On July 20, the U.S. House of Representatives passed the Consumer Protection and Recovery Act (H.R. 2668). Authored by Representative Tony Cárdenas (D-CA), the Act is intended to restore the Federal Trade Commission’s section 13(b) consumer protection enforcement powers and would authorize the FTC to seek permanent injunctions and other equitable relief, including restitution and disgorgement.
In a joint statement issued after the vote, House Energy and Commerce Committee Chair and Consumer Protection and Commerce Subcommittee Chair stated that “[t]oday the House took decisive action to restore the FTC’s authority to help return money to consumers and businesses that have been defrauded by scammers. Congressional action is necessary following the Supreme Court’s April ruling that undermined the agency’s longstanding consumer protection powers. The Consumer Protection and Recovery Act will restore the FTC’s ability to force scammers that have broken the law to repay those who have been harmed or defrauded. It’s now time for the Senate to act so that we can restore this critical FTC authority that has protected consumers for more than 40 years.”
The bill would add a new subsection (e) to section 13 of the FTC Act that specifies types of equitable relief the FTC may pursue: restitution for losses, contract reformation and recission, money refunds, and the return of property. The new subsection (e) also provides the FTC disgorgement authority to seek court orders requiring bad actors repay unjust gains acquired in violation of law. The bill would also provide that and FTC attorney may seek temporary restraining orders and preliminary injunctions without bond and that any relief sought under section 13(b) may be for past violations in addition to ongoing and imminent violations.
The bill was quickly pushed through committee and the House just three months after the Supreme Court ruled in AMG Capital Management, LLC v. FTC that the Federal Trade Commission did not have the authority to pursue monetary penalties under Section 13(b).
To date, House Energy and Commerce Committee Republicans have expressed concern over their belief that the proposed legislation is facially overbroad and requires statutory “guardrails,” including a short statute of limitations and a limitation to blatant fraud. Interestingly, House Republicans argue that any 13(b) fix should be part of the development and implementation of a national privacy framework.
On July 19,2021, the White House issued a supporting statement. “The Administration supports House passage of H.R. 2668, the Consumer Protection and Recovery Act. This legislation would expressly authorize the Federal Trade Commission (FTC) to seek permanent injunctions and pursue equitable relief for all violations of law enforced by the Commission. One core mandate of the FTC is to protect consumers from fraud and deception in the marketplace. Accordingly, H.R. 2668 would clarify the Commission’s range of tools to provide relief to consumers and put a stop to unlawful business practices. The legislation amends the Federal Trade Commission Act to provide FTC lawyers with explicit authority to require bad actors to return money earned through illegal activity and to seek both injunctive and monetary relief for consumers in Federal courts. The Administration applauds this step to expressly authorize the FTC to seek permanent injunctions and pursue equitable relief for all violations of law enforced by the Commission and ensure that the cost of illegal practices falls on bad actors, not consumers targeted by illegal scams.”
Richard B. Newman is an FTC defense lawyer at Hinch Newman LLP.
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