FTC Action-Deceptive Trade Practices

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7^th Circuit Court of Appeals

Case Name: FTC v. Credit Bureau Center, LLC

Case No.: 21-2945

Officials: Sykes, Chief Judge, and Flaum and Brennan, Circuit Judges.

Focus: FTC Action-Deceptive Trade Practices

Brown is the exclusive proprietor and operator of a credit-monitoring service. To attract customers, Brown’s websites employed a strategy known as the “negative option feature,” where they offered a “free credit report and score.” However, the crucial detail that customers were automatically enrolled in a $29.94 monthly “membership” subscription for Brown’s credit-monitoring service was deliberately obscured in much smaller text. Customers only became aware of this enrollment when Brown sent them a letter after the fact. One of Brown’s contractors took advantage of this confusion by advertising counterfeit rental properties on Craigslist and instructing applicants to obtain a “free” credit score from Brown’s websites. Consequently, the Federal Trade Commission (FTC) brought a lawsuit against Brown under the Federal Trade Commission Act, 15 U.S.C. 53(b). The district judge concluded that Brown was complicit in his contractor’s fraudulent scheme and that the websites did not fulfill specific disclosure requirements outlined in the Restore Online Shopper Confidence Act (ROSCA), 15 U.S.C. 8403. As a result, the judge imposed a permanent injunction and ordered Brown to provide over $5 million in restitution to the Commission.

Upon review, the Seventh Circuit upheld the decision regarding liability and the issuance of a permanent injunction. However, in a departure from previous legal precedent, the court nullified the restitution award. The basis for this decision was rooted in the fact that Section 13(b) exclusively permits restraining orders and injunctions. The Federal Trade Commission Act (FTCA) comprises two comprehensive remedial provisions that explicitly allow restitution if the Commission adheres to specific procedures. Upholding the principle of stare decisis should not grant the Commission the means to bypass these intricate enforcement provisions.

Affirmed.

Decided 08/30/23

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