The US Supreme Court slashed the Federal Trade Commission’s power to seek monetary awards in court, throwing out a legal tool the consumer-protection agency has used to collect billions of dollars over the past decade.
The justices on Thursday unanimously said the FTC can’t seek consumer redress when it invokes a provision that lets the agency go straight to federal court to try to stop an alleged fraud. The ruling is a triumph for business trade groups, which had urged the court to curb the agency’s powers.
The FTC in 2012 dramatically ramped up its use of the decades-old provision to recoup money for consumers. The agency reported winning so-called restitution and disgorgement of almost $12 billion in 2016 alone, including $10 billion in a settlement with Volkswagen stemming from its diesel-emissions scandal.
“With this ruling, the court has deprived the FTC of the strongest tool we had to help consumers when they need it most,” FTC Acting Chairwoman Rebecca Kelly Slaughter said. “We urge Congress to act swiftly to restore and strengthen the powers of the agency so we can make wronged consumers whole.”
Writing for the Supreme Court, Justice Stephen Breyer said Congress didn’t authorize efforts to recoup money in 1973 when it amended the Federal Trade Commission Act to let the agency seek a court-ordered “permanent injunction.”
Breyer said the text and structure of the added provision “taken as a whole, indicate that the words ‘permanent injunction’ have a limited purpose — a purpose that does not extend to the grant of monetary relief.”
Breyer said the FTC retains other avenues to get restitution for consumers, though those tools involve a more complicated process. “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,” Breyer wrote.
The ruling could help LendingClub Corp., which is fighting FTC allegations it misled consumers with hidden fees and charged borrowers even when they paid off loans. The FTC has been seeking to recoup more than $1 billion for customers, according to Elliott Stein, senior litigation analyst at Bloomberg Intelligence.
The ruling comes as the FTC and Justice Department increase antitrust enforcement against top technology companies. The FTC and a group of states sued Facebook in December, seeking to break up the company by unwinding its acquisitions of Instagram and WhatsApp. The FTC suit doesn’t seek monetary redress for consumers.
The FTC says consumers get the vast majority of the money it recoups. From 2016 to 2020, the commission returned $1.1 billion directly to people, and another $10 billion went to consumers from other agencies or directly from defendants, the FTC said in court papers.Over the same time period, the agency sent about $22 million to the Treasury, mostly because the per-person payments were too small to justify the processing costs or because victims could not be located, the FTC said.
The Supreme Court case involved Scott Tucker, a former race-car driver convicted of running a fraudulent payday-lending empire. The FTC sued, and a judge ordered Tucker and his companies to repay $1.3 billion to defrauded consumers. Tucker’s case was featured on the Netflix series “Dirty Money.”
Slaughter urged senators at a hearing Tuesday to restore the agency’s power to recoup money for consumers in the event the Supreme Court ruled against the commission. Otherwise, she said, enforcement actions will slow down and redress for consumers “will dry up.”
Senator Maria Cantwell of Washington, a Democrat who chairs the Senate Commerce Committee, said Thursday she is working on legislation to restore the agency’s power to get monetary rewards.
“Protecting consumers and compensating them for harm is a paramount duty of the FTC,” said Cantwell, whose panel oversees the FTC.