Following the Supreme Court’s April ruling in AMG Capital Management that the FTC is not entitled to monetary relief under Section 13(b) of the FTC Act, the FTC has pivoted to other weapons in its enforcement arsenal to obtain monetary relief from those subject to enforcement actions.  The latest example is the FTC’s pursuit of civil penalties against a merchant cash advance provider.

The FTC initially sued RCG Advances, LLC and other defendants who provided merchant cash advances to small businesses in June 2020 for allegedly taking out withdrawals that exceeded the agreed-upon repayment amount.  Lacking the ability to obtain monetary relief after the AMG decision, the FTC got creative and amended its complaint, adding new statutory claims under the Gramm-Leach-Bliley Act (the GLB Act).  Under the GLB Act, the FTC alleges that the defendants obtained customers’ financial information by making “false, fictitious, or fraudulent statement[s] or representation[s.]”  The FTC is empowered with enforcing the GLB Act—and dozens of other statutes, such the Fair Debt Collection Practices Act and the Fair Credit Reporting Act—as rule violations, meaning the FTC can seek consumer redress under Section 19 of the FTC Act and civil penalties.

The pursuit of civil penalties here is particularly interesting.  Under a different section of the FTC Act—15 U.S.C. § 56—the FTC must first refer rule violation cases seeking civil penalties to the Department of Justice, but here the DOJ declined the referral.  This series of events allows the FTC to seek civil penalties on its own behalf in federal court.

The FTC has sought a congressional fix to its Section 13(b) authority.  Until then, the FTC will likely remain creative in broadly interpreting the other statutes it enforces to use its Section 19 and civil penalty authority.  Whether the DOJ will conveniently decline to pursue those civil penalty cases so that the FTC can do so directly remains to be seen. Parties facing such proceedings are likely to seek discovery on the DOJ-FTC communications leading to the declination by the DOJ.  These machinations are no mere bureaucratic pillow fight.  With civil penalties of $43,792 per violation, this can be a haymaker.