Seventh Circuit Affirms $5.2 Million Judgment Against Credit-Monitoring Business for Deceptive Advertising

On August 30, 2023, the Seventh Circuit affirmed a district court decision reinstating the a $5.2 million judgment against Credit Bureau Center and its owner (“CBC”) for their deceptive online advertising.  

The Federal Trade Commission (“FTC”) initiated this lawsuit against CBC in 2017 for the company’s use of an online marketing device known as a “negative opinion feature”.  The websites offered visitors a free credit report but, when they applied for the free report, they were also automatically enrolled in a $29.94 monthly membership subscription.  Information about this subscription was limited and buried in small text.  The FTC alleged violations of several consumer protection statutes, including the Restore Online Shoppers’ Confidence Act, and sought relief under section 13(b) of the Federal Trade Commission Act. The litigation centered on section 13(b), which the FTC and various circuit courts interpreted to authorize restitution awards.

The District Court initially agreed with the FTC that section 13(b) authorizes restitution awards and ordered CBC to pay $5.2 million to refund consumers.  The Seventh Circuit disagreed and reversed, thus breaking with a consensus in other circuits that restitution awards are proper under section 13(b).  To resolve this circuit split, the Supreme Court heard another very similar case from the Ninth Circuit, FTC v. AMG Capital Management, LLC, and held that section 13(b) does not authorize restitution awards.  Subsequently, the FTC returned to the District Court and asked the judge to reimpose the $5.2 million restitution award under another section of the FTCA, section 19(b), which the District Court and Seventh Circuit agreed authorizes such an award.

The $5.2 million award will be paid to consumers in the form of refunds.