The Federal Trade Commission (“FTC”) and Consumer Financial Protection Bureau (“CFPB”) have renewed their vow to continue to coordinate their activities and avoid duplication of federal law enforcement and regulatory efforts. The FTC and CFPB have recently announced they reauthorized their ongoing Memorandum of Understanding (“MOU”), under the terms of the Consumer Financial Protection Act (“Act”), to coordinate efforts to protect consumers and avoid duplication of federal law enforcement and regulatory efforts, for three years.
As you may recall, back when the Dodd-Frank Act passed, there was much discussion about the potential for overlap between the FTC and CFPB’s jurisdiction to regulate and enforce consumer financial services laws. The resulting act significantly altered the consumer financial protection landscape by consolidating rulemaking authority and, to a lesser extent, supervisory and enforcement authority in one regulator—the CFPB. In contrast, the FTC had and retained statutory authority for enforcing general consumer protection requirements over nonbanks, but is prevented from conducting supervision over nonbanks and from regulating depository institutions altogether. Due to the overlap between the FTC and CFPB’s authorities, the two agencies are required to coordinate.
Have the efforts to coordinate and to avoid duplication been successful? A recently posted blog on the FTC website promoted the renewed MOU under the title “Peace, love, and understanding.” So at least the FTC itself through its blog post appears to think there is “harmony.” The post goes on to provide highlights of the MOU. For example, the FTC and CFPB share information about companies they are planning to investigate, keep lines of communication open about rulemakings and industry guidance, the CFPB participates in the FTC’s consumer sentimental complaint database, and share nonpublic information about companies.
The level of sharing and coordination in practice, however, were not identified in the MOU or related publicity. Also, the FTC and CFPB have not disclosed in how many instances they have disagreed on policy positions, initiated investigations through civil investigative demands of companies already under scrutiny by the other, or have taken a different approach to enforcement as exemplified in the carrier billing lawsuit initiated by the CFPB against Sprint, after the FTC and states settled with AT&T and T-Mobile for similar billing methods. In the case of the CFPB, the staff has taken certain positions with respect to the interpretation of existing legal requirements and the retroactive application of potential requirements from future rulemaking that appear to go beyond the FTC’s interpretation.
The MOU is significant because it demonstrates the strength of the tools available to the FTC and CFPB to impose their expectations on conduct in the consumer financial services market, and to investigate perceived wrongdoing. Moreover, the MOU reflects the reality that many in the consumer financial services marketplace, especially nonbank financial services providers, are confronted with having to satisfy expectations established by two government agencies with different powers and authorities.