On January 23, 2012, the Consumer Financial Protection Bureau (CFPB) and the FTC announced that they had signed a memorandum of understanding (MOU). In doing so, the two agencies fulfilled requirements of the Dodd-Frank Act that they negotiate an agreement to coordinate enforcement actions against entities subject to both agencies’ jurisdiction and to harmonize certain rulemakings.
Under section 1024 of the Dodd-Frank Act, the CFPB has enforcement authority over nonbank entities that offer or provide consumer financial products or services. Because the FTC retains enforcement authority over such entities under the Dodd-Frank Act, both agencies could bring separate, and perhaps inconsistent or duplicative, enforcement actions against the same entity over the same issue in the absence of coordination. Accordingly, the Dodd-Frank Act requires the CFPB and the FTC to negotiate an agreement to coordinate enforcement actions against nonbank entities subject to the enforcement authority of both agencies regarding the offering or provision of financial products or services. Under the MOU, each agency has agreed to give notice to the other before commencing an investigation, filing an action or commencing a proceeding, settling an action or proceeding, or intervening in an action against a supervised entity where the other agency also has the authority to bring an enforcement action against the supervised entity. They will coordinate to avoid duplicative or conflicting enforcement actions.
The Dodd-Frank Act also requires the two agencies to negotiate an agreement to coordinate CFPB rulemaking to prohibit “unfair, deceptive, or abusive acts or practices” under section 1031 of the Dodd-Frank Act and FTC rulemaking to prohibit “unfair or deceptive acts or practices” under section 18 of the Federal Trade Commission Act as applied to nonbank entities that are subject to the jurisdiction of both the CFPB and the FTC. Under the MOU, each agency has agreed to provide the other agency with notice before proposing or issuing any rules or formal comprehensive guidance documents under these statutory provisions. They will consult on such rules or guidance documents.
As with other MOUs the FTC has entered into in the past, for example, its MOU with the FDA over review of labeling and advertising of food, cosmetics, medical devices and dietary supplements), the devil is often in the details, and a plan for coordination does not mean that there will be perfect efficiency or consistency. Given that many of the attorneys working at the CFPB came from the FTC, we expect the communication between the two agencies to be open and frequent. It is clear from the detail in this MOU that the agencies have given considerable thought on how to manage the overlapping jurisdiction to maximize agency resources. Whether this results in more or less aggressive rulemaking, supervisory and/or enforcement actions overall remains to be seen.
UPDATE: For a more detailed discussion of this issue, click here.