By Lawrence Hurley
WASHINGTON (Reuters) – U.S. Supreme Court justices on Wednesday expressed concern in a case involving a leading payday lender that the Federal Trade Commission has overstepped its authority by seeking ill-gotten gains from companies who engaged in deceptive practices.
Judges have heard arguments in a dispute involving businessman and racing driver Scott Tucker, who is serving jail time for crimes related to the same underlying behavior at issue in court.
Tucker’s attorneys said the FTC lacks the power to seek restitution under a section of a statute called the Federal Trade Commission Act that allows the agency to prosecute violators and allows judges to issue permanent injunctions. The legal question is whether judges have the power under this provision to order defendants to return money that consumers have handed over.
Conservative and Liberal judges questioned whether the FTC was using the correct provision of the law to seek ill-gotten gains, noting that there is another section of the law that could allow the agency to seek refunds, although ‘it can be more difficult to be successful. .
Conservative judges skeptical of the power of independent federal agencies have expressed similar concerns about the FTC’s use of its enforcement power.
“With good intentions, the agency pushes boundaries and stretches statutory language to do good or prevent evil. The problem is, it translates into a transfer of power from Congress to the executive over whether to exercise that authority, ”said Conservative Judge Brett Kavanaugh.
Liberal Judge Elena Kagan noted that the FTC’s use of the provision in question appeared to be based on expediency.
“It’s clearly better from the agency’s point of view,” Kagan said.
Tucker and his company, AMG Capital Management, are appealing a decision by the San Francisco-based 9th U.S. Court of Appeals that approved the FTC’s power to recapture $ 1.27 billion in earnings ill-gotten.
AMG offers consumers short-term, high-interest online payday loans that renew automatically. He was sued by the FTC in 2012 for inadequate information on loan terms. AMG agreed to end the practices the FTC had opposed, but was reluctant to return the money.
If the court chooses not to restrict the agency’s authority, it would be because, until recently, the courts have sided with the FTC on the issue since the provision was enacted in 1973.
“My question is, again, it’s close and the lower courts have been uniform for 50 years. We cannot reverse everything that has been decided, ”said Liberal Judge Stephen Breyer.
The FTC and its supporters have said that a ruling in Tucker’s favor will significantly reduce his ability to undo the financial damage caused by fraudsters.
Tucker in 2018 was sentenced to 16 years and eight months in prison after being convicted of breaking federal loan and racketeering laws.
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.
The Supreme Court ruling will affect another case the justices have agreed to hear in which the FTC is seeking $ 5.2 million in ill-gotten gains from another company, the Credit Bureau Center.
The Supreme Court’s review of legal disputes comes at a time when the United States is inundated with scams, with some taking advantage of fears about the spread of the coronavirus to deceive unsuspecting consumers. Automated calls are flooding landlines touting fake medical devices and other deceptive offers. Since they often come from overseas, law enforcement in the United States has a hard time dealing with crooks.