The Seventh Circuit Court of Appeals has overturned a ruling from a lower court that fined the owner of a credit monitoring service $5 million for engaging in deceptive acts after it was sued by the Federal Trade Commission, in what is considered to be a stunning rebuke of a federal agency’s authority.
A copy of the ruling in the case of Federal Trade Commission v. Credit Bureau Center, LLC, and Michael Brown, can be accessed by clicking here.
The FTC sued the defendants for violating Section 13(b) of the Federal Trade Commission Act, accusing the defendants of violating consumer protection statutes and engaging in deceptive acts. The defendants allegedly marketed free credit reports and scores while simultaneously enrolling individuals in a monthly credit monitoring service. The individuals were notified of their enrollment via a letter that was sent after the enrollment had already taken place.
A District Court judge granted summary judgment for the FTC and ordered the defendants to pay $5.3 million in restitution. The defendants appealed the decision.
The defendant argued that Section 13(b) of the FTC Act does not authorize an award of restitution. While 13(b) allows for a permanent injunction against an individual or organization, it does not explicitly allow for restitution. The FTC argued the section implicitly authorizes it, which the Appeals Court decided “doesn’t sit comfortably with the text of Section 13(b).”
The FTC also pointed to another case in the Seventh Circuit — FTC v. Amy Travel Service — which went the FTC’s way in a similar case, but the Seventh Circuit — in a lengthy explanation — admits that a Supreme Court ruling has caused it to revisit its stance.
“In short, nothing in the text or structure of the FTCA supports an implied right to restitution in section 13(b), which by its terms authorizes only injunctions,” the Appeals Court wrote.
