Will Questions About FTC Enforcement Authority Shift Enforcement to CFPB?

In a decision that could have broad implications for the Federal Trade Commission’s (FTC) remedial authority, the 7th Circuit Court of Appeals recently overturned a $5 million restitution award to the FTC in a consumer deceptive practices case, ruling that an express grant of injunctive authority does not implicitly authorize an award of restitution. This decision in FTC v. Credit Bureau Center, LLC,¹ overturns a 30-year-old 7th Circuit precedent and goes against interpretations that other circuit courts have endorsed in the years since.

The FTC shares jurisdiction with the Consumer Financial Protection Bureau (“Bureau”) in limited but important areas. And while the Commission’s authority to impose restitution may be in doubt, the Bureau’s authority is clear.

The Bureau is expressly authorized to impose rescission or reformation of contracts, refunds, restitution, disgorgement, and damages.² This is in addition to the Bureau’s authority to impose civil money penalties.

7th Circuit Guts FTC’s Restitution Authority

The appeals court held that the FTC could not collect on the restitution a Chicago federal judge ordered a credit monitoring company and its owner to pay in an agency suit accusing the defendants of tricking customers into signing up for the company’s paid credit monitoring services.

The Commission sued the credit reporting company and its owner under section 13(b) of the Federal Trade Commission Act (FTCA), 15 U.S.C. § 53(b). Section 13(b) authorizes temporary restraining orders and permanent injunctions to enjoin violations of federal trade law.³

However, the FTC has read section 13(b) to implicitly authorize restitution, an interpretation that was endorsed by the 7th Circuit in FTC v. Amy Travel Service, Inc., 875 F.2d 564, 571 (7th Cir. 1989) and by other circuit courts in the years since. The agency has used this tool to recover hundreds of millions of dollars in cases alleging unfair or deceptive practices.

In rejecting the long-held interpretation of section 13(b), the 7th Circuit contended that the Supreme Court has disfavored finding implied remedies authority since Amy Travel. That jurisprudence requires courts to “consider whether an implied equitable remedy is compatible with a statute’s express remedial scheme.”⁴ Specifically, “courts cannot assume that a statute with ‘elaborate enforcement provisions,’” such as the remedial scheme in the FTCA, “implicitly authorizes other remedies.”⁵

Appeals Court Applies Meghrig v. KFC Western

The court relied heavily on the Supreme Court’s 1996 decision in Meghrig v. KFC Western.⁶ There, the Court refused to find restitution authority under the plain meaning of § 6972(a) in the Resource Conservation and Recovery Act of 1976 (RCRA).

The statute authorizes district courts “to restrain any person [responsible for toxic waste], to order such person to take such other action as may be necessary, or both.”⁷ Neither award, per the court, contemplated the award of past cleanup costs as damages or restitution.⁸

In addition, the Meghrig court compared the relief granted in the RCRA with the analogous, but not parallel, provisions of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA). CERCLA was passed several years after RCRA went into effect and was designed to address many of the same toxic waste problems that inspired the passage of RCRA.

Meghrig Ruling Holds Congress Deliberately Legislated Restitution Under RCRA

Unlike RCRA, CERCLA expressly permits the recovery of “all costs of removal or remedial action”⁹ and it expressly permits the recovery of any “necessary costs of response, incurred by any … person consistent with the national contingency plan.”¹⁰ The Meghrig court pointed to CERCLA as evidence that Congress “knew how to provide for the recovery of cleanup costs” and that by failing to provide a restitution remedy in RCRA, Congress did so deliberately.¹¹

In its decision, the 7th Circuit found that “[e]very one of Meghrig’s reasons for refusing to find restitutionary authority in the RCRA applies with equal force to section 13(b).” First, like the RCRA, the court found that section 13(b)’s plain text does not contemplate an award of restitution.¹²

Similarly to the comparison of CERCLA to RCRA by the Meghrig court, the 7th Circuit looked to the overall remedial structure of the statute, finding that the relationship between section 13(b), § 45(l) and § 57b(b) was “telling.”¹³ While both § 45(l) and § 57b(b) expressly authorize additional equitable remedies, section 13(b) lacks comparable language.

Pursuant to § 45(l), when a person violates a final cease and desist order, the district courts are empowered to “grant mandatory injunctions and such other and further equitable relief as they deem appropriate” (emphasis added). When someone engages in conduct prohibited by a rule, § 57b(b) of the FTCA authorizes “such relief as the court finds necessary …, [including] the refund of money or return of property” (emphasis added).

Congress acted “intentionally and purposefully in the disparate inclusion or exclusion” of expanded equitable relief in sections of FTCA other than section 13(b).¹⁴

A Shift to the CFPB?

Even before the Credit Bureau decision, the CFPB possessed enforcement tools that the Commission did not. In particular, the CFPB is authorized to impose civil money penalties of up to $1,000,000 “for each day during which such violation continues” (annually adjusted for inflation).¹⁵

This authority, and the threat of using it, provides the Bureau with significant leverage in negotiating resolutions for alleged violations of consumer financial laws. Civil money penalties may also provide an effective deterrent.

Where the Commission and Bureau share enforcement authority – particularly with debt collection and data privacy issues – they have coordinated their efforts.¹⁶ Bureau Director Kathy Kraninger has publicly stated that coordination with other state agencies is a priority.¹⁷

The recent Equifax settlement offers an example of Commission-Bureau coordination. There, the Bureau—not the Commission—imposed a $100 million civil money penalty following a coordinated investigation with the Commission and attorneys general from across the country.¹⁸

In a joint press conference announcing the settlement, Commission Chairman Joseph Simons reportedly renewed his call on Congress to pass federal data security legislation that would give the Commission civil penalty authority, stating that “[t]he CFPB and the states were able to obtain civil penalties for this breach. The FTC could not because we do not have civil penalty authority.”¹⁹

We are continuing to monitor developments following this decision and will provide updates on an ongoing basis.

FOOTNOTES

1 Federal Trade Commission v. Credit Bureau Center, LLC, 2019 WL 3940917 (7th Cir. 2019).
2 12 U.S.C. § 5565.
3 15 U.S.C. § 53(b)(1).
4 Credit Bureau Center, supra note 1, at *1.
5 Id. at *1 (quoting Meghrig v. KFC W., Inc., 516 U.S. 479, 487 (1996)).
6 Meghrig v. KFC W., Inc., 516 U.S. 479 (1996). 
7 § 6972(a) (emphasis added).
8 Meghrig, supra note 6, at 479.
9 42 U.S.C. § 9607(a)(4)(A).
10 42 U.S.C. § 9607(a)(4)(B).
11 Meghrig, supra note 6, at 485.
12 Credit Bureau, supra note 1 at *16.
13 Id.
14 Credit Bureau, supra note 1 at *7.
15 12 U.S.C. § 5565(c).
16 Consumer Financial Protection Bureau and Federal Trade Commission, Memorandum of Understanding Between the Consumer Financial Protection Bureau and the Federal Trade Commission (February 25, 2019), available at https://www.ftc.gov/system/files/documents/cooperation_agreements/ftc-cfpb_mou_225_0.pdf.
17 See Kathleen L. Kraninger, Director, Consumer Financial Protection Bureau, Speech at the Bipartisan Policy Center (Apr. 17, 2019), available at https://www.consumerfinance.gov/about-us/newsroom/kathleen-kraninger-director-consumer-financial-protection-bureau-bipartisan-policy-center-speech/.
18 Consumer Financial Protection Bureau, CFPB, FTC and States Announce Settlement with Equifax Over 2017 Data Breach (July 22, 2019), available at https://www.consumerfinance.gov/about-us/newsroom/cfpb-ftc-states-announce-settlement-with-equifax-over-2017-data-breach/.
19 Jedidiah Bracy, Equifax to Pay $575M to Settle with FTC, CFPB, US States for 2017 Breach, INTERNATIONAL ASSOCIATION OF PRIVACY PROFESSIONALS (July 22, 2019), available at https://iapp.org/news/a/equifax-to-pay-575m-to-settle-with-ftc-cfpb-us-states-for-2017-breach/.