forward to working with you, our committee does, to make sure that 

these improvements are made as we move forward. I thank you 

again, Mr. Chairman. 

Mr. RUSH. The chair thanks the gentlelady. The chair now recognizes the gentleman from Georgia, Dr. Gingrey, for 2 minutes for 

the purposes of an opening statement. 


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OPENING STATEMENT OF HON. PHIL GINGREY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF GEORGIA 

Mr. GINGREY. Mr. Chairman, I thank you for calling the hearing 

today on such an important issue. It hadn’t been examined in 

depth by this committee since 106th Congress. I join with my colleagues in congratulating the new chairman of the FTC, Jon 

Leibowitz, and I look forward to his testimony. I think one of the 

most important things as we go forward is to strike a balance. And 

we heard testimony from our distinguished chairman a little bit 

earlier in regard to, and I paraphrase, the government during the 

past 8 years, at least the past 8 years, has taken sort of a handsoff or soft approach to regulation to the detriment of consumers. 

Well, in the first 60 days of the current Administration very aggressive intervention by the government led to over $200 million of 

egregious loans to AIG executives, so this is I think a perfect example of why we need to strike a balance. 

No doubt both lenders and borrowers can share the blame for 

elements of the current credit climate within the economy, and as 

the economy begins to work toward recovery one of the basic ways 

in which we can work in a bipartisan manner to prevent these 

problems from occurring again is through consumer credit reform. 

Unfortunately, there will always be bad actors within the financial 

and credit markets, and this committee hopefully will play a role 

in mitigating this in the future. First and foremost, credit scams 

that take advantage of innocent consumers are absolutely shameful. However, before we look to expand the role and the duties of 

the FTC, it is imperative that we examine how the FTC could be 

more effective given its current and very broad set of responsibilities. 

Mr. Chairman, moving forward, we must ensure that there continues to be strict scrutiny and transparency within the rulemaking process of the FTC. The Magnusson-Moss rulemaking 

structure is unique because in order to ensure transparency it was 

specifically designed in the 70’s to be difficult to make sporadic 

whimsical changes. As we are about to begin this hearing and future deliberation on the legislative changes to the FTC, I am reminded of the words of Speaker Pelosi when she took the gavel at 

the start of the 110th. She guaranteed that it would be the most 

open and honest Congress in the history of our Nation. I hope that 

this subcommittee takes heed of these words as we begin to modify 

the role. 

Mr. Chairman, transparency is everything, and with that I look 

forward to the testimony of the Honorable Jon Leibowitz, and I 

thank you so much for holding the hearing. 

Mr. RUSH. The chair thanks the gentleman. The chair now recognizes the gentlelady from Ohio, Ms. Sutton, for 2 minutes for the 

purposes of opening statement. 

OPENING STATEMENT OF HON. BETTY SUTTON, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF OHIO 

Ms. SUTTON. Thank you so much, Mr. Chairman. Thank you for 

holding this hearing. It is extremely important to the people that 

I represent in Ohio. You know, time and time again we have 

learned that sometimes the people who are hurt the most by what 


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is going on out there are the ones who need our help the most. 

Today there are a wide range of financial products advertised to assist consumers in paying off debt and emerging from debt from 

pay-day lending to car title loans, short-term loans with incredibly 

high interest rates all but ensure that individuals remain in debt, 

and these individuals, many of them, are my constituents. The 

American people expect their government to rein in unscrupulous 

and unfair lending. Last November, voters in Ohio overwhelmingly 

improved a referendum on pay-day lenders to end predatory loans. 

Our referendum capped interest rates provided borrowers with 

more time to pay back loans and prohibited new loans to pay off 

old ones which will help to break that cycle of debt. However, we 

are now learning that these lenders are exploring new loopholes 

and operating under different licenses and adding new fees such as 

inflated check cashing fees for checks they have just printed and 

even as our Attorney General, Richard Cordray, and our state legislature and our governor are working to address this situation, the 

Federal Trade Commission must aggressively act as the American 

people expect. While I used Ohio as an example, this is a problem 

that severely impacts people in need throughout our country and 

if the Federal Trade Commission does not have the tools or the authority to aggressively protect Americans, then it is our responsibility to strengthen the Commission and restore Americans’ confidence, and I look forward to being a part of making that happen. 

Mr. RUSH. The chair thanks the gentlelady. And now it is my 

pleasure to recognize the gentleman from Louisiana, Mr. Scalise, 

for the purpose of 2 minutes of opening statement. 

OPENING STATEMENT OF HON. STEVE SCALISE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF LOUISIANA 

Mr. SCALISE. Thank you, Mr. Chairman. I appreciate you holding 

this hearing. Fraudulent and deceptive practices that prey upon 

consumers are deplorable and shameful especially during these 

tough economic times because consumers are even more vulnerable 

to unethical scams. We need to make sure that the FTC is fully utilizing the tools they already have available to them and also ensure 

that the FTC is working with our local, state attorneys general, 

those people that are closest in many cases to the practices of those 

illegal and unethical practices that are going on where we would 

have the ability to actually go and get prosecutions and root out 

the things that are being done to take advantage of our consumers 

in this country. 

Another critical issue that we need to look at is the coordination 

with other federal agencies like the FBI, who are also involved in 

some of these investigates themselves as well as local attorneys 

general that were not duplicating the scarce resources that we do 

have, so I look forward to hearing from Chairman Leibowitz of the 

Federal Trade Commission, and yield back the balance of my time. 

Mr. RUSH. The chair thanks the gentleman. The chair now recognizes my friend, my colleague, my classmate, the gentleman from 

Texas, Mr. Green, for 2 minutes for the purposes of opening statement. 


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OPENING STATEMENT OF HON. GENE GREEN, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. GREEN. Mr. Chairman, thank you for your friendship over 

the last 17 years. I thank you for holding this hearing on the consumer credit and debt protection and to look at the role that the 

FTC should play. I would like to welcome our new FTC chairman, 

Jon Leibowitz, and congratulate him on the new position as the 

chair of the Commission. I look forward to working with you. The 

FTC is important all the time but in this day and time it is even 

more so. As the primary federal agency that enforces consumer 

credit laws at entities other than banks, the thrifts and federal 

credit unions, the FTC has broad responsibility regarding consumer 

financial issues in the mortgage market including those involving 

mortgage lenders, brokers, and services. 

The FTC enforces a number of federal laws governing mortgage 

lending, Truth in Lending Act, the Home Ownership and Equity 

Protection Act, and the Equal Credit Opportunity Act. The Commission also enforces Section 5 of the Federal Trade Commission 

Act which more generally prohibits unfair and deceptive acts or 

practices in the marketplace. That is probably one of the most important that we can deal with. In addition, the Commission enforces a number of other consumer protection statutes that govern 

financial services including Consumer Leasing Act, Fair Debt Collection Practice Act, the Fair Credit Reporting Act, the Credit Repair Organization Act, and the privacy provisions of the GrammLeach-Bliley Act. 

I also have a particular concern about non-traditional loans such 

as pay-day loans and car title loans, which can carry enormous interest rates and fees. In 2006, Congress enacted to cap the pay-day 

loans made to military personnel to a 36 percent annual percentage 

rate after pay-day loans grew 34 percent to reach a total of 500 

million the previous 2 years. That figures has doubled since 2002. 

In an economic climate such as the one we are in today where credit availability is shrinking consumers may be more inclined to turn 

to these options which are much less regulated and therefore the 

potential for predatory practice is much greater. In recent months, 

the FTC has taken significant steps to protect consumers and crack 

down on scam artists by going after Internet pay-day lenders, alleged mortgage foreclosure rescue companies, and companies claiming they remove negative information from the consumers’ credit 

reports. 

I look forward to hearing what other actions the FTC is making 

to protect consumers, what tools it may need from Congress, and 

what the rest of our witnesses believe could be done better to protect consumers in today’s volatile economic environment. All told, 

this gives the FTC broad authority to go after those predatory practices. The Congress may need to act particularly to give FTC authority to issue rules under the Administrative Procedures Act. 

Again, Mr. Chairman, thank you for calling the hearing, and I appreciate the opportunity. 

Mr. RUSH. The chair thanks the gentleman. The chair now recognizes my friend from Florida, Mr. Stearns, for 2 minutes for the 

purposes of an opening statement. 


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OPENING STATEMENT OF HON. CLIFF STEARNS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA 

Mr. STEARNS. Good morning, and thank you, Mr. Chairman. Welcome the new chairman. Mr. Leibowitz had been on the FTC as 

commissioner, I think, since September, 2004, so we have someone, 

Mr. Chairman and members, who is experienced and can help us 

out. He has seen some of the problems and some of the accomplishments. Obviously, as members have talked about, the current financial situation and housing crisis has brought a lot of relevant 

consumer protection issues to the forefront and we need to see how 

much more authority we should give the Federal Trade Commission. Something that no one has mentioned is perhaps giving them 

more jurisdiction over the banks to credit unions and the thrifts 

that my colleague from Texas mentioned they do not have jurisdiction, and of course that is 75 percent of the credit cards, so I think 

the people across the hall here will probably not like that, but it 

would fall in their jurisdiction. I think it is something that we 

should not not discuss. 

The FTC has authority, but as I pointed out earlier, it is sort of 

limited because 75 percent of the credit cards go through credit 

union, banks, and thrifts. But they can issue and prohibit unfair 

and deceptive acts, particularly dealing with advertising. The 

FTC’s stated goal is to protect consumers at every stage of the 

credit life cycle by both the FTC and consumer protection groups 

acknowledge that more can be done to protect consumers. And I 

think with his over 4 years experience as a commissioner he will 

certainly have some ideas that bring it to bear on this problem. 

The FTC has taken more aggressive action, I think, more recently 

against companies such as Internet pay-day lenders and credit repair companies who purposely deceive consumers, but the issue of 

whether the FTC should expand its jurisdiction, as I mentioned 

earlier, is still up in the air. It should be something of consideration. 

But I look forward, Mr. Chairman, in a bipartisan manner to see 

what we can do to help the Federal Trade Commission, and I appreciate you having this hearing. Thank you. 

Mr. RUSH. The chair thanks the gentleman. Now all the members of the subcommittee have had an opportunity to issue opening 

statements. And it is now my distinct honor and privilege to welcome the new chairman of the FTC, Mr. Jon Leibowitz, to this committee. I want to say, Mr. Liebowitz, we are excited about your 

chairmanship. We look forward to working with you and look forward to having a meaningful and productive relationship on behalf 

of the American people. First of all, it is the practice of the subcommittee beginning with this Congress to swear in all witnesses 

so would you please stand up and raise your right hand? 

[Witnesses sworn.] 

Mr. RUSH. Let the record reflect that the witnesses all answered 

in the affirmative. Chairman Leibowitz, you are now recognized for 

5 minutes for purposes of an opening statement. 


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TESTIMONY OF HONORABLE JON LEIBOWITZ, CHAIRMAN, 

FEDERAL TRADE COMMISSION 

Mr. LEIBOWITZ. Thank you, Mr. Chairman, Mr. Radanovich, Ms. 

Schakowsky, members of the subcommittee, I am Jon Leibowitz. I 

am the chairman of the Federal Trade Commission, and I really do 

appreciate the opportunity to appear before you today to discuss 

the FTC’s role in protecting consumers from predatory financial 

practices. This is my first hearing of several you mentioned, and 

let me just say this. You are an authorizing committee. We want 

to work with all of you. We will not be successful agency unless we 

can work together, and I hope that we will be doing that over the 

coming weeks and months. The Commission’s views are set forth 

in the written testimony which was approved by a vote of the entire Commission, though my answers to your questions represent 

my own views. 

Mr. Chairman, during these times of difficulty for so many American consumers, the FTC is working hard. Whether Americans are 

trying to stave off foreclosure, lower their monthly mortgage payments or deal with abusive debt collectors the FTC is on the job 

enforcing the law, offering guidance, and in the process of issuing 

new regulations. The written testimony describes in great detail 

the Commission’s enforcement, education, and policy tools and how 

we have used those tools to protect and advocate for consumers of 

financial services. We brought about 70 cases involving financial 

services since I came to the Commission 4–1/2 years ago, and we 

have gotten $465 million in redress for consumers over the past 10 

years in this area alone. 

But let me highlight just a few recent cases. In the fall, Bear Stearns and its EMC subsidiary paid $28 million to settle Federal 

Trade Commission charges of illegal mortgage servicing practices. 

For example, they misrepresented the amounts consumers owed. 

They collected unauthorized fees. They made harassing and deceptive collection calls. In January we sent out more than 86,000 redress checks, 86,000, to reimburse consumers who were harmed. 

And today the FTC announced two more cases against so-called 

mortgage rescue operations that allegedly charged thousands of 

dollars in upfront fees but failed to provide any assistance in saving people’s homes. 

Even worse, these scurrilous companies Hope Now and New 

Hope gave consumers false hope by impersonating the HUD-endorsed Hope Now alliance, which helps borrowers with free debt 

management and credit counseling services, mostly low income consumers. I am pleased to report that the courts have issued temporary restraining orders stopping these fraudulent claims and 

freezing the company’s assets. We are announcing a third action 

today against yet another rogue rescue scam. Less than 2 weeks 

ago, FTC investigators discovered a foreclosure rescue web site that 

was impersonating the HUD web site itself. The HUD inspector 

general had the site taken down. Last week, however, we were told 

that the same site had popped up again on a differed ISP. 

Within hours, we filed a complaint against the unknown operators of the site, and armed with a court order we shut it down. Let 

me assure you, particularly in this economic climate the FTC will 

continue to target fraudulent mortgage rescue operations, but we 


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can do better and we will. Mr. Chairman, you mentioned the lack 

of statutory authority, the one hand tied behind our back. First, we 

are going to vigorously enforce new mortgage rules issued by the 

Federal Reserve Board that go into effect this fall that will prohibit 

a variety of unfair, deceptive, and abusive mortgage advertising, 

lending, appraisal, and servicing practices such as banning subprime buyer’s loans. 

Second, the 2009 Omnibus Appropriations Act gave us authority 

to find violators in this area for the first time. And, third, we are 

going to use the regulatory authority given to use by the Omnibus 

to issue new regulations that will protect consumers from other 

predatory mortgage practices. We expect these rules to address 

foreclosure rescue scams and unfair and deceptive mortgage modification and servicing practices. At the same time, we are going to 

focus more attention on empirical research about how to make 

mortgages and other disclosures more effective so that consumers 

have accurate, easily understandable information about a mortgage’s terms. 

We have put a prototype disclosure form on your desks. It is 

clearly better, and we have copy tested this, than what people are 

using under current law. But we could use more help. FTC law enforcement would be a greater deterrent if we were able to obtain 

civil penalties for all unfair and deceptive acts and practices related to financial services beyond mortgages, for example, in-house 

debt collection and debt negotiation. The FTC could also do more 

to assist consumers if it could use streamlined APA rulemaking 

procedures to promulgate rules for unfair acts and practices related 

to financial services other than mortgage loans. These steps, of 

course, would require congressional action. They may perhaps require some more resources. 

Will all these measures be enough? Well, they could certainly 

help to ensure that we are never in this kind of economic mess 

again. Finally, Mr. Chairman, as you know, right now jurisdiction 

is balkanized between the FTC and the banking agencies about 

who protects American consumers from deceptive financial practices. Several bills have been introduced that call for an overall federal consumer protection regulator of financial services. As discussions about these proposals continue, we urge you to keep this in 

mind. The FTC, the Commission, has unparalleled expertise in consumer protection. That is what we do. 

We are not beholding to any providers of financial services, and 

we have substantial experience effectively and cooperating working 

with the states, especially cooperatively working with the states. In 

short, if your committee and if Congress determines that such an 

overall federal regulator is needed, if you do, we ask that the FTC 

be an integral part of the discussion about how to best protect the 

American public. Thank you, Mr. Chairman, for the opportunity to 

speak today about what the FTC has done and what we are going 

to do. We look forward to working with this committee, and I am 

pleased to answer your questions. Thank you. 

[The prepared statement of Mr. Leibowitz follows:] 


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Mr. RUSH. The chair thanks the chairman. The chair recognizes 

himself for 5 minutes for the purposes of questioning our witness. 

Chairman Leibowitz, during the housing boom the FTC had clear 

jurisdiction over many of the worse predatory lenders with the 

most objectionable practices, but the Commission arguably didn’t 

do much to address any of these activities. As a matter of fact, it 

was the states that successfully brought actions against lenders 

such as Countrywide and AmeriQuest when there are abusive lending practices in the sub-prime mortgage market. In the second 

panel Attorney Jim Tierney will talk about these and other issues 

a little more. 

But to begin with, I want to ask a simple question to you. What 

happened at the FTC? Why did the FTC not take aggressive action 

against mortgage lenders in the earlier part of this decade? 

Mr. LEIBOWITZ. Well, Mr. Chairman, I would say sometimes the 

simple questions are the most difficult ones to answer, but let me 

try to respond. First of all, I think, as you know, we are a tiny 

agency by Washington standards. We have 270 attorneys doing 

consumer protection. And, as Mr. Radanovich and others mentioned, we cover the entire waterfront of the economy with a few 

exceptions like common carriers. So we have to—and we spent a 

lot of time doing things like stopping fraud, going after spyware, 

you know, because we talked about that together. Having said that, 

I think we did a pretty good job. You know, we brought 75 cases 

in the last 5 years. We have gotten in the last 10 years $465 million in consumer redress, and that is just in this area of financial 

services alone. 

Could we have done more? Yes, I think we could have done more. 

Will we do more in the future? Yes. And do we need to work with 

the state attorneys general? Yes, and we do it all the time. We are 

part of several regional task forces. The director of or Atlanta office 

or southeastern regional office has actually set up a task force with 

state AGs, and they are going after predatory lending. But, yes, we 

can do more. I have been exchanging phone calls with Attorney 

General Holder about resurrecting something called the Executive 

Working Group, which involved the Federal Trade Commission, the 

state AGs, and the Justice Department. And it was something that 

was used in the 1990s and the 1980s to sort of coordinate efforts. 

I think we are going to resurrect that, and I think that would be— 

you can ask Attorney General Tierney, but I believe that that will 

be something that is welcome by all the state AGs, and it will allow 

us to help coordinate even more. 

Mr. RUSH. You asked for new authority for the FTC such as additional rulemaking authority, the ability to seek civil penalties, and 

possibly additional authority over banks and other depository institutions. But there are critics, and some of them are on this panel, 

or the next panel rather, and they argue that the Commission 

hasn’t been aggressively using the authority it already has. My 

question is given the FTC’s record over the past 8 years, why 

should we give this authority to you now? How can you assure us 

that you will use these authorities to aggressively protect American 

consumers? 

Mr. LEIBOWITZ. Well, I think, you know, you raise a very fair 

question, but I would say this. We are hamstrung, speaking for myVerDate Mar 15 2010 23:44 Mar 23, 2012 Jkt 067816 PO 00000 Frm 00054 Fmt 6633 Sfmt 6602 E:\HR\OC\A816.XXX A816

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self, we are hamstrung by the Magnusson-Moss rulemaking process. When you pass laws like Can-Spam, Gramm-Leach-Bliley, 

FACTA, you have given us APA rulemaking authority so that we 

can do rules more quickly. But in a Mag-Moss rule, and I think Mr. 

Radanovich raised the rationale for making rulemaking, and Congressman Stearns too, we are making rulemaking more complicated under Mag-Moss. It is a legitimate argument. But what we 

have found is that sometimes it takes 6 or 8 years to do 

rulemakings, and when it takes 6 or 8 years to do rulemakings, it 

is impossible to do a rulemaking in a timely manner to stop or to 

respond to a crisis. 

So, for example, 2 years ago we did a sweep of Internet advertising for mortgages, and we found facially deceptive ads, over 200 

different companies on the Internet. And the commissioners had 

discussions about what should we do about this. Well, we ended up 

bringing some cases against the worse malefactors. We wrote letters to everybody. Some people cleaned up their work. But we 

couldn’t do a rulemaking because under Mag-Ross rules by the 

time we started or finished the rulemaking, we knew that Congress 

would legislate in this area, as they should. And so if we could 

have some relief from Mag-Moss, I think we can be more effective 

in helping consumers. 

And it is a legitimate debate. I think when you reach reauthorization, which I know you want to do this year, we will have a discussion about the broader—about broader Mag-Moss rulemaking 

relief and finding malefactors. But again you can be much more effective if you have fining authority, which we don’t have for violations of Section 5. You can be much more effective if you can do 

some sort of streamline rulemaking authority too. 

Mr. RUSH. My time is up, but I want to inform the members of 

the subcommittee if the chairman will indulge us, we want to go 

through a second round of questioning. The chair now recognizes 

the gentleman from California for 5 minutes, Mr. Radanovich. 

Mr. RADANOVICH. Thank you, Mr. Chairman. And welcome, Mr. 

Leibowitz, to this subcommittee. Congratulations on your recent 

appointment. I did want to ask a couple questions. This first one, 

I am going to ask about five questions to the subject matter about 

why would you like the FTC to have an APA notice and comment 

rulemaking to define unfair deceptive acts for financial services. 

Why isn’t the current Section 5 authority sufficient? 

Mr. LEIBOWITZ. Well, it is two things. First of all, in the Omnibus 

Act we have a fining authority for the rules that the fed issued 

under the FTC Act and rulemaking authority. We are going to use 

that to go after deceptive and unfair mortgage servicing and in 

some other areas. Why do we want expanded rulemaking authority? Because we think when you write rules, you can set standards 

for an entire industry, and here where you have—where you have 

many, many actors it is better to try to set standards, and also we 

have seen a pattern and practice of bad behavior by many companies. Not all, but many. And so we think it would be helpful. It 

would make us a more effective agency. 

Mr. RADANOVICH. Do you have thoughts on what kind of rules 

you would like to propose for the activities that are not already covered under existing statutes? 


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Mr. LEIBOWITZ. We do. I think debt negotiation would be one 

area. We would want to work with the committee in thinking about 

other areas, but, yes, we do and we can get back to you with some 

more thoughts on that. 

Mr. RADANOVICH. OK. What would be the most prevalent consumer fraud violations in financial services that you think the FTC 

should be pursuing that it currently can’t? 

Mr. LEIBOWITZ. Well, I mean I guess I would say this. We found 

a fair amount of fraud in the entire life cycle of the mortgage instrument, and when you have an economic downturn as severe as 

the one that we are in now, I think there is more of an incentive 

to see more of this, so we are—in the mortgage area we now have 

that rulemaking authority that was given to us in the Omnibus. 

We think that is going to be helpful. We think we are going to be 

able to find malefactors and write good rules, but I think—and we 

have deployed more resources. We have really doubled our resources in the last 2 years to go after predatory financial practices. 

Having said that, there is just no shortage of bad acts that we 

could look at in this area. Most companies, of course, do the right 

thing but there are a lot of people who have just been ripping off 

consumers and the cases that we brought today sort of attest to 

that. 

Mr. RADANOVICH. Right. Yes. And I will get on to those cases 

that you brought in just a second. One more quick question though. 

Why can’t the Commission use your existing authority to propose 

rules defining unfair acts and practices for financial services? Why 

can’t you use what you have now? 

Mr. LEIBOWITZ. Well, again, we could do it, but if they are not— 

if it is not under APA rulemaking, notice and comment rulemaking, 

then it takes us literally years to do the rulemaking. I don’t think 

that serves the American people well. I don’t think it effectuates 

what you want us to effectuate on this committee. 

Mr. RADANOVICH. OK. Thanks. Now with regard to the cases that 

you mentioned that you have presented a very good record of the 

cases that the Commission has brought under a multitude of laws 

that you already have to enforce but unscrupulous actors continue 

to violate the law. Will more laws or rules reduce that fraud? 

Mr. LEIBOWITZ. I think, look, and we will have some of this discussion going forward when you look at our reauthorization, and 

growing the agency would be something that would be enormously 

important. We have about 1,100 employees. We do anti-trust and 

consumer protection. In 1980, we had 1,800 employees and the population of the United States was a third smaller than it is now. So 

part of it is more resources, but I also think part of it is the ability 

to have—the ability to have rulemaking authority. 

Mr. RADANOVICH. And you have to balance this idea of dealing 

with the bad actors and there may be more of them out there, you 

know, during this financial crisis or not. I don’t know how you 

measure how many bad actors are out there, but the other side of 

over enforcement is higher compliance costs, and where do you find 

the balance to where you are regulating so much that, you know, 

we have higher cost of goods out there as a result of it? 

Mr. LEIBOWITZ. Well, Congressman, you are right. We have to 

strike the right balance, and reasonable people can disagree about 


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exactly where that balance should be. But, look, we have brought 

68 cases in the last 5 years in the financial services area against 

malefactors. We have no fining authority. Forty-seven attorneys 

general, I believe, have fining authority to go after people who violate the law, and so fining authority is something you get for violating a rule and that would make us much—that would be an very 

important tool in our arsenal. And, by the way, when you pass 

pieces of legislation like Can-Spam, which came out of this committee, you have given us that fining authority, at least for specific 

matters. So it is a discussion we want to have with you going forward but that would be one thing that would make us more effective, I think. 

Mr. RADANOVICH. All right. Thank you for your answers. And 

thank you, Mr. Chairman. I yield back. 

Mr. RUSH. The chair thanks the gentleman. The chair now recognizes the gentlelady from California, Ms. Matsui, for 5 minutes for 

questioning. 

Ms. MATSUI. Chairman Leibowitz, as I mentioned in my opening 

statement, the issue of loan modification scams is a growing problem, particularly in California where we have the highest number 

of homes going into foreclosure. We hear individuals and companies 

advertising on radio and television with a simple message that 

they can lower your mortgage payments, stop your foreclosure. And 

many of these people are calling themselves foreclosure consultants 

or in some cases acting like they were government agencies like 

HUD. They make guarantees and promises to homeowners seeking 

help to save their home, but this help usually comes with a price 

tag in the form of an advanced fee between $1,500 up to $9,000. 

That being said, I would like to hear what the FTC is doing to 

crack down on these fraudulent loan modification scams. In your 

written testimony, you announced two new cases targeting mortgage foreclosure rescue scams bringing the total to eight such 

cases. Is enforcement the right approach to ending this type of 

fraud? You initiated 8 cases. Will those cases serve as a deterrent 

to other scammers and other steps that the FTC can take to end 

these practices? 

Mr. LEIBOWITZ. Well, that is a great question, and we do think 

that these—and, by the way, I should mention that we are also 

members of the Sacramento Task Force and many task forces in 

your districts around the country. Well, I do think that the cases 

against Hope Now and New Hope, which are two entities that are 

claiming to be affiliated with the Hope Now alliance, are ones that 

will be helpful as a deterrent but we also think that rulemaking 

authority and fining authority will make our ability to deter more 

effective. And again we want to do rules because they are needed 

in the mortgage servicing area, in the mortgage modification, and 

rescue area, and going after rescue scams. So we would like to be 

able to use the whole arsenal. We have been given some authority 

in the Omnibus Appropriations Act that will be helpful. We are 

looking for more authority from this committee and we want to 

move forward with that if the committee believes it is appropriate. 

Ms. MATSUI. OK. Some examples of fraudulent schemes are, as 

we mentioned, advance fee scams where, you know, consumers are 

charged for services that are never rendered, and in exchange for 


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this fee, it is up from $1,500 to $9,000, homeowners are promised 

guarantees to save their homes. In some cases, consumers usually 

pay these fees with a credit card, which should make it easier to 

track the payment and help the consumer recoup their money. 

What is the government doing to help recoup these advance fees 

to make consumers whole again, and is there a mechanism in place 

to help consumers recoup their advance fees? 

Mr. LEIBOWITZ. Sure. I mean when we bring these cases, and, by 

the way, the Hope Now case is a case that involved an advance fee 

of $1,000 to $1,500. My understanding is that when consumers— 

consumers got no help whatsoever or very little assistance. When 

they asked for their money back, it was done. So when we bring 

these cases, we try to ask for a disgorgement of profits. We try to 

get redress to consumers. In the case we brought against Bear 

Stearns as a subsidiary, EMC we got 86,000 redress checks issued. 

But it is tough because sometimes these assets dissipate and sometimes it is hard to determine, you know, not in these cases but in 

other cases which ones were fraudulently made or which advertisements were deceptive and which ones weren’t and that is why a 

penalty authority will be very helpful to us if we can get it. 

Ms. MATSUI. Well, do you think Congress should ban these advance fees? 

Mr. LEIBOWITZ. I would want to come back—I would want to 

think about that. I would want to think about that. We certainly 

see experience—we certainly had experience with these advance fee 

scams including advance fee credit card scams that make us think 

that certainly the practice of a lot of companies should be prohibited. But as far as advance fees generally in the financial services 

area, I would want to think about that because there may be some 

value when legitimate companies are doing some things with advance fees. 

Ms. MATSUI. So would you think then that the FTC should declare its view that it is an unfair practice to charge an advance fee 

for services that do nothing to save a home? 

Mr. LEIBOWITZ. Well, I would certainly think that we could look 

at that in the context of our rulemaking and some states, I believe, 

so ban advance fees in the financial services area so it is something 

we can take a look at. I think we probably should in the context 

of any rulemaking authority we have been given in the Omnibus 

or that you give us additionally. 

Ms. MATSUI. Well, thank you very much, and I see my time is 

up. Thank you. 

Mr. RUSH. The chair now recognizes the gentleman from Nebraska, Mr. Lee Terry. 

Mr. TERRY. Thank you, Mr. Chairman. I appreciate this. The 

gentlelady brings up, I think, several good points, and I think really gets to the heart of the matter, and that is if we are going to 

stream line rules, the procedures for the rules, we want to make 

sure that it is going to be effective in protecting consumers and 

that you will be able to use the FTC’s authority. But the argument 

here about advance fees begs the question of who is ultimately 

going to be able to decide what is deceptive and what is not. Sometimes it is obvious where you can put 100 people together and they 

will say that practice is deceptive. There are other things like 


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maybe advance fees that some people will say are deceptive or that 

are wrong, but they are not deceptive. 

And so how are we going to split those hairs if you are coming 

to us and asking us to streamline the rules or the procedures to 

make your rulemaking. Who should have the authority in there to 

determine which specific practice is deceptive or not deceptive? 

Mr. LEIBOWITZ. Well, I think that is right and in some practices 

maybe deceptive as practiced by some companies whereas other 

companies may do them in a legitimate way. 

Mr. TERRY. That is why it is really—— 

Mr. LEIBOWITZ. Right. It is a good question and whether we 

have—whether we are bringing cases or whether we are enforcing 

rules that we promulgated, we have to go before a federal judge, 

so there is that mechanism as a check and balance against any excesses of the FTC, but I don’t believe anybody has suggested at 

least in the last 25 years that we have engaged in any excesses at 

our agency. I think people think that we are a pretty good—I think 

people think that we are a pretty good agency and we try to do the 

right things with our limited resources and leverage of resources. 

Mr. TERRY. In specific about streamlining the rule process so you 

can be more nimble, do you have specifics for us or is that just kind 

of a general statement that would be helpful for you? 

Mr. LEIBOWITZ. Well, I think it is both in the sense that if we 

have a—if we have more agile rulemaking, something closer to 

APA rulemaking, we can respond more quickly. I do think that we 

are going to, you know, use the APA rulemaking authority given 

to us in the Omnibus Act to address foreclosure rescue scams 

where we know there are very, very serious problems, mortgage 

modification where we know there are problems. We know that 

both because we have testified to it and others have, and also because of the Bear Stearns case where we saw lots of embedded fees 

that consumers just didn’t know about and are being hit with. 

Mr. TERRY. Yes, those get to be fairly obvious. 

Mr. LEIBOWITZ. And let me just add my point to that that advance fees are prohibited under CROA. We prohibit the under the 

telemarketing sales rules which is an FTC rule, and in some instances, not in every, but in some instances it has really sort of 

helped clean up bad practices that harm consumers. 

Mr. TERRY. All right. And those were developed within your own 

rules? You decided in those instances—— 

Mr. LEIBOWITZ. The telemarketing sales rules were promulgated 

by us pursuant to legislation enacted by Congress in the early 

1990’s, I believe. 

Mr. TERRY. Right. But for those specific instances with the specifics of advance fees, that was something that you did within the 

FTC by rulemaking? 

Mr. LEIBOWITZ. Yes, that is exactly right. 

Mr. TERRY. And that is the point that I am getting to. I guess 

there are two sides of the coin that we can look at here and one 

is we can criticize the FTC over the last 8 years for not being aggressive enough. Eight years from now are we going to look back 

at the FTC when we streamline your rules and say you were overly 

aggressive and without specific congressional approval defining 

general practices as deceptive practices thereby freezing trade? 


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Mr. LEIBOWITZ. Look, it is a fair question but I think in these 

times of, you know, where we have seen so much harm to consumers by deceptive acts and practices, you might want to—given 

that we are an agency that has a track record for being aggressive 

but balanced, you might want to err on the side of giving us more 

authority. Believe me, in the 1960’s and 70’s Congress was always 

able to pare us back when they thought we were going a little bit 

too far. But, again, you know, in areas like debt collection, in-house 

debt collection where we have seen problems including in the Bear 

Stearns case and debt negotiation, those would be areas not covered by the Omnibus where we think we could do—— 

Mr. TERRY. In my last 14 seconds, I am just very curious, in the 

last several years in the financial services area you have brought 

40 or 60—— 

Mr. LEIBOWITZ [continuing]. Sixty-eight cases. 

Mr. TERRY [continuing]. Sixty-eight complaints. Generally what 

were those? What is the major area? 

Mr. LEIBOWITZ. It is really a combination of different areas. It is 

7 mortgage advertising, 5 pay-day loan cases—6 pay-day loan 

cases, a couple of fair lending cases, mortgage servicing cases, 9 

foreclosure rescue scam cases, and 12 credit counseling cases, and 

11 debt collection cases. Those are the—and, sorry, 17 credit repair 

cases as well. So it is a combination of—it is different areas mostly 

within our financial services group, and then we have had our regions. We have 7 regional offices around the country doing more in 

this area because it is a high priority for us. 

Mr. RUSH. The gentleman’s time is up. The chair now recognizes 

the vice chair of the subcommittee, Ms. Schakowsky, for 5 minutes. 

Ms. SCHAKOWSKY. Thank you. Chairman Leibowitz, since 2001, 

state attorneys general have been active, often aggressively pursuing the bad actors in the field of consumer credit. They took the 

lead on cases like Household Finance, AmeriQuest, Countrywide, 

and uncovered extensive abusive practices, inflated appraisals, fabricated income statements, misrepresentations to borrowers, illegal 

and deceptive fees, and rates. Was the FTC approached to participate in these activities? 

Mr. LEIBOWITZ. You know, some of those cases took place before 

I came to the Commission. I believe in AmeriQuest, which is a terrific case by the state AGs, we approached them about whether 

they needed our help because we are always happy to help with 

cases and we work a lot with state AGs, and I think that they 

were—I think that they demurred on that, that they were—— 

Ms. SCHAKOWSKY. But my understanding that in fact the Commission has often opted not to participate. In fact, a former attorney general, James Tierney, who will be sitting on our second 

panel, in his testimony he states that the past 8 years have been 

a time of limited cooperation between the FTC and state attorneys 

general with respect to enforcing consumer protection in the areas 

of consumer credit, and so would you agree with this assessment? 

Mr. LEIBOWITZ. Well, I would say this. I can’t speak for the first 

four—from 2000 to 2004. I wasn’t at the Commission. From 2005 

through now, we have been working fairly often with the states. 

We are involved in regional task forces. But, look, we can certainly 

step it up and we certainly will. And one of the things I am very 


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heartened about is our very positive conversations with Attorney 

General Holder about resurrecting the executive working group, 

which had sort of—which was very active in the 1990’s and sort of 

was flailing in the last 8 years. It is a way for us to help coordinate 

with the Justice Department and with state AGs through regular 

meetings, regular consumer protection activities, so I think that 

will be a big plus. 

Ms. SCHAKOWSKY. Wonderful. Let me talk about a different area. 

Under Section 18 of the FTC Act whenever the Commission promulgates a rule on unfair or deceptive acts of practices dealing 

with consumer credit matters the Federal Reserve and other banking agencies are required to promulgate a similar rule for depository institutions or explain why such a rule is unnecessary. So 

were we to give the FTC speedier APA rulemaking under Section 

18 of the FTC Act, would this not ameliorate at least somewhat the 

lack of functional or regulatory parity because of the reciprocal requirements under Section 18 whereby banking agencies have to 

consider the FTC’s lead? 

Mr. LEIBOWITZ. Well, Congresswoman, it might very well be 

helpful but I think what your question touches on, and I know you 

know this, is the sort of incredible balkanization, right? 

Ms. SCHAKOWSKY. Right. 

Mr. LEIBOWITZ. Consumers don’t know whether they got—consumers don’t care whether they got a mortgage from a bank or 

whether it came from a mortgage, a non-bank mortgage. 

Ms. SCHAKOWSKY. Right. 

Mr. LEIBOWITZ. If it is deceptive, if it is, you now, a sub-prime 

loan or a non sub-prime loan with hidden fees that they don’t know 

about, it is hurting them. So we have a sort of balkanization of authority here. There are three or four different banking entities or 

banking agencies that have some jurisdiction over the 60 percent 

of the mortgages that are issued by banks. We have jurisdiction 

over the others. And I think that is why Elizabeth Warren and the 

professor at Harvard and a variety of folks on the hill are thinking, 

you know, that it may be time to have one single entity that protects consumers from predatory financial instruments. And certainly I know people on this committee are thinking about that, 

and I want to make sure that you know from our perspective we 

are a consumer protection agency. 

Ms. SCHAKOWSKY. So you could do banks as well is what you are 

saying? 

Mr. LEIBOWITZ. We could do banks as well, I would say with this 

qualification. The banking agencies, you know, they are mostly concerned with safety and soundness. We don’t do safety and soundness. We are not those kinds of bank regulators but if you want 

an entity to do consumer protection for consumers who have financial instruments, we can do that really, really well. 

Ms. SCHAKOWSKY. Let me ask the final thing. 

Mr. LEIBOWITZ. Sure. 

Ms. SCHAKOWSKY. There was a colloquy on the Senate floor that 

clarified the authority that is this trigger under Section 18 was not 

under Section 18 and only applied to non-banks. Do you see this 

if it goes forward as a missed opportunity? 


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Mr. LEIBOWITZ. Well, you know, do I personally see this as a 

missed opportunity? I certainly think Congress needs to look at the 

notion of a single entity whether it is housed in the FTC or whether it is a new one to protect consumers from predatory financial instruments, deceptive and unfair ones. I see this as actually an opportunity for us because the language in the Omnibus Appropriations Act gives us rulemaking throughout the entire life cycle of a 

mortgage only of course for non-bank issued mortgages. But that 

is a real opportunity to do rulemaking, and after we do rulemaking 

to actually be able to have standards, get those from rules, and to 

find malefactors who fall below those standards. 

So I see your point, and we are very supportive of Congress having a discussion about creating an entity to protect consumers here, 

but I also think we have been struggling for this legislation for 

quite some time. It is going to be helpful to us. 

Mr. RUSH. The chair now recognizes the gentlelady from Ohio, 

Ms. Sutton, for 5 minutes. 

Ms. SUTTON. Thank you so much, and thank you, Mr. Chairman, 

for your commitment to look after the entire life cycle of credit. 

There are so many questions that I have, I am going to probably 

going to need to follow up after the course of this hearing to try 

and unravel exactly what is going on out there because I can tell 

you that my constituents are feeling the effects of all of this confusion. It is kind of confusing for anyone who is watching this hearing to figure out who has authority over what, and who has the responsibility to protect them let alone, you know, know where to 

turn. So in the last line of questioning from my distinguished colleague, Representative Schakowsky, we are talking about the new 

opportunity you have within limits for rulemaking. 

But if I was to ask you this question, it sounds to me like you 

have limited opportunity for rulemaking that will provide some 

people protection but there is whole other category of people out 

there who may be suffering from the very same thing and the same 

practices over which you have no ability to help them, is that correct? 

Mr. LEIBOWITZ. That is correct. 

Ms. SUTTON. Let me go on record as saying I don’t think that 

makes any sense. 

Mr. LEIBOWITZ. That makes a lot of sense, and again in going 

back to Ms. Schakowsky’s questions, one of the other things that 

is sort of peculiar about this rulemaking is that the fed can enact, 

promulgate rules under the FTC Act by notice and comment rulemaking, APA rulemaking, the simple rulemaking that we can then 

enforce for over non-bank mortgage companies, over non-bank 

issued mortgages. But if we want to do that rulemaking right now, 

it would have to be under Magnusson-Moss and it would never get 

done because contested rulemakings under Magnusson-Moss just 

don’t get done, so we are glad that they promulgated these rules. 

We are glad we can enforce them. 

We think those rules are going to be helpful in curbing bad advertising and things like liar’s loans but it is like trying to—even 

for the Commission, and all the commissioners are very, very hard 

working, you know it is like running through a rabbit warren to 


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try to figure out how these laws interact and regulations interact 

with each other. 

Ms. SUTTON. Well, again, I appreciate that very much because it 

seems like we should be able to inject some more sense into the 

process and into this puzzle. In your testimony on page 8 you 

talked about suing a credit card marketing company. Obviously, 

you can reach the credit card marketing company. Can you tell me 

what exactly is a credit card marketing company? 

Mr. LEIBOWITZ. Well, we can’t reach—as you know, we can’t 

reach bank issued credit cards, which is about, I think someone 

said 75 percent. I think it is now probably up to about 95 percent. 

So a credit card marketing company is simply a non-bank affiliate 

or surrogate that markets the credit card, and what we found with 

some of our advance fee cases is they will say you can have a credit 

card, give us $500, and then when you give them $500 some of it 

is taken away by fees, by prohibitive monthly costs or you can only 

use the credit card to buy from their catalog, so those are some of 

the types of cases we have brought. 

And then we had a major case involving a company called 

CompuCredit, which we brought jointly with the banking agencies 

where they had—and it was a credit card company that actually 

targeted sub-prime borrowers, people who couldn’t otherwise get 

credit, so that is sort of laudatory at some level. But the credit card 

limit was $300, and the first month had $185 in fees, which 

weren’t accurately disclosed we alleged, and we had a settlement 

for $115 million for consumers just the end of last year. That was 

very, very important for us. 

Ms. SUTTON. OK. So the question that I have though is if a bank 

is engaging in the exact same activity, can you do anything about 

it? 

Mr. LEIBOWITZ. You know, we could run across the hall to the 

banking agencies where they are testifying and tell them they 

should take a look at it. We can go talk to them, but we can’t do 

anything about it. 

Ms. SUTTON. That is my point, and that is my concern. OK. Mr. 

Chairman, I will hold my questions at this point until the next 

round. 

Mr. RUSH. The chair thanks the gentlelady. The chair now recognizes my friend, the gentleman from Pennsylvania, Mr. Pitts, for 

5 minutes. 

Mr. PITTS. Thank you, Mr. Chairman. Mr. Leibowitz, as an overwhelming number of mortgage fraud cases began to surface in 2007 

the FBI formed a financial crimes task force and has had more 

cases than it can handle, and these are largely criminal fraud 

cases. Does the FTC have a role in investigating these cases? If so, 

would you elaborate? 

Mr. LEIBOWITZ. I want to get back to you on those cases. We do 

a lot of work with the postal inspectors. We do some work with the 

FBI, of course, but when we see something that is criminal we generally refer it to the Justice Department, and if they will take it 

they have more appropriate sanctions than we do. We generally 

can only get redress and disgorgement and stop the bad conduct, 

so sometimes we are sort of the fallback entity for going after 


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fraudulent behavior in this area, but I will get back to you on 

whether we have worked with the FBI task force specifically. 

Mr. PITTS. OK. Thank you. The Commission has conducted research on ways to improve mortgage disclosure. If the disclosure 

documents were simplified in a manner that provided relevant information similar to the prototype disclosure developed by the 

Commission, would that have prevented any of the fraud that occurred in the home mortgage loan market in your opinion or might 

fraudsters simply find a way around that simplified uniform disclosure? 

Mr. LEIBOWITZ. Well, I would say this. Fraudsters, you know, can 

often find a way around even simplified disclosures, and I hope all 

of you have the draft disclosure form on your desk. If not, we will 

make sure we get you copies. But sometimes what is happening is 

that consumers don’t see imbedded fees, and what we have done 

with our sort of disclosure form, it is simple. We have copy tested 

it. In other words, we have asked consumers to look at this and 

compare it to the existing HUD, RESPA and TILA forms that they 

use. And those forms have both—they are both over inclusive and 

under inclusive. They have too much information so consumers 

don’t know what to focus on, and they don’t focus on some specific 

aspects of information. 

So can I say to you that it would prohibit—it would have stopped 

a specific fraud? I don’t think so. But would it have sort of helped 

some consumers make more informed decisions when they are dealing maybe not with deception but more with unfairness? We think 

it might have. And even, by the way, for consumers these forms or 

this draft form and others like it, it doesn’t just help the consumer 

who is being ripped off. It helps the consumer who wants to be able 

to make informed choices, and say, well, here, you know, the fees 

are going to be more and here the fees will be—here the fees and 

the overall cost of the loan will be less. So that is just helping consumers like all of us make choices from among competitors. 

Mr. PITTS. The FTC prohibits both unfair and deceptive practices. 

Mr. LEIBOWITZ. That is correct. 

Mr. PITTS. Unfair is defined as any act that causes or is likely 

to cause substantial injury to consumers which is not reasonably 

avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition. Bringing an enforcement action for violation of a deceptive practice is much more 

common for the FTC. Why are unfair cases brought so infrequently? 

Mr. LEIBOWITZ. Well, I think, you know, you articulated—I think 

you read directly from the statutory authority we have. It is harder 

to show unfairness. Unfairness is sometimes a more amorphous 

term, so when we see—when we are going after a typical bottom 

feeder who is ripping off consumers, we just see it is clear deception. But sometimes, for example, in our spyware cases and in a 

variety of our other cases involving data security and Internet-related problems, we will use unfairness. We have been using it actually more in the last several years because we think it is important. 


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Mr. PITTS. Should unfair acts be better defined to provide greater 

certainty to make enforcement easier? 

Mr. LEIBOWITZ. I would say certainly if we had a little more leverage in our unfairness standard, we might be able to bring unfairness cases more often. We had a much broader standard in the 

1960s and 1970s, and through the late 1970s, and then Congress 

asked us to modify first of our own volition and then it put it in 

the statute, I think, in 1992, our unfairness authority. So this has 

been the subject of some debate going back and forth about whether we should have a little more flexibility here. We would love to 

work with you on this. 

Mr. PITTS. Thank you. My time is up. Thank you, Mr. Chairman. 

Mr. RUSH. The chair now recognizes the gentleman from Texas, 

Mr. Green, for 5 minutes. 

Mr. GREEN. Thank you, Mr. Chairman. Mr. Chairman, an issue 

came up just now, and I was going to ask you, is there any numbers that the FTC could share with the committee on the number 

of criminal prosecutions it referred to the Justice Department that 

actually are taken by the Justice Department because I think that 

is something we would like to see. 

Mr. LEIBOWITZ. Yes, we will get you—we will get you that information. We do have Tim Yuris, who is the first chairman under 

Chairman Bush, set up a criminal liaison unit and which we still 

have and which takes some of the cases that are clearly of a criminal nature where we started investigations and sends it over to the 

Justice Department or to certain other prosecutors, so we can get 

you that information. Some of it—with the caveat that I have to 

go back and look. Some of it may be confidential. And then sometimes, again, as you know from the cases because you know our 

agency—— 

Mr. GREEN. We just need the numbers. 

Mr. LEIBOWITZ. Yes, we will get them. 

Mr. GREEN. The percentages, and if there are cases that are definitely not controversial, it would be interesting to see what type of 

cases may not be accepted and what type would be. 

Mr. LEIBOWITZ. Right. I can just tell you as a general matter 

sometimes the cases don’t rise to the level of ones that the Justice 

Department wants to prosecute so we do it ourselves. 

Mr. GREEN. OK. And you have the ability to do it yourself? 

Mr. LEIBOWITZ. Not as a criminal matter but as a civil matter 

so to stop ongoing harm. 

Mr. GREEN. Our office has been hearing from constituents concerned that the free credit reports do not list all the information 

that credit lending entities have access to. Do you know if there is 

a case and, if so, do you believe consumers should have access to 

all this information? It seems that consumers should have access 

to all the credit information available to them. Have you heard of 

that or has that been an issue with the FTC? 

Mr. LEIBOWITZ. Yes. We brought a case, I think in 2002–2003 before I got to the Commission freecreditreport.com. I think I am 

summarizing it but I believe they are actually charging fees. There 

is a place where consumers can go to get a free credit report without entering into a contract, a monthly contract, and I think that 

is called annual credit report. And we actually, not to make light 


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of this, but we actually put out a spoof of freecreditreport.com that 

got picked up by You Tube and by a variety of other media outlets 

just 2 weeks ago. So this is an area of some concern to us, and I 

know the consumers—we do get complaints on this. 

Mr. GREEN. That is what I was going to say. There may be 

things that the consumer may not—that is not on that report that 

is being used for their credit rating. 

Mr. LEIBOWITZ. Credit source, are you talking about credit 

source? Yes, they are included in the free credit report. 

Mr. GREEN. And is there any restriction on what can be considered to go into your credit score either by practice or by rule or 

statute? 

Mr. LEIBOWITZ. Let me, Congressman, get back to you on that. 

It is a legitimate question and I want to give you the right answer. 

Mr. GREEN. I know I only have a minute left, but there are many 

varieties of mortgage foreclosure rescue fraud but in each case the 

perpetrator makes misleading promises that the consumer’s home 

will be safe from pending foreclosure permanently. Most consumers 

end up losing their home, however, as well as the money they paid 

to these scammers. I am aware the FTC took action in February 

to sue a company operating one of these scams, and I commend you 

for that. How widespread is the problem and does the Commission 

have the tools and resources to go after a lot of bad actors, not only 

the ones you see but it seems like some of it may be cottage industries that we are seeing in regional areas and not maybe national. 

Mr. LEIBOWITZ. Right. Well, with the entity that we just brought 

an action against today that is impersonating HUD, we are having 

sort of a whack-a-mole problem with them because we found the 

site. We found the site. The HUD inspector general took it down. 

Then it popped up again under a web site from Germany, registered in Germany, and then we have taken that site down, so we 

have a little long arm problem in terms of asserting our jurisdiction. The other thing is that if we can find these malefactors which 

the Omnibus Appropriations Act will let us do or provision that 

Senator Jorgen got into the Omnibus Appropriations Act will let us 

do, I think that would be very, very helpful, and we will do a rulemaking on foreclosure rescue scams and also deceptive modifications. 

Mr. GREEN. If you would share that with us even though we are 

not a writer of the appropriations bill and maybe not rise to the 

need for an authorization, but some of us could help with getting 

the encouragement of the appropriators to include that. 

Mr. LEIBOWITZ. We would love to work with you. We would love 

to help. 

Mr. GREEN. Thank you. 

Mr. RUSH. The chair now recognizes the gentleman from Michigan, Mr. Stupak, for 5 minutes. 

Mr. STUPAK. Thank you, Mr. Chairman. Chairman Leibowitz, 

thanks for being here. The Commission, as you have indicated, has 

authority under Section 18 of the Federal Trade Commission Act, 

and I understand it is particularly cumbersome. Instead of promulgating rules under the APA, the Commission must go through a far 

more difficult process known as the Magnusson-Moss Act. So my 

question is since you have been chair, has the Commission considVerDate Mar 15 2010 23:44 Mar 23, 2012 Jkt 067816 PO 00000 Frm 00066 Fmt 6633 Sfmt 6602 E:\HR\OC\A816.XXX A816

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ered promulgating the rule under the Magnusson-Moss Act or have 

you just sort of disregarded the whole process? 

Mr. LEIBOWITZ. We have a few rules that we are in the process 

of promulgating outside of this area under Mag-Moss, but they are 

generally sort of not good government rules but non-controversial 

rules because under Mag-Moss if you want to promulgate a rule 

and there is an opposition to that rule they get to require an independent referee, multiple rounds of submissions, and it takes a 

really long time. 

Mr. STUPAK. Do you think Congress should just repeal that? 

Mr. LEIBOWITZ. I would say this. There are probably some legitimate reasons why Congress gave us this cumbersome rulemaking. 

Mr. STUPAK. Can you give me one reason why they would give 

you such a burdensome procedure if our purposes—— 

Mr. LEIBOWITZ. Off the top of my head, no, but I would say this. 

I certainly think some relief from Magnusson-Moss would be justified. I think the original—look, we are an agency that Congress 

wanted to give us when they created us in 1914 enormously broad 

jurisdiction but fairly limited remedies, as opposed to the Justice 

Department where they have to go after more specific crimes and 

they put people in jail. They have fining authority. And so the rationale for Mag-Moss, I suppose, is that it sort of slows things down 

because we have such broad jurisdiction. I do think over time what 

we found is that some relief to Mag-Moss would be helpful in allowing us to have leverage over the bad guys. 

So, for example, I think 47 attorneys—when you promulgate a 

rule, you can get a fine for a violation of a rule. Otherwise, when 

we use our Section 530, you can’t do that, and so if we can find 

malefactors as 47 attorneys general can do, that would make us 

more effective in doing what you want us to do, which is protecting 

consumers. 

Mr. STUPAK. In order to protect consumers, you have to move 

quicker. I mean we don’t want you to be the Justice Department, 

you indicated you don’t have fines and all that, but isn’t really your 

power is to look for that unfair and deceptive practices and act 

quickly to cease and desist. Isn’t that really the role of the FTC? 

It seems like Magnusson-Moss is just the opposite. It slows you 

down so you cannot be nimble and react to current trends. 

Mr. LEIBOWITZ. That is exactly right. In a controversial rulemaking, you know, in a rulemaking where there is opposition, and 

many good rulemakings have opposition, you know, we would always look to see what all stakeholders want. Of course we are 

going to do that, and we are going to do that in the rulemakings 

that we got in the Omnibus Appropriations which will be APA 

rulemakings. 

Mr. STUPAK. Right, but even that is limited in the Omnibus. 

Your rulemaking authority, that is somewhat limited, is it not? 

Mr. LEIBOWITZ. It is limited. It applies to mortgages but not 

other financial instruments not issued by banks, and of course it 

only goes to non-bank issued mortgages, but it is still better than 

what we had so we are very grateful for it and we thank this committee for protecting it in the Omnibus. 

Mr. STUPAK. Well, let me ask you this. Since 2001, the attorneys 

general have been active and very aggressive in pursuing bad acVerDate Mar 15 2010 23:44 Mar 23, 2012 Jkt 067816 PO 00000 Frm 00067 Fmt 6633 Sfmt 6602 E:\HR\OC\A816.XXX A816

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tors in the field of consumer credit. They took the lead on cases 

against Household Finance, AmeriQuest and Countrywide, and uncovered extensive abuse of practices, inflated appraisals, fabricated 

income statements, misrepresentations of borrowers, and illegal 

and deceptive fees and rates. Was the FTC approached to participate with the AGs in their—— 

Mr. LEIBOWITZ. In some cases we have, and we have participated 

with them. In some cases, they have done it on their own, and I 

believe demurred when we offered help. And then probably there 

are some cases again in hindsight that we should have been involved in earlier but they took the lead. The attorneys general have 

been terrific in protecting consumers. I don’t think we have been 

slackers at all. I think we have been pretty good but on a going 

forward basis we are going to work more with the attorneys general. 

Mr. STUPAK. OK. So how do you envision working closer relationship between the states as you are now the newly appointed chairmanship because I think it is important while the states bring 

forth but sometimes they look to you for resources and to help 

them with these investigations, and I would think what goes on in 

one part of the country is probably going on in the other part of 

the country and therefore the FTC should be more involved and 

should have a closer working relationship with the state AGs. 

Mr. LEIBOWITZ. Well, I absolutely hear that, and of course we can 

have—it is easier for us to get remedies that apply across all 

states, and so many of the bad acts in the mortgage industry—— 

Mr. STUPAK. Well, have you reached out to the AGs? 

Mr. LEIBOWITZ. Yes. We have reached out to the AGs, and we 

have also reached out to the attorney general. You may not have 

been here when I talked about this, but we are in the process of 

trying to resurrect something called the Executive Working Group 

which was very active in the 1990’s, sort of stopped in the last 8 

years, that involves Justice, the attorneys general, and the Federal 

Trade Commission having regular meetings to coordinate activities. 

That is going to be very, very helpful going forward. 

Mr. STUPAK. You are right. I didn’t hear that earlier testimony 

but I am glad to hear it and urge you to continue that progress. 

Thanks. 

Mr. RUSH. The chair thanks the gentleman. The chair now recognizes himself for 2 minutes of additional questions. Chairman 

Leibowitz, if this Congress would enhance your authority, can the 

Commission set up a separate office to regulate and enforce consumer abuses and, if so, would this cover other substance of the 

FTC? 

Mr. LEIBOWITZ. Well, I would say this. As you know, Mr. Chairman, we are a small agency with a pretty large mission and we 

have to leverage our resources all the time, so if you give us that 

authority, and I think a majority of the Commission would be willing to embrace that authority and I think we could do good things 

for consumers, we will need more resources. I don’t know that we 

need to grow to the level we were at in 1980, which was 1,800 

FTEs, but I think to discharge—what you don’t want us to do is 

to take people from spyware cases and other types of fraud cases 


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and then simply move them to the newest, most problematic area 

and forget about all the other things we do. 

So I think we need more resources. I do know the appropriations 

committees are interested in giving us more resources and have 

given us small plus ups over the last couple of years because they 

like what we are doing, but we probably need additional resources 

on top of that. 

Mr. RUSH. I have less than 1 minute, and I just want to ask another question on pay-day lending. I believe that pay-day lenders 

have a role in our economy but there are far too many abuses. Does 

the FTC have authority to crack down on pay-day lending practices 

such as rollover fees and the specific statutory language leading to 

direct the Commission to adequately deal with certain abusive payday lending features? 

Mr. LEIBOWITZ. Well, I would say yes and no. We have brought 

about a half dozen pay-day lending cases in the last 5 years. We 

don’t have obviously—Congress set a cap, I believe, for pay-day 

loans outside of military bases at 36 percent a couple of years ago. 

We obviously don’t have the authority to set a cap but one thing 

we found in our pay-day loan cases is the imbedded—is that malefactors have sort of imbedded fees that consumers don’t know 

about, and so they will pay off their loan in 2 weeks but it will be 

a day late, and so then there will be a fee that pops up and then 

it is compounded and then they are sort of in a worse circle of debt. 

So we have the authority to do that. 

I think if you gave us the authority to go—if you gave us the authority to do rulemakings, we would look at ways to promulgate 

rules that would require better behavior by a lot of the pay-day 

lenders. 

Mr. RUSH. The chair recognizes Mr. Radanovich for 2 minutes for 

additional questioning. 

Mr. RADANOVICH. Thank you, Mr. Chairman. Mr. Leibowitz, you 

had mentioned that the commissioners decided not to initiate a 

rulemaking on deceptive Internet advertising, and the reason was 

because Congress would eventually act on the issue which you 

would have if you could proceed under the APA. And it sounds like, 

and we can have a discussion about this, that you are suggesting 

that the FTC APA rulemaking would obviate the need for legislative body at all. And adding to that question, I think I would ask 

isn’t the Magnusson-Moss process intentionally deliberate similar 

to the congressional legislative process? I mean the founding fathers set this whole thing up so that legislating was difficult, and 

should your job be made easier or should you have to deliberate 

with us for a proper approach—— 

Mr. LEIBOWITZ. All of us think our jobs should be made easier, 

but I don’t mean to suggest that we would have obviated the need 

for congressional legislation if we had been able to do a rulemaking. And I don’t mean to say that we wouldn’t have stopped, 

you know, the economic mess that we all know we are in, but I do 

think we could have cleaned things up more quickly if we had APA 

rulemaking or something close to APA rulemaking, but again these 

were just discussions among commissioners because we knew that 

under APA—we knew that under Mag-Moss rulemaking it would 

be very, very hard to do a rule in a timely manner. 


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And that is the problem with Mag-Moss rulemaking. I don’t 

mean to say—I don’t know if you were here when I was having a 

conversation with Mr. Stupak. There is a rationale for having us 

make rules more slowly, and certainly among folks who follow the 

FTC and have for years and decades there might have been some 

excesses perceived or real in the 1970’s that led to some of the restrictions. For example, the restriction on unfairness that makes, 

as Mr. Pitts pointed out, makes it difficult for us to bring an unfairness case. But having said that, I think it is worth, and I know 

you are interested in just discussing this issue further about 

whether it makes sense to give us some relief from Mag-Moss. It 

doesn’t necessarily mean it has to go all the way over to APA rulemaking, but I do think in some areas, you know, you want us to 

be able to act more nimbly, more agile and more quickly, maybe 

not in every area but in some. 

And when you pass new rules or new laws like Can-Spam, you 

have given us that APA rulemaking, and we have that APA rulemaking in the Omnibus for mortgages, for everything in the mortgage life cycle. So one thing is watch to see how we do in the mortgage with the rulemaking authority we have. If we do a balanced 

job, maybe it makes sense to give us just a little bit longer leash. 

Mr. RADANOVICH. Thank you. 

Mr. RUSH. The chair now recognizes the gentlelady from Ohio for 

2 minutes. 

Ms. SUTTON. Thank you, Mr. Chairman. You heard some discussion here about the state attorneys general, and in my opening 

statement I talked about some of the actions that we have taken 

in Ohio, but even after all that we have done, I am going to read 

to you the headline of a report from the Housing Research and Advocacy Center that is in Cleveland. The headline reads pay-day 

lenders operating in 81 Ohio counties charging up to 680 percent 

interest. Lenders avoiding the 28 percent APR cap passed by legislature and voters, and that is at the state level, in 1,020 stores 

statewide. And just to give you an idea of what is happening here 

despite legislation passed in 2008 aimed at lowering interest rates 

on short-term loans pay-day lenders are operating, as the headline 

reads, in 81 of Ohio’s 88 counties making loans in some cases that 

carry that extraordinary annual percentage rate, 24 times more the 

rate that was approved by the legislature for such lending. 

And they have avoided the 28 percent cap by using other laws, 

so they are very crafty and they are very quick making the necessary adjustments to continue to reap what they reap. I guess my 

question just is what can you do to help or what can we do to help? 

Mr. LEIBOWITZ. Well, I mean there is no magic bullet for solving 

these problems, as I am sure you know. I was asking my staff 

about usury laws in different states yesterday as I was preparing 

for the hearing, and someone pointed out that in Missouri the cap 

is 2000 percent, so you borrow $100, you forget about it, the next 

year you owe $2,000. Look, one part is working with attorneys general because we have to leverage our limited resources, and that 

is a part of it. Another part is consumer education. We have a terrific consumer education group and that is a part of it. You know, 

I wish I could tell you there is a particular answer to this problem 

but it is—there just isn’t, and we all have to sort of pull—and, by 


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the way, as more people are unemployed as the economy continues 

to spiral down, you are going to see more of these problems. You 

are going to see more people borrowing from pay-day lenders. 

Now Congress made the determination that outside of military 

bases pay-day lenders should be capped at, I think, 36 percent. I 

suppose Congress could make the determination that pay-day lenders should be capped at 36 percent and limited in fees, but that is 

a decision for you to make. I will say this. If you give us more authority to do rulemaking in this area, we will take a look at payday loans. 

Ms. SUTTON. With the chair’s indulgence, I appreciate that, and 

thank you for bringing up the issue about loans near military 

bases, and I would like to follow up with you about that as well 

because I understand that still problems remain, and I would like 

to talk about how we actually aggressively go after that. 

Mr. RUSH. The chair thanks the gentlelady, and the chair thanks 

the chairman again for the extensive use of his time. We know that 

you are quite busy and we certainly thank you for your enlightening commentary to this committee. We do intend to work with 

you on these and other matters as we proceed. And we just want 

to let you know that we appreciate your presence here. 

Mr. LEIBOWITZ. Thank you. 

Mr. RUSH. The chair now calls the second panel to the witness 

table. The chair wants to welcome this extraordinary panel before 

the committee, and we want to introduce you individually, and 

then we will ask that you all stand after your introduction so that 

we can swear you in. To my left, Mr. James Tierney. He is a Lecturer-in-Law at Columbia Law School, and he is the former attorney general of Maine. Welcome, Mr. Tierney. Next to Mr. Tierney 

is Mr. Christopher Peterson, Professor of Law at the S.J. Quinny 

College of Law. Welcome, Mr. Peterson. Next to Mr. Peterson is 

Mr. Ira Rheingold. He is the Executive Director of the National Association of Consumer Advocates. Mr. Rheingold, welcome. And 

next to Mr. Rheingold is Mr. Nathan Benson. He is the CEO of the 

Tidewater Finance Company, Inc., and he is testifying on behalf of 

the American Financial Services Association. Welcome, Mr. Benson. And now I would like to swear the witnesses in. Will the witnesses please stand and raise your right hand? 

[Witnesses sworn.] 

Mr. RUSH. Let the record reflect that the witnesses all answered 

in the affirmative. The chair recognizes Mr. Tierney for 5 minutes 

for the purposes of an opening statement. 

TESTIMONY OF JAMES TIERNEY, LECTURER-IN-LAW, COLUMBIA LAW SCHOOL; CHRISTOPHER PETERSON, PROFESSOR 

OF LAW, S.J. QUINNY COLLEGE OF LAW; IRA RHEINGOLD, 

EXECUTIVE DIRECTOR, NATIONAL ASSOCIATION OF CONSUMER ADVOCATES; AND NATHAN BENSON, CHIEF EXECUTIVE OFFICER, TIDEWATER FINANCE COMPANY, INC., FOR 

THE AMERICAN FINANCIAL SERVICES ASSOCIATION 

TESTIMONY OF JAMES TIERNEY 

Mr. TIERNEY. Thank you, Mr. Chairman. My name is Jim Tierney. I am the Director of the National State Attorney General ProVerDate Mar 15 2010 23:44 Mar 23, 2012 Jkt 067816 PO 00000 Frm 00071 Fmt 6633 Sfmt 6602 E:\HR\OC\A816.XXX A816

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gram at Columbia Law School, and in that capacity I work closely 

with the men and women who serve as your attorneys general and 

your staff, all of whom are deeply committed to rooting out fraud 

in the area of credit. My testimony is obviously my own, but I have 

discuss it with a number of attorneys general, including your own, 

Mr. Chairman, Lisa Madigan, and I think I broadly reflect the 

views of those attorneys general who are committed to this important issue. I think if there is one thing that is clear is that we have 

insufficient consumer protection in the field of credit. That is the 

bottom line. We are not doing enough. The crisis is real and it is 

growing. And if there is one single lesson that has to be received 

in the halls of Congress and the halls of federal regulators, including the Federal Trade Commission, is that the states got it right 

and the states got it first. 

Speaking bluntly, until we have effective state regulation from 

state attorneys general and state banking commissioners, we will 

never get ourselves out of this hole. The question is how do we get 

from here to there, and that is a challenge. There is a long history 

of relationships between the federal and state approach to working 

with these issues. The federal government has a number of very 

narrow federal statutes enforced by not the Federal Trade Commission but enforced by banking regulatory agencies whose first job is 

to assure the safety and soundness of the banking community, and 

we see how well they have done that. 

But in addition to that, it is their responsibility allegedly to deal 

with consumer protection and they just don’t do it. It is not their 

highest priority. It never will. On the state side you have broader 

laws, state unfair, deceptive and trade practices act, which are 

flexible, and state attorneys general get it right and get it first not 

because of—although they show great leadership and great courage 

they get it because they are structured to do it. They live in communities. Like you, they have constituents. They are able to move 

and move quickly, and they are able to move on a national basis 

and on a bipartisan basis so that they are able to achieve some 

very specific and concrete results. 

Now get to the hearing of the Federal Trade Commission. There 

is a long history between the Federal Trade Commission and the 

state attorneys general. Sometimes it is very positive. In the 1970s 

federal funding with the help of the Federal Trade Commission actually went to the states to get states more involved in consumer 

protection. Again, during the terms of the first President Bush and 

President Clinton, again we had warm and solid relationships with 

the Federal Trade Commission and the states were on the same 

side. The last 8 years have been very cold years. And I commend 

our new chairman. Our new chairman did the best he could to explain the facts as he found them, but the bottom line is that the 

Federal Trade Commission has been on the sidelines on a number 

of very, very important cases, and this is very unfortunate. 

Not only were they not involved in the cases but even informally 

they never called up an attorney general and said what did you 

learn? What are you seeing about the patterns of fraud? And this 

is a serious problem. I commend the chairman for reinstituting the 

Executive Working Group, which I called for in my formalized testimony. It is extraordinarily important. There are some regional diVerDate Mar 15 2010 23:44 Mar 23, 2012 Jkt 067816 PO 00000 Frm 00072 Fmt 6633 Sfmt 6602 E:\HR\OC\A816.XXX A816

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rectors of the FTC who work with the states, there are some who 

not. Certainly, the FTC are bringing cases but are these the biggest 

cases or is the FTC showing an instinct for the capillary. Are they 

striking at the major issues or are they grabbing onto low hanging 

fruit when they go after a case? We don’t know. We don’t know because people are not sitting down in the same work and discussing 

how do we put together a systematic, sophisticated process by 

which we can root out consumer fraud, and that requires a lot of 

work because there will never be enough lawyers in the Federal 

Trade Commission, never, never, never, to track down the kind of 

consumer fraud we are seeing. 

The FTC has to work with the states, state banking commissioners, the private bar, consumer advocacy groups, in other words, 

all the people that the states work with every day as they fashion 

the kind of priority prosecutions that are absolutely necessary to 

make this happen. Now not only have the states brought the cases 

that have been alluded to in the earlier testimony, the Household, 

the AmeriQuest, and the Countrywide, but they had to do it with 

one hand tied behind their back because they are litigating with 

the same federal agencies who are trying to pre-empt them from 

bringing these cases at all. That case is back before the United 

States Supreme Court again in April. It is a serious issue. The 

Banking Committee has held hearings on this. It is extraordinarily 

important that the Federal Trading Commission and the chair of 

the Federal Trade Commission stand up as has the chair of the 

FDIC, Sheila Bare, and said this is not a time to pre-empt states. 

We have a problem. We need more consumer protection, not less, 

and the timing is of extreme importance. So with that, Mr. Chairman, thank you for giving me this opportunity, and I look forward 

to answering any questions that you might have. 

[The prepared statement of Mr. Tierney follows:] 


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Mr. RUSH. Thank you. The chair now recognizes Mr. Christopher 

Peterson. Mr. Peterson, you are recognized for 5 minutes. 

TESTIMONY OF CHRISTOPHER PETERSON 

Mr. PETERSON. Thank you, Mr. Chairman, ranking member. It is 

an honor to be here today and share a few thoughts. I would like 

to start with two quick statistics, if I could, about the sub-prime 

and alternative mortgage product crisis. The first is roughly 6 million foreclosures coming through the pipe according to Credit 

Suisse, and then foreclosure rescue scam cases brought by the Federal Trade Commission, 6. According to their testimony in the Senate last month, they brought 6 foreclosure rescue scam cases for 6 

million foreclosures. That is 1 in a million. Where I come from that 

is sort of a cliche you talk about when you said he is not doing anything, right? In my view, honorably, the Federal Trade Commission 

is a good agency that does their best but they are not doing anything. We are talking about taking teacups of water out of an 

ocean. It is just not even close to the sort of magnitude of problems 

that we are talking about. 

And so if I could just quickly, you talk about the rule of the law. 

We all have been talking about all these generalizations about separating good loans from bad loans. Just talk about the laws for a 

second. There is equal credit—they have four titles of the Consumer Credit Protection Act, and then they have their deceptive 

trade practices authority. The Equal Credit Opportunity Act is designed to prevent discrimination in awarding credit. It doesn’t do 

anything in the way of preventing bad loans from being made. The 

Fair Credit Reporting Act tries to clear up inaccurate credit information, but that is not the problem that we had here. Lots of people had prime credit histories and were still getting non-amortizing 

loans that have gone in waves into foreclosure. 

The Fair Debt Collection Practices Act is a nice gesture but it 

generally doesn’t apply to home mortgage loan servicers and it 

comes too late. I mean at the point where the loan is already in 

default and there is debt collection problems, it is too late at that 

point. Then the Truth in Lending Act is a nice idea but it is too 

late. The disclosures are confusing. People generally just don’t read 

them. They ignore the disclosures. And even if that was a great 

strategy the statute that is designed to promote honesty in origination of loans doesn’t apply to mortgage brokers who are the people 

that actually talk to consumers. What sort of a truth in lending 

idea doesn’t apply to the people who talk to the borrower? 

And then in addition to those four statutes, they also have two 

significant regulations that they have done under their deceptive 

trade practices authority. The holder in due course notice rule 

which doesn’t apply to home mortgages, and that was back in 1975 

and it has never been updated. And, second, the credit practices 

rule which bans about 5 different problematic contractual provisions including confessions of judgment and pyramiding late fees, 

but it hasn’t been updated since 1984. And this regulation doesn’t 

talk about any of the non-amortizing products and sub-prime products that we are talking about in the past few months. 

And that is it. I just did it. In 3 minutes I summed up their entire regulatory structure, and it really doesn’t do much of anything 


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to try and prevent home mortgage fraud. And what are the barriers 

that prevent more stuff from taking place? Well, it is true that they 

have this inefficient regulatory rulemaking process, and it seems to 

me it would be helpful to speed that up. But the real problem is 

the fragmented federal regulatory system. On my hand I can count 

11 different agencies that are supposed to be dealing with this 

problem, the Federal Reserve Board of Governors, the Office of the 

Comptroller, the Office of Thrift Supervision, FDIC, the National 

Credit Union Administration, the new Federal Housing Finance 

Administration, if I am getting that right, the new OFHEO, HUD, 

SEC, the FBI and Justice at the same time, and then finally the 

Federal Trade Commission. 

In this fragmented system, the capital flows to the weakest regulator like water going down into the basement. And the result is 

that there is very, very little actual rulemaking to try and deal 

with the problematic practices that are actually in our industry. So 

I have been coming up with a list of all the things that I think 

needs to get done, and I have this gigantic list of problems in our 

statutory system. It is a big list. We are talking a lot of changes 

that need to be made. Congress could do that but it is going to be 

a long and complicated bill. It is going to be very controversial. You 

could give it to a federal agency to try and do it but which one 

would you choose? The only plausible existing candidates are the 

Federal Reserve, which already have that authority under the 

Home Ownership and Equity Protection Act or the Federal Trade 

Commission, which is a good choice but has nowhere near the resources and has a too expansive mission. 

In my view, respectfully, it is time for a new regulatory agency 

that deals exclusively with this issue and has authority to pursue 

protection of consumers on consumer finance issues. And if you are 

not talking about that, if you are just talking about more tinkering 

then you are just kind of kidding yourself and you are not really 

going to fix anything. 

[The prepared statement of Mr. Peterson follows:] 


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Mr. RUSH. The chair thanks the gentleman. The chair now recognizes Mr. Rheingold for 5 minutes. 

TESTIMONY OF IRA RHEINGOLD 

Mr. RHEINGOLD. Thank you, Chairman, and thank you, Ranking 

Member Radanovich. It really is quite a honor to testify before you, 

Congressman Rush. I started my career as a consumer advocate in 

Chicago where I began a legal assistance foundation foreclosure 

prevention project, and I worked through the mid-90’s dealing with 

all the mortgage crises that we had in Austin and Roslin, all over 

Chicago. And the things that we saw in Chicago in the 90’s, we are 

seeing nationwide today. What I think disappoints me most about 

today’s hearing is I am going to go through a litany of things that 

we consumer advocates saw in the 90’s, saw in the early 2000’s, 

and we see the exact same thing today. Nothing has changed except that things have gotten worse, and there has not been a federal response to it, including the FTC. 

I think about the world I see. I run an organization called the 

National Association of Consumer Advocates. We are the private 

attorneys, the legal service attorneys across this country who actually do the consumer advocacy work. We are on the ground every 

single day representing consumers who are losing their houses or 

having their car repossessed or being harassed by debt collectors. 

We see what is going on there but the federal regulatory agencies 

and the FTC have not talked to us. So what do we have out here? 

Oh, I should mention I also run a project called the Institute for 

Foreclosure Legal Assistance, so I am in contact and talk daily 

with all the private attorneys, the legal service attorneys in the 

community who are actually fighting foreclosures. We are on the 

ground. We know who the bad actors are. We see the bad practices, 

and we see what is going on out there. 

So what do we have? We have a completely broken mortgage 

lending industry. There is no question about it. Unfairness runs 

rampant. Bad lending practices are everywhere. We have a broken 

mortgage servicing system, completely broken. It is unaccountable. 

They can’t figure out how much money people owe. They can’t modify a loan to save their lives. We have seen, Chicago is a perfect 

example of it, a dual credit market. If you are middle income or 

rich, you have banks. If you are poor or you are low income, what 

do you have? You have currency exchanges and you have pay-day 

lenders, and you have rent to own, and you have refund anticipation loans. It is stealing wealth out of the communities that we 

care about most, and it has gone on unabated for the last decade 

with nobody really taking any real action and it is only getting 

worse. 

We have a debt collection industry that is completely out of control. We have growth of a debt buying industry that is sort of mind 

boggling in the way they go about collecting debts without actually 

even knowing—not having the contract that the person actually 

had that debt originally from. They don’t have any proof that that 

is owed, yet they are using our nation’s court and using our nation’s private arbitration system to collect debts against people. We 

have a broken credit reporting system where consumers can’t get 


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real access to their credit reports. They don’t get the information 

necessary and they can’t fix those reports once they are broken. 

All of those things is what our credit market looks like today. 

And I went and talked with consumer advocates who I talk with 

every single day in this country. I asked them about the FTC and 

their role over the last 8 years and the last 10 years in protecting 

consumers. I will just pick some of the adjectives that I got responded, passive, antagonistic, irrelevant, disengaged, counterproductive, stuck in a world that doesn’t regulate. They have not 

been part of the ballgame here. They can cite statistics. They can 

talk about some cases that they brought. In the scheme of things, 

it is mostly irrelevant. Now to be fair to them, they are under 

resourced, and there are good career attorneys there who do their 

best. But the fact is they have been disengaged. 

I have been in Washington now 7 years after I left Chicago, and 

some day I hope to return. And on one hand I can count the conversations I have had with the FTC. We are the people out there 

doing this kind of work. We are out there on—it really is sort of 

mind boggling to me that we sit here today with the problems that 

existed 10 years ago and we have had federal regulatory agencies 

who have done nothing except exacerbated the problem. The Federal Trade Commission, as Chris said, was using the spoon to clean 

out an ocean. They simply did not do the job. There is a number 

of things that can be done to improve them. Hopefully in the new 

Administration they will be more assertive and more aggressive. 

They have been completely passive in using their unfairness authority. They need to use it. They need to declare things—we know 

when things are unfair. 

When you give somebody a loan that they can’t afford to pay 

back, that is unfair. It is not a really hard thing to figure out. They 

do need greater rulemaking authority. It is crazy. Six to 8 years 

to make a rule to protect consumers, that is just not the way it 

should work. Hopefully, they will have leadership, and I hope 

Chairman Leibowitz will demonstrate some leadership in terms of 

being assertive and aggressive in this area. They should have concurrent authority over the banks. There is a special place in regulatory hell for the federal bank regulators over the last 8 years and 

their complete failure to what has happened here. So hopefully the 

FTC can use of their consumer protection powers. I will stop there 

but be happy to answer any questions you might have about the 

FTC and the credit crisis we are facing. 

[The prepared statement of Mr. Rheingold follows:] 


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Mr. RUSH. Thank you. The chair now recognizes Mr. Benson for 

5 minutes. 

TESTIMONY OF NATHAN BENSON 

Mr. BENSON. Good morning, Chairman Rush, Ranking Member 

Radanovich, and members of the subcommittee. My name is Nathan Benson, and I am the CEO of Tidewater Finance Company, 

which was established in 1992 to purchase and service retail installment contracts. The company is based in Virginia Beach, Virginia, and has two lines of business, Tidewater Credit Services for 

consumer goods and Tidewater Motor Credit for auto services. I am 

here today in my capacity as a board director of American Financial Services Association, AFSA, whose 350 members include consumer and commercial finance companies, auto finance companies, 

card issuers, mortgage lenders, industrial banks and other firms 

that lend to consumers and small businesses. AFSA appreciates the 

opportunity to provide testimony to the members of the subcommittee. 

Today, I will focus my testimony on the role that the Federal 

Trade Commission has played, and continues to play, in helping to 

restore confidence in the financial services industry. I will also address the installment loan industry’s importance in providing access to credit to millions of Americans. The FTC is the effective 

regulator. The FTC has been very successful in enhancing consumer protection under its current authority. It has addressed the 

economic crisis in two ways, first, by using its enforcement authority under Section 5 of the FTC Act to pursue bad actors in the subprime mortgage industry, and, second, by setting federal policy 

through guidance and public comment. I will start by providing 

some examples that fall into the first category. The FTC successfully negotiated a $40 million settlement with 

Select Portfolio Services in November 2003 for engaging in unfair 

and deceptive practices in servicing sub-prime mortgage loans. The 

settlement was modified in August 2007 to provide additional protections to borrowers, including mandatory monthly mortgage 

statements, a 5-year prohibition on marketing optional products 

such as home warranties and refunds for foreclosure attorney fees 

for services that were not actually performed. The FTC has entered 

into a $65 million settlement with First Alliance Mortgage Company for making deceptive sub-prime mortgage loans. The FTC distributed the $65 million to nearly 20,000 affected borrowers. 

The FTC has successfully pursued other sub-prime mortgage 

lenders engaged in what the Commission deemed to be inappropriate conduct, including Capital City Mortgage Corporation and 

Quicken Loans. I want to just move on to the installment lending 

and its role in providing credit to consumers. At the outset, let me 

say that AFSA shares Congress’ concern about predatory lending. 

We support the goal of protecting consumers from unfair, abusive, 

or deceptive lending and servicing practices while preserving access 

to responsible lenders. 

The installment lending industry was born in 1916 out of a need 

to provide credit to working men and women. The Russell Sage 

Foundation worked with lenders to develop a set of principles by 

which they would abide in their lending activities. Lenders agreed 


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to make the cost of their loans transparent so that borrowers understood the true cost of the loan. Loans would be structured over 

a period of time allowing a repayment schedule that was long 

enough to match the earning power of the borrower. Finally, the 

lender would price the loan based on the character of the borrower, 

which was defined as a combination of the borrower’s employment 

stability and previous history of handling credit. 

Today’s installment lenders are a key element in improving the 

socio-economic status of poorer citizens and supporting our company’s economic health. They do this by adhering to basic principle 

of economics, that people should borrow so they can consume based 

on their permanent income, and that such consumption is the fuel 

of our economy. Typically, the middle and upper class borrow 

through traditional banking and financial services relationships. 

However, average wage earners with few financial assets often cannot borrow in this way. Traditional banks simply are not equipped 

to offer products and services to these consumers in a manner that 

is profitable for the enterprise. As a result, these consumers need 

access to safe forms of small-sum credit. These are the very products the installment loan industry, an industry fully and completely regulated and examined at the state level, have been providing successfully for decades. 

Certainly, people turn to installment lenders for multiple reasons. Key among these, however, is the need to access small sums 

to deal with unforeseen circumstances. I could go on but if there 

are any questions. 

[The prepared statement of Mr. Benson follows:] 


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Mr. RUSH. Thank you. I certainly want to thank the panel for 

their excellent testimony. The chair now recognizes himself for a 

round of questioning for 5 minutes. I want to address my first 

question to the entire panel, and each one of you can take a few 

seconds to answer the question as you will. Most of you have testified this morning that the FTC has not done enough to address 

consumer credit issues over the past years, particularly over the 

last 8 years. And let me just ask each one of you, do you believe 

that this has occurred because of a lack of action, political or structure in nature? In other words, do you believe the Commission has 

failed to act because of a lack of will or because of some underlying 

obstacles such as the lack of statutory authority, the lack of resources, burdensome procedures, or all of the above? If you could 

explain to me in your answer why you believe the FTC has failed 

to act. Mr. Tierney. 

Mr. TIERNEY. Well, we can go in the same order, Congressman. 

I think it is clear that the leadership of the Federal Trade Commission at the very highest level in the last 8 years, very highest level, 

shared the de-regulatory philosophy that was predominant at the 

time, and the philosophy was clearly stated to state attorneys general on a regular basis that you were vicious intermeddlers, you 

were denying credit to people who need it, you are applying the 

wrong standards, that we should let the marketplace prevail and 

it will be a self-regulatory procedure. And although time and again 

attorneys general would expressly predict, it turned out conservatively, a million home foreclosures they were characterized as 

alarmists, not necessarily by the Federal Trade Commission but by 

the tone of the times and by the interest groups that surrounded 

the Commission, so the Commission at the top reflected the reality. 

I would also make another smaller point that our past two presidents have persisted in naming people to the Commission with an 

anti-trust background, not a consumer protection background, and 

that is a bipartisan characterization of our past three presidents 

actually. And that it would be a really good idea if the Federal 

Trade Commission had someone on the Commission who had a consumer protection background, and, secondly, actually had worked 

with the states and did not come from a large law firm or from the 

Hill. And I don’t mean the personal characterization, but I really 

do believe that the FTC is lacking that kind of background and experience at the very highest level. 

Mr. RUSH. Does the other panel want to weigh in on this? 

Mr. PETERSON. I do. I would like to say that in the past 12 years 

it has been primarily a political or lack of willpower issue, but 

going forward it is more likely to have something to do with the 

structural issues. I think that there are structural problems but 

even if 12 years ago we had cleared out all those structural problems they still wouldn’t have done anything. Going forward, I think 

they are going to try and do some things now, and it is going to 

be harder for them to do it than it should be because of the structural barriers and it would probably help if we cleared some of 

those out. But even still, I think we are still talking about tinkering with things. We are not talking about the magnitude change 

that needs to happen in order to help facilitate more efficient and 

effective commerce. 


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Mr. RHEINGOLD. I would concur with my fellow panelists, I think 

a lot of it was ideological. I think there was this notion that self 

regulation would work and the FTC should not interfere in the 

commerce of credit, so I think that is part of it without a doubt. 

And in part that is why a lot of consumer advocates did not engage 

with the FTC and the AGs didn’t engage with the FTCs because 

we fear that the work we did would actually be undercut by their 

philosophy. I do think that resources are a significant problem 

there. They have an awful lot of jurisdiction. They have very limited resources. They have very little rulemaking, and I also agree 

that if they had that authority over the last decade nothing would 

have changed, but I think going forward we have some opportunity 

to do something. 

Mr. RUSH. Mr. Benson, I have 30 seconds so please. 

Mr. BENSON. Yes. We felt that through those cases that they 

have done anything about, that has affected over 10,000 people, 

and when they pick on an entity in an industry that has helped 

everyone that is tied to that industry, so it is not just that entity 

that is being affected. It is everyone in that environment that gets 

cleaned up pretty quick, so we think they have been pretty effective. When they pick on one entity it goes through to the whole industry doing the same things, so we think so far they have been 

effective. 

Mr. RUSH. Thank you very much. The chair now recognizes the 

ranking member, Mr. Radanovich, for 5 minutes. 

Mr. RADANOVICH. Thank you, Mr. Chairman. Mr. Benson, welcome to the subcommittee. I appreciate your testimony. I want to 

start off with you on a couple of questions. Do you believe the FTC 

needs APA procedures in order to be effective or can it use the existing authority that it has to effectively regulate the industry? 

Mr. BENSON. We believe that it can use its existing authority 

that it has. 

Mr. RADANOVICH. Let me ask you, how can regulation be used to 

reduce fraud without adding unnecessary compliance costs that are 

inevitably passed on to the consumer? 

Mr. BENSON. Well, most of our members through AFSA are state 

regulated so we are controlled by them. We are in favor of disclosure with all our members, so we work with those people so we believe with full disclosure and with obviously the regulations with 

the state, we believe that fraud will come out as long as it is monitored. 

Mr. RADANOVICH. I was looking at the new sample disclosure 

form by the FTC, which I thought was kind of interesting. Can you 

tell me your opinion of it? It seems it is easy to read. Have you 

seen it? 

Mr. BENSON. No, we haven’t seen it. 

Mr. RADANOVICH. OK. OK. My first glance at is it is something 

that looks kind of positive. I was curious to know what your 

thoughts would be on it. 

Mr. BENSON. As I said earlier, our view is more disclosure and 

the simpler it gets, a lot better it is. 

Mr. RADANOVICH. OK. One last question. The FTC has proposed 

disclosure simplification forms for mortgage—I think you have already answered that one. Thank you, Mr. Benson. I appreciate 


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that. Mr. Rheingold, can I ask you, you testified that the FTC— 

that had the FTC had the will to actively engage in oversight much 

of the current credit crisis could have been avoided. We are talking 

about increasing authority through the APA and we are discussing 

that additional authority. Isn’t that kind of a duplicative entry 

statement? 

Mr. RHEINGOLD. I don’t think so. I actually think there are two 

things happening here, and I think to be fair the FTC was not the 

controlling regulatory agency. The OCC and the OTS really failed 

and they had a lot of things that they could have done to prevent 

the disaster we have today. I think the OCC through its enforcement powers, if they in fact had been effective enforcers and using 

those decisions, I think the perfect example of a strong enforcement 

agency can do is what the Massachusetts AG did in the Freemon 

case where they brought a case against the mortgage company who 

was engaged in unfair practices, where they were making loans 

that people could not afford, and using the unfairness authority 

that court declared that these practices, A, B, C, and D, making a 

loan at a teaser rate that explodes and people can’t afford it is unfair. 

Making a loan to people over 50 percent of their gross income is 

per se unfair. If the FTC would have taken some of those actions, 

even in the Fairbanks case there was an opportunity to declare certain practices that the service industry does as unfair, it could have 

had a real impact on the type of practices that exist throughout the 

mortgage industry. 

Mr. RADANOVICH. Using that example, where was the problem 

then? Was it in the lack—was it in the application of MagnussonMoss or was it—— 

Mr. RHEINGOLD. Well, I am talking about their enforcement 

power. There is a difference between rulemaking—there are a couple of ways that they can set the law. By bringing in—if the FTC 

brings an action and gets a court order that declares as part of 

their court-agreed order that this practice is unfair, that will have 

a pretty large impact in terms of the rest of the industry because 

it will send a clear signal that this is an unfair practice and hopefully would stop it. That is one way they could do it, through their 

court enforcement procedures. 

I think the easier thing they could have done if they, in fact, had 

normal every day authority to make rulemaking is they could have 

done that without having to bring court cases. And the fact is, as 

someone who has been a veteran of dealing with a lot of the rulemaking that is done through all sorts of regulatory agencies, industry and consumer groups have ample opportunity through the APA 

procedure to get their voices heard and influence that process. And 

the notion that they need 6 to 8 years with this lengthy, excuse me, 

cockamamie system of developing a way of rulemaking really it is 

counterproductive and useless, and anything that they could do 

with the current system that we have in place if it takes 6 to 8 

years by the time you get a decision the problems out there would 

have evolved to something completely different. 

Mr. RADANOVICH. All right. Thank you very much, Mr. 

Rheingold. I yield back, Mr. Chairman. 


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Mr. RUSH. The chair thanks the gentleman. The chair now recognizes the gentlelady from Ohio, Ms. Sutton, for 5 minutes. 

Ms. SUTTON. Thank you, Mr. Chairman. We have heard repeatedly here today about some of the shortcomings of what we are trying to accomplish in the process that now exists. A couple of those, 

of course, revolve around the fact that the FTC, we hear over and 

over again, doesn’t have the authority over banks that it has over 

other entities, and we also hear about the rulemaking process 

being too cumbersome, but I guess one of the questions for this 

committee and for the Congress and for all of us here is if the FTC 

had rulemaking authority that was more streamlined, APA rulemaking authority, and they had greater authority over the banks, 

and they had resources to do the job, is it better for the FTC to 

be the agency that deals with this or some of you have suggested 

there should be a new entity to do so. If you could just answer 

those questions for me, I would appreciate your opinion. 

Mr. TIERNEY. I guess I would say, Congresswoman, I, like many 

of us, was studying the proposal by Professor Warren. It has been 

called the so-called Durbin-Delahunt bill. I have not taken a position on it yet but it has a lot to it. But, if I may, to go back to your 

earlier point about pay-day lending, and remember the name of the 

song, If You Can’t Be With the One You Love, Love the One You’re 

With, we have enough authority now between the states and the 

trial lawyers and the legislatures and the Federal Trade Commission. If we just want to do something and focus on the problem 

such as pay-day, take the resources we have, set a national strategic goal, and just go do it. 

And my concern about discussion of the larger institution is that 

while we play that huge congressional effort that goes on for so 

long, that we have millions of people suffering every day, and we 

should do something right now. 

Mr. BENSON. I believe that the way you regulate it, and I am the 

only, I think, business person here, is you got to have some skin 

in the game, you got to have some money in the game, so if you 

are going to securitize you got to have—someone has got to hold 

a portion of the securitization on the books. If you are going to 

have loans out there, you got to have the risk factor, that you 

shouldn’t be able to go and draw on someone’s back account. You 

should be able to analyze the person’s credit, make the loan that 

they can afford over time, payments over time, equal payments. 

That would solve the problem rather than the risk factor. When 

you have got nothing at risk, the issues come out. 

Mr. PETERSON. If I could, I think that a new agency is the way 

to go. That is my honest opinion. The second choice would be the 

Federal Trade Commission. I don’t think you should give it to the 

Federal Reserve Board. They have demonstrated that they are 

bankers at their heart and soul, and they have the authority to 

pass—they have extensive authority under the 1994 Home Ownership and Equity Protection Act. You passed that statute and gave 

them all the power that they needed and they did nothing. The 

Federal Reserve Board could have stopped this easily with their 

rulemaking authority under HOEPA, and they didn’t do anything, 

so what is to think that that is going to change now? 


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And what is more with the Federal Reserve Board, they have so 

much political autonomy. It is so hard to exercise oversight over 

them because of their justified and needed monetary policy independence. I just don’t think that it is a good political entity that 

is going to be at the beck and call of Congress and will be responsive to the people. It is time for a new consumer finance regulator 

that deals with these types of questions, and if you can’t get that 

passed the Federal Trade Commission is the next best choice. But 

the problem is that the FTC has a lot of other important stuff to 

do. It needs to be out there on the anti-trust watchdog beat. It 

needs to be dealing with privacy issues, telemarketing issues, all 

very important issues, and very different than the consumer finance problems that we are talking about now. If this is ever going 

to happen, it is now, and if you don’t do it now it will never happen, and we will continue to suffer from these systemic problems 

for the next 50 to 100 years. 

Mr. RHEINGOLD. I agree. 

Ms. SUTTON. Is that an I agree, Mr. Rheingold? 

Mr. RHEINGOLD. I absolutely agree. 

Ms. SUTTON. OK. Thank you, and I yield back. 

Mr. RUSH. The chair thanks the witnesses. We don’t intend to go 

into a second round of questioning. I think that we have been well 

served by both panels today, and the chair really again—we are 

most grateful to this panel for the extensive use of your time. And 

we want to commend you on your patience with us through this 

particular issue. I just want to note that all witnesses should be 

prepared to receive and answer written questions from members of 

this subcommittee. And with that, thank you very much. 

Mr. BENSON. Could I ask that my complete statement be included in the record? 

Mr. RUSH. So ordered. And I would like to request unanimous 

consent to enter into the record a statement from the organization, 

Public Citizen. Without objection, so ordered. 

[The information was unavailable at the time of printing.] 

Mr. RUSH. This subcommittee now stands adjourned. 

[Whereupon, at 12:30 p.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 


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