US Supreme Court puts a stop to FTC extracting big bucks from crooks to refund victims

Oops, watchdog doesn't actually have the power to do so, panel unanimously point out


The US government's consumer watchdog cannot force scammers to return the money they cheated out of their victims, the Supreme Court declared unanimously this week.

All nine justices on America’s highest court ruled [PDF] against the Federal Trade Commission on Thursday and, instead, sided with payday loan firm AMG Capital Management LLC.

The business's founder Scott Tucker was criminally convicted in 2017 of setting illegal interest rates to extract hundreds of millions of dollars from people.

Specifically, Tucker and his lawyer were convicted of racketeering, wire fraud, and money laundering after setting up chains of payday lending companies charging up to 1,000 per cent interest on loans. Tucker is serving a 16 year, eight month prison sentence, with his lawyer Tim Muir getting eight years. The FTC also went to court to extract at least $500m from the business and, in 2018, started sending the money to the crooks' victims as refund checks.

But AMG sued back, all the way to the highest court in the land to stop the pay back, and has now won. The Supremes said they were not convinced that the FTC had the power to extract payments for citizens and Congress would have to authorize that.

“In AMG Capital, the Supreme Court ruled in favor of scam artists and dishonest corporations, leaving average Americans to pay for illegal behavior,” the FTC’s Acting Chairwoman Rebecca Kelly Slaughter said in a statement. “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.”

The letter of the law

The regulator's position is that, under Section 13(b) of the Federal Trade Commission Act, if it had "reason to believe" that any party “is violating, or is about to violate” laws that the watchdog enforces, it could seek injunctive relief to end any unfair or deceptive trade practices and impose monetary penalties to “remedy past violations.”

However, the Supremes disagreed that this allows the FTC to extract, via the courts, refunds from scam artists. “The question presented is whether this statutory language authorizes the Commission to seek, and a court to award, equitable monetary relief such as restitution or disgorgement,” Justice Breyer declared. “We conclude that it does not.”

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The ruling effectively derails the FTC’s efforts to help victims get their money back. “Over the past four decades," Slaughter continued, "the Commission has relied on Section 13(b) of the Federal Trade Commission Act to secure billions of dollars in relief for consumers in a wide variety of cases, including telemarketing fraud, anticompetitive pharmaceutical practices, data security and privacy, scams that target seniors and veterans, and deceptive business practices, among many others.

“More recently, in the wake of the pandemic, the FTC has used Section 13(b) to take action against entities operating COVID-related scams. Section 13(b) enforcement cases have resulted in the return of billions of dollars to consumers targeted by a wide variety of illegal scams and anticompetitive practices, including $11.2 billion in refunds to consumers during just the past five years."

It should be noted that the FTC can still fight for civil penalties against wrongdoers, where the money goes to the US government. But the maximum amount it can receive in these instances is tiny compared to the millions it's used to getting as refunds for folks. Companies are more likely to get away with a slap on the wrist unless the Department of Justice steps in with criminal charges against swindlers.

The FTC said it will lobby to reform Section 13(b) to restore its previous powers, which it didn't really have in the first place; Slaughter is expected to testify before the consumer protection subcommittee of the House Committee on Energy and Commerce next week.

Meanwhile, you can find an analysis of the ruling here, published today by law professor Ronald Mann. ®


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