Money Back Not Guaranteed: Consumer Redress and the Federal Trade Commission

Issue: Whether Section 13(b) of the Federal Trade Commission Act authorizes the Federal Trade Commission to seek an injunction that includes the defendant returning all unlawfully obtained money.

The Supreme Court has agreed to hear two consumer protection cases about the remedies available to the Federal Trade Commission (FTC) under the Federal Trade Commission Act (FTC Act).  The FTC’s mission is to protect consumers by preventing unfair or deceptive business practices as well as unfair methods of competition. Section 13(b) of the FTC Act gives the agency the authority to seek a permanent injunction to stop these practices. 15 U.S.C. § 53(b). For more than 30 years, the FTC has argued, and federal courts have agreed, that an injunction under Section 13(b) can include restitution and other forms of monetary relief. See, e.g., Fed. Trade Comm’n v. Sec. Rare Coin & Bullion Corp., 931 F.2d 1312, 1316 (8th Cir. 1991).  Indeed, disgorging ill-gotten gains from companies that violate the FTC Act is one of the FTC’s primary remedies. Thus, the Supreme Court’s decision will have profound implications for both the agency and consumers.

The first case, AMG Cap. Mgmt., LLC v. Fed. Trade Comm’n, involves one of the largest payday lenders in the United States. In 2012, the FTC sued AMG Services, Inc. (AMG) under Section 13(b) for falsely claiming they would charge borrowers a loan amount plus a one-time finance fee. Instead, AMG piled undisclosed fees onto their loan and then illegally collected on loans by threatening borrowers with arrest and lawsuits. A Nevada district court granted summary judgment to the FTC, enjoined AMG from engaging in similar conduct in the future, and ordered AMG to pay $1.3 billion in equitable monetary relief. 910 F.3d at 422. On appeal, AMG argued that Section 13(b) did not permit an award of equitable monetary relief. Id. at 426. The Ninth Circuit disagreed with AMG, holding that Section 13(b) carries with it the right to grant “ancillary” relief, including restitution and other equitable monetary relief. Id. AMG appealed that decision to the Supreme Court.

The companion case, Fed. Trade Comm’n v. Credit Bureau Ctr., came to the Supreme Court through a contrasting Seventh Circuit decision. In 2017, the FTC sued Credit Bureau Center, LLC, and others for luring people to its website with bogus Craigslist rental ads. 325 F. Supp. 3d 852, 856 (N.D. Ill. 2018). When consumers responded to the ads, the defendants impersonated property owners, offering property tours to consumers if they first obtained free credit reports and scores from the defendants’ websites. Id. at 857. Instead of providing tours, the defendants signed consumers up for a credit-monitoring service with continuing $30 monthly charges. Id. An Illinois district court awarded the agency $5.2 million in restitution. Id. at 869-70. The Seventh Circuit reversed that decision, holding the FTC Act does not expressly allow the FTC to seek restitution. 937 F.3d 764, 775, 786 (7th Cir. 2019). The FTC appealed that decision to the Supreme Court.

Although the FTC normally depends on the U.S. Solicitor General to represent it at the Supreme Court, the Solicitor General decided not to represent the FTC in its petition. This signals that the Administration is at odds with the FTC.

WHAT’S AT STAKE

The Supreme Court’s decision in these cases will have a significant impact on the FTC’s continued ability to seek monetary relief to return money to consumers when they are victims of unfair, deceptive, or anticompetitive practices. The FTC’s restitution authority under Section 13(b) is arguably the agency’s most potent weapon in two battles of great concern to older adults—the fight against consumer fraud and the fight against rising prescription drug prices. As detailed in the FTC’s 2018 Protecting Older Consumers Report to Congress, the FTC has filed many Section 13(b) redress actions protecting older adults. For over three decades, the FTC has exercised its Section 13(b) authority to return millions of dollars to older adults. Id.

Older adults suffer disproportionately from fraud and deception. Applied Res. & Consulting LLC, Financial Fraud and Fraud Susceptibility in the United States: Research Report from a 2012 National Survey 11 (Sept. 2013). Each day, older adults confront countless advertising pitches falsely claiming that products and services can reverse aging, prevent age-related diseases, and provide retirement security. AARP and AARP Foundation have worked tirelessly to protect consumers from fraud through education, AARP’s national Fraud Watch Network Helpline, and other efforts. Still, vigorous law enforcement is crucial in this fight.

Likewise, older adults—especially those on low or moderate fixed incomes—experience difficulty paying for prescription drugs at a time when prices are rising at two or three times the rate of inflation. The high price of drugs forces many older adults to sacrifice their health and welfare by not filling their prescriptions, skipping doses, or cutting pills in half. Ashley Kirzinger et al., Data Note: Prescription Drugs and Older Adults, Kaiser Family Found. (Aug. 9, 2019). The FTC also uses its Section 13(b) authority to seek restitution from drug companies that violate the FTC Act.

Older adults simply cannot afford to have companies who break the law keep hundreds of millions of dollars in ill-gotten gains. The Supreme Court will decide if the FTC can continue to use its enforcement power to return money to older consumers harmed by fraud and unfair practices. Loss of this historically effective remedy will limit the FTC’s ability to remedy harm to older consumers.

Maame Gyamfi
mgyamfi@aarp.org