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  • CFPB Takes Action Against Debt Relief Companies for Allegedly Violating the TSR and Claiming to be Affiliated With the Federal Government

    Consumer Finance

    On October 12, the CFPB announced the filing of a complaint in the U.S. District Court for the District of Maryland against two companies, their service provider, and their owners (defendants) for allegedly misleading consumers about their debt validation program. According to the complaint, the defendants allegedly engaged in abusive and deceptive acts and practices in violation of the Telemarketing Sales Rule and the Consumer Financial Protection Act by purportedly (i) charging advance fees for debt-relief services before altering the terms of the consumers’ debts or achieving promised results; (ii) misrepresenting the abilities of their debt-relief and credit-repair services; (iii) failing to disclose to consumer that if they stopped making payments on debts enrolled in the service they may be subject to collections or lawsuits from creditors that could increase the overall amount of money owed due to fees and interest; and (iv) misrepresenting an affiliation, endorsement, or sponsorship with the federal government by using direct mailers designed to look like an official government notice.

    Consumer Finance CFPB Debt Relief Enforcement CFPA Telemarketing Sales Rule UDAAP

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  • Senate Special Committee Hearing Focuses on Continuing Efforts to Combat Illegal Robocalls

    Federal Issues

    On October 4, the Senate Special Committee on Aging (Committee) held a hearing entitled “Still Ringing Off the Hook: An Update on Efforts to Combat Robocalls” to discuss efforts to combat illegal robocalls. Committee Chairman Susan M. Collins (R-Me.) opened the hearing by reinforcing the importance of utilizing technology not only to block robocalls but to better understand the scams that continue to impact consumers. Sen. Collins also stressed the positive impact “aggressive law enforcement” has had on these efforts.

    According to a hearing-related press release issued by the FTC, the Commission received more than 3.4 million robocall complaints from consumers in 2016 and at least another 3.5 million complaints between January and August 2017. The FTC’s ongoing efforts to address these complaints include: (i) initiating enforcement actions targeting robocall violators; (ii) cooperating with law enforcement at the state, federal, and international level to develop solutions to prevent and detect calls; and (iii) as previously discussed in InfoBytes, publicly posting robocall numbers received from consumer complaints to help enable industry groups develop call-blocking solutions. The following four witnesses offered testimony on industry and state efforts to protect consumers from scams and increase education efforts.

    • Ms. Lois C. Greismann, Associate Director of the Division of Marketing Practices, Bureau of Consumer Protection, FTC (testimony);
    • The Honorable Josh Shapiro, Pennsylvania Attorney General (testimony);
    • Mr. Kevin Rupy, Vice President for Law and Public Policy, USTelecom (testimony); and
    • Ms. Genie Barton, President, BBB Institute for Marketplace Trust (testimony).

    Federal Issues Privacy/Cyber Risk & Data Security FTC Telemarketing Sales Rule U.S. Senate State AG

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  • FTC Announces Two Separate Settlements to Resolve Allegedly Deceptive Telemarketing Schemes

    Consumer Finance

    On September 1, the FTC issued a press release announcing a settlement with a Utah-based operation and its owner (Defendants) to resolve allegations that the company had created merchant accounts to help telemarketers process consumer credit card transactions in violation of the Federal Trade Commission Act (FTC Act) and the Telemarketing Sales Rule (TSR). According to the complaint, Defendants nominated individuals to serve as “principals” of straw companies, which then were used to open merchant accounts to assist telemarketers who did not meet the requirements or standards for opening the accounts on their own. The telemarketers, in turn, allegedly deceived consumers by making false promises regarding business opportunities that they claimed would generate substantial income, and processed credit card payments from consumers using the straw company merchant accounts for the allegedly “worthless opportunities.” Under the terms of the order, Defendants are permanently banned from the payment processing business, including acting as an independent sales organization or sales agent, and must pay a judgment of more than $3 million. The FTC suspended the judgment due to the Defendants’ inability to pay, but noted that it “will become due immediately if [Defendants] are found to have misrepresented their financial condition.”

    Separately on August 31, the FTC announced that a default judgment had been issued in a pending action brought against the operators of a deceptive telemarketing scheme who allegedly targeted Spanish-speaking consumers by pretending to be affiliated with the Peruvian government and deceived consumers by giving the impression that the calls were from emergency responders or by people the consumers had provided as references. The allegations, which violated the FTC Act and the TSR, claimed that consumers were presented opportunities to participate in language courses at discounted prices and were misled about prizes they had won. When consumers declined to participate or cancelled delivery of the prizes, the telemarketers made “false and threatening” claims of “legal or financial consequences,” allegedly posing as lawyers or government officials. Under the terms of the default judgment, the telemarketers (i) are ordered to pay $6.3 million as equitable monetary relief; (ii) are banned from telemarketing activities; and (iii) prohibited from misrepresenting material facts.

    Consumer Finance FTC Enforcement Telemarketing Sales Rule FTC Act Settlement

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  • CFPB Proposes Permanent Ban on Credit Repair Company for Misleading Consumers, Illegal Fees

    Consumer Finance

    On August 30, the CFPB and a credit repair company requested a California federal court to enter a final judgment and order to end the CFPB’s lawsuit against the company. The Bureau claimed that the company had violated the Consumer Financial Protection Act of 2010 and the Telemarketing Sales Rule among other things. According to a CFPB press release, the company “[c]harged illegal advance fees”; “[m]isled consumers about the benefits of its credit repair services”; “[m]isrepresented the costs of its services”; and “[f]ailed to disclose limits on ‘money-back guarantee.’” As previously reported in InfoBytes, the CFPB filed similar proposed final judgments against other credit repair companies for largely the same reasons.

    In addition to permanently prohibiting the defendant from working in the credit repair industry, the proposed settlement also requests a civil money penalty of $150,000.

    Consumer Finance CFPB Telemarketing Sales Rule CFPA Enforcement

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  • FTC Files Complaint Against Operators of Online Discount Clubs and Payment Processors for Allegedly Debiting More Than $40 Million from Consumers Without Their Consent

    Consumer Finance

    On August 16, the FTC issued a press release announcing charges against the operators of a group of marketing entities and payment processors (Defendants) for allegedly violating numerous laws when they enrolled consumers into online discount clubs and debited more than $40 million from consumers’ bank accounts for membership without their authorization. According to the August 15 complaint, several of the Defendants promoted their respective online discount club through websites and telemarking calls to offer services to consumers in need of payday, cash advance, or installment loans. Other Defendants then used “Remotely Created Payment Orders” and “Remotely Created Checks” without the consumers’ authorization to debit their bank accounts for the initial application fee as well as automatically-recurring monthly fees. Notably, during the period when one of the discount clubs was launched, several of the Defendants were facing contempt proceedings for allegedly violating a 2008 stipulated final order with the FTC in another deceptive debiting scam. The Defendants purportedly, among other things, (i) engaged in unfair billing practices; (ii) made false, misleading, and deceptive statements when they represented, “directly or indirectly,” to consumers seeking refunds that they were not entitled to a refund because the entities possessed personal and financial information, which served to confirm that the consumers agreed to “purchase the products or services” or authorize money to be debited from their bank accounts; and (iii) provided “substantial assistance or support” in the way of payment processing services while knowing—or “consciously avoiding knowing”—that the actions being supported were in violation of the Telemarketing Sales Rule. The FTC also claims that hundreds of thousands of consumers called to cancel their memberships and request refunds, with thousands more informing their banks about the unauthorized debits. Additionally, more than 99.5 percent of consumers enrolled in a discount clubs apparently never accessed a single coupon—“the only service for which they had supposedly paid.”

    Consumer Finance FTC Telemarketing Sales Rule Fraud UDAAP

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  • 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

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  • 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

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  • 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

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  • 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 a direct-broadcast satellite service provider. The court found the service provider 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 the service provider. Among the requirements in the order, the service provider 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.” The service provider 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

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  • 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

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