There’s yet another controversy for the federal government, as a former Equifax lawyer is now running the agency that protects consumers. Andrew Smith, has been appointed to head the Bureau of Consumer Protection, according to a statement released by the Federal Trade Commission.
“Lawyer who repped Equifax will run office that investigates Equifax,” reads a headline from Think Progress. “FTC approves appointment of Andrew Smith to head Bureau of Consumer Protection,” another headline reads attached to a blog post on the JD Supra website.
And don’t second-guess yourself. You’ve read both of those headlines correctly. The newly appointed Federal Trade Commission, the actual, bipartisan five-person committee compliant to the U.S. Senate, voted down party lines, 3-2, to appoint industry lawyer Andrew Smith to lead the commission’s staff Bureau of Consumer Protection. Have in mind, like the above-mentioned headlines highlighted, Smith–though certainly a well qualified and accomplished figure in his legal practices–could bring unheeded controversy to one of the most important consumer protection entities in the federal government.
Smith served as legal counsel on retainer for Equifax and has even testified on behalf of the company before Congress in response to a massive data breach that’s impacted hundreds of millions of consumers in 2017. (This story is the latest of Equifax-related stories that this author has covered for this publication in recent days.) Formerly a partner with the international Covington & Burling firm, Smith has represented additional firms like Facebook and Uber, many of whom, are currently being investigated by the agency that he was appointed to lead. Equifax falls under this category, as well.
Almost immediately, minority Democrats on the commission highlighted major concerns associated with the potential for conflicts of interest and additional ethical issues that could compromise the FTC’s current enforcement actions.
“While Andrew Smith may not technically be prohibited from working on these matters, his participation may raise the appearance of a conflict, undermining the hard work and analysis our staff conducts,” said Democratic commissioner Rohit Chopra, adding: “The Commission should prioritize addressing these appearances of conflict before ethical quandaries arise.”
Chopra’s sentiments bring up an important point that the newly appointed Republican commissioners, including chair Joe Simons, seem to overlook.
“Regardless of which party enjoys political power, it is impossible to attract high caliber professionals to the FTC without encountering some conflicts. That is precisely why the agency has well-established processes for dealing with recusals, to ensure appropriate oversight and minimal disruption while strictly adhering to ethics rules,” Simons said in defense of Smith. But, strong recusal processes and built-in fail-safes still don’t address the main issue: public trust.
The main opposition to Smith’s appointment doesn’t bring into question his professional capabilities whatsoever. More or less, it’s the public trust that seems breached due to the cases that Smith is tied too. Alluding to the Equifax affiliations once more, the data breach was one of the worst in recent history. Almost immediately, even as the New York Times speculated his appointment just days before, Smith’s ascension to one of the most powerful consumer protection positions in the federal government struck a nerve with journalists, lawmakers, and consumers.
Financial Digits reached out to sources at the Federal Trade Commission; however, the only responses to our questions include links to statements, additional process items from the votes, and the various opinions of all five commissioners.
“Andrew Smith is sworn in, I stand ready to work with him to lead our Bureau of Consumer Protection. Consumers and honest companies expect nothing less,” Chopra added.
Despite the various controversies, the real issue here is the so-called “revolving door” interlinked with the FTC’s echo chamber and the several companies the agency regulates. Pointed out by the Intercept’s David Dayen in recent coverage on Smith’s appointment, the ascension of an industry lawyer who has represented contentious companies isn’t an isolated occurrence. In fact, in many ways, its commonplace for well-qualified individuals to serve temporary periods in government and return to high-paying private sector work.
In Smith’s case, he’s previously served at the FTC; however, he left the agency to begin private sector practice again. During this time, though, Smith has taken on and defended clients in some of the most contentious cases ever to his the FTC. The most recent being the Equifax data breach; however, the most eye-opening is when Smith represented a convicted criminal who was sentenced in 2017 to 16 years for exploiting and deceiving consumers in a massive payday loan scandal. The criminal, Scott Tucker, was ordered to pay a $1.3 billion restitution to the FTC per a critical judgment in 2017.
Though we should certainly be wary of “guilt by association” tactics, Smith’s track record has proven to be controversial enough to sway public opinion towards distrusting his ascension and the individuals who paved the way for it. This should be the case for all of the current commissioners though, as many have varied pasts that seem to run counter to the mission of the CFPB.
Chopra, a former student loan ombudsman for the Consumer Financial Protection Bureau (CFPB) and leader within the U.S. Department of Education, has taken to task public integrity and has even published academic work challenging certain commonplace practices surrounding corruption, external influence, cronyism, and nepotism. But, despite all his talk, Chopra ascended to his new role as a commissioner by riding the coattails of Sen. Elizabeth Warren, D-Mass.
Regardless, the takeaway from this entire incident is that Smith’s ascension, and the following controversy, are just another glaring reality of the revolving door between government and the private sector. Wentong Zheng, a professor of law at the University of Florida Levin School of Law, wrote in 2015 for the Notre Dame Law Review that the “revolving door” could be harmful to current governance and regulatory regimes.
“A growing body of empirical literature, however, either finds no conclusive evidence of a capture effect or finds evidence of an opposite effect that the revolving door indeed results in more aggressive, not less aggressive, regulatory actions,” Zheng writes. “To account for these incongruous results, scholars have formulated and tested a new “human-capital” theory positing that revolving-door regulators have incentives to be more aggressive toward the regulated industry as a way of signaling their qualifications to prospective industry employers.”
The allusion here heralds the “revolving door,” in this case, as the only seemingly capable means of human capital flowing into the halls of policymaking. One major issue is with this model is the encroaching danger of cronyism and nepotism that can impact entire institutions. Smith’s first day on the job is in late May.
Clearly, Smith is a capable person and is more than qualified to lead a consumer protection agency. Yet, the concerns of his private sector dealings will rot at the public trust of consumer protection entities who, in my view, do some decent work. The CFPB’s oversight and nearly unlimited power over the financial sector has been degrading. But, maybe an unfortunate appointment is merely a coincidence.