By Lawrence Hurley
WASHINGTON (Reuters) -The U.S. Supreme Court on Thursday made it more difficult for the Federal Trade Commission to force scam artists and companies that engage in deceptive business practices to return ill-gotten gains obtained from consumers, ruling in favor of a criminally convicted payday lender who challenged the agency.
The 9-0 ruling, authored by liberal Justice Stephen Breyer, handed a victory to businessman and racecar driver Scott Tucker, who is serving a prison sentence after being convicted in 2017 on racketeering, wire fraud and money laundering charges – the same conduct at issue in the Supreme Court case.
The justices found that the agency overstepped its authority in its practice of seeking court orders to make fraudsters return money improperly obtained from consumers in the form of restitution or disgorgement.
The ruling limits the agency’s authority to seek restitution under one section of a U.S. law called the Federal Trade Commission Act that lets it sue lawbreakers and authorizes judges to issue permanent injunctions. The justices ruled that judges do not have the authority under that provision to order defendants to return money to consumers.
The decision means the FTC will have to use other lengthier and more complicated legal avenues to obtain restitution for consumers or ask Congress to amend the law.
Breyer wrote in the ruling that if the agency believes these other processes are “too cumbersome or otherwise inadequate, it is, of course, free to ask Congress to grant it further remedial authority.”
The business practices of Tucker and his company, AMG Capital Management, targeting low-income borrowers led to the largest court-ordered settlement in the FTC’s history, totaling $1.27 billion. Tucker and his company appealed a ruling by the San Francisco-based 9th U.S. Circuit Court of Appeals that endorsed the agency’s authority to recoup the money.
Payday loans involve the lending of a relatively small amounts of money at high interest rates, sometimes to be repaid when the borrower gets their next paycheck. Payday loans have been linked to increases in defaults and personal bankruptcies.
Tucker in 2018 was sentenced to 16 years and eight months in prison after being found guilty of violating federal lending and racketeering laws.
(Reporting by Lawrence Hurley; Editing by Will Dunham)
