FTC’s New Consumer Protection Chief Defends Ability to Enforce

Despite objections from Sens. Elizabeth Warren, D-Mass., Richard Blumenthal, D-Conn., and Brian Schatz, D-Hawaii, (see 1805150062), the agency introduced Smith Wednesday evening (see also the personals section of this publication). The lawmakers cited how Smith -- a financial services attorney at Covington & Burling -- previously represented companies accused of “some of the worst abuses of consumers,” including Facebook, Equifax and Uber, making him “unable to function as the FTC’s top consumer advocate.”

After the Equifax data breach, Smith testified in October before the Senate Banking Committee, representing the Consumer Data Industry Association on consumer data protection issues. Smith separately represented AMG Services, a payday lender linked to a scheme that resulted in a $1.3 billion fine for violators and a 16-year prison sentence for defendant Scott Tucker. Smith said now that the goal of a compliance attorney is to keep the client on the right side of the law and avoid issues with regulators. If the FTC identifies violations, he said, the attorney failed the client in his advisory role. “In that context, it’s not necessarily a whole lot different than what I would be doing at the FTC,” Smith said.

Smith declined to offer exact details on the timing and scope of work at Facebook and Equifax, citing client confidentiality, but he said work with the social media platform was minimal and concerned topics unrelated to the FTC data privacy investigation (see 1803260039). Smith said he spoke with Democratic Commissioners Rohit Chopra and Rebecca Slaughter “quite a bit” before the commission’s 3-2 vote approving his appointment. “I understand where they’re coming from,” he said. “The issues they raised are ones that are for further consideration, but I will tell you that the recusal rules are very bright-line, and they are very broad-line, meaning they cast a broad net.” Smith said his expected recusals on Equifax and Facebook are “business as usual” for the agency, citing former Consumer Protection Bureau Director Tom Pahl’s recusal from the Equifax case. Smith is required to submit a list of previous clients to the FTC to determine where else he could be recused. We submitted a Freedom of Information Act request to the commission for that document and others.

Chairman Joseph Simons said he was “disappointed that two of my new colleagues have chosen to turn Mr. Smith’s appointment into a source of unnecessary controversy. I am highly confident that Mr. Smith will be an effective leader of the Bureau of Consumer Protection.” Chopra said he fears Smith “will be spending too much time on the sidelines,” and raised concerns about the appearance of conflict of interest in other cases. Slaughter said Smith’s appointment could potentially undermine the “public’s confidence in the commission’s ability to fulfill its mission,” since he will be “barred from leading on data privacy and security matters that affect so many consumers, command so much public attention, and implicate such key areas of the law.”

When Smith joins the FTC May 21, the agency will examine his clients from the past two years, and even work in minimal capacities could result in recusal, he said. This is Smith’s second stint at the FTC. In 2003, he led the agency’s effort drafting 10 rules and six studies under the Fair and Accurate Credit Transactions Act. Congress that year amended the Fair Credit Reporting Act to include a number of additional consumer protections. “All five of the new commissioners are enthusiastic, and I’m excited to work with them and continue FTC’s long tradition of collegiality and bipartisanship,” Smith said. “I think it’s going to be a lot of fun to be back there, and there’s a lot of important work to do protecting consumers.”

Fox in Henhouse

Public Citizen Counsel-Civil Justice and Consumer Rights Remington Gregg called Smith’s appointment a “deeply disturbing” and “laughable” example of the “fox guarding the henhouse.” Smith has made a career of “defending corporate interests … to protect their bottom line,” he said. It’s mind-boggling the FTC appointed someone who recently defended credit reporting agencies before Congress to lead an office responsible for protecting consumers, he added.

Consumer Watchdog Privacy Project Director John Simpson said people who “prey on consumers” aren't qualified to lead the Consumer Protection Bureau. Allied Progress Executive Director Karl Frisch said the FTC has “given the fox keys to the henhouse and asked him to protect the hens -- they know he won't, and they don't care.”

Common Cause Chief-Strategy and External Affairs Stephen Spaulding questioned whether the FTC performed a search extensive enough to produce the right candidates. Offices for Warren, Blumenthal and Schatz didn’t comment.

Defenders

Regulatory compliance attorneys in Washington defended Smith.

Crowell & Moring attorney Chris Cole described him as a well-respected attorney with extensive experience in consumer protection law and well-qualified to lead a bureau that needs leadership stability. Had Smith’s prior compliance work derailed the appointment, it would have sent a “troubling message” about the politicization of the FTC, Cole said: “Some clients are pure and some are not. To do this job well, however, we do not need to subscribe to our clients’ views on all things.”

DLA Piper attorney Jim Halpert said Smith is a “bright and very capable lawyer with very significant experience in financial privacy law.” Antitrust lawyer David Balto said he was “shocked” by the amount of opposition to Smith’s appointment, arguing the potentially unethical behavior of an attorney’s clients doesn't reflect anything about that attorney’s ability to be a regulator on the opposite side.