Don’t Forget the Federal Trade Commission
The new president will appoint two commissioners and a chairperson, and this could impact your business.
by Sue Johnson, strategic alliance consultant
When it comes to enforcement of federal consumer protection laws, most people think of the Consumer Financial Protection Bureau (CFPB). But there’s another agency that should not be overlooked when watching President Trump’s appointments in the coming months. That is the Federal Trade Commission (FTC).
About the FTC
The Federal Trade Commission (FTC or Commission) is a bipartisan, independent agency with a dual mission—to protect consumers by stopping unfair and deceptive acts or practices in or affecting commerce (UDAP), and to promote competition by challenging anticompetitive business practices.
The FTC is headed by five commissioners, nominated by the President and confirmed by the Senate. The President chooses one commissioner to act as chairperson and no more than three Commissioners can be of the same political party. It currently has two open seats, so President Trump will fill two seats and appoint a new chairperson, giving the Commission a 3-2 Republican majority for the first time in nearly a decade.
Why is it important not to forget the FTC? Here are a few examples of areas in which it has jurisdictional authority over non-bank entities in the real estate and financial marketplace.
Real Estate Competition
The FTC has long opposed efforts by Multiple Listing Services (MLS) and real estate associations to restrict the ability of non-traditional real estate brokers (e.g., fee-for-service brokers, discount full-service brokers, and internet referral networks) to compete.
In a 2007 joint study by the U.S. Department of Justice, entitled “Competition in the Real Estate Industry,” the FTC said that attempts by real estate brokers to restrict non-traditional business models “hinder competition in the industry.” It recommended that the FTC and DOJ “continue to monitor the cooperative conduct of private associations of real estate brokers, and bring enforcement actions in appropriate circumstances” if the conduct is anticompetitive and violates antitrust laws.”
The FTC has brought enforcement actions over the years to stop rules that restrict non-traditional listing agreements from being displayed on public real estate websites. Most resulted in consent orders in which the MLS or association agreed not to adopt or enforce such rules for 10 years. Each violation of the consent orders carried a civil penalty of $11,000. The Commission also opposed proposed state laws requiring that real estate professionals entering into exclusive service provision agreements with their clients provide state-mandated minimum service packages.
Unfair and Deceptive Acts or Practices (UDAP)
Section 5 of the Federal Trade Commission (FTC) Act gives the Commission UDAP authority over most non-bank entities (including real estate brokers) that are not subject to the CFPB’s UDAAP (unfair, deceptive and abusive acts and practices) jurisdiction. It also has concurrent jurisdiction with the CFPB over federal consumer protection statutes (such as the Truth in Lending Act) that specify that violations of certain practices are to be treated as if they were “unfair or deceptive” acts or practices under Section 5.
Some financial services attorneys speculate whether or not the FTC will step up its enforcement of UDAP and specific federal consumer protection laws against non-bank entities if the CFPB Director is made removable without cause as a result of the PHH Corp vs. CFPB case or Congressional action.
Since Dodd-Frank did not transfer to the CFPB authority to enforce the data security requirements of the Gramm-Leach-Bliley Act and the Fair Credit Reporting Act, the FTC retained the authority to enforce these requirements. It also has the authority to pursue data security violations under the UDAP clause of the FTC Act. During the Obama administration, it aggressively pursued enforcement actions related to data privacy and security.
The Do-Not-Call Registry
The FTC enforces the Do-Not-Call Registry, which gives consumers the ability to place their telephone number on the registry and prohibits telemarketers from calling anyone whose name is on the registry unless they meet certain criteria.
It has been aggressive in assuring that companies abide by the Do-Not-Call Registry rules. According to its website, it brought 105 enforcement actions and recovered over $41 million in civil penalties and
$33 million in redress or disgorgement.
The Future of the FTC under President Trump
While we do not yet know the Trump administration’s priorities for the FTC, he appointed Dr. Joshua D. Wright, a Republican FTC Commissioner from 2013-2015, to lead FTC transition efforts. Wright was considered by The Wall Street Journal to be the most conservative FTC Commissioner during his tenure. Nevertheless, the shaping of the FTC in the Trump Administration bears watching. As one Washington, D.C. financial services attorney says, “Once the FTC finds you, you can never get rid of them.”