As the Federal Trade Commission and the Food and Drug Administration agreed over forty years ago to do in connection with the advertising and labeling of foods, drugs, devices and cosmetics, the FTC and the Consumer Financial Protection Bureau have now entered into their own memorandum of understanding.
On January 20, 2012, The CFPB -- an organization that was born out of the recent financial system overhaul -- and the FTC signed a Memorandum of Understanding outlining how the agencies plan to collaborate with each other in regulation of the non-bank financial sector. The memorandum sets forth a variety of procedures the FTC and the CFPB plan to carry out in furtherance of protecting consumers and businesses from harmful acts within Consumer Financial Products or Services. The CFPB and FTC share responsibilities and authorities to protect consumers and, in recent years, have seen some duplication of efforts, resulting in inefficiencies at the regulatory level. The memorandum seeks to avoid the future duplication of regulatory efforts, as well as prevent unnecessary burdens on business and ensuring consistent enforcement of consumer financial laws.
A few of the memorandum's primary directives are: (i) the CFPB and the FTC will enter into an agreement to avoid duplication or conflict of rulemaking activities and will closely coordinate the same; (ii) the CFPB will first consult with the FTC prior to issuing rules related to compliance with federal consumer financial laws; (iii) the CFPB and the FTC will share consumer complaint information to facilitate preparation of statistical reports, supervision and enforcement activities, as well as the monitoring of the market for Consumer Financial Products and Services; and (iv) the FTC will coordinate with the CFPB's office to ensure that service members and their families are educated regarding Consumer Financial Products and Services offered by motor vehicle dealers, and both agencies will monitor and address complaints concerning those dealers. The memorandum also establishes guidelines for the handling of confidential information between agencies.
It will be very interesting to see how the CFPB and FTC work together in handling matters subject to their dual jurisdiction. Moreover, while businesses recognize the wide-sweeping powers of the FTC, given the new empowerment of the CFPB and its close working relationship with the FTC, businesses that are the subject of a CFPB investigation must recognize the significant potential for liability that may be at hand and respond appropriately.