The Impact of AMG Capital Management on Consumer Financial Services Enforcement

4 min

In a unanimous opinion on April 22, 2021, the United States Supreme Court held in AMG Capital Management, LLC v. Federal Trade Commission that Congress did not authorize the Federal Trade Commission (FTC) to obtain equitable monetary relief pursuant to its authority under Section 13(b) of the Federal Trade Commission Act (FTCA) to obtain an injunction.  While much of the reaction has understandably focused on the decision's impact on the FTC, AMG Capital also will have a substantial impact on the Consumer Financial Protection Bureau (CFPB or the Bureau). The CFPB and the FTC have co-extensive enforcement jurisdiction as to nonbanks and many of the consumer finance laws. The FTC and the CFPB also are similarly authorized to investigate and enforce their respective prohibitions against unfair or deceptive acts and practices. Section 5 of the FTCA prohibits "unfair or deceptive acts or practices in or affecting commerce" (hereinafter referred to as the FTC's "UDAP" authority), and Section 1031 of the Consumer Financial Protection Act (CFPA) prohibits "unfair, deceptive, or abusive act[s] or practice[s]" (UDAAP) related to the provision of consumer financial products or services. Indeed, much CFPA deception and unfairness doctrine relies on or derives from long-standing FTCA case law.

The AMG Capital decision limits the FTC's authority to seek equitable monetary relief on grounds that the FTCA does not expressly authorize equitable monetary relief under section 13(b). In contrast, the CFPB's authority to pursue equitable monetary relief is written into the CFPA. Specifically, Section 1055 of the CFPA (12 U.S.C. § 5565) provides the CFPB with the authority to recover equitable monetary relief and civil money penalties in enforcement actions it brings in its administrative forum and in federal court.

Section 13(b) of the FTCA (15 U.S.C. § 53(b)) gives the FTC the authority to bring suit in federal court against defendants it believes are "violating" or are "about to violate" the FTCA – including the FTCA's prohibition against "unfair or deceptive acts or practices in or affecting commerce." Pursuant to Section 13(b), the FTC may bring suit "to enjoin any such act or practice" and may seek "a permanent injunction" to prevent any such act or practice. Notwithstanding the plain language of Section 13(b), the FTC has, for decades, taken the position that Section 13(b) allows it to obtain equitable monetary relief. And many courts have agreed. But the Supreme Court's decision put an end to this assumption and made it clear that the FTC may not seek any equitable monetary relief under Section 13(b).

Accordingly, unless and until the FTC is granted the authority by Congress to once again seek monetary relief under Section 13(b)—and several legislative proposals currently before Congress propose to explicitly grant the FTC such authority—its ability to seek restitution is limited to its authority under Section 19 of the FTCA. Section 19 allows the FTC to sue a defendant and to seek relief, such as "recission or reformation of contracts, the refund of money or return of property, the payment of damages, and public notification" in two circumstances. First, the FTC can use Section 19 to enforce certain rule and statutory violations other than its Section 5 UDAP authority. Second, the FTC can proceed with an administrative cease and desist proceeding before an ALJ and after that proceeding is concluded bring an action in federal court for monetary relief under Section 19. In this circumstance, however, Section 19, unlike Section 13(b), requires the FTC to meet a heightened standard and to prove that the conduct for which it is suing is such that "a reasonable [person] would have known under the circumstances was dishonest or fraudulent[.]" This added step makes Section 19 a more cumbersome enforcement provision for the FTC.  Unlike Section 13(b), Section 19 is subject to a statute of limitations -three years.

As a result, nonbanks with consumer-facing products or services should expect that the CFPB will become the primary federal enforcement agency, at least for the foreseeable future.  Moreover, the Bureau's next presumptive director is current FTC Commissioner Rohit Chopra, who is well versed in FTC consumer finance priorities and the specific enforcement tools that the CFPA confers on the Bureau (Chopra was the first CFPB student loan ombudsperson).

We already expected that the Bureau would increase its enforcement activity under a Biden Administration. Now, AMG Capital increases the likelihood that the CFPB's Office of Enforcement will be the dominant federal law enforcement actor in the consumer finance space for the foreseeable future.