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Supreme Court Curbs FTC Authority on Consumer Redress (3)

April 22, 2021, 2:42 PMUpdated: April 22, 2021, 7:13 PM

The U.S. Supreme Court said the Federal Trade Commission doesn’t have the authority to compel consumer redress from companies, ruling unanimously in a favor of a payday lender’s challenge to a $1.3 billion penalty.

Section 13(b) of the Federal Trade Commission Act doesn’t give the FTC authority to obtain consumer redress through litigation in federal district court, the Supreme Court ruled Thursday in AMG Capital Management LLC v. FTC.

AMG Capital asked the court to overturn decades of appellate court precedent that backed the FTC’s pursuit of restitution alongside court injunctions to immediately stop alleged consumer scams and antitrust violations.

Section 13(b)—a 1973 amendment to the 1914 law that created the FTC—says the commission can seek injunctive relief through litigation, but is silent on whether it can also seek equitable relief, including consumer redress.

The FTC can secure redress for past actions through administrative proceedings under the FTC Act’s sections 5 and 19, however.

“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,” Justice Stephen Breyer wrote on behalf of the unanimous court.

But because section 13(b) doesn’t explicitly provide for the FTC’s ability to get monetary relief for past actions, the Supreme Court “must conclude” that the law “as currently written does not grant the Commission authority to obtain equitable monetary relief,” Breyer wrote.

FTC Responds

The FTC said the ruling leaves “average Americans to pay for illegal behavior.”

“With this ruling, the Court has deprived the FTC of the strongest tool we had to help consumers when they need it most. We urge Congress to act swiftly to restore and strengthen the powers of the agency so we can make wronged consumers whole,” Acting FTC Chair Rebecca Kelly Slaughter said in a statement.

Michael Patillo, a MoloLamken LLP partner representing AMG Capital, said he was pleased with the ruling.

“We think that the Court’s unanimous decision speaks for itself,” he said in an email to Bloomberg Law.

AMG, owned by payday loan impresario and former race car driver Scott Tucker, appealed a December 2018 decision from the U.S. Court of Appeals for the Ninth Circuit that upheld the FTC’s $1.27 billion restitution order against Tucker.

Tucker is currently serving a nearly 17-year prison sentence for leading a nationwide payday lending operation that violated state interest rate laws and misled consumers.

Appellate courts for decades ruled that the FTC has the authority to seek consumer redress until a 2019 decision in FTC v. Credit Bureau Center, LLC overturned Seventh Circuit precedent and broke with eight other circuits.

The case is AMG Capital Mgmt., LLC v. FTC, U.S., No. 19-508, 4/22/21.

(Updates with comment from AMG Capital counsel in 10th and 11th paragraphs)

To contact the reporter on this story: Evan Weinberger in New York at eweinberger@bloomberglaw.com

To contact the editor responsible for this story: Michael Ferullo at mferullo@bloomberglaw.com