Top court overturns $1.3B penalty against payday loan tycoon | News

The fine against Tucker and his businesses was the largest ever obtained at the time by the FTC in a litigated case. But Thursday’s decision by the high court invalidates the FTC’s fine, and its ability to seek restitution through courts in the future unless Congress gives the agency that power.

Tucker was convicted in a separate criminal case for running a payday loan business that federal prosecutors said exploited 4.5 million borrowers to the tune of $3.5 billion. He is currently serving a sentence of more than 16 years in prison. His conviction also included a forfeiture order requiring him to give up any proceeds or assets gained as a result of his crimes.

Justice Stephen Breyer wrote in an opinion for the court that the FTC does not have the power to seek restitution through federal courts in cases where consumers have been ripped off. The ruling severely curtails the power of the FTC, a federal consumer watchdog agency.

Acting FTC chairwoman Rebecca Kelly Slaughter, in a statement, said “the Supreme Court ruled in favor of scam artists and dishonest corporations, leaving average Americans to pay for illegal behavior.

“With this ruling, the Court has deprived the FTC of the strongest tool we had to help consumers when they need it most. We urge Congress to act swiftly to restore and strengthen the powers of the agency so we can make wronged consumers whole.”

Breyer’s opinion said that the FTC could still seek restitution in cases it pursues through its own administrative process.

But the FTC in recent years had sought restitution through the courts, a speedier path for the agency.

The FTC said Thursday it had secured $11.2 billion in refunds to consumers over the last five years using the route that the Supreme Court had just invalidated.

The FTC has already been trying to convince Congress to affirm its ability to seek restitution. On Tuesday, the agency submitted testimony to the U.S. Senate Committee on Commerce, Science and Transportation urging Congress to consider passing legislation to let the FTC sue directly in federal court for violations of the FTC Act and recover ill-gotten gains.

U.S. Sen. Jerry Moran, a Kansas Republican, and U.S. Sen. Roy Blunt, a Missouri Republican, both serve on the Commerce Committee. Neither could be immediately reached for comment.

Tucker was sued by the FTC in 2012 after a lengthy investigation into his payday lending enterprises. Tucker, who lived in Leawood, started in the payday lending industry in the late 1990s after serving one year in prison for an unrelated financial scam from the early 1990s.

Tucker made millions from his work in payday lending, enough that he was able to fund a professional auto racing team for himself and others.

The FTC accused Tucker of running a deceptive payday loan business that tended to trick customers with confusing loan terms. Payday loans are marketed as short-term, small dollar loans that borrowers expect to repay by the time they get their next paycheck. Critics say the industry is ripe for abuse with interest rates that trap often-desperate borrowers into cycles of debt that are difficult to break.

The FTC argued, and a federal judge later agreed, that Tucker’s businesses tricked borrowers through confusing loan terms that resulted in steep interest rates and borrowing costs.

The judge ordered that Tucker and his corporate affiliates pay $1.3 billion to the FTC,…