3/11/2013. Federal Trade Commission Section 5(a) of the Federal Trade Commission Act

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1 Paul Huck, Partner, Hunton & Williams LLP Robert Clements, Senior Assistant Attorney General Office of Attorney General, State of Florida The Society of Corporate Compliance and Ethics 2013 South Atlantic Regional Compliance and Ethics Conference March 15th, 2013 Miami, FL Federal Trade Commission Section 5(a) of the Federal Trade Commission Act State Attorneys General State Deceptive and Unfair Trade Practices Acts Consumer Financial Protection Bureau Title X, Consumer Financial Protection Act Section 5(a) of the Federal Trade Commission Act, 15 U.S.C. 45(a) prohibits unfair or deceptive acts or practices in or affecting commerce. Deceptive acts or practices must show a representation, omission, or practice that is material and likely to mislead consumers acting reasonably under the circumstances. Unfair acts or practices - causes or is likely to cause substantial injury to consumers which cannot be reasonably avoided by consumers themselves and are not outweighed by countervailing benefits to consumers or to competition. Section (1), Florida Statutes (2012) prohibits unfair or deceptive acts or practices in the conduct of any trade or commerce. Deceptive acts or practices - representation, omission, or practice that is likely to mislead the consumer acting reasonably in the circumstances, to the consumer's detriment 1

2 Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act established the Bureau of Consumer Financial Protection ( CFPB ) The CFPB is authorized to take enforcement actions and to prescribe rules to prohibit unfair, deceptive or abusive acts or practices. It is generally unlawful for a covered person to provide a consumer financial product or service that is not in conformity with federal consumer financial law, to otherwise violate federal consumer financial law or to engage in unfair, deceptive or abusive practices. Deceptive means (1) a representation, omission, act, or practice that misleads or is likely to mislead the consumer; (2) the consumer s interpretation of the representation, omission, act, or practice is reasonable under the circumstances; and (3) the misleading representation, omission, act, or practice is material. Unfair means an act or practice that causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers, and the injury is not outweighed by countervailing benefits to consumers or to competition. Abusive means an act or practice that materially interferes with the ability of a consumer to understand a term or condition of a consumer financial product or service or that takes unreasonable advantage of a consumer, which includes: A lack of consumer understanding of the risks, costs, or conditions associated with the product or service; The inability of the consumer to protect him or herself in selecting or using the product or service; A consumer s reasonable reliance on the covered entity to act in the consumer s interest. 2

3 Under 1002, covered person means: Any person that offers or provides a consumer financial product or service, and Any service provider, to the extent that the service provider offers or provides a consumer financial product or service; A related person, which is defined as: Any director, officer or employee charged with managerial responsibility for a covered person; Any controlling shareholder of a covered person; Any agent of a covered person; Any shareholder, consultant, joint venture partner or other person who materially participates in the conduct of affairs of a covered person; Any independent contractor (including any attorney, appraiser or accountant) who knowingly or recklessly participates in any (i) violation of law, or (ii) breach of fiduciary duty; but excludes all of the foregoing with respect to depository institutions and their holding companies. Consumer financial product or service means: Any financial product or service provided for use by consumers primarily for personal, family or household purposes Financial product or service means: Credit (extending, servicing, acquiring, purchasing, selling, brokering); Leasing; Real estate settlement services and appraisals of real and personal property; Deposit taking and money transmitting; Stored value (selling, providing, issuing, with exceptions); Checks (cashing, collecting, guarantying); Financial data processing; Financial advisory services, including credit counseling, debt management and debt settlement; Consumer reports (collecting, analyzing, maintaining or providing; with exceptions); Debt collection (if related to a consumer financial product); Any other financial product or service as defined by the CFPB Financial product or service does not include either the business of insurance or electronic conduit services. Other exclusions from coverage. The Director has exclusive rulemaking authority with regard to federal consumer financial law. Under 1002, Federal consumer financial law means (i) the CFPA, and (ii) enumerated consumer laws. Enumerated consumer laws means the: Unfair, Deceptive or Abusive Acts or Practices Equal Credit Opportunity Act Home Mortgage Disclosure Act Truth in Lending Act Real Estate Settlement Procedures Act Homeowners Protection Act Consumer Leasing Act Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act Fair Credit Reporting Act Fair Debt Collection Practices Act Electronic Fund Transfer Act Truth in Savings Act Privacy of Consumer Financial Information (Gramm-Leach-Bliley Act) 3

4 FTC Rules and Regulations violation of FDUTPA can be based on: (a) Any rules promulgated pursuant to the Federal Trade Commission Act, 15 U.S.C. ss. 41 et seq.; (b) The standards of unfairness and deception set forth and interpreted by the Federal Trade Commission or the federal courts; (c) Any law, statute, rule, regulation, or ordinance which proscribes unfair methods of competition, or unfair, deceptive, or unconscionable acts or practices. CFPA - A state attorney general or state regulator may bring a civil action in any state or federal district court that has jurisdiction over the defendant to enforce the provisions of the CFPA State statutes - Any law, statute, rule, regulation, or ordinance which proscribes unfair methods of competition, or unfair, deceptive, or unconscionable acts or practices. Targets of intentional breaches: financial institutions, energy sector, news media, payment card industry, technology, health care, retailers Unintentional breaches Potential for local, state, federal and international regulatory overlay Notice of a breach can come from a variety of sources: financial losses; customer complaints; payment card brands; law enforcement Critical to identify and understand the nature and scope of the breach How much and what kind of data or other information was accessed Was data from non-us individuals or entities involved 4

5 Breach notification and other regulatory obligations State, federal, international law Industry standards Contractual obligations to customers, vendors, thirdparties Formal notification and reporting documents If event occurs and litigation is anticipated, data preservation obligations arise under US law But those obligations may conflict with, e.g., EC law Assess potential insurance claims Assist law enforcement with investigation Possibility of defending legal actions Regulatory enforcement Private lawsuits Manage disputes with business partners and other third parties State investigations and enforcement actions investigative subpoena / depositions Assurance of Voluntary Compliance lawsuit Federal investigations / enforcement actions CID Legal action Joint investigations / enforcement actions 5

6 FOIA and the 50 States Sunshine Laws Chapter 119, Florida Statutes (2012): [A]ll state, county, and municipal records are open for personal inspection and copying by any person. Section (1), Florida Statutes (2012) Includes all documents received pursuant to law or in connection with the official business of any agency. Statutory Exemptions over 500 types of records/categories of information, including: Trade secret information Active criminal investigative/intelligence information Certain types of civil investigations, e.g., antitrust, civil RICO 6