Federal agencies such as the Federal Trade Commission and Securities and Exchange Commission often pursue individuals for violations of consumer and investor protection laws. The FTC frequently enforces laws regulating telephone or email marketing, and the SEC enforces rules concerning money solicitation for investment. Federal agency statutes give the enforcement divisions enhanced collection tools not available to private creditors with money judgments. For example, federal agencies may garnish wages under federal garnishment statutes notwithstanding states, including Florida, that exempt some debtors from wage garnishment.
For asset protection purposes it is important to appreciate practical realities of federal agency debts and the agency’s collection practices. First, there are two general types of federal agency rule enforcement. Agencies may charge an individual with a variety of fraud, which is criminal in nature, or the agencies may fine or penalize individuals for rule infractions that proscribe civil monetary awards. Agencies will pursue criminal fraud actions when they believe the defendant is involved in intentional misrepresentations that harm the public. Criminal sanctions may include injunctions, asset freezes, and monetary restitution. Agencies are likely to seek only civil damages when they find a defendant who, without intent to deceive the public, violated rules and regulations pertaining to the defendant’s commercial activities.
Asset protection is difficult in the event of criminal sanctions. Criminal restitution orders are enforced and collection as tax obligations. Agencies have the same powers to collect restitution as the IRS has by statute to collect federal tax debts. Restitution can be collected from any property interest held by the defendant regardless of almost all state court asset exemptions.
Most agency enforcement actions are settled for a relatively small amount and the defendant’s assurance of corrective actions. When cases are not settled, and the agencies take the case to trial, there is a significant chance of a large damage award if the agency prevails because each individual violation warrants a separate and cumulative monetary award.
In practice, federal agencies will seek and advertise the large civil awards against defendants, but they do not invest large amounts of time and money trying to actually collect the money; federal agencies are not aggressive collectors of civil judgments. Agency collection of civil awards is based upon the laws, rules, and procedures of the state where the defendant resides. Agency attorneys are knowledgeable in their areas of regulatory law, but they are not trained or experienced in debt collection. Agency attorneys are unlikely to be familiar with each state’s collection laws and asset exemptions, so that defendant’s attorney often have to educate the agency attorney with whom they want to negotiate settlement. For this reason, a defendant with an effective asset protection plan is usually able to negotiate favorable settlements of agency civil judgments. There are attorneys who specialize in defending federal agency enforcement actions and who have experience negotiating with federal agency attorneys. People who receive notice of federal agency enforcement should find legal representation from an attorney who practices in this narrow area rather than a general commercial litigation firm.
Last updated on April 17, 2021