Agency Operating Cost and Recovery of Monetary Relief – Chris Hoofnagle | UC Berkeley School of Law, School of Information

The FTC proclaimed in 2014 that, “Over the past 3 years…the FTC returned over $196 million to victims of deceptive or unfair practices and forwarded $117 million to the U.S. Treasury.” But during this period, operating the agency cost taxpayers over $900 million.

Actually collecting on the FTC’s many judgments and settlements is a major challenge. In 2012, the Commission created a unit the Bureau of Consumer Protection focused on collections. Still, over the past ten years, only about 25 percent of judgments and settlements result in full payment.

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The chart “provides a detailed estimate of the following: (a) total settlements and judgments entered into by the FTC in each of the past 10 fiscal years (FY2004-2014); (b) the share of these settlements and judgments that the FTC has collected and (c) the share of these settlements and judgments that the FTC collected within the first two years after the settlement or judgment was entered. It does not include suspended judgments, which are not legally collectible…”

There are many reasons for non-collection of judgments and settlements. First, many companies resist paying. As a result, the FTC has to engage in significant investigation and garnishments in order to fully collect. For instance, to complete almost $16 million of collections against Hi-Tech Pharmaceuticals, the FTC had to subpoena 64 different entities and obtain 35 garnishments. Second, there is little money left from the fraud especially when dealing with true scam artists. Third, some respondents attempt to evade penalties by filing bankruptcy, but in those cases, the FTC has intervened to make the judgment non-dischargeable. Finally, some respondents hide assets. There are two ways of dealing with hidden asset problems. In cases where the respondent gets a suspended judgment, the FTC uses an “avalanche” clause in order to reimpose the full amount of a penalty if hidden assets are later discovered. In other cases, it has used coercive detention. For instance, Kevin Trudeau was ordered to jail based on his unwillingness to reveal to a receiver the location of hidden assets.

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