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FCC, FTC Issue Joint Statement on Broadband Data Security Regulation; Senate Resolution Introduced to Repeal FCC Privacy Rules
On March 1, FCC Chairman Ajit Pai and acting FTC Chairman Maureen K. Ohlhausen issued a Joint Statement announcing an FCC Order (Stay Order) staying the enactment of certain data security provisions (§ 64.2005) adopted by the Commission late last year as part of its Broadband Privacy Order while the Commission and Congress consider an appropriate resolution of the broader Net Neutrality proceeding. Absent a stay, the rule was set to go into effect on March 2. Separate and apart from explaining the Stay Order, the Joint Statement effectively serves as a commitment by both the FCC and FTC to return “jurisdiction over broadband providers’ privacy and data security practices … to the FTC, the nation’s expert agency with respect to these important subjects.” Moreover, the statement also highlights what might be considered a guiding principle behind the new leadership at both the FCC and the FTC – namely, that “[a]ll actors . . . should be subject to the same rules” and “[t]he federal government shouldn’t favor one set of companies over another.”
The Stay Order arose out of an October 2016 decision to amend the Broadband Privacy Order to include new “sector-specific privacy rules” that the FCC determined were “necessary to address the distinct characteristics of telecommunications services.” This final version, the Broadband Privacy Order – was published in the Federal Register (81 Fed. Reg. 87,274) on December 2, 2016.
This amendment marked a substantial change from the original language included in the order as proposed back in March 2016, where the Commission “propose[d] to apply the traditional privacy requirements of the Communications Act to . . . broadband Internet access service (BIAS).” Then-commissioner and current FCC Chairman Pai strongly disagreed with the amendment at the time, filing a dissenting statement in which he argued, that “it makes no sense” for the FCC to enact “rules that apply very different regulatory regimes based on the identity of the online actor” because, among other reasons, it will inhibit competition in the online advertising market and also “lead to consumer confusion about which online companies can and cannot use their data.” Thereafter, eleven separate timely petitions to reconsider the October 2016 Order were filed, along with a petition requesting that the Commission stay the effective date of the Order.
The decision to delay the enactment of the new privacy regulations relied on Chairman Pai’s earlier argument that the data security rule as amended is not consistent with current FTC privacy standards, and thus found the March 2 effective date to be based on the incorrect underlying assumption that “carriers should already be largely in compliance with these requirements because the reasonableness standard adopted in [the] Order . . . resemble[] the obligation to which they were previously subject pursuant to Section 5 of the FTC Act.” As made clear by Chairman Pai in the Joint Statement, “[t]he stay will remain in place only until the FCC is able to rule on a petition for reconsideration of its privacy rule.”
Notably, shortly after the release of the Joint Statement, on March 7, Sen. Jeff Flake (R-Ariz), chairman of the Senate Judiciary Subcommittee on Privacy, Technology and the Law, introduced a joint resolution to formally provide for “congressional disapproval” of 81 Fed. Reg. 87,274, i.e., the Broadband Privacy Order referenced above, under the Congressional Review Act (CRA). The CRA is a 1996 law that empowers Congress to repeal federal regulations. According to a statement released by his office, Sen. Flake—who has long opposed the privacy regulations at issue—sent a letter back in January of last year to FCC Chairman Tom Wheeler expressing concerns that the FCC is “overreaching its authority” with its planned broadband regulations. The Arizona Senator thereafter, on May 11, 2016, chaired a Privacy, Technology and the Law Subcommittee hearing seeking “answers on the legality of the proposed FCC rules and the consequences for consumers and the future of the internet.” And, most recently, on March 1, Sen. Flake wrote a Wall Street Journal op-ed laying out his position on the matter.
Flood Insurance Takes Center Stage on Hill this Week
On March 9, the Housing and Insurance Subcommittee held a hearing to examine the National Flood Insurance Program (NFIP) and, according to a memo released by the Subcommittee, “provide an opportunity to review the current government flood insurance model, the technological changes since 1968 that could improve the NFIP, and how the private sector could develop a private flood insurance market that compliments the current NFIP model.” With the current NFIP program set to expire on September 30, the hearing comes as Congress is in the process of drafting a proposal to reauthorize and overhaul the program.
Roy Wright—a top FEMA official and the only witness slated to testify at the hour-long hearing—answered questions and, according to the written statement submitted prior to his appearance, discussed “a number of opportunities [that] should be explored that could provide for the growth of the private market for flood insurance.” Wright stated, among other things, that “improving the nation’s overall flood resiliency will depend on finding an appropriate balance between reducing risk to the taxpayer through a greater private sector role while sustaining a robust and affordable federal program.”
Following the hearing, the Financial Services Committee issued a press release highlighting key takeaways, including:
- “The National Flood Insurance Program is in need of significant reform. The program runs an estimated annual deficit as high as $1.5 billion and already is $24.6 billion in the red to taxpayers, with no foreseeable way to ever repay them.”
- “Instead of reducing taxpayer risk to deadly floods, the federal government has spent more than $200 billion on flood recoveries since 2000 in addition to the NFIP. Meanwhile, customer dissatisfaction with how the NFIP operates, approves flood maps, and pays claims has remained high and keeps on growing with each new storm.”
- “The private sector can and should play a more meaningful role in flood insurance.”
Flood Insurance Market Parity and Modernization Act. Earlier in the week, on March 8, legislation intended to accelerate development of the private flood instance market was introduced in both Houses of Congress. In the Senate, Sens. Dean Heller (R-NV) and John Tester (D-MT) reintroduced the Flood Insurance Market Parity and Modernization Act (S. 563), which has been referred to the Committee on Banking, Housing and Urban Affairs. Meanwhile, in the House, Rep. Dennis Ross (R-FL.) and Rep. Kathy Castor (D-FL) announced the introduction of H.R. 1422–the House version of the Flood Insurance Market Parity and Modernization Act.
Flood Insurance Fairness Act. On March 7, Reps. Carlos Curbelo (R-Fla) and Charlie Crist (D-Fla) introduced the Flood Insurance Fairness Act (H.R.1401), a bill intended to “ensure fairness in premium rates for coverage under the National Flood Insurance Program for residences and business properties.” The bill has been referred to the House Committee on Financial Services. As explained by Rep. Crist in a press release, “[b]y extending relief to more Florida properties–including rentals and businesses–we can better protect the financial well-being of middle class families across the state.” A June 2015 version of the bill was previously introduced by Rep. Curbelo during the 114th Congress.
Senate Confirms Ben Carson for HUD Secretary
On March 2, Dr. Ben S. Carson was sworn in as the 17th Secretary of the U.S. Department of Housing and Urban Development. Vice President Mike Pence administered the oath of office. Earlier in the day, the Senate confirmed the retired neurosurgeon as the new secretary of the HUD Secretary in a 58-41 vote, primarily along party lines. The Senate Banking, Housing, and Urban Affairs Committee unanimously voted to move Carson out of committee on January 24. Dr. Carson’s full biography is available here.
Senate Banking Committee Announces Subcommittee Assignments for 115th Congress
On January 17, the Senate Committee on Banking, Housing and Urban Affairs Chairman Mike Crapo (R-Idaho) and Ranking Member Sherrod Brown (D-Ohio), announced subcommittee assignments for the 115th Congress. The Senators named to head each subcommittee are listed below:
- Dean Heller of Nevada will be the new chairman of the Securities, Insurance and Investment subcommittee. Sen. Mark Warner of Virginia will continue to serve as ranking member.
- Pat Toomey of Pennsylvania will remain chairman of the Financial Institutions and Consumer Protection subcommittee. Sen. Elizabeth Warren of Massachusetts will be the new ranking member.
- Tom Cotton of Arkansas will become chairman of the Economic Policy subcommittee. Sen. Heidi Heitkamp of North Dakota will be the new ranking member.
- Ben Sasse of Nebraska will chair the National Security and International Trade and Finance subcommittee. Sen. Joe Donnelly of Indiana will serve as ranking member.
Sen. Tim Scott of South Carolina will continue to chair the Housing, Transportation and Community Development subcommittee. Sen. Robert Menendez of New Jersey will remain ranking member.
Senate Republicans Announce Three New Banking Committee Members
On January 3, 2017, Senate Republican leadership released committee assignments for the 115th Congress, and in the process, announced the addition of three new Republican members of the Banking, Housing, and Urban Affairs Committee. Specifically, Sens. David Perdue (R-Ga.), Thom Tillis (R-N.C.) and John Kennedy (R-La.) have been assigned to the Committee, replacing Sens. Jerry Moran (R-Kan.), who was reassigned, David Vitter (R-La.), who retired last year, and Mark Kirk (R-Ill.), who lost his re-election bid. Looking ahead, committee chairs will be selected next week following a vote of the members of each respective committee and then ratified by the Senate Republican Conference.
CFPB Releases Annual Report to Congress on Transparency, Accountability in 2016
On January 3, the CFPB announced the release of its annual report to the Senate and House Committees on Appropriations for 2016. The report—which covers October 1, 2015 through September 30, 2016—identifies the specific responsibilities that the Dodd-Frank Act tasked to the CFPB and explains how the Bureau has attempted to meet those responsibilities. Among other things, the report describes Bureau regulations and guidance related to the Dodd-Frank Act including, but not limited to: (i) a proposed rule on arbitration; (ii) a proposed rule related to payday loans, vehicle title loans, and other similar credit products; (iii) a final rule to amend various provisions of the mortgage servicing rules implementing the Real Estate Settlement Procedures Act and the Truth in Lending Act; and (iv) a final rule amending Regulation C, implementing the Home Mortgage Disclosure Act. The report also includes descriptions of the Bureau’s supervisory activities and enforcement actions undertaken by in the 2016 fiscal year.
Senate Approves Law Facilitating Punishment of Corrupt Foreign Officials
On December 8, Congress passed the Global Magnitsky Human Rights Accountability Act as part of the National Defense Authorization Act for 2017, which now awaits President Obama's signature. Championed by U.S. Senators Ben Cardin (D-Md.), Ranking Member of the Foreign Relations Committee, and John McCain (R-Ariz.), Chairman of the Armed Services Committee, the bill gives the President of the United States the authority to deny human rights abusers and corrupt officials entry into the United States or access to our financial institutions. The bipartisan legislation builds on the Russia-specific Sergei Magnitsky Rule of Law Accountability Act of 2013 to apply sanctions globally, and makes significant acts of corruption sanctionable offenses.
Congress Approves 10-Year Extension of Iran Sanctions Act
On December 1, the U.S. Senate, by a 99-0 margin, passed a 10-year extension of the Iran Sanctions Act (ISA) sending the measure to the White House and delaying any potentially tougher actions until next year. Originally approved in 1996, the extended bill passed onto the Senate in November with only one vote against it from the House. Congressional authority to enforce sanctions against Iran—which was due to expire on December 31 if not renewed—will be presented to President Barack Obama, who will decide whether to sign the bill into law in the coming days.
FCC Denies Petition by MBA to Exempt Certain Mortgage Servicing Calls from Prior Express Consent Requirement
In an order dated November 15, the FCC’s Consumer and Governmental Affairs Bureau denied a petition by the Mortgage Bankers Association (MBA) that sought an exemption from the FCC’s prior express consent requirement for non-telemarketing residential mortgage servicing auto-dialer calls to wireless numbers. In its order, the Bureau concluded that MBA had failed to show (1) that the calls in question would be free of charge to consumers; and (2) that the parties seeking relief should be able to send non-time-sensitive calls to consumers without their consent.
Among other things, the Order explained that the Telephone Consumer Protection Act (TCPA) “reflects Congress’ recognition of the potential costs and privacy risks imposed on wireless consumers from the use of auto-dialer equipment, which can generate large numbers of unwanted calls” and accordingly, the FCC has generally attempted to balance and accommodate the legitimate business interests of callers in addition to recognized consumer privacy interests.
PHH Response Due Date Pushed Back as Solicitor General Permitted to Respond to CFPB's Petition in PHH Corp. v. CFPB by December 22
As discussed previously, the D.C. Circuit ordered PHH to respond to the CFPB’s petition for en banc review of the October 2016 three-judge panel decision in PHH Corp. v. CFPB. In an Unopposed Motion for Leave to file the United States' Response, filed December 1, the Office of the Solicitor General sought permission to file its own responsive briefing on or before December 22. In an Order issued December 1, the D.C. Circuit granted the Solicitor General’s request, but also moved back the due date for PHH’s responsive papers so that both responses are now due on December 22.
Earlier in the week, on November 30, two groups filed amicus briefs in support of the CFPB’s petition together along with motions requesting an invitation from the court. The first brief was submitted by a group of leading consumer protection organizations, while the second brief was filed by a group of 21 current and former members of Congress.