Money, Money, Money – How Does the FTC Get Money Back to Consumers

For those of you enjoying the summer weather and listening to ABBA on repeat (or maybe that's just me), you might have missed that earlier this month the Federal Trade Commission (FTC) released its Annual Report on Refunds to Consumers (Annual Report). When the FTC prevails in a lawsuit or reaches a settlement, most of us tend to focus on two things - how much money the government or consumers will get and the legal implications of the case or settlement. The focus often strays away from how the money actually gets back to the government or consumers - hence this Annual Report. The FTC's Office of Claims and Refunds is charged with returning money to where it belongs.

The release of the Annual Report gives us the perfect opportunity to do a quick refresher on the difference between consumer redress and civil penalties and to emphasize the importance of the different avenues of getting money in the post-AMG landscape. Following an administrative order, the FTC can, on some occasions, use Section 19 of the FTC Act to seek consumer redress from the respondent in federal court for consumer injury caused by conduct at issue in the proceeding. On the other hand, civil penalties are not available for first-time Section 5 (that an act or practice is unfair or deceptive) violations - civil penalties are only available when a respondent violates an FTC order or a trade regulation rule (e.g., the Telemarketing Sales Rule), and those funds go to the U.S. Treasury, not consumers.

Prior to the AMG case, the FTC relied heavily on Section 13(b) of the FTC Act to get monetary redress for consumers. Following the decision, however, if the FTC brings a lawsuit alleging a violation of Section 5 of the FTC Act, the FTC is only able to seek nonmonetary injunctive relief and will not be able to obtain any monetary redress for consumers. If the FTC wants to get redress for consumers, it must litigate the matter to final judgment and then initiate a new lawsuit in federal court. The FTC must also go to federal court to obtain civil penalties for violations of its orders and trade regulation rules.

Despite the AMG case, the FTC continues to do quite well at getting money back to consumers. In 2023, $324 million in refunds went to consumers, $137.7 million of which were refunds that came directly from the FTC; the rest of the funds were distributed by defendants and other federal agencies. The FTC, whenever possible, uses money it receives from defendants to provide refunds to injured consumers (and pay administrative costs). When a refund program is not possible or there are leftover funds after the refund program has ended, the FTC sends these remaining funds to the Treasury (and in some cases to co-plaintiffs), as allowed by the court and applicable law. The Annual Report notes that the FTC generally closes a refund program and returns money to the Treasury when there are insufficient funds to continue another round of payments or when consumers have already received full refunds. On average, the Treasury receives less than 5% of the funds collected. In 2023, $4.5 million was sent to the Treasury through this process. It is important to note that this money returned to the Treasury does not include civil penalty judgments.