Am. Fin. Servs. Asso. v. FTC - 247 U.S. App. D.C. 167, 767 F.2d 957 (1985)

Rule:

The court may set aside the Federal Trade Commission's action only if it is not supported by substantial evidence in the rulemaking record, 15 U.S.C.S. § 57a(e)(3), or if it is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. (incorporating 5 U.S.C.S. § 706(2) (A) standard).

Facts:

Petitioners, an association of consumer finance and small-loan companies, sought review of the Federal Trade Commission's (FTC) Rule on Credit Practices (Rule) (16 C.F.R. § 444). Petitioners alleged the Rule prohibiting wage assignments and security interests in household goods, exceeded the FTC's statutory authority to define unfair acts or practices, and exceeded its rulemaking authority by failing to define with specificity the acts or practices deemed unfair. Petitioners further argued the determinations were not supported by substantial evidence in the rulemaking record, the remedy was overly broad for preventing the identified unfair practices, and FTC exceeded its authority by preempting state laws and regulations governing consumer credit transactions.

Issue:

Was the Federal Trade Commission's (FTC) Rule on Credit Practices (Rule) (16 C.F.R. § 444) invalid for being overly broad, for not being supported by substantial evidence, and for being issued in excess of the FTC’s authority? 

Answer:

No.

Conclusion:

The court held that it may set aside the Federal Trade Commission's action only if it is not supported by substantial evidence in the rulemaking record, 15 U.S.C.S. § 57a(e)(3), or if it is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. The court recognized that the FTC was the expert body to determine what remedy was necessary to eliminate the unfair or deceptive trade practices which have been disclosed. It has wide latitude for judgment and the courts will not interfere except where the remedy selected has no reasonable relation to the unlawful practices found to exist. In this case, the court found that the FTC used the three-part consumer injury test to justify its use of authority over unfair practices, and that there was substantial evidence that wage assignments and security interests in household goods caused substantial unavoidable injuries to consumers without countervailing benefits. The Rule was not an abuse of discretion, did not unlawfully preempt state law, and was within the FTC's authority.