US FTC Succeeds in First Expanded Use of Gramm-Leach-Bliley Penalty Authority

Just into the new year, the FTC notched its first success in a creative theory to extend its monetary penalty authorities, which the Supreme Court trimmed back last year.  In FTC v. RCG Advances, the FTC settled allegations that a small-business financing firm and its principals violated Section 521(a) of the Gramm-Leach-Bliley Act. Originally understood to prohibit scammers from obtaining financial information under a false pretext, Section 521, as used by the FTC, implicates a much broader theory—that the statute is triggered by any misrepresentation in the course of a transaction where a consumer presents payment information. Given that the FTC can punish first-time violations of this statute with civil penalties and restitution, businesses should carefully scrutinize the representations that they make in any transaction where consumers provide financial information such as credit card or bank account numbers.

Read more in Mayer Brown’s Legal Update.