A federal judge in Chicago has given some power back to a consumer protection agency brought down by a Supreme Court ruling last spring that weakened its ability to secure refunds for consumers.
The ruling last week by U.S. District Judge Matthew F. Kennelly has rekindled hopes that the Federal Trade Commission could, after years, finally claim $ 5.2 million in refunds for consumers who have been stricken by unexpected credit monitoring charges by a company called Credit Bureau Center LLC.
In the program, which ran from 2014 to 2017, consumers who responded to online ads for discounted apartments in red light areas, such as Logan Square and downtown Evanston, were tricked into clicking a link for a “free credit score” before being able to visit properties, according to the original FTC case.
After clicking on the link, they were hit with a recurring credit monitoring fee of $ 29.94 per month, which was disclosed in the fine print not noticed by many applicants, according to the FTC.
The agency estimates that the Credit Bureau Center – which did business under the name MyScore, eFreeScore, and other names as well – cashed in millions of dollars before it closed.
An attorney representing the Credit Bureau Center has said he will appeal Kennelly’s decision, which he says gives the green light to the federal agency’s “administrative overrun”.
The program was closed in 2017. The following year, Kennelly ordered the company and website owner Michael Brown to pay $ 5.2 million in restitution.
It would have been a fairly ordinary FTC case – until the company fought back.
Brown’s attorney argued that part of the 1973 law governing the agency – “Section 13 (b)” – does not explicitly give the FTC the power to obtain restitution for consumers by using court injunctions.
In 2019, a Chicago-based Seventh Circuit U.S. Court of Appeals judge agreed.
This decision upset three decades of precedent. For years, the FTC has used the law to obtain injunctions against common scams such as illegal robocalls, bogus tech support, and bogus debt collections. Over the past five years, the agency has obtained $ 11.2 billion in reimbursement for illegal and anti-competitive business practices by obtaining court injunctions against the companies.
In April, however, the Supreme Court dealt the FTC a heavy blow in a ruling in a similar case. He ruled 9-0 in the case, which involved AMG Capital Management, a high-interest short-term loan company that had been sued by the FTC for deceptive practices.
The agency had won $ 1.27 billion in restitution for consumers, but AMG successfully argued in the Supreme Court that the FTC could not use 13 (b) to impose refunds.
Now, Kennelly’s decision is putting some bite back into the federal consumer watchdog.
Rejecting the Credit Bureau Center’s arguments, Kennelly ruled that the FTC could instead use a 2010 law called the Restore Online Shoppers’ Confidence Act – ROSCA, for short – to recover money for apartment hunters who have been affected by unwanted credit monitoring fees. .
This law prohibits post-transaction third-party sellers from billing a person’s account unless all terms have been disclosed and the consumer has given express consent to the charges. It is intended to prevent people from accidentally signing up for an unwanted recurring offer while shopping online.
“This is very good news and we are very grateful for the court order,” said Todd Kossow, director of the FTC’s Midwest region. “This means that we can keep the money we have collected so far from the defendants and return it to the victims of their scheme.”
Kossow said the FTC previously raised around $ 1.1 million from the Credit Bureau Center and Brown, and once they get the rest of the money, they will return it to consumers. People fooled by the scheme will not need to ask for a refund. But with the planned call, it might take a while.
Stephen Cochell, the Houston attorney representing the Credit Bureau Center, says it’s unfair for the FTC to change strategy and try to recover funds under a different law, after the Supreme Court ruled that the agency was using powers it did not explicitly have.
“This rule protects many innocent people from administrative excesses,” Cochell said.
The FTC is urging Congress to pass legislation to provide a more permanent solution.
In July, the US House passed a bill stating that the FTC can seek monetary relief in federal court “from businesses that engage in illegal business practices such as false advertising, consumer fraud. and anti-competitive behavior ”.