WASHINGTON (PAI) âOne of the shadiest parts of the business world, payday lenders, won a big victory in the United States Supreme Court. The same is true for the rest of the business class, as judges removed a federal agency’s power to impose punitive fines.
And with consumers losing out to predators in the judges’ 9-0 decision, Congress may have to step in to right the wrong, the US Public Interest Research Group (USPIRG) said.
This is because businesses, in general, could benefit from the April 22 legal decision in AMG Capital Management v FTC. It removes the agency’s power to arbitrarily impose heavy punitive fines on businesses that mislead or lie to consumers.
In the 18-page decision, Judge Stephen Breyer wrote that the Federal Trade Commission could still seek and obtain court orders prohibiting such lies.
But the FTC couldn’t fining companies for past practices at all, he said, unless it went through its long, drawn-out administrative process. The 107-year-old law establishing the agency says yes to injunctions, Breyer added. But that’s all.
As the USPIRG put it with conviction, âThis means the FTC cannot help consumers get their money back. “
Payday lenders have been known to lend money to the poor and the working class, often people of color who live paycheck to paycheck, advancing them money charged against those checks. Interest rates are reaching triple digits. The AMG rate was 30% per month.
“The language and structure of” Section 13 (b) of the FTC Governing Law, “taken as a whole, indicates that the words” permanent injunction “have a limited purpose – one that does not extend to the granting of monetary relief. These words are buried in a long provision that focuses on purely injunctive, non-monetary relief, âBreyer wrote.
However, consumers and the commission are not completely on the sidelines. If the FTC followed its administrative procedural methods, it could still seek and obtain “conditioned and limited monetary relief” from wandering businesses, Breyer said. He didn’t define the sentence.
The Ninth U.S. Court of Appeals had upheld a $ 1.27 billion FTC fine against payday lender AMG and its owner, Scott Tucker, who is now in jail for racketeering. The fine amounted to overpayments AMG forced consumers to fork out from 2008 to 2012.
Using an example from lower court rulings, Breyer wrote that AMG would typically charge $ 90 per month on a $ 300 loan. AMG would continue to roll it around by citing unintelligible and barely readable fine print in the loan agreement. The amount owed climbed to $ 975.
The only way the borrower could avoid escalation was to not only repay the $ 390 at the end of a month, but also to explicitly state the contract and its fine print, Breyer noted. Unsaid: Honest businesses let consumers off the hook when they have paid off their loans.
The “court’s decision was widely anticipated, but that doesn’t make it any less disappointing or dangerous for American consumers,” said Ed Mierzwinski, USPIRG senior director for federal consumer protection programs.
In response, Congress must act urgently to protect Americans by restoring the power of the FTC to recover money from unscrupulous businesses and individuals such as payday lender Scott Tucker, who has challenged the authority of the FTC in this matter. “
The court “prejudices the victims of its illegal schemes and leaves the door open for other bad actors to follow its example without fear of serious financial repercussions”.
The victims will not be able to get the money, Breyer wrote for the court. Neither does the FTC, acting on their behalf. But he added that Congress could restore the power of the FTC through legislation.
“Section 13 (b) does not explicitly authorize the commission to obtain court-ordered pecuniary relief, and such relief is precluded by the structure and history of the act,” reads a summary of the decision. . âSection 13 (b) provides that ‘the commission may seek … a permanent injunction.’ According to its terms, this provision concerns a prospective injunctive measure, and not a retrospective monetary measure.