(Updates with more details from the hearing, additional comment by FTC chairman)
WASHINGTON -(Dow Jones)- Federal Trade Commission Chairman Jon Leibowitz said Thursday that he believes Congress needs to grant his agency more powers to better protect consumers, especially as the economic crisis has forced the FTC to step up its efforts to fight financial-related fraud.
Speaking before the Senate Commerce Committee, Leibowitz urged lawmakers to consider several measures to bolster the relatively tiny agency, including expediting its rule-making authority, allowing the FTC to go after firms and individuals who aid and abet fraud, and giving the agency the ability to assess civil penalties against violators.
"Having the ability to prosecute those who make fraud possible by assisting others is a key component of an effective enforcement program," Leibowitz said in prepared testimony. "The commission urges Congress to clarify the law and provide explicit authority for the FTC to take law enforcement action against those who provide substantial assistance to another while knowing, or consciously avoiding knowing, that the person is engaged in unfair or deceptive practices."
Leibowitz's testimony about bolstering his agency's consumer-protection powers comes as the Senate Banking Committee is seeking to craft a financial regulatory overhaul that could gain bipartisan support.
A key part of the Obama administration's push for a rewriting of financial regulations is the creation of a Consumer Financial Protection Agency. The U.S. House included language in its own financial bill approved in December to create such an agency, but its inclusion in a Senate package is highly uncertain because numerous business groups continue to lobby against the idea and Republicans continue to oppose it.
Leibowitz said he personally supports the idea of creating a consumer financial protection agency. If designed properly, he said, the agency "could be wonderfully helpful in ensuring that consumers are protected from predatory financial instruments."
He also said that he and his fellow commissioners at the FTC are "more comfortable" with the version of the consumer protection agency contained in the recent U.S. House legislation than other versions that have been floated. The FTC doesn't have authority over banks, credit unions or savings and loans institutions, but it does have the ability to police against deceptive practices by non-bank mortgage companies, mortgage brokers, creditors and debt collectors. In 2009 alone, the FTC and states brought more than 200 cases against firms for offering phony mortgage modification and foreclosure-rescue scams.
Although the agency can seek monetary relief for consumers harmed by fraud, the FTC isn't able to pursue civil penalties. Leibowitz urged lawmakers to amend the law in this area so the FTC can "more effectively deter financial and other types of fraud."
He also said the law governing the agency's rule-making procedures is "medieval" and he hopes Congress will act to allow the agency to instead follow guidelines under the Administrative Procedures Act, the law that guides other regulators such as the U.S. Securities and Exchange Commission and Commodity Futures Trading Commission. Senate Commerce Chairman John Rockefeller IV (D., W.V.) said he believes the FTC "must remain a cornerstone of our consumer protection system."
(Brent Kendall contributed to this article.)
Copyright 2009 Dow Jones Newswires
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