Supreme Court To Hear Arguments in FTC Case Over Allowance of Fines in Consumer Protection Suits

The Supreme Court has agreed to hear arguments in a case that will determine whether the Federal Trade Commission is allowed to seek monetary restitution from individuals and companies accused of violating consumer protection laws.

The case of Federal Trade Commission v. Credit Bureau Center will be heard and ruled on during the Supreme Court’s next term, which begins in October. A date for when arguments will be held has not yet been set.

Under Section 13(b) of the FTC Act, the agency is empowered to file suit against violators of consumer protection laws in federal court and those courts are authorized to issue permanent injunctions. Seven courts of appeal have ruled that this includes the right for the court to demand the violator return the amount that was taken to those who were victimized, while one court of appeal has ruled that the FTC can not do that. The question thus put to the Supreme Court is: Whether Section 13(b) authorizes district courts to enter an injunction that orders the return of unlawfully obtained funds.

The case is actually an aggregation of four separate lawsuits, which have been combined into one. The case that this now the primary case involves the FTC suing the defendants for violating Section 13(b) of the Federal Trade Commission Act, accusing the defendants of violating consumer protection statutes and engaging in deceptive acts. The defendants allegedly marketed free credit reports and scores while simultaneously enrolling individuals in a monthly credit monitoring service. The individuals were notified of their enrollment via a letter that was sent after the enrollment had already taken place.

A District Court judge granted summary judgment for the FTC and ordered the defendants to pay $5.3 million in restitution. The ruling was ultimately overturned by the Seventh Circuit Court of Appeals.

One of the four cases being consolidated involves noted payday lending tycoon Scott Tucker, who was fined $1.3 billion by the FTC and sentenced to 17 years in prison in separate actions. Tucker was charged with illegally accessing the bank accounts of individuals and withdrawing interest payments on payday loans, but not taking out any money to pay down the principal. He was also charged with filing a false tax return.

The case is similar to one that the Supreme Court ruled on earlier this year when it limited the monetary fines that the Securities and Exchange Commission could levy against individuals and companies it accused of violating stock trading laws.

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