The Supreme Court weakens a key consumer protector – Greeley Tribune
The Federal Trade Commission, the main consumer guardian against unfair and misleading businesses, already has too few teeth when it comes to enforcing the law. On Thursday, a unanimous Supreme Court tore another molar tooth.
Following the court's decision to weaken federal law against pesky robocalls, the ruling could lead you to believe that the current court is virulent against the consumer. But that's not the problem; The fact is that Congress leaves too many gaps for regulators to fill. The court identifies issues that lawmakers can easily fix - or rather that it could fix if it were functional.
Judge Stephen Breyer's ruling on Thursday related to the case against the FTC owned by AMG Capital Management, an online payday loan company that successfully brought the commission to court in 2012.
Like the typical payday lender, AMG had borrowers sign contracts that enabled the company to automatically withdraw funds from their bank accounts when the loans were due in a matter of weeks. However, according to the decision, those contracts contained harmful fine print: unless the borrower jumped through a series of hoops to instruct AMG not to renew a loan, it would not be repaid in full when due - even if that was the borrower's intent - instead Financing costs continue to increase for months and eventually triple the borrower's debt.
Keep in mind that these borrowers are usually low-income or bad credit people so they have not been able to get credit cards, bank loans, or other lower-interest solutions. From 2008 to 2012, when the US economy bottomed and then recovered slowly, AMG issued more than 5 million of these loans. Payday loans can be a debt trap even if they are honestly carried out. AMG's behavior was even more predatory.
It just means that the complainant is not at all compassionate in this case. Perhaps it is understandable why the commission went to court not only to stop the loans but also to try to get some of the borrowers' money back. A federal district court in Nevada joined the FTC in asking the company to pay the $ 1.27 billion commission to reimburse AMG borrowers. The 9th Instance Court of Appeals upheld the verdict and opened the case for the Supreme Court.
The problem, the judges said, is that the law does not give the commission the power to do what it did. In particular, the court ruled that if the FTC wants to ask for fines, it cannot go directly to court to obtain them. Instead, it must seek an injunction from an administrative judge, then go to court and prove that “a reasonable man would have known, given the circumstances, that the conduct in question was“ dishonest or fraudulent ”- for example, by showing that the loans were issued were issued following an injunction. The law also allows the commission to fall back only three years to remediate violations.
Prior to Thursday's ruling, a number of lower courts had confirmed the FTC's practice of imposing interim injunctions and fines in court, resulting in billions in reimbursements for defrauded Americans.
The Commission, consumer advocates, and attorneys general had urged the court to continue this practice, arguing that it would be difficult to stop companies from demolishing consumers when the penalty was an injunction allowing the misleading operator to keep the money.
However, that is not the reputation of the judges. Legislators gave the FTC a full overview of US business practices, but were more reluctant when it came to the FTC being able to do something about the problems it identified. Not only is the process of reclaiming the proceeds of fraudulent practices cumbersome and hindered, but the Commission has no power to make rules, and it cannot impose real fines on lawbreakers until their second offense, that is, until they break an order In response to the first time, they broke the law.
As with the Robocall decision (which narrowed the reach of the Federal Communications Commission), the AMG case tells an independent agency that it cannot fill the political loopholes left by Congress. It has been a long time since Congress gave the FTC real authority to prevent unfair and misleading corporate practices, and Thursday's decision proved that.
- Jon Healey is the assistant editorial page editor for the Los Angeles Times
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