The Association of National Advertisers is warning Congress that the proposed creation of the Consumer Financial Protection Agency (CFPA), in its current state, would have "sweeping impact this legislation would have on the jurisdiction, regulatory powers, and longterm health of the Federal Trade Commission."
That came in a letter this week to House Financial Services Committee Chairman Barney Frank (D-Mass.) and ranking member Spencer Bachus (R-Ala.)
The letter is in advance of next week's markup in the Committee of the Consumer Financial Protection Agency Act of 2009, which creates a new financial oversight arm of the government in response to the financial meltdown.
While Jaffe acknowledges a legitimate interest in strengthening financial market regulation, he argues that the current proposal could produce "severe unintentional collateral damage to the FTC and the regulation of advertising in all other areas of the economy."
By moving most of the FTC's authority over financial services practices and financial privacy issues to the new agency, says Jafffe, Congress would be engaging in "drastic regulatory transplant surgery almost certain to adversely affect the efficacy of the consumer protection and privacy missions of the FTC."
ANA is concerned not only with what power the FTC would lose, but what new powers it and the CFPA would gain.
Giving the CFPA rulemaking authority over "unfairness" without tethering it to specific consequences like "substantial injury to consumers" that was not reasonalbly avoidable or outweighed by "countervailing benefits," as the FTC enforcement is currently circumscribed, would give CFPA "nearly unfettered discretion," he argues.
He also says that the bill gives the FTC more expedited rulemaking authority without thoroughly examining the consequences. "Such a significant and systemic change to fundamental FTC procedures should not be carried out as an afterthought in a legislative package focusing totally on other aspects of regulatory reform."
One change he told B&C could have significant impact on the cable and broadcast industries is expressly allowing the comission to hold entities accountable for aiding and abetting.
In a separate letter, filed by the Advertising Coalition (ANA is a member), coalition executive director Jim Davidson says that the aiding and abetting language casts a wide net that could include "virtually anyone involved in preparing, placing, receiving, televising, or printing an ad."
The coalition wants the committee to insure it does not hold advertisers to an amibiguous standard and that it recognizes judicial precedent that media companies do not have an affirmative obligation to investigate the content of advertising.
There is some disagreement over the FTC's current authority over the media when it comes to deceptive ads. In its crackdown on weight-loss ads several years ago, the commission attempted to educate TV stations and others about the warning signs of off-limit claims by marketers, but also warned it could go after stations for those claims.
In a speech on the CFPA Friday, President Obama said that the goal of the bill was "to close gaps in regulation, eliminate overlap, and set rules of the road for Wall Street that make fair dealing and honest competition the only way for financial firms to win and prosper."
But Jaffe argues in his letter that despite that claim the bill would eliminate that overlap, the bill would instead "give the states concurrent authority to enforce regulations adopted by the CFPA and give them the green light to adopt consumer protection laws that are even stricter than federal laws." That, he says, 'will undermine the goal of consistent and coherent national financial regulation."
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