02/06/2020 - Fake It Till They Make It: How Bad Actors Use Astroturfing to ... - (EventID=110461)

Video Description

Connect with the House Financial Services Committee Get the latest news: https://financialservices.house.gov/ Follow us on Facebook: https://www.facebook.com/FinancialDems/ Follow us on Twitter: https://twitter.com/FSCDems Wednesday, February 06, 2020 (2:00 PM) -- Fake It Till They Make It: How Bad Actors Use Astroturfing to Manipulate Regulators, Disenfranchise Consumers and Subvert the Rulemaking Process ________ This hearing will have one panel with five witnesses: • Bartlett Naylor, Financial Policy Advocate, Public Citizen • Beth Simone Noveck, Professor and Director, GovLab, Tandon School of Engineering, New York University • Paulina Gonzalez-Brito, Deputy Director, California Reinvestment Coalition • Seto Bagdoyan, Director, Forensic Audits and Investigative Service, U.S. Government Accountability Office • Dr. Steven Balla, Associate Professor, George Washington University Overview This hearing will examine the prevalence and potential impact of fraudulent comment submissions during the notice-and-comment period for proposed federal financial regulations. The testimony will discuss recent reports alleging that certain special interest groups have used invented or stolen identities to submit comments about proposed rules, a practice often called “astroturfing.” The testimony will also present actions regulators and legislators can take to deter and mitigate fraudulent comment submissions. The Administrative Procedure Act The Administrative Procedure Act (APA), enacted in 1946, contains the primary procedural requirements of the federal rulemaking process. The APA requires that an agency generally provide notice in the Federal Register when it intends to promulgate a rule. This step is referred to as a notice of proposed rulemaking (NPRM) or a proposed rule. The agency must then allow “interested persons an opportunity” to comment on the proposed rule. After the comment period has ended, the APA requires the agency to consider the “relevant matter presented.” Under various judicial interpretations of the APA, the agency is also required to review the comments it received and respond in a “reasoned manner” to “significant” comments. “Significant” comments are those that “raise relevant points and which, if adopted, would require a change in the agency’s proposed rule.” Agencies are not required to weigh their decisions based on the number of comments received in favor of or opposition to a particular policy — although the number of comments received could influence an agency’s perception of the public’s view on an issue. The E-Government Act of 2002 and eRulemaking Congress enacted the E-Government Act of 2002 to enhance the management and promotion of electronic government services and processes, including the rulemaking process. In January 2003, the eRulemaking Program, led by the Environmental Protection Agency, launched the “Regulations.gov” website, which is the public-facing website of the Federal Docket Management System (FDMS), the centralized online system federal agency officials use to structure online regulatory activities such as the collection of comments under the APA. Regulations.gov was created to enhance agencies’ ability to receive comments electronically. Agencies are not required to use the website and may operate their own portal for receiving comments electronically. Site administrators for Regulations.gov lack sufficient funding and resources and as such have struggled to implement the design and operation of the site. Notable Instances of Astroturfing In December 2019, the Securities and Exchange Commission published a proposed rule in the Federal Register that would amend the agency’s rules governing shareholder proposals. The proposed amendments enjoyed broad support from many trade associations and industry groups. During a speech about the proposed rule, SEC Chairman Jay Clayton quoted several comments the agency had purportedly received from “long-term Main Street investors, including an Army veteran and a Marine veteran, a police officer, a retired teacher, a public servant, a single mom, [and] a couple of retirees who saved for retirement” in support of the proposed amendments. An investigation by Bloomberg revealed that the letters quoted by the Chairman were not actually written by ordinary citizens, but instead were created by a pro-corporate advocacy group that had used the identities of ordinary Americans. According to Chairman Clayton, he contacted the agency’s general counsel and office of inspector general to discuss the suspicious comments and investigate claims that the comments came from a special interest group In 2016, the Consumer Financial Protection Bureau sought comments in advance of issuing a regulation that would focus higher scrutiny on the payday lending industry. The agency’s efforts were frustrated by an influx of over a million... Hearing Page: https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=406112