Skip to main content
Menu Icon Menu Icon
Close

InfoBytes Blog

Financial Services Law Insights and Observations
Section Content

Upcoming Events

Filter

Subscribe to our InfoBytes Blog weekly newsletter for news affecting the financial services industry.

  • FTC Files Complaint Against Independent Sales Organization and Sales Agents for Alleged Credit Card Laundering Charges

    Consumer Finance

    On August 7, the FTC issued a press release announcing charges against 12 defendants, comprised of an independent sales organization (ISO), sales agents, payment processors, and identified principals, for allegedly violating the Federal Trade Commission Act and the Telemarketing Sales Rule (TSR) by laundering credit card transactions on behalf of a “telemarketing scam” operation (operation) through fictitious merchant accounts. According to a July 28 complaint filed by the FTC, the defendants engaged in a scheme with the operation to process credit card charges through merchant accounts set up by the operation under fictitious company names instead of processing charges through a single merchant account under the operation’s name. This type of practice, the FTC claims, is known as “credit card laundering” or “factoring” and violates the TSR. The defendants purportedly (i) underwrote and approved the operation’s fictitious companies; (ii) set up merchant accounts with its acquirer for the fictitious companies; (iii) used sales agents to market processing services to merchants; (iv) processed nearly $6 million through credit card networks; and (v) transferred sales revenue from the transactions to companies controlled by the defendants. The FTC seeks “permanent injunctive relief, recession or reformation of contracts, restitution, the refund of monies paid, disgorgement of ill-gotten moneys, and other equitable relief.”

    Notably, in 2013, the FTC accused the same “telemarketing scam” operation of allegedly promoting “worthless business opportunities” to consumers and falsely promising that they would earn thousands of dollars. A 2015 summary judgement resulted in over $7 million in consumer injury. (See previous InfoBytes coverage here.)

    Consumer Finance Credit Cards FTC UDAAP Telemarketing Sales Rule Fraud

    Share page with AddThis
  • CFPB Sues Credit Repair Companies for $2 Million

    Consumer Finance

    On June 27, the CFPB filed two complaints in the District Court for the Central District of California against several credit repair companies and affiliated individuals. The CFPB alleged that these defendants violated the Consumer Financial Protect Act and the Telemarketing Sales Rule by charging consumers illegal fees and misleading consumers about services (see complaints here and here).

    According to a CFPB press release, the defendants allegedly “[c]harged illegal advance fees” such as initial consultation fees, and set-up fees prior to providing certain services. Defendants also allegedly “[f]ailed to disclose limits on ‘money-back guarantees’” and “[m]isled consumers about the benefits of their services” by suggesting they could remove negative information from credit reports and “substantial[ly] increase” credit scores.

    The CFPB submitted a proposed final judgment for each suit. In the first suit, the CFPB proposed a civil money penalty of over $1.5 million, and restrained defendants from working in credit repair services or maintaining an ownership interest in any company that provides credit repair services for a period of five years. In the second suit, the CFPB sought similar injunctive relief, and also proposed “equitable monetary relief in the form of disgorgement . . . in the amount of $500,000.”

    Consumer Finance Courts Enforcement CFPB Litigation Credit Scores CFPA Telemarketing Sales Rule

    Share page with AddThis
  • FTC Obtains Multiple Judgments Against California and Florida-Based Robocall Operations

    Consumer Finance

    The FTC recently entered judgments against robocalling operations based in California and Florida who engaged in activities that violated, among other things, the Telemarketing Sales Rule (TSR) and the Telemarketing Consumer Fraud and Abuse Prevention Act.

    California Default Judgments. On June 2, the FTC announced a California federal district court judge approved default judgments against an individual and each of the nine corporations for which he was an “actual or de facto owner, officer or manager” (Defendants). According to the FTC’s complaint, over a period spanning approximately seven years, the Defendants allegedly initiated—or helped to initiate—“billions” of illegal robocalls without receiving written permission from consumers. Many of the calls made were to numbers on the Do Not Call (DNC) Registry to “induce the purchase of goods or services” such as auto warranties, home security systems, or search engine optimization services. Violations of the TSR cited include knowingly assisting and facilitating telemarketers engaged in abusive practices. According to the terms of the default judgments, the individual has been assessed a $2.7 million penalty, and the Defendants are permanently banned from all telemarketing activities.

    Florida Consent Order. On June 5, the FTC and the Florida Attorney General entered eight stipulated orders against Orlando-based individuals and companies—18 Defendants in total—who violated the TSR, Telemarketing and Consumer Fraud and Abuse Prevention Act, and Florida’s Telemarketing and Consumer Fraud and Abuse Act for, among others things, using robocalls to sell credit card interest rate reduction programs, in addition to calling numbers on the DNC Registry. According to the joint complaint, the Defendants allegedly engaged in the following violations: (i) offered debt relief programs but failed to provide promised services; (ii) misrepresented their affiliations with consumers’ banks or credit card companies; (iii) unfairly authorized charges without obtaining consent; (iv) received fees prior to providing debt relief services; (v) failed to transmit telemarketer information; (vi) used prerecorded messages to “induce the purchase of goods or services”; and (vii) failed to make oral disclosures. The stipulated orders settle charges against all Defendants and require that they stop the “allegedly illegal conduct.” Some of the Defendants have also been issued financial penalties. Furthermore, the FTC entered a $4.8 million judgment against 12 Defendants identified as the primarily parties for the scam. This amount represents the full amount of consumer harm caused. All stipulated orders can be accessed through the FTC press release.

    Consumer Finance FTC Privacy/Cyber Risk & Data Security State AG UDAAP Enforcement Telemarketing Sales Rule Fraud

    Share page with AddThis
  • Do Not Call Violations Net $280 Million Fine for FTC, States

    Courts

    On June 5, the U.S. District Court for the Central District of Illinois ruled in favor of the Federal Trade Commission (FTC) and the states of California, Illinois, North Carolina, and Ohio resolving Do Not Call litigation against Dish Network (Dish). The court found Dish liable for making millions of calls resulting in violations of the Telemarketing Sales Rule (TSR) and the Telephone Consumer Protection Act, among other things. The $280 million in civil penalties, with a record $168 million going to the FTC, is the largest civil penalty ever awarded for violation of the FTC Act.

    Additionally, the court issued a permanent injunction order against Dish. Among the requirements in the order, Dish will show within 90 days of the order effective date that they are “fully complying with the safe harbor provisions” and “have made no prerecorded telemarketing calls at any time during the five (5) years immediately preceding the effective date”. Dish must also hire an expert to ensure compliance with the injunction and telemarketing laws, provide semi-annual compliance materials, and ensure their compliance with the TSR.

    Courts FTC Mortgages UDAAP DOJ Telemarketing Sales Rule Litigation

    Share page with AddThis
  • FTC Enters Settlement Resolving Investigation into “Bogus Online Investment” Telemarketing Scheme

    Privacy, Cyber Risk & Data Security

    On March 13, the FTC announced a $25 million settlement with the operators of a national telemarketing scheme who allegedly stole millions of dollars from consumers in violation of the FTC Act and the Telemarketing Sales Rule. According to the complaint filed by the FTC in 2016, the defendants allegedly sold “bogus online investment opportunities” to consumers nationwide in the form of schemes such as opportunities to buy or invest in e-commerce related websites or credit card company/e-commerce website profit-sharing programs, and then pocketed the payments—some of which exceeded more than $20,000. The defendants did not admit or deny the facts alleged in the complaint in the stipulated final order with the FTC, which imposed a $25 million monetary judgment that was partially suspended.  The order also prohibits the defendants from telemarketing, marketing investment opportunities, and selling or otherwise benefiting from consumers’ personal information.

    Consumer Finance FTC Telemarketing Sales Rule Privacy/Cyber Risk & Data Security

    Share page with AddThis
  • FTC Reaches $9 Million Settlement with Nationwide Debt Relief Company

    Financial Crimes

    On March 7, the FTC announced that it had reached a settlement with a debt relief company and its principals over allegations that they mislead consumers and charged illegal advance fees. The FTC claimed that the defendants sent direct mail ads that looked like official attorney or bank documents and exaggerated the amount of money consumers would save and the time it would take them to become debt free. In violation of the FTC’s Telemarketing Sales Rule, the defendants also allegedly charged advance fees before negotiating savings on credit card debts. The stipulated order requires the defendants to pay $9 million (to be partially suspended upon payment of $510,000), a figure that represents the amount of alleged harm to consumers. The defendants are also banned from “making misrepresentations about debt relief and other financial products or services, and making unsubstantiated claims about any products or services.”

    Financial Crimes FTC Telemarketing Sales Rule Debt Relief

    Share page with AddThis
  • FTC and 10 States Settle Charges with Remaining Defendants in Illegal Telemarketing Campaign

    Courts

    On February 21, the FTC announced that, along with 10 state attorneys general, it has entered a Stipulated Order for Permanent Injunction and Civil Penalty Judgment against defendants who were allegedly part of an illegal robocall campaign that ran from October 2011 through July 2012. According to the joint complaint filed by the FTC and the states in 2015, the campaign averaged approximately 12 to 15 million illegal sales calls a day asking consumers to complete a political research survey and then connecting them to a live telemarketer who sold cruise packages. The FTC’s 2015 press release noted that while “do-not-call and robocall rules do not prohibit political survey robocalls, the defendants’ robocalls violated federal law because they incorporated a sales pitch.” The 2017 settlement order imposed a $1.35 million fine, to be suspended after they pay $2,500 based on ability to pay, and bars the defendants from: (i) “initiating, or causing anyone else to initiate, any robocalls or helping anyone else make robocalls”; and (ii) “engaging in illegal telemarketing practices.” Certain other defendants reached settlements in 2015, which, in addition to imposing various civil money penalties, prohibited them also from engaging in abusive telemarketing practices.

    Courts FTC State AG Telemarketing Sales Rule

    Share page with AddThis
  • CFPB Sues Law Firms for Unlawful Debt Relief Scheme

    Courts

    On January 30, the CFPB announced that it was seeking a permanent injunction against a group of affiliated law firms and their managing attorneys who charged illegal fees to consumers seeking debt relief. In a complaint filed with the Central District of California, the Bureau alleges, among other things, that the firms violated the Telemarketing Sales Rule by (i) collecting improper fees in advance of providing debt relief services; (ii) misrepresenting that advance fees would not be charged; and (iii) providing substantial  assistance to another company it knew or should have known was engaged in acts or practices that violated the rule, because the company had itself been the subject of a $40 million final judgment for similarly deceptive upfront fee arrangements in March 2016. The CFPB contends that the same attorneys from the earlier 2016 action—presently under appeal—took over operations of the firms now targeted.

    Courts Consumer Finance CFPB Telemarketing Sales Rule

    Share page with AddThis
  • Federal District Court Holds Claims Brought by CFPB Alleging Deceptive Conduct Must Meet Heightened Rule 9(b) Standard

    Courts

    In a recent case, a California District Court held that CFPB’s claims alleging deceptive conduct under the Telemarketing Sales Rule (“TSR”) against a credit repair company failed to meet the heightened pleading requirement under Fed. R. Civ. P. 9(b), under which a plaintiff must “state with particularity the circumstances constituting fraud” – including pleading “the time, place, and specific content of the false representations.” CFPB v. Prime Marketing Holdings, LLC, CV 16-07111-BRO, Dkt. No. 32 (C.D. Cal. Nov. 15, 2016).

    Specifically, the court in Prime Marketing Holdings concluded that the CFPB’s general allegations of deception “failed to identify any specific instances where the defendant made such a misrepresentation” including, for instance, “what representations were made, when these representations were made and to whom they were made.” Id. at 12-13. Based on this finding, the court dismissed without prejudice the four deception-based claims. Id.

    Courts Consumer Finance Fraud CFPB Telemarketing Sales Rule

    Share page with AddThis
  • FCC Enforcement Chief Touts Global Anti-Robocall Push

    Federal Issues

    In an official FCC blog post published November 21, FCC Enforcement Chief Travis LeBlanc re-emphasized the agency’s efforts to work with international law enforcement partners to target fraudsters who might otherwise be outside the FCC’s reach. As explained by Mr. LeBlanc:

    “Unsolicited calls and text messages are more than just a nuisance these days. They are used to perpetrate criminal fraud, phishing attacks, and identity theft schemes all around the world. These calls often overwhelm facilities, including emergency or 911 call centers. Those responsible for sending unwanted calls and texts often operate from outside of the United States, too often allowing them to evade our enforcement. Indeed, it is very easy for these scammers to operate from multiple countries, hide their locations, change their phone numbers between calls, trick caller ID systems into displaying false or trusted numbers, increasingly demand payments in hard-to-trace forms such as cash or gift cards, and move quickly to avoid detection and prosecution in our increasingly mobile world.”

    Earlier this year, the FCC signed a memorandum of understanding with members of the “Unsolicited Communications Enforcement Network,” a global network of law enforcement authorities and regulatory agencies that have agreed to share intelligence, identify common threats, learn from each other’s best practices and assist each other with investigations where permissible to combat unsolicited communications.

    Federal Issues Criminal Enforcement FCC Enforcement Telemarketing Sales Rule

    Share page with AddThis

Pages