US Supreme Court restricts FTC’s power to recoup ill-gotten gains

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WASHINGTON, April 22 (Reuters) – The United States Supreme Court on Thursday made it more difficult for the Federal Trade Commission to force crooks and companies that engage in deceptive business practices to return ill-gotten gains among consumers, ruling in favor of a criminally convicted payday lender who challenged the agency.

The 9-0 decision, drafted by Liberal Judge Stephen Breyer, prompted Democrats in both houses of the US Congress to pledge to pursue legislation to restore the FTC’s powers to seek monetary remedies in courts on behalf of consumers.

The Supreme Court “ruled in favor of crooks and dishonest corporations, letting average Americans pay for illegal behavior,” said Acting FTC President Rebecca Kelly Slaughter. “With this ruling, the court robbed the FTC of the most powerful tool we have to help consumers when they need it most.”

The decision was a victory for businessman and racing driver Scott Tucker, who was convicted in 2017 of racketeering, wire fraud and money laundering. The business practices of Tucker and his company, AMG Capital Management, targeting low-income borrowers led to the largest court-ordered settlement in FTC history, totaling $ 1.27 billion.

The judges found that the agency had overstepped its authority in its practice of seeking court orders to compel fraudsters to return money improperly obtained from consumers in the form of restitution or restitution. Business groups have complained that the FTC has aggressively extracted billions of dollars in monetary rewards from businesses in recent years.

The ruling limits the agency’s power to seek redress under a section of a US law called the Federal Trade Commission Act that allows it to prosecute violators and authorizes judges to issue permanent injunctions. The judges ruled that the provision does not give judges the power to order defendants to return money to consumers.

The FTC said it has used the so-called 13 (b) authority to return $ 11.2 billion to consumers over the past five years.

Now the FTC will have to use other, longer and more complicated legal avenues to obtain restitution for consumers, unless Congress acts. Last year, FTC commissioners called on Congress to pass legislation specifically allowing the agency to demand restitution.

“Protecting consumers and compensating them for damages is a primary duty of the FTC,” said Democratic Senator Maria Cantwell, who chairs the Senate Commerce Committee. “We are working to pass legislation immediately to ensure that this authority is properly protected.”

“This decision is a blow to the FTC,” added Democratic Senator Ed Markey.

Breyer wrote in the ruling that if the agency feels other processes are “too cumbersome or inadequate, it is of course free to ask Congress to grant it additional remedial power.”

Tucker and his company appealed a decision by the San Francisco-based 9th U.S. Court of Appeals that approved the agency’s power to recoup ill-gotten gains.

Payday loans involve lending a relatively small amount of money at high interest rates, sometimes to be repaid when the borrower receives their next paycheck. Payday loans have been linked to an increase in defaults and personal bankruptcies.

The Justice Department said Tucker operated a nationwide internet payday loan business that systematically evaded state laws for more than 15 years to charge illegal interest rates of up to 1,000 percent on ready. Tucker in 2018 was sentenced to 16 years and eight months in prison.

After several states sued for the loan, prosecutors said, Tucker formed bogus relationships with Native American tribes. By claiming his businesses were tribal-owned, prosecutors said, Tucker was able to protect businesses from lawsuits using tribal sovereign immunity.

Reporting by Lawrence Hurley; Editing by Will Dunham

Our Standards: Thomson Reuters Trust Principles.

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