Opinion ID: 455766
Heading Depth: 1
Heading Rank: 3

Heading: substantial evidence and breadth of remedy

Text: 117 Petitioners contend that even if the Credit Practices Rule's ban on HHG security interests and wage assignments represents a permissible application of the three-part consumer injury standard within the Commission's statutory authority, the challenged provisions must still be set aside as arbitrary and capricious agency action. Petitioners argue that the Commission's conclusions are not supported by substantial evidence in the record and that the prohibition is an overly broad means of preventing the consumer injuries identified.
118 This court may set aside the Commission's action only if it is not supported by substantial evidence in the rulemaking record, see 15 U.S.C. Sec. 57a(e)(3), 33 or if it is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.... Id. (incorporating 5 U.S.C. Sec. 706(2)(A) standard). The legislative history of the Magnuson-Moss Act further provides that the substantial evidence standard is to be applied only to the Commission's factual determinations; the arbitrary or capricious standard is to be applied to all other determinations. See American Optometric Ass'n, 626 F.2d at 904 (setting forth scope of judicial review under FTC Act of a trade regulation rule). A factual finding is supported by substantial evidence if the record contains such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. American Textile Mfrs. Inst., Inc. v. Donovan, 452 U.S. 490, 522, 101 S.Ct. 2478, 2497, 69 L.Ed.2d 185 (1981) (quoting Universal Camera Corp. v. NLRB, 340 U.S. 474, 477, 71 S.Ct. 456, 459, 95 L.Ed. 456 (1951)). To decide whether an agency's action is arbitrary or capricious, the court must consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment. Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 823, 28 L.Ed.2d 136 (1971). This 'arbitrary and capricious' standard of review is a highly deferential one, which presumes the agency's actions to be valid. Environmental Defense Fund, Inc. v. Costle, 657 F.2d 275, 283 (D.C.Cir.1981) (citations omitted). Contrary to the dissent's approach, this standard forbids the court's substituting its judgment for that of the agency, and requires affirmance if a rational basis exists for the agency's decision. Ethyl Corp. v. EPA, 541 F.2d 1, 34 (D.C.Cir.) (en banc) (citations omitted), cert. denied, 426 U.S. 941, 96 S.Ct. 2662, 49 L.Ed.2d 394 (1976).
119 The Credit Practices Rule, as previously discussed, was adopted after a nine-year rulemaking period in which an extensive record was developed and each provision of the Rule painstakingly considered. See supra pp. 962-964 & nn. 2-4. The Commission has presented detailed documentation of the record evidence relied upon to support each of its conclusions. See 49 Fed.Reg. 7745-48, 7755-68. The Commission's documentation is amply sufficient and we find no need to duplicate or supplement that documentation with our own recitation of the record evidence supporting each of the Commission's findings and conclusions. 34 Thus we address only the principal challenges to the sufficiency of the evidence raised by petitioners. 120 First, petitioner AFSA questions the sufficiency and reliability of the anecdotal evidence supplied by legal aid attorneys or consumer legal specialists who attested to the consumer injuries resulting from the use of HHG security interests and wage assignments. See AFSA Brief at 52-55. Specifically AFSA relies on reservations about the attorneys' testimony expressed by the Presiding Officer. See AFSA Brief at 53 n. 2. AFSA, however, disregards the Presiding Officer's final conclusion: 121 [The attorneys] testimony was truthful and provided credible evidence of the injuries suffered by their clients in the consumer credit marketplace. Indeed, it would be difficult to identify a better source for such evidence. 122 P.O. Report, Appendix at 687. Furthermore, as the FTC points out, it relied on not only a large number of anecdotes from consumer law specialists, but also on other corroborating studies and materials. See FTC Brief at 24 n. 17; see also supra note 19. 123 Petitioners also contend that the record does not support the Commission's conclusion that the injuries entailed in the use of HHG security interests and wage assignments outweigh any benefits the availability of such clauses may provide consumers. Specifically, petitioners argue that the FTC did not find, and could not find on the basis of the record evidence, that the proscription on the use of household goods and wage assignments would not diminish the availability of credit or increase its cost for those consumers whose access previously depended on their ability to pledge household goods and wage assignments as collateral. See AFSA Brief at 42. Petitioners fault the Commission for accepting the conclusions of the rulemaking staff that the Rule would only marginally affect the cost and availability of credit over the contrary views of the FTC's Bureau of Economics and Bureau of Consumer Protection. See AFSA Brief at 47. In sum, petitioners claim that the Commission's cost-benefit approach was inadequate and that this inadequacy had been brought to the Commission's attention by two of its own bureaus. 35 124 Petitioners' argument harbors a fundamental misconception about the nature of the Commission's required cost-benefit analysis. Petitioners would require that the Commission's predictions or conclusions be based on a rigorous, quantitative economic analysis. There is, however, no basis for imposing such a requirement. 125 In its 1982 Policy Letter, the Commission stated its view of the required cost-benefit analysis: 126 As to the element pertaining to the weighing of benefits and costs, however, the Commission believes there is an associated problem to consider, namely the risk that the analysis might unnecessarily complicate and delay an investigation or an ultimate litigation. For this reason, the Commission believes that a highly quantitative benefit/cost analysis may not be appropriate in each and every individual case, and that in some cases a far more subjective analysis would be the reasonable approach. 127 1982 Policy Letter, supra note 18, at 33. 128 Analogously the Magnuson-Moss Act, establishing the Commission's rulemaking authority, requires the Commission to include a statement of a rule's economic impact in the statement of basis and purpose. 15 U.S.C. 57a(d)(1). Congress, however, explicitly expressed its intent that this requirement not place excessively strict burdens on the Commission. 129 In particular, the requirement that the statement include statements as to the economic impact of the rule does not require the Commission to undertake a full scale economic investigation prior to promulgation of the rule. To do this would inordinately delay FTC proceedings and deny relief to the consuming public while indefinite questions of economic prediction were resolved by the Commission. This provision should be read to require that the Commission consider the economic impact of the rule to issues and summarize its best estimate of that impact in the statement. Obviously, a full evaluation of the economic impact of the rule would have to await its implementation. 130 H.R.Rep. No. 1107, 93d Cong., 2d Sess. 47 (1974), U.S.Code Cong. & Admin.News 1974, p. 7729. 131 In addition to rejecting petitioners' view of the standard to which the Commission's cost-benefit analysis should be held, we also find petitioners' specific contentions of error unpersuasive. Most of petitioners' cost estimates are based on their own self-serving predictions that finance companies will restrict the availability and increase the cost of credit as a result of the Commission's Rule. Memoranda from the FTC's Bureaus of Economics and Consumer Protection form the primary basis of support in the record for petitioners' arguments. See Bureau of Economics Final Recommendations, supra note 3; see also Muris Memorandum, Higgins Memorandum, and Gramm Memorandum, supra note 3. 132 The Bureau of Economics and Consumer Protection focus their criticism on the rulemaking staff's interpretation of the econometric evidence in the record. 36 However, the econometric evidence in the record, by all accounts, contains deficiencies which prevent definitive answers. Thus it boils down to an issue of interpretation. The Division of Credit Practices put forth a strong argument supporting the staff's analysis and countering the interpretation proffered by the two Bureaus. See Memorandum to Commission from Christopher Keller, et al. (May 24, 1983), J.A. at 1933 [hereinafter cited as Keller Memorandum]. 133 The Keller Memorandum points out that the Bureaus' counter-arguments are based primarily on abstract or on theoretical arguments about the operation of credit markets and the nature of consumer debtors which have little or no factual support in the record. 37 Keller Memorandum, J.A. at 1933. The Keller Memorandum also notes the Bureaus' exclusive focus on costs to the exclusion of the Rule's benefits which are both pecuniary and non-pecuniary. 38 The non-pecuniary nature of many of the benefits makes them difficult to measure and weigh in cost-benefit terms. Keller Memorandum, J.A. at 1939-41. 134 On the basis of the record before us, we cannot say that the Commission's decision to reject the Bureaus' interpretations of the record evidence was unreasonable. Nor do we find the dissent's reassessment of the costs and benefits entailed by proscribing the use of HHG security interests and wage assignments persuasive. The dissent basically concludes, upon its own interpretation of the record, that the Commission grossly exaggerates the beneficial impact of the Rule, see Dissent at 996, and underestimates the costs by failing to determine in absolute terms the number of consumers who will be denied credit as a result of the Rule. However, the possibility of drawing two inconsistent conclusions from the evidence does not prevent an administrative agency's finding from being supported by substantial evidence. Consolo v. Federal Maritime Comm'n, 383 U.S. 607, 620, 86 S.Ct. 1018, 1026, 16 L.Ed.2d 131 (1966). In our view, as indicated in our discussion of the nature of the cost-benefit analysis required of the Commission and the Commission's specific analysis in this rulemaking, see supra pp. 985-988 & nn. 35-38, the conclusions reached by the Commission with respect to the relative costs and benefits of proscribing the use of HHG security interests and wage assignments are supported by substantial evidence in the rulemaking record. See National Ass'n of Regulatory Util. Comm'rs v. FCC, 737 F.2d 1095, 1140 (D.C.Cir.1984) (The fact that an agency's decision ... rests on a set of evidentiary facts less desirable or complete than one which would exist in some regulatory utopia does not alter our role.).
135 Petitioners claim that the challenged provisions of the Credit Practices Rule sweep too broadly and that the Commission could have chosen alternate means more narrowly tailored to preventing the specific abuses identified. 39 Our review of the Commission's chosen remedy is quite limited. 136 The Commission is the expert body to determine what remedy is necessary to eliminate the unfair or deceptive trade practices which have been disclosed. It has wide latitude for judgment and the courts will not interfere except where the remedy selected has no reasonable relation to the unlawful practices found to exist. 137 Jacob Siegel Co. v. FTC, 327 U.S. 608, 612-13, 66 S.Ct. 758, 760-761, 90 L.Ed. 888 (1946). We find no abuse of discretion and no cause to interfere in the present case. The Commission reasonably concluded that the most effective way to eliminate the unfair practices of taking HHG security interests and wage assignments was to proscribe their use. 138 The Commission considered narrower, alternative remedies but determined that such alternatives failed to address the full range of problems found inherent in the use of HHG security interests and wage assignments. For example, the Commission rejected a suggested alternative provision requiring only that creditors disclose in plain English the meaning of the contractual remedies. The Commission reasoned: 139 [D]isclosure alternatives would deal only partially with limited seller incentives to promote alternative remedies ... and would not address at all consumers' limited incentives to search for information about remedies. 140 49 Fed.Reg. at 7747. See id. at 7787-89 (discussing empirical evidence on the costs and benefits of the disclosure alternative). 141 Petitioner AFSA apparently seeks to bolster its overbreadth argument (and its cost-benefit argument) by citing to the Presiding Officer's observation that the prohibition of HHG security interests may have far-reaching effects. The Presiding Officer's observation, however, was with respect to the household goods provision as it was then drafted. The provision at that time did not contain the narrow definition of household goods that it now does. Thus the Presiding Officer found that the rule would prohibit the granting of security interests in such broad categories of property as jewelry, expensive luxury items, and, depending upon the purpose of the loan, grants of security interests in real property and personal property not within the commonly accepted definition of household goods. P.O. Report, J.A. at 644. The Commission's inclusion of a precise, narrowly tailored definition of household goods in 16 C.F.R. Sec. 444.1(i) addressed the concerns identified by the Presiding Officer. 40 See 49 Fed.Reg. at 7767-68. 142 In sum, following a careful review of the Commission's analysis of the record evidence, we find petitioners' challenges unpersuasive. The Commission's decision to proscribe the use of HHG security interests and wage assignments is supported by substantial evidence in the record and the Commission has neither acted arbitrarily or capriciously nor abused its discretion.