Circuit Split Casts Doubt on FTCA Enforcement

A three-judge panel on the Seventh Circuit Court of Appeals ruled that the Federal Trade Commission (FTC) could not collect restitution from a company that violated Section 13(b) of the Federal Trade Commission Act (FTCA) because that provision does not permit the FTC to collect monetary relief like restitution. 

The case centers on the FTC alleging that Credit Bureau Center and its owner Michael Brown violated Section 13(b) of the FTCA by using deceptive means to get consumers to pay for credit-monitoring services. The FTC sought a permanent injunction and ordered Mr. Brown to pay $5 million in restitution. 

The Seventh Circuit ruled that Section 13(b) allows the FTC to seek a permanent injunction, but does not allow for restitution. The text of the law reads, “That in proper cases the Commission may seek, and after proper proof, the court may issue, a permanent injunction.”

This court decision overturned decades of Seventh Circuit precedent and disagrees with many decisions issued by courts in other circuits. In fact, the Seventh Circuit ruled in 1989 that Section 13(b) carries an implied authority “to order any ancillary equitable relief necessary to effectuate the exercise of the granted powers.” This 1989 ruling confirmed that the FTC could seek monetary relief for violations of this provision.

In the Seventh Circuit, the FTC can still seek monetary relief by using Section 19 of FTCA, but it requires administrative adjudication, which can be more cumbersome than using Section 13(b).

Legal experts have stated that the Seventh Circuit decision is crucial for financial service firms. “This is a very big deal,” said M. Sean Royall, Partner at Gibson Dunn & Crutcher LLP. “There could be significant consequences for the FTC if this goes up to the Supreme Court.”