Are the CFPB and FTC Partners or Rivals?

WASHINGTON — Overlapping missions and jurisdictions are fueling competition between the Consumer Financial Protection Bureau and the Federal Trade Commission, according to former officials at both agencies.

Though there is often underlying tension between government agencies, some sources said it is particularly acute when it comes to the CFPB and FTC. Both agencies share oversight of certain areas, including debt collection, payday lending and auto financing, and appear anxious to be known as the more aggressive one in rooting out potential consumer harm.

"In the current environment where there are pressures to be very pro-consumer, both internally and externally at these agencies, the goal is to not be perceived as the less aggressive agency," said Leonard Gordon, a former FTC official who's now a partner at Venable's antitrust and advertising and marketing groups. "There's always rivalry between government agencies that have shared missions and both are trying to do their best to be the toughest cop on beat."

Both FTC and CFPB officials denied any rivalry, arguing that they are focused on protecting consumers.

"This is more about coordination in consumer protection than it is about competition," said Chris Koegel, assistant director in the division of financial practices at the FTC. "Part of this has to do with timing following the financial crisis … even before the CFPB was created, the FTC was devoting more resources and energies to preventing the financial scams and unlawful financial practices that we're seeing."

CFPB Director Richard Cordray also emphasized coordination over competition with the FTC.

"I have learned a lot from the work I have done with the FTC, going back to my time as Ohio Attorney General. At the CFPB, our people have appreciated the strong sense of teamwork we have built with the FTC," said Cordray in a statement to American Banker. "Both of us recognize that the many bad actors cropping up around the country give us more than enough work to do together, and that we are more effective working together than working alone."

Still, some observers point to a perceived competition between the two agencies in Operation Collection Protection, a joint initiative launched last year between the FTC, CFPB and state enforcement agencies to crack down on illegal debt collection.

The FTC has periodically issued updates on the actions it has taken, noting state authorities which have partnered on cases. But the CFPB is often not named in those cases, and the agency itself barely refers to the operation despite continuing to take its own actions against debt collectors.

"The CFPB and FTC seem to be doing their own thing," said Alan Kaplinsky, who heads the consumer financial services group at Ballard Spahr. In Operation Collection Protection, "If you examine the consent orders and lawsuits filed, you will see that while the FTC and the CFPB often partner with state AGs, they don't ever formally partner with each other."

When the CFPB takes action in the banking arena, it often partners with the appropriate banking regulator. But both the CFPB and FTC have separately gone after cell phone companies over the same allegations — so-called "cramming," which allows third-parties to make charges on consumer bills — without working together. The FTC has taken actions against companies like AT&T and T-Mobile while the CFPB cited Sprint and Verizon.

Kaplinsky said the FTC is not alone in not wanting to be upstaged by the CFPB, which opened its doors in 2011.

"This goes back to what I call the 'regulatory Olympics' where the other federal agencies have become tougher regarding enforcement because they don't want to be left in the dust by the CFPB," he said. "My impression is that the CFPB and FTC compete with each other. The seeds for this were planted when Congress decided to confer on the CFPB the right to regulate non-banks that remain subject to the enforcement jurisdiction of the FTC."

Gordon, the former FTC official, said regulatory competition alone is not causing the agencies to come down harder on firms.

"The regulators are paying more attention to what is required to substantiate a debt. The FTC started that and the CFPB has built on it" and "the bar seems to get higher with each case as cases bounce back and forth between the two agencies," Gordon said. "The agencies are getting more aggressive in terms of applying the laws, such as what they deem as abusive or deceptive acts or practices, and also in terms of seeking settlements involving higher penalties and monetary relief."

To be sure, the CFPB and FTC have taken some actions together. They filed a joint action in early 2015 against a mortgage servicer and they do share work, specifically on cases against debt collectors and payday lenders. Both agencies have also partnered on events related to debt collection and jointly filed several amicus briefs to give an opinion on a case. The CFPB also issues an annual report to Congress about the work that it has done, along with the FTC, in enforcing the Fair Debt Collection Practices Act.

"The CFPB continuously works with the FTC to enforce consumer protection laws related to issues including debt collection and credit reporting. Our partnership is highly productive and we are deeply appreciative of our colleagues at the FTC for the important work they do," said a CFPB spokesperson. "We coordinate closely to ensure that our work is complementary and that markets for consumer financial products are getting efficient and effective federal government oversight. We look forward to continued collaboration in carrying out our shared commitment to protect consumers."

Former officials said it is also often easier for federal regulators to just let one agency handle a case in order to save resources and staff. The CFPB and FTC signed an agreement in March 2015 to help coordinate their efforts in consumer protection but also to prevent duplication.

"The CFPB has so many different pieces of the financial services market under its jurisdiction that frankly, from a staffing standpoint, it's smart for them to let some of the other agencies take on a case where there is overlapping jurisdiction so the CFPB can spend resources in other areas where nobody else has jurisdiction," said Joe Rodriguez, of counsel at Morrison & Foerster, who formerly worked in the CFPB's fair lending group. "I don't know that it's so much about competition between the CFPB and FTC than it is just about overlapping jurisdiction."

Koegel, who specifically focuses on the FTC's debt collection law enforcement side like Operation Collection Protection, agreed.

"In debt collection there is not usually a need to do the actions jointly with the CFPB," he said. "There is always a case-specific determination as to whether the FTC or the CFPB will handle the case and whether it's an efficient use of resources to do so jointly."

At the same time, however, others said it's surprising they don't have more coordinated efforts publically, given that they have a similar mission and jurisdiction.

For example, the FTC is hosting a workshop on automobile distribution on Jan. 19 that includes discussions with state regulators. While the CFPB does not have authority over auto dealers, it has citied indirect auto lenders for potential discrimination based on the interest rate pricing that lenders set with auto dealers — a move that raised many questions from outsiders about the CFPB's jurisdiction. Some argue that this is an area where the CFPB should coordinate more with the FTC to gain stronger leverage against auto dealers, which remain the province of the FTC.

The CFPB also appears so far to have let the FTC take the lead in certain areas like consumer privacy and data security. The FTC hosted its first "PrivacyCon" conference in Washington on Jan. 14 following the release of a report on privacy issues.

"The CFPB has done very little in the data privacy and security area. The FTC recently issued a pretty scary report that warned banks and other companies about using big data to make underwriting decisions," Kaplinsky said. "I wouldn't be surprised to see the CFPB get more actively involved in data privacy and security, particularly with respect to the issues raised by the FTC in this report."