What if McCain Defaults?

Yesterday, I wrote about John McCain's presidential campaign pledging its fundraising list as collateral for a loan - the same fundraising list that it said it would never sell to third parties. In that post I asserted that it was unlikely that McCain's campaign could be sued by consumers for violating the privacy policy, and pointed out that it's too early to sue in any case, since McCain's campaign hasn't defaulted on anything, and so the bank hasn't seized the list. However, that rather begs the question: is there anything that would happen if the list was seized? Well, potentially, there is. First, there's the potential breach of contract suit. As I mentioned yesterday, it would be unlikely to succeed, but that doesn't mean that the threat isn't there. There's also potential action by the government (probably more likely if McCain loses the presidential race). Section 5 of the FTC Act (discussed here) prohibits unfair or deceptive trade practices. That prohibition has been interpreted broadly, and has been used to punish companies which sell lists in violation of privacy policies in the past (e.g., this settlement with Gateway Learning, makers of "Hooked on Phonics"). Thus, theoretically, there's a chance that the FTC might take action if the campaign defaulted and the bank seized the list.

Realistically though, the FTC isn't going to go after a political campaign for pledging its fundraising list as collateral, since that would prevent other political campaigns from doing the same thing in the future, and the FTC is controlled by the government (i.e., politicians). Similarly, as I said yesterday, there are real obstacles to a breach of contract action being successfully brought. The bottom line is that the only hit John McCain's campaign is likely to take from pledging its list is political (if that).