As readers of this blog already know, Professor Jeff Sovern and I come at most issues from different sides of the street.  Over the years, through our respective blogs and at various programs, we have engaged in spirited but respectful debate about many consumer finance issues.  For that reason, I was particularly disappointed to read Jeff’s blog post about Andrew Smith’s appointment as Director of the FTC’s Bureau of Consumer Protection.

Despite his comment that he does not “mean that Mr. Smith is a thief,” Jeff’s characterization of Andrew as a “Payday Lender Lawyer” in the title of his blog post coupled with his use of the quote “set a thief to catch a thief,” seems intended to raise questions about Andrew’s integrity based solely on his past representation of payday lenders.  Although we strongly disagree with Jeff’s support for the CFPB’s payday lending rule and his criticism of the payday lending industry, those matters are certainly fair game for debate.  However, Andrew has had an unblemished ethical record as an attorney in private practice and as a government attorney in his previous tenure with the FTC.  Indeed, Andrew is considered to be among the country’s most prominent consumer financial services lawyers, as evidenced by his position as Chair of the American Bar Association Consumer Financial Services Committee, his appointment long ago as a fellow of the American College of Consumer Financial Services Lawyers, and his ranking by Chambers USA which evaluates America’s leading lawyers for business.

We also strongly reject the inference that payday lending is a form of theft and observe that, regardless of how an attorney’s clients are viewed, it is bad policy for a lawyer’s qualifications for government appointment to depend on his or her clients’ reputations.  If that were the standard, white collar criminal lawyers would never qualify for government service.

I am confident that in his new leadership role at the FTC, Andrew will continue to adhere to the highest ethical standards.

I was pleased to see the announcement yesterday afternoon by FTC Chairman Joseph Simons that the FTC has approved the appointment of Andrew Smith to serve as Director of the agency’s Bureau of Consumer Protection, beginning next week.

As I indicated in my prior blog post, I have known Andrew for many years going back to his tenure at the FTC earlier in his career and have always felt that Andrew was a very fair-minded attorney who studiously called the shots as he saw them.  In addition to bringing his excellent lawyering skills to the FTC, I am confident that Andrew will continue to take an even-handed approach in his new leadership role.

Andrew’s appointment was approved by a 3-2 vote, with both Democratic commissioners, Rohit Chopra and Rebecca Slaughter, voting against his appointment.


According to media reports, the FTC is expected to appoint Andrew Smith, an attorney in private practice in Washington, D.C. who currently represents many industry clients, to lead the FTC’s Consumer Protection Bureau.  His expected appointment has reportedly met with criticism from two Democratic Senators.

Before entering private practice, Andrew was an attorney with the FTC.  He currently chairs the American Bar Association’s Consumer Financial Services Committee.

I have known Andrew for many years going back to his tenure at the FTC where he served in senior supervisory and policy-making positions.  I always felt that Andrew was a very fair-minded attorney who studiously called the shots as he saw them.  As a leader of the ABA Consumer Financial Services Committee, including in his current position as Committee Chair, he has been very even-handed, always ensuring that the voices of consumer advocates are heard.  The ABA represents all of it members, not just lawyers who work for or represent the consumer financial services industry.

The knee-jerk criticism of Andrew by two Democratic Senators based on his prior legal work for clients and his need to recuse himself from FTC investigations involving those clients is completely unfounded.  If anything, it demonstrates that Andrew is an excellent lawyer and that his services are in high demand.  Indeed, the BTI Consulting Group recently named Andrew to its 2018 “Client Service All-Stars” list, which recognizes “the leaders in superior client service.”  Andrew is one of only three consumer financial services lawyers in the country named to this list.  My partner, Scott Pearson, also received this rare honor.

Last Thursday, the Senate confirmed five individuals—three Republicans and two Democrats—nominated by President Trump to serve as FTC commissioners.  The change to Republican control can be expected to impact the FTC’s future regulatory and enforcement priorities and initiatives.

The confirmed nominees consist of the following individuals:

  • Joseph Simons.  Mr. Simons, a Republican, most recently worked as an attorney in private practice in Washington, D.C., and formerly served as a head FTC antitrust lawyer.
  • Noah Phillips.  Mr. Phillips, a Republican, most recently served as Chief Counsel to Senator John Cornyn, the Republican Whip.
  • Christine Wilson.  Ms. Wilson, a Republican, most recently served as Senior Vice President for Regulatory & International Affairs at Delta Air Lines.
  • Rohit Chopra.  Mr. Chopra, a Democrat, most recently served as a senior fellow at the Consumer Federation of America, formerly served as the CFPB’s Student Loan Ombudsman.
  • Rebecca Slaughter.  Ms. Slaughter, a Democrat, most recently served as Chief Counsel to Senator Chuck Schumer, the Senate Minority Leader.

The FTC has been operating with just two commissioners consisting of Acting Chairman Maureen Ohlhausen and Commissioner Terrell McSweeny.  Ms. Ohlhausen, a Republican whose term expires in September 2018, has been appointed by President Trump to serve as a judge on the U.S. Court of Federal Claims.  Since Ms. Wilson was appointed to fill Ms. Ohlhausen’s seat and the Senate has not yet confirmed Ms. Ohlhausen as a federal judge, it is uncertain when Ms. Wilson will be sworn in as an FTC commissioner.

Although the term of Ms. McSweeny, a Democrat, expired in September 2017, she continued to serve as an FTC Commissioner, reportedly pursuant to an FTC practice that allows a commissioner to remain in his or her position until a replacement is confirmed.  She has resigned effective April 28.



The FTC has filed comments on the CFPB’s Request for Information regarding its civil investigative demands and investigational hearings.

In the RFI, the CFPB requested feedback on various aspects of the CFPB’s processes and requirements for issuing CIDs, responding to CIDs, and conducting investigational hearing.  The FTC’s comments primarily describe the FTC’s comparable processes and requirements and highlights changes made in 2017 to the CID process used by the FTC’s Bureau of Consumer Protection (BCP).  Those changes included (1) adding more detail about the scope and purpose of investigations to give companies a better understanding of the information sought, (2) limiting the relevant time periods to minimize undue burden on companies and focus the FTC’s resources on investigating harms that have an immediate impact on consumers, (3) shortening and simplifying the instructions for providing electronically stored data, and (4) increasing response times for CIDs, where appropriate.

In addition to describing its own processes and requirements, the FTC makes several specific suggestions for the CFPB to consider including the following:

  • The FTC suggests that the CFPB may wish to consider applying an approach to opening and closing investigations that is similar to the FTC’s approach while remaining consistent with the CFPB’s structure, management, workload, and other relevant considerations.  At the FTC, the BCP Director is responsible for implementing the Commission’s enforcement agenda and meets regularly with the FTC Chairman and the other FTC Commissioners to obtain views about investigations and possible investigations to accomplish that agenda.  On a day-to-day basis, the BCP Director is responsible for ensuring that other BCP managers make opening and closing decisions in conformity with the FTC’s enforcement priorities and objectives.  The BCP Director has regular and frequent communications with other BCP managers, including regular discussions about specific divisional or regional office work, including matters currently under investigation and those as to which an investigation is contemplated.  Other BCP managers check with the BCP Director before opening, continuing, or closing an investigation that might not be in line with FTC priorities and objectives or that might present other challenging or sensitive issues.
  • The FTC observes that its procedures for CID issuance appear to be significantly different from those of the CFPB.  When a BCP staff member believes issuance of a CID is appropriate, he or she drafts the CID along with a supporting recommendation and, once approved  by the BCP Director, he or she submits the proposed CID and recommendation memo to the FTC.  Since any Commissioner is permitted to issue a CID relating to any matter under investigation, a single Commissioner generally reviews the proposed CID and recommendation memo to determine whether to approve, modify, or reject a proposed CID.  The FTC believes that because approval is sought for hundreds of proposed CIDs each year, it is more efficient and less burdensome to have a single Commissioner rather than the full FTC review each CID.  Also, Commissioner-approval ensures that there will be an independent assessment of a CID’s costs and benefits by someone who is not conducting the investigation.  In contrast, at the CFPB, not only the Director but also the Assistant Director and the Deputy Assistant Directors of the Office of Enforcement have authority to issue CIDs.  In addition, it is generally a CFPB Deputy Assistant Director who authorizes the issuance of a CID and that individual may be involved in direct oversight of investigations in a way that an FTC Commissioner is not.  The FTC suggests that because its approach has allowed the FTC to successfully balance the need to obtain information without imposing unnecessary or undue burdens, the CFPB may wish to consider the FTC’s experience, including revising its delegation of authority to one or more senior officials who are not directly involved in an investigation.
  • The FTC suggests that the CFPB may want to consider adopting requirements for processing requests for extending the dates and manner of compliance with CIDs that are similar to the FTC’s requirements.  To ensure that the meet-and-confer process is productive, the FTC requires CID recipients to make available persons who are familiar with the recipient’s information management system and the requested materials.  BCP staff conducts the meet-and-confer sessions, which are usually held telephonically.  After having the meet-and-confer, the appropriate BCP manager with the delegated authority can extend the compliance date if the CID recipient “has demonstrated satisfactory progress toward compliance,” and can also modify the terms of compliance with the CID.  The FTC believes that this combination of the meet-and-confer requirement and the delegated authority to modify the time and manner upon a demonstration of satisfactory progress toward compliance allows the FTC to reduce unnecessary and undue burden while at the same time advancing the purposes of the investigation.
  • The FTC observes that the BCP’s current guidelines for submission of electronically stored information (ESI) appear to be significantly shorter and less complex than the most recently available CFPB production requirements.  As streamlined in 2017, the BCP’s production requirements for submission of ESI in response to a CID are less complex, require the processing and production of fewer fields, and no longer require that each field meet exacting requirements for specialized eDiscovery applications.  By providing ESI in the new streamlined format, data can be used in any subsequent proceedings, obviating the need for the recipient to reproduce the data at a later time.




According to its newly-released Consumer Sentinel Network Data Book, the FTC received complaints from 2.68 million consumers in 2017, a decrease from 2016 when 2.98 million consumers submitted complaints.  The annual report, which does not include do-not-call complaints, provides national and state-by-state data on consumer complaints received by the FTC.  While the number of complaints declined, consumers reported losing a total of $905 million to fraud in 2017, which was $63 million more than in 2016.

Despite the use of the term “complaints” in the FTC’s press release and numerous references to “complaints” in the new annual report, the new report states that it refers to “consumer reports” rather than “complaints” because “[o]ften, people make these reports after they have experienced something problematic in the marketplace, avoided a loss, and decided to alert others.”

Debt collection was the most-reported category in 2017.  Identity theft was the second-most reported category in 2017, with credit card fraud the most common type of identity theft reported and tax fraud the second most common type.  Imposter scam reports, which the FTC describes as reports about someone pretending to be a trusted person to get consumers to send money or give personal information, was the third-most reported category in 2017.

The other two “top-five” report categories in 2017 were telephone and mobile services (fourth) and banks and lenders (fifth).  For military consumers, identity theft was the top report category in 2017.

The Consumer Sentinel Network is an online database of consumer complaints maintained by the FTC.  Other federal and state law enforcement agencies contribute to the database, including the CFPB and the offices of 20 state attorneys general (who are listed on page 86 of the report).  Private-sector organizations contributing data include the Council of Better Business Bureaus, which consists of all North American Better Business Bureaus.

Any federal, state, or local law enforcement agency can obtain access to the database by entering into a confidentiality and data security agreement with the FTC. Certain international law enforcement authorities are also allowed access.

While the data only reflect ”unverified reports filed by consumers,” regardless of merit, the report nevertheless could significantly affect the industries targeted by the complaints. The FTC and state attorneys general have long used consumer complaints to identify victims and potential targets for investigations, and Mick Mulvaney, President Trump’s appointee as CFPB Acting Director has indicated that the CFPB will continue to use complaints in setting its priorities.

Because industries receiving a large number of complaints are more likely to draw a regulator’s attention, minimizing the number of consumers who complain to the FTC, CFPB, or other consumer watchdogs is an essential first step to reducing potential exposure.  To accomplish this, it is important for companies to establish their own systems to track and resolve complaints. CFPB examination procedures specifically instruct examiners to assess the quality of a company’s complaints system.

The FTC has filed a lawsuit in a California federal district court against three interrelated student loan debt relief companies and the individual who is their majority owner for alleged violations of Section 5 of the FTC Act and the Telemarketing Sales Rule (TSR).  The TSR implements the Telemarketing and Consumer Fraud and Abuse Act.  While the CFPB appears to be embarking on a new strategic path in 2018 that will result in less aggressive enforcement, the lawsuit demonstrates that the FTC is continuing to target the debt relief industry for compliance with consumer protection statutes.  According to the FTC’s press release, the lawsuit represents the eighth action the FTC has taken in “Operation Game of Loans,” the FTC’s enforcement initiative targeting deceptive student loan debt relief scams.

The FTC alleges that the defendants violated Section 5 and the TSR by engaging in conduct that included the following:

  • Sending mailers to consumers representing they were eligible for federal programs that would permanently reduce their loan payments to a fixed, lower amount or result in total loan forgiveness.  The FTC alleges these representations were deceptive in violation of Section 5 and material misrepresentations in violation of the TSR because while the Department of Education and state government agencies administer loan forgiveness and discharge programs, none of those programs guarantee a fixed, reduced monthly payment for more than one year, and most consumers are not eligible because of the programs’ strict eligibility requirements.
  • Representing that consumers’ monthly payments were being applied to their loan balances.  The FTC alleges that this representation was deceptive in violation of Section 5 and a material misrepresentation in violation of the TSR because the defendants were charging consumers a monthly fee unrelated to their student loans that purportedly gave consumers access to various discounts and other benefits.
  • Charging an advance fee for enrollment in a “financial education” program.  The FTC alleges that this fee violated the TSR advance fee prohibition.

The FTC’s complaint seeks consumer redress and injunctive relief.

On January 25, the White House announced that President Trump had sent the nominations of four individuals to the Senate to serve as FTC commissioners.  Three of the nominations, those of Joseph Simons, Rohit Chopra, and Noah Phillips had been announced last fall, at which time President Trump had indicated that he planned to name Mr. Simons FTC Chairman upon his confirmation by the Senate.

The nominees consist of the following individuals:

  • Joseph Simons.  Mr. Simons, a Republican, is currently an attorney in private practice in Washington, D.C., and formerly served as a head FTC antitrust lawyer.  He is nominated for a term of seven years from September 26, 2017, the date on which term of FTC Commissioner Terrell McSweeny expired.  (Despite the expiration of her term, Ms. McSweeny, a Democrat, continues to serve as an FTC Commissioner, reportedly in accordance with a long-standing FTC practice of commissioners remaining in their positions until a replacement is confirmed.)
  • Rohit Chopra.  Mr. Chopra, a Democrat, currently serves as a senior fellow at the Consumer Federation of America, formerly served as the CFPB’s Student Loan Ombudsman.  Mr. Chopra is nominated to fill the unexpired term of seven years from September 26, 2012 of Joshua Wright who resigned.
  • Noah Phillips.  Mr. Phillips, a Republican, currently serves as Chief Counsel to Senator John Cornyn, the Republican Whip.  Prior to his service in the Senate, Mr. Phillips worked as an attorney in private practice in New York City and Washington, D.C.  Mr. Phillips is nominated for a term of seven years from September 26, 2016, the date on which the term of former FTC Commissioner Julie Brill expired.
  • Christine Wilson.  Ms. Wilson, a Republican, currently serves as Senior Vice President for Regulatory & International Affairs at Delta Air Lines.  She previously was an attorney in private practice in  Washington, D.C.  Ms. Wilson is nominated for a term of seven years from September 26, 2011, the date on which the term of FTC Commissioner Maureen Ohlhausen expires, and is thereafter reappointed for a term of seven years (from September 26, 2018).  (Ms. Ohlhausen, who has been serving as Acting FTC Chair, was recently appointed by President Trump to serve as a judge on the U.S. Court of Federal Claims.)



The FTC has released its annual report summarizing its activity during 2017 relating to privacy and data security issues.  In its self-declared role as “the nation’s primary privacy and data security enforcer,” the FTC outlines 10 privacy cases and 4 data security cases that it brought in 2017, including Uber Technologies (transportation service), Vizio (television manufacturer), Blue Global (lead generator), Upromise (college rewards program), ACDI Group (an alleged debt buyer), TaxSlayer (tax preparation service), and D-Link (wireless routers and Internet cameras).  In addition, the FTC also brought its first actions to enforce the EU-US Privacy Shield in 2017.  The FTC report also described its activities relating to international enforcement, children’s privacy, and Do-Not-Call.

The FTC also highlighted its advocacy efforts, workshops, and publications, many of which focus on what are likely future areas of FTC enforcement, such as privacy and security concerns with IoT devices, payment systems, artificial intelligence and blockchain technologies, connected cars, and student privacy.  One of the FTC’s new publications of note is its Stick with Security blog series, which offers periodic insights into key takeaways from recent law enforcement actions, closed investigations, and experiences of companies.  The FTC report also demonstrated that the agency is attempting to be flexible in light of the changing nature of identity theft, informational injuries, and modern technologies while remaining vigilant in its mission to protect consumers.  Companies should similarly remain cognizant of the FTC’s role as “one of the most active privacy and data security enforcers in the world.”

On Thursday, December 14, the Federal Communications Commission voted 3-2 to reverse its 2015 order classifying the provision of broadband internet access services as a “telecommunication service” subject to Title II of the Communications Act of 1934, and restoring the classification of broadband internet access services as an “information service” under Title I of the Communications Act.  This reclassification moves the provision of broadband internet services from treatment as a utility (with greater governmental oversight over the provision of the utility’s services) to treatment as another offering by a telecommunications service provider.

The December 14 Order consequentially rescinds the rules prohibiting blocking of lawful internet content and applications, throttling or degrading lawful internet traffic, and paid prioritization of certain internet traffic.  These three prohibitions form the core of the “net neutrality” rules – essentially, the rules that required all internet traffic to be treated equally.

The FCC reversal on net neutrality could impact consumer payments in a couple of ways.  First, fintech companies (generally speaking, young companies with fewer resources whose business models are supported by fast, cheap internet access) which find their internet speeds either throttled or more costly may be outcompeted by larger, more established businesses which can more easily pay for higher internet speeds.  This may result in fewer fintech companies bringing new ideas and products to market.

A more direct impact may be felt in peer to peer payment platforms.  One could imagine two or three reasonably similar mobile device based payment applications, which have purchased (or can afford) varying degrees of internet access.  If one P2P platform takes 1-2 seconds to transact, while another takes 10-15, from a user experience perspective it is reasonable to assume the slower platform will quickly be abandoned in favor of the quicker platform.  Again, this favors providers with either larger margins or deeper pockets that can afford to pay for faster internet access, or a model that introduces tiered pricing for speeds.  One can imagine P2P platforms offering free and premium versions of their platform, with a premium version introducing higher access and settlement speeds.

Relatedly, the FCC and the Federal Trade Commission signed a memorandum of understanding on December 14 in which the FTC agreed to monitor the broadband market, and investigate and take enforcement actions against internet service providers for unfair or deceptive acts or practices (using the FTC’s authority under Section 5 of the FTC Act).  While the FTC is focused on UDAP issues with respect to the provision of internet services, might the CFPB look at internet speeds (and their disclosure) in connection with consumer financial services and identify potential issues for purposes of its authority to prohibit unfair, deceptive, or abusive acts or practices?  For example, would banks or platform providers need to disclose their internet speed, and could they face a UDAAP challenge if their transactions failed to meet such speeds?

Following the FCC’s vote, New York Attorney General Eric Schneiderman announced his plans to “lead a multistate lawsuit to stop the rollback of net neutrality.”  According to media reports, nearly 20 states, including Massachusetts, Mississippi, Hawaii, Maine, Vermont, and Illinois, have indicated that they intend to participate in Mr. Schneiderman’s lawsuit.