by Jeff Sovern
Last Friday, President Trump announced an Executive Order on Core Principles for Regulating the United States Financial System. Here is the list:
(a) empower Americans to make independent financial decisions and informed choices in the marketplace, save for retirement, and build individual wealth;
(b) prevent taxpayer-funded bailouts;
(c) foster economic growth and vibrant financial markets through more rigorous regulatory impact analysis that addresses systemic risk and market failures, such as moral hazard and information asymmetry;
(d) enable American companies to be competitive with foreign firms in domestic and foreign markets;
(e) advance American interests in international financial regulatory negotiations and meetings;
(f) make regulation efficient, effective, and appropriately tailored; and
(g) restore public accountability within Federal financial regulatory agencies and rationalize the Federal financial regulatory framework.
Some of these are relevant to consumer protection, most notably (a), (c), (f), and (g), as Peter Cubita pointed out at the CFPB Monitor blog, and I want to say something about them, but first I wanted to call attention to what is not included on the list. I learned in my first semester of law school that in our system, Congress, not the president, is the principal policy-maker in the US. That flows from the Constitution's grant of "[a]ll legislative powers" to Congress in Article I. So the starting point in regulating our financial system should be what Congress has identified as key principles. The president's job is to "take Care that the Laws be faithfully executed . . . ." which includes the laws that Congress has enacted, and so in turn includes Congress's core principles. The EO states that it is "the policy of my Administration to regulate the United States financial system in a manner consistent with" the stated core principles. Shouldn't the core principles include acting consistently with what Congress wanted?
What are Congress' core principles in consumer law? We can find them in two places. One is the principles that are consistently expressed in consumer law, like prohibitions on fraud and deception, as enacted in the Federal Trade Commission Act, the Fair Debt Collection Practices Act, and elsewhere. Perhaps this is embodied in the first of the president's core principles, when he speaks of empowering Americans to make informed choices, but if so, it's a rather elliptical reference. Shouldn't the core principles for regulating our financial system explicitly include the prevention of fraud?
A second place we can find Congress's core principles is in the declarations of purpose and the like at the beginning of many statutes. For example, the Fair Credit Reporting Act says in section 1681(a)(4), that “There is a need to insure that consumer reporting agencies exercise their responsibilities with fairness, impartiality, and a respect for the consumer’s right to privacy.” Where is that reflected in Trump's core principles? Or the purpose of the FDCPA, specified in section 1692(e) as including “to eliminate abusive debt collection practices . . . .” I've deliberately chosen as examples statutes that were enacted decades ago, because the principles reflected in those laws have worked their way into the tissues of our laws and financial system and so are as "core" as anything we have in consumer law.