What is H.R. 2668?
(Updated February 15, 2022)
This bill would amend section 139(b) of the Federal Trade Commission (FTC) Act to give the FTC the ability to obtain both injective and monetary equitable relief for all violations of consumer protection laws that the agency enforces. It would also clarify that under section 13(b), the FTC may seek temporary restraining orders and preliminary injunctions without bond, and that any relief sought under section 13(b) may be for past violations as well as ongoing and imminent violations.
Argument in favor
The Federal Trade Commission (FTC) is the most important U.S. government agency tasked with protecting consumers from frauds and scams. As part of its work, the agency should have the power to recover and return money that everyday Americans lose to illegal schemes. Recent court rulings denying the FTC’s previously-established authority to recover profits of illegal schemes under section 13(b) of the FTC Act have imperiled this part of the FTC’s mission, and Congress should pass this legislation to restore the FTC’s authority on this critical issue.
The Supreme Court’s ruling on the issue of the FTC’s authority to recover ill-gotten gains from illegal schemes under section 13(b) was unambiguous: this part of the FTC Act does not give the agency the power to exact monetary restitution for frauds and scams. However, as the Court is clear that other parts of the FTC Act do allow the FTC to seek restitution under, it is unnecessary for Congress to restore the FTC’s specific authority to recover illegally obtained profits under section 13(b). Alternatively, this bill as written has insufficient guardrails against due process violations and risks over-empowering the FTC.
Consumer protection; victims of scams and frauds; scammers and fraudsters; restitution to victims of scams and frauds; the Federal Trade Commission (FTC); and the FTC Act.
Cost of H.R. 2668
A CBO cost estimate is unavailable.
In-Depth: Sponsoring Rep. Tony Cárdenas (D-CA), who is Vice Chair of the House Energy and Commerce Subcommittee on Consumer Protection and Commerce, introduced this bill to cement the Federal Trade Commission’s ability to retrieve money for victims of fraud and scams:
“The COVID-19 pandemic has given rise to an increase of scams and fraud that prey on consumers’ fears and financial insecurities. The FTC’s ability to return money taken from Americans through scams or fraud is under attack in the courts. Inaction is not an option and will only embolden these bad actors. That is why I am proud to introduce the Consumer Protection and Recovery Act along with my colleagues from the Consumer Protection and Commerce Subcommittee to restore and protect the FTC’s authority to put money back in the pockets of hard-working Americans.”
In announcing this bill’s markup by the Energy and Commerce Committee’s Consumer Protection and Commerce Subcommittee on May 27, 2021, Energy and Commerce Committee Chairman Frank Pallone (D-NJ) and Consumer Protection and Commerce Subcommittee Chair Jan Schakowsky released a joint statement noting the need for this legislation after an April 2021 Supreme Court ruling holding that the FTC could no longer use its enforcement authority to get money back from fraudsters and scammers:
“Last month, the Supreme Court ruled that the FTC may no longer use its authority to get Americans their money back from fraudsters and scammers. This decision undermined a key tool in the FTC’s toolbox, which it used for more than four decades to carry out its mission to protect consumers. In the days before the Supreme Court issued its ruling, Subcommittee Vice Chair Cárdenas introduced the Consumer Protection and Recovery Act to affirm the FTC’s authorities, which was cosponsored by every Democratic member of the Consumer Protection and Commerce Subcommittee. On Thursday, we look forward to marking up this critical legislation to restore the FTC’s power to force companies engaged in illegal activity to return funds to the consumers they have wronged.”
Acting FTC Chairwoman Rebecca Kelly Slaughter has spoken in favor of this legislation. In a statement after the Supreme Court ruled that section 13(b) authority does not authorize the FTC to seek monetary remedies, she said:
“The Supreme Court ruled in favor of scam artists and dishonest corporations, leaving average Americans to pay for illegal behavior. We urge Congress to act swiftly to restore and strengthen the powers of the agency so we can make wronged consumers whole.”
The National Association of Consumer Advocates supports this legislation. Its Legislative Director, Christine Hines, says:
“After recent years of litigious, whack-a-mole attacks on the FTC’s long-established authority to enforce laws and hold bad actors accountable in court, we are grateful that Congress is coming together to clarify the FTC’s statutory right to actively pursue monetary and equitable remedies on behalf of the public.”
House Energy and Commerce Committee Republicans opposed this legislation during its committee consideration. From a process perspective, the Republican committee members took issue with the “partisan process strewn with process fouls” by which this “defective legislation” advanced and criticized the “lack of expert witnesses and input from both sides of the aisle in the committee.” On a substantive level, Committee Republicans raised concerns about this legislation’s failure to protect due process or to prevent the FTC from operating “unchecked as it did in the 1970s.” Committee Republicans concluded:
“The Committee should have received input from all of the FTC Commissioners and worked in a bipartisan manner to reach common ground to provide the FTC the tools to protect consumers, rather than providing the FTC with new, blanket authorities without guardrails and insurances.”
Consumer Protection and Commerce Subcommittee Ranking Member Gus Bilirakis (R-FL) specifically criticized the lack of testimony from a Republican FTC commissioner (Acting FTC Chairwoman Rebecca Kelly Slaughter was the only member of the agency who testified on this bill), saying, “If we are to find a balanced solution to addressing FTC authorities, we must work in good faith and in a bipartisan manner to do so.” Alluding to previous overreaches by the FTC, Bilirakis added:
“Republicans all agree seeking financial restitution for victims is essential, but there is a history of regulatory overreach we must consider and how that impacts all business sectors as we rebound from the COVID-19 pandemic.”
In addition to calling for 13(b)-specific guardrails, Republicans also voiced their intent to address the FTC’s 13(b) authority as part of a more holistic FTC policy revamp, including the establishment of a national privacy framework. Amendments to this legislation to this end were not adopted in the final bill.
This legislation passed the House Energy and Commerce Committee by a 30-22 party-line vote with the support of 18 Democratic House cosponsors. Every Democrat on the Energy & Commerce Subcommittee on Consumer Protection and Commerce is a cosponsor of this legislation.
A number of consumer advocacy groups, including truthinadvertising.org, the National Association of Consumer Advocates, and Consumer Reports, support this legislation.
Of Note: The FTC is the primary federal consumer protection agency. Section 13(b) of the FTC Act currently authorizes the FTC to bring suit in federal courts seeking belief for consumers; this is a critical enforcement tool that the agency uses to combat fraud and scams under the FTC Act. In 2020 alone, the FTC refunded over $482 million to over 1.6 million consumers targeted by illegal activities.
For over 40 years, the FTC’s authority under section 13(b) to obtain equitable monetary relief for consumers and to disgorge unjust profits from bad actors was settled law. In 2019, the Seventh Circuit Court of Appeals reversed its own precedent to hold that the FTC does not have authority under section 13(b) to obtain monetary relief. The Court further held that recent Supreme Court decisions require adherence to the strict text of the FTC Act, rather than precedent. After the Seventh Circuit’s decision, the Third Circuit followed in its footsteps.
This decision made nearly 48 million Americans in six states unable to obtain monetary redress under section 13(b). Additionally, it limited the FTC’s ability to protect consumers in cases where defendants have currently ceased unlawful activities, but are likely to resume them in the future.
On April 22, 2021, the Supreme Court unanimously held that section 13(b) is limited to stopping or mandating certain conduct and does not allow the FTC to seek equitable monetary relief or require bad actors to return money earned through illegal activity. The Supreme Court has yet to address the question of whether or not section 13(b) as written allows the FTC to obtain relief for past conduct.
Explaining the Court’s ruling, Justice Stephen Breyer wrote that Section “13(b) as currently written does not grant the Commission authority to obtain equitable monetary relief.” However, Justice Breyer added that the FTC can seek restitution under other provisions of the FTC Act and that the FTC “is, of course, free to ask Congress to grant it further remedial authority” if it believes that the authority given to it elsewhere in the FTC Act is “too cumbersome or otherwise inadequate.”
In 2020, all five FTC Commissioners emphasized the need for quick congressional action to pass legislation affirming the FTC’s authority under 13(b) to recover stolen money from bad actors and to provide equitable monetary relief to consumers.
Sponsoring Rep. Tony Cárdenas (D-CA) Press Release
House Energy and Commerce Committee Report
House Energy and Commerce Committee Press Release
Summary by Lorelei Yang
(Photo Credit: iStockphoto.com / designer491)
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