For now – and maybe for a long while – it will be tougher to get ill-gotten gains back from the bad actors … at least without an additional act of Congress. As reported on Thursday (April 22), the U.S. Supreme Court handed down a ruling that curbs the ability of the Federal Trade Commission (FTC) to recover monies fraudulently obtained from consumers by individuals or enterprises. At issue was whether a 1973 law that lets the FTC seek injunctions to battle fraudsters allows the commission to also seek financial judgments against those bad actors.
In terms of the background of the case, the FTC gained a judgment against racecar driver Scott Tucker, who was sentenced to prison for operating a payday loan scheme and charging borrowers illegally high rates. The judgment ordered Tucker and several co-defendants to pay $1.3 billion. Tucker’s own court filings challenged the FTC’s authority to seek or obtain such monetary awards.
In the decision, in the case captioned AMG Capital Management LLC, et al. v. Federal Trade Commission, the Court ruled that a provision of the Federal Trade Commission Act – Section 13(b) “does not authorize the Commission to seek, or a court to award, equitable monetary relief such as restitution or disgorgement.” Later in the decision, the Court noted that “Section 13(b) provides that the “Commission may seek . . . a permanent injunction” on those activities to address activities deemed improper.
Moving to Other Avenues?
“By its terms, this provision concerns prospective injunctive relief, not retrospective monetary relief,” wrote the Court. As noted by The Wall Street Journal, the FTC will have to go through other legal avenues to get monetary redress for consumers (where typically monetary damages have been made up of restitution and disgorgement). Those new avenues would require the FTC to move through a range of administrative proceedings that would identify and then seek to halt allegedly fraudulent actions. Over the last several years, the Court noted, the FTC exhibited an “increasing tendency” to use the 13(b) provision to seek monetary awards.
As to what comes next, wrote the court, “if the Commission believes that authority too cumbersome or otherwise inadequate, it is, of course, free to ask Congress to grant it further remedial authority.”
There are movements in place by the FTC to get that authority, explicitly from Congress, to seek restitution and disgorgement. In one example, the SAFE Data Act would allow agencies, including the FTC, to obtain civil penalties and restitution. The Journal noted that the law has been used to get more than $11 billion back from those found to have engaged in deceptive business practices.
In at least one signal of the FTC’s strategy beyond Congressional action, FTC Commissioner Rohit Chopra tweeted after the ruling that the decision “forbids the FTC from getting money from bad actors … even if Congress takes action to address this, commissioners should act now to deploy the FTC’s dormant Penalty Offense Authority through Section 5(m)(1)(B), trigger broader sanctions for bad actors through Section 18 and undertake other agency reforms.”
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