Supreme Court: FTC can’t use court injunctions to get refunds for wronged consumers

The U.S. Supreme Court has dealt a major blow to one of the federal government’s consumer watchdogs, taking away much of the Federal Trade Commission’s power to get money back for consumers who have been defrauded.

In a 9-0 ruling Thursday, the nation’s high court sided with AMG Capital Management, a high-interest, short-term loan company, in its case against the FTC.

The federal agency had successfully sued AMG for deceptive practices and won $1.27 billion in restitution for consumers.

AMG filed suit, arguing that the 1973 law governing the FTC didn’t explicitly spell out that the agency has the authority to mandate refunds.

That was even though the FTC has, for decades, used the courts to force companies that defraud consumers to pay them back. The agency has used that tool to go after illegal robocallers, phony tech-support companies and fake debt collectors, among other perennial troublemakers. Over the past five years, it has gotten $11.2 billion in refunds for illegal and anti-competitive business practices.

Rebecca Kelly Slaughter, the FTC’s acting chairwoman, said that “the Supreme Court ruled in favor of scam artists and dishonest corporations, leaving average Americans to pay for illegal behavior.”

Slaughter called on Congress to pass legislation giving the watchdog agency more teeth to protect consumers.

U.S. Rep. Jan Schakowsky, D-Illinois, who chairs the House subcommittee on consumer protection, plans to hold a hearing Tuesday on the matter.

The AMG case was similar to an Illinois case involving Credit Bureau Center. In that case, apartment hunters in Chicago and elsewhere complained of surprise credit-monitoring fees.

The FTC obtained a judge’s order forcing the business to repay $5.2 million. But the Seventh U.S. Circuit Court of Appeals in Chicago later sided with the credit-monitoring company, ruling against the FTC, saying it didn’t have the authority to use a court injunction to recover money — not even for deserving victims.

The appeals court said the agency first must get a cease-and-desist order, and then it could sue the company if it violated that order, adding another required step.