How the FTC Demonstrates Why We Need a Strong, Independent, Pro-Consumer CFPB

by Jeff Sovern

The FTC is a terrific agency that has done a lot of good for consumers.  Every FTC staffer I've ever met has impressed me as dedicated to consumer welfare, hard-working, and talented.  And yet, the FTC could do more if it weren't hamstrung by precisely the limits the financial industry and the House Financial Services want to impose on the CFPB.  Two examples of what more it could do: first, though the Dodd-Frank Act gave the FTC the power to issue regulations governing auto dealer in section 1029, the FTC hasn't used that power.  In contrast, during the six years since that Act was enacted, the CFPB started up and has issued many regulations protecting consumers. Second, the FTC continues to reach consent decrees that permit sellers to describe used cars as "certified" even though the cars have been recalled and the recall repair has not been done.  I wrote about this here, and it happened again last week. Personally, I think it's crazy to expect consumers to check to see if their certified car has been recalled or even to read disclosures closely enough to discover that certified does not mean the car is safe; surely consumers paying extra for a certified car are doing it at least in part because they think they are getting a safe car.

So why doesn't the FTC do more?  I suspect it's because the FTC is saddled with a commission-structure–which is often a recipe for gridlock–and is subject to the congressional appropriations process.  That gives industry lobbyists a lot of power to urge members of Congress to cut the FTC's budget if it doesn't do what the lobbyists want–and much of that is too much "inside baseball" to draw the attention of the media or voters, with the result that countervailing arguments are not given enough attention.  Congress has shown a willingness to whack the FTC when it thought the FTC was protecting consumers too aggressively.  Commissioners would be wise to eschew battles with Congress over controversial items and devote Commission resources to attacking practices that are universally-condemned, rather than draw industry ire and risk being deprived of any resources to aid consumers.  But the result is that the FTC is less protective of consumers than it could be.

The CFPB could still help consumers even if it starts to look like the FTC.  But consumers would be far better off if the FTC started to look more like the CFPB.

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