On October 19, 2020, the Federal Trade Commission issued its annual  report to Congress regarding the FTC's efforts to protect senior citizens from fraud and abuse. In the report, the FTC noted that adults over 60 are more likely to report losing money to certain types of alleged scams, including romance scams, imposter scams, and online shopping programs. Moreover, the FTC reports that seniors were more than six times more likely than younger consumers to report that they lost money because of tech support phishing activities, and three times more likely to report losing money because of lottery scams.

In a  separate statement, Commissioner Rohit Chopra said the agency's analysis suggests the need for two key actions. These actions, and Commissioner Chopra's statement generally, indicate that the FTC is considering how to move forward in the face of the Supreme Court's potential  erosion of its favored enforcement tool—Section 13(b).   His comments also have important implications for payment processors and other financial intermediaries that are facing inquiries from the FTC.

First, he recommended that the agency focus its enforcement actions on "larger, established firms," rather than "smaller-scale scammers." As an example, he pointed to the FTC's settlement with payment processor Fiserv (formerly known as First Data) as a "model[] for the entire agency." Commissioner Chopra believes that such enforcement actions against larger corporations would be a "better use of resources" and "more likely to lead to effective relief and systemic impact."

Second, Commissioner Chopra questioned the FTC's current emphasis on Section 13(b) enforcement actions, highlighting certain limitations in relying primarily on Section 13(b) to pursue alleged wrongdoers. First, he expressed reservations regarding Section 13(b) because it did not allow the FTC to maximize consumer recovery because monetary relief is generally "capped at direct harm." In doing so, he appears to acknowledge that Section 13(b) is not the optimal tool to use against intermediaries—like payment processors—that may not be directly liable for a merchant's conduct that harms a consumer. Moreover, he acknowledged that the FTC's ability to recover funds under Section 13(b) "is in jeopardy" in light of the Supreme Court's forthcoming decision in FTC v. Credit Bureau, which will decide whether the FTC is entitled to recover monetary relief under Section 13(b).

Because of this perceived lack of deterrence and consumer remedies available under Section 13(b), Commissioner Chopra urged the FTC to pivot its enforcement efforts to Section 19 enforcement actions. Section 19 authorizes the FTC to pursue civil penalties and damages for violations of FTC-promulgated rules. Commissioner Chopra, however, recognized the current limitation on the FTC's ability to proceed under Section 19—a lack of FTC-promulgated rules addressing conduct the FTC now targets. Thus, he has urged the FTC to "restat[e] existing legal precedent through rulemaking."

Commissioner Chopra's recommendation to commence large-scale rulemaking, however, appears to overlook the complex nature of FTC rulemaking. Historically, Congress granted the FTC broad rulemaking authority. In fact, in the 1970s, the FTC was issuing a rule a month—a blistering pace. In reaction to what Congress and the public viewed as this aggressive regulatory overreach, Congress passed the Federal Trade Commission Improvement Acts of 1980. The statute requires the FTC to engage in "hybrid" rulemaking, which adds more onerous requirements to the traditional notice-and-comment requirements for "informal rulemaking" under section 553 of the Administrative Procedure Act, including (1) when seeking to make an interpretative rule or general policy statement, demonstrating that the act or practice to be proscribed is "prevalent"; and (2) conducting informal hearings, during which the presiding officer must make findings of fact and conclusions of law and allow interested parties to cross-examine. Thus, the pivot that Commissioner Chopra advocates to rule-focused enforcement actions may be easier said than done.

Whether Commissioner Chopra's comments are shared by others at the Commission is unclear, and no other Commissioner joined his statement. The FTC's powers are in flux, and Commissioner Chopra is thinking creatively about ways to boost the FTC's enforcement heft. Whether his views on enforcement remain his own or are adopted by the Commission will depend on the election and other factors. Stay tuned.

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