FTC Chief Ramirez Announces Resignation

On January 13, the FTC announced that Chairwoman Edith Ramirez will be stepping down effective February 10. Chairwoman Ramirez was appointed by President Barack Obama and has served as a commissioner since April 2010. She became chairwoman in March 2013, after former FTC Chairman Jon Leibowitz resigned. Her departure means that President-elect Donald Trump will have the chance to fill three vacancies at the agency.

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FTC Files Complaint Against Device Maker Concerning Alleged Failures to Reasonably Secure Routers and Internet Protocol (IP) Cameras

On January 5, the FTC announced that it was initiating and enforcement action against a Taiwanese computer networking equipment manufacturer and its U.S. subsidiary. In a complaint filed with the Northern District of California, the FTC charged that the device-manufacturer failed to take reasonable steps to secure its routers and Internet Protocol (IP) cameras, potentially compromising sensitive consumer information, including live video and audio feeds from D-Link IP cameras. Specifically, the FTC alleged that hackers could exploit these vulnerabilities using any of several “simple methods.”

According to its press release, the complaint filed today is part of broader FTC’s efforts to protect consumers’ privacy and security in the “Internet of Things” (IoT), which includes cases the agency has brought against a computer hardware manufacturer, and a marketer of video cameras. In a statement, Jessica Rich, director of the FTC’s Bureau of Consumer Protection, explained “[h]ackers are increasingly targeting consumer routers and IP cameras — and the consequences for consumers can include device compromise and exposure of their sensitive personal information.” Accordingly, Ms. Rich explained further, “[w]hen manufacturers tell consumers that their equipment is secure, it’s critical that they take the necessary steps to make sure that’s true.” The FTC has provided guidance to IoT companies on how to preserve privacy and security in their products while still innovating and growing IoT technology.

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PHH v CFPB: PHH and U.S. Solicitor General Respond to CFPB’s Petition for En Banc Review

On December 22, PHH filed its brief opposing the CFPB’s petition for en banc review of the October 2016 three-judge panel decision in PHH Corp. v. CFPB. PHH argued that the case is not worthy of review by the full D.C. Circuit because, although the majority of the panel determined that the CFPB’s structure violated the constitutionally-mandated separation of powers, that “conclusion, which horrifies the CFPB, simply means that an agency of the Executive Branch will be answerable to the Chief Executive.” With respect to the panel’s unanimous decision that the CFPB incorrectly interpreted RESPA, PHH argued that en banc review is inappropriate because, among other reasons, the D.C. Circuit could not side with the CFPB without “creat[ing] a circuit split with every other court to have considered the proper scope of RESPA.”

At the invitation of the D.C. Circuit, the U.S. Solicitor General also filed its brief later the same day. While the Solicitor General supported the CFPB’s petition for en banc review of the constitutional question, it also suggested that, consistent with Judge Henderson’s dissent from the panel opinion, the full D.C. Circuit could simply vacate the CFPB’s order against PHH on the grounds that the Bureau misinterpreted RESPA. Doing so, the Solicitor General notes, would be consistent with the “well-established principle … that normally the Court will not decide a constitutional question if there is some other ground upon which to dispose of the case.” This ruling would vacate the panel majority’s conclusion that the CFPB’s structure was unconstitutional, although the Solicitor General noted that PHH could renew its constitutional challenge if the CFPB continues to pursue the case on remand.

With respect to the separation of powers question itself, the Solicitor General argued that en banc review is warranted because the majority departed from the analysis used by the Supreme Court to decide such questions. Specifically, the Solicitor General suggests that the panel majority erred by concluding “that an agency with a single head poses a greater threat to individual liberty than an agency headed by a multi-member body that exercises the same powers,” noting that the President’s authority over the multi-member FTC was similarly limited and the FTC enjoyed similar powers at the time the Supreme Court upheld its constitutionality.

Finally, after the filing of the Solicitor General’s brief, PHH requested permission to file an additional brief on the grounds that the Solicitor General had raised arguments not presented in the CFPB’s petition.

For additional background, please see our summaries of the panel decision, the CFPB’s petition for rehearing, and the D.C. Circuit’s order directing PHH to respond and the Solicitor General to provide views.

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Eleventh Circuit Stays Enforcement of FTC’s LabMD Order

In an order released November 10 in LabMD, Inc. v. FTC, the Eleventh Circuit stayed the execution of an FTC data security enforcement order against LabMD Inc. pending the appellate court’s own ruling on whether the agency acted on an unreasonable interpretation of what security companies must provide.  LabMD, Inc. v. FTC, No. 16-16270-D, Order Granting Stay (11th Cir. Nov. 10, 2016).

The FTC had ruled in July that LabMD’s data security practices violated the FTC Act, clarifying and expanding upon the FTC’s authority to regulate corporate data security practices. After an FTC administrative law judge denied LabMD’s request to stay enforcement until the medical company had exhausted its remedies on appeal, LabMD appealed to the Eleventh Circuit, which granted the stay in a unanimous decision.

Noting that the case turns upon whether the FTC’s interpretation of the FTC Act is reasonable, the Appellate cCourt granted the stay based on its finding that (i) “there are compelling reasons why the FTC’s interpretation may not be reasonable”; (ii) complying with the FTC’s Order would cause LabMD irreparable harm given its financial situation, (iii) there would be no substantial injury to other parties given that LabMD is no longer operating, and (iv) the public interest factor was neutral. The appeal will now proceed on the merits of LabMD’s arguments for reversal of the FTC’s enforcement order.

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POSTED IN: Courts, Data Risk / Privacy

As Part of Joint Initiative with the CFPB, FTC Launches Updated, Mobile-Friendly Military Consumer Website

On November 15, the FTC anounced the launch of its new mobile-friendly “financial readiness” website, which is designed to help members of the military community navigate personal financial decisions in light of the unique challenges they face, such as frequent relocations and deployment. The website, which may be found at www.Military.Consumer.gov, is a collaborative effort of the FTC, DoD, CFPB and others.

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POSTED IN: Consumer Finance, Miscellany