FTC ANNOUNCES PAYDAY LENDER OPERATORS INVOLVED IN ALLEGED FRAUD TO BE BANNED FROM CONSUMER LENDING BUSINESS

FROM:  U.S. FEDERAL TRADE COMMISSION
FTC Action Stops Massive Payday Loan Fraud Scheme Defendants Agree to be Banned from Consumer Lending

The operators of a payday lending scheme that allegedly bilked millions of dollars from consumers by trapping them into loans they never authorized will be banned from the consumer lending business under settlements with the Federal Trade Commission.

The settlements stem from charges the FTC filed last year alleging that Timothy A. Coppinger, Frampton T. Rowland III, and their companies targeted online payday loan applicants and, using information from lead generators and data brokers, deposited money into those applicants’ bank accounts without their permission. The defendants then withdrew reoccurring “finance” charges without any of the payments going to pay down the principal owed. The court subsequently halted the operation and froze the defendants’ assets pending litigation.

According to the FTC’s complaint, the defendants told consumers they had agreed to, and were obligated to pay for, the unauthorized “loans.” To support their claims, the defendants provided consumers with fake loan applications or other loan documents purportedly showing that consumers had authorized the loans. If consumers closed their bank accounts to stop the unauthorized debits, the defendants often sold the “loans” to debt buyers who then harassed consumers for payment.

The defendants also allegedly misrepresented the loans’ costs, even to consumers who wanted the loans. The loan documents misstated the loan’s finance charge, annual percentage rate, payment schedule, and total number of payments, while burying the loans’ true costs in fine print. The defendants allegedly violated the FTC Act, the Truth in Lending Act, and the Electronic Funds Transfer Act.

Under the proposed settlement orders, the defendants are banned from any aspect of the consumer lending business, including collecting payments, communicating about loans, and selling debt. They are also permanently prohibited from making material misrepresentations about any good or service, and from debiting or billing consumers or making electronic fund transfers without their consent.

The orders extinguish any consumer debt the defendants are owed, and bar them from reporting such debts to any credit reporting agency, and from selling or otherwise benefiting from customers’ personal information.

The defendants are Coppinger and his companies, CWB Services LLC, Orion Services LLC, Sandpoint Capital LLC, Sandpoint LLC, Basseterre Capital LLC, Basseterre Capital LLC, Namakan Capital LLC, and Namakan Capital LLC, and Rowland and his companies, Anasazi ervices LLC, Anasazi Group LLC, Vandelier Group LLC, St. Armands Group LLC,; Longboat Group LLC, doing business as Cutter Group, and Oread Group LLC, d/b/a Mass Street Group.

The settlement orders impose consumer redress judgments of approximately $32 million and $22 million against Coppinger and his companies and Rowland and his companies, respectively. The judgments against Coppinger and Rowland will be suspended upon surrender of certain assets. In each case, the full judgment will become due immediately if the defendants are found to have misrepresented their financial condition.

The Commission vote approving the proposed stipulated final orders was 5-0. The documents were filed in the U.S. District Court for the Western District of Missouri. The proposed orders are subject to court approval.

NOTE: Stipulated final orders have the force of law when approved and signed by the District Court judge.

FTC ALERTS RETAILERS REGARDING ATHLETIC MOUTHGUARD PROTECTION CLAIMS

FROM:  U.S. FEDERAL TRADE COMMISSION 

FTC Alerts Major Retailers to Concerns About Concussion Protection Claims for Athletic Mouthguards Made on Websites

Staff of the Federal Trade Commission has sent letters to five major retailers, alerting them to concerns about whether there is adequate substantiation for concussion-protection claims made for athletic mouthguards sold on their web sites.

“Given all of the news reports in the past few years about concussions, retailers should be vigilant in reviewing claims made for products they are selling for young athletes,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection.

According to the letters, making an objective claim for a product without a reasonable basis to support the claim is deceptive, and “competent and reliable” scientific evidence is generally needed to substantiate health-related claims.  The letters point out that retailers, as well as product manufacturers, can be liable for violating the FTC Act if they disseminate false or unsubstantiated claims.

Each letter identifies a mouthguard on the retailer’s website for which a concussion protection claim is made.  The letter then discusses the FTC’s 2012 case against mouthguard manufacturer Brain-Pad Inc., and recommends that the retailer review its website to ensure that it is not making unsupported concussion protection claims.  The letter also suggests that the retailer contact the product manufacturer to inquire about the substantiation for concussion protection claims, and says that the staff plans to revisit their website in 90 days.

This is the third set of warning letters the FTC has sent regarding concussion protection claims.  In November 2012, after the order in the Brain-Pad case became final, agency staff sent out warning letters to 18 other manufacturers of sports equipment, advising them of the Brain-Pad settlement and warning them that they might be making deceptive concussion protection claims for their products.  Letters to almost a dozen additional manufacturers were subsequently sent out over the next 18 months.

The FTC also testified before a Congressional subcommittee last May, noting that as awareness of the danger of concussions has grown, manufacturers have started making concussion-protection claims for an increasing array of sports-related products.

For more information about concussions, see: Concussion and Mild Brain Traumatic Injury on the website of the Centers for Disease Control and Prevention.

The FTC is a member of the National Prevention Council, which provides coordination and leadership at the federal level regarding prevention, wellness, and health promotion practices.  These letters advance the National Prevention Strategy’s goal of increasing the number of Americans who are healthy at every stage of life.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them.

FTC CONTINUES FIGHT AGAINST BUSINESSES INVOLVED WITH OFFERING PHONY MORTGAGE RELIEF

FROM:  U.S. FEDERAL TRADE COMMISSION 

Federal and State Agencies Stop Phony Mortgage Relief Schemes

FTC Brings Six Actions Against Scams That Allegedly Preyed on Homeowners with Operation Mis-Modification

The Federal Trade Commission has taken action against six mortgage relief operations charging that defendants preyed on distressed homeowners by misrepresenting that they typically could lower homeowners’ mortgage payments and interest rates or prevent foreclosure, and illegally charging advance fees. In each case, the FTC has sought an order stopping the illegal practices and freezing the defendants’ assets pending the outcome of the litigation.

The FTC’s actions are part of a joint federal and state enforcement sweep, Operation Mis-Modification, with the Consumer Financial Protection Bureau, which brought charges against three other mortgage relief operations, as well as 15 state attorneys general and other state agencies, which announced 32 similar actions.

“Mortgage relief schemes like these target people who are already having financial problems and, all too often, inflict even further harm on them,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “We’re determined to stop operations that illegally charge up-front mortgage relief fees or make empty mortgage relief promises.”

In today’s announced actions, the FTC has charged the defendants in each operation with violating the FTC Act and the Mortgage Assistance Relief Services (MARS) Rule, now known as Regulation O.  The Rule bans mortgage foreclosure rescue and loan modification services from collecting fees until homeowners have a written offer from their lender or servicer that they deem acceptable.

Including the six cases announced today, the FTC has brought 48 actions against companies peddling fraudulent mortgage relief schemes since 2008.  These law enforcement actions have helped tens of thousands of consumers who were victims of these scams, and have prevented tens of thousands more from becoming victims.

Danielson Law Group. The FTC has alleged that these Utah-based defendants touted a success rate that exceeded 90 percent and enticed consumers to pay hefty advance fees ranging from $500 to $3,900 – falsely promising that attorneys would negotiate loan modifications with substantially reduced mortgage payments using their special relationships with lenders or mortgage analysis reports produced by a proprietary software program. The defendants also urged homeowners to stop paying their lenders, and falsely promised full refunds if they did not obtain a loan modification, according to the FTC.

At the request of the FTC, a U.S. district court temporarily halted the operation, which allegedly took more than $35 million from distressed homeowners, and some of the defendants have stipulated to preliminary injunction with an asset freeze.

FMC Counseling Services, Inc. The FTC has alleged that from at least February 2011, this Fort Lauderdale, Fla.-based operation made false claims that it was affiliated with the federal government’s Making Home Affordable assistance program, and that it would renegotiate consumers’ mortgages, reducing them by several hundred dollars. Deceptively using the Federal Deposit Insurance Corporation’s logo and doing business as the “Federal Debt Commission,” the “Federal Mortgage Marketplace,” and the “Federal Assistance Program,” the defendants promised consumers their mortgage modifications would be completed quickly or that they could provide free mortgage refinancing.  The defendants also told consumers to cease communications with their lenders, and to turn over their mortgage payments while refinancing was pending.  Collecting more than $600,000 in payments from hundreds of consumers, the defendants did nothing for consumers and failed to apply any funds received from consumers to their existing mortgages. As a result, many consumers lost their homes as well as their mortgage payments.  

At the request of the FTC, a U.S. district court temporarily halted the operation, and then entered a preliminary injunction with an asset freeze against all defendants.

Lanier Law. The FTC has alleged that from at least 2011, this Jacksonville, Fla.-based operation typically told consumers that they would get a loan modification or that their chances of getting one was 85 percent to 100 percent. The defendants typically collected an upfront fee of $1,000 to $4,000, or an ongoing monthly fee of $500 or more. In some cases, according to the FTC, they also told consumers not to pay their mortgages while their supposed loan modifications were pending, and that they would conduct an audit of consumers’ mortgage documents to find errors or fraud committed by the lender.

In addition to charging the Lanier defendants with violating the FTC Act and the Mortgage Assistance Relief Services Rule, the FTC also charged them with violating the Do Not Call Rule by calling consumers who were on the Do Not Call list, and by failing to buy the Do Not Call Registry in any state where they operated.

At the request of the FTC, a U.S. district court judge ordered the Defendants to stop making misrepresentations about loan modifications and froze defendants’ assets to preserve the possibility of providing redress to consumers.

Mortgage Relief Advocates. The FTC has alleged that from at least August 2010, this California-based operation sold fraudulent mortgage assistance services on its websites and through telemarketing. The defendants tout their supposedly good relationships with lenders, and falsely claim their “forensic” loan audits will uncover violations in the Truth in Lending Act in 80 percent of the loans reviewed, and that these supposed violations can be used as leverage in modifying mortgage loans and reversing foreclosures, according to the complaint. Charging an up-front fee of $1,000 to $3,200, the defendants are alleged to have rarely provided the promised mortgage relief. The FTC has requested that the court enter a temporary restraining order.

Home Relief Foundation. The FTC has alleged that from approximately October 2010 to December 2013, this Austin, Texas-based operation preyed on financially distressed homeowners nationwide by making false promises that because of their affiliation with attorneys, their affiliation with a government program, their knowledge of the industry, and their relationships with mortgage lenders, Home Relief Foundation would be able to lower consumers’ interest rates and monthly mortgage payments.  The defendants also allegedly told consumers to stop paying their mortgages – without disclosing that if they did so, consumers could face bankruptcy, risk losing their homes, or damage their credit ratings.  Charging advance fees ranging from $500 to $4,000, the defendants collected more than $500,000 during the course of their operation, according to the complaint.  

The defendants marketed their services mainly through websites they controlled, including homerelieffoundation.org, ghardinlaw.com, and patlonglaw.com.

At the request of the FTC, a U.S. district court judge ordered the Defendants to stop making misrepresentations about loan modifications and froze defendants’ assets.

CD Capital Investments. The FTC has alleged that from mid-2011, this Southern California-based operation often promised consumers would receive mortgage relief services within two to four months, and often claimed affiliation with the Obama Administration’s “Making Home Affordable Program,” with some other government entity, or with the consumer’s lender or servicer. They told some consumers they would receive a lower fixed-interest rate, a reduction in their mortgage payment, or a reduction in the principal balance of their mortgages, according to the complaint.

Telling consumers that lenders or servicers would not foreclose on their homes if they were in the process of obtaining a loan modification, and urging some not to pay their monthly mortgage payments or communicate with their lender or servicer, the defendants collected at over $1 million in revenues – by charging up-front fees of $495, supposedly to “process” the consumer’s application, and monthly fees that averaged about $399, for what they called “post application monitoring,” the FTC alleged.

Typically, consumers found that instead of getting mortgage relief, the defendants did not submit a loan modification application on their behalf, or the application was denied. Many consumers found themselves seriously delinquent and facing foreclosure, according to the complaint.   The FTC will seek a preliminary injunction to halt defendants’ practices during the pendency of the litigation.

For consumer information about avoiding mortgage and foreclosure rescue scams, see Home Loans.

The Danielson Law Group complaint names as defendants Philip Danielson, LLC, doing business as Danielson Law Group and DLG Legal; Foundation Business Solutions, LLC, , doing business as emerchant, LLC, and Full Biz Solutions; Linden Financial Group, LLC; Acutus Law, P.C., formerly known as Danielson Silva Attorneys at Law, P.C.; Direct Results Solutions, LLC; Strata G Solutions, LLC; Philip J. Danielson; Tony D. Norton; Sean J. Coberly; Tanya Hawkins, also known as Tonya L. Hawkins; and Chad E. VanSickle. The complaint also names April D. Norton as a relief defendant. The FMC Counseling Services, Inc. complaint names as defendants Jonathan L. Herbert and the six companies he controls: FMC Counseling Services, Inc., FMC Review Corporation, FMC Consultants Group, Inc., FDC Assoc Group Inc, FDC Business, Inc., and NDR Group, Inc. The Lanier Law complaint names as defendants Michael W. Lanier and the companies he controlled: Lanier Law, LLC, Fortress Law Group, LLC, Surety Law Group, LLP, and Liberty & Trust Law Group of Florida, LLC. The Mortgage Relief Advocates complaint names as defendants Mortgage Relief Advocates, LLC, National Forensic Loan Audit Servicers, LLC, Evertree LLC, Keystone Real Estate, LLC, Pablo Rodriguez, and Michael Rodriguez. The Home Relief Foundation complaint names as defendants John DiCristofalo, his wife Amanda DiCristofalo, and the company they controlled, Home Relief Foundation, Inc. The CD Capital Investments complaint names defendants CD Capital Investments, LLC, CD Capital, LLC, GDS Information Services, Inc, Christian D. Quezada, Mireya Duenas, and Gabriel Drews Stewart.

The Commission vote authorizing the staff to file the complaints and seek additional relief against defendants in all six cases was 5-0. The FTC filed the Danielson Law Group complaint and request for a Temporary Restraining Order (“TRO”) and Preliminary Injunction in the U.S. District Court for the District of Nevada.  On June 23, 2014, the court granted the FTC’s request for the TRO, and on July 3, 3014, some of the defendants stipulated to a Preliminary Injunction. The FTC filed the FMC Counseling Services, Inc. complaint and request for a TRO and a Preliminary Injunction in the U.S. District Court for the Southern District of Florida.  On July 7, 2014, the court granted the FTC’s request for a TRO.  On July 17, 2014, the court granted the FTC’s request for a Preliminary Injunction. The FTC filed the Lanier Law complaint and request for a TRO and a Preliminary Injunction in the U.S. District Court for the Middle District of Florida. On July 8, 2014, the court granted the FTC’s request for the TRO. The FTC filed the Mortgage Relief Advocates complaint and request for a TRO and a Preliminary Injunction in the U.S. District Court for the Central District of California. The FTC filed the Home Relief Foundation complaint and request for a Preliminary Injunction in the U.S. District Court for the Western District of Texas. On July 18, 2014, the court granted the FTC’s request for a Preliminary Injunction.  The FTC filed the CD Capital Investments complaint in the U.S. District Court for the Central District of California.

NOTE:  The Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest.  The complaint is not a finding or ruling that the defendant has actually violated the law.  The cases will be decided by the court.      

AUTO LENDER SETTLES FTC CHARGES OF CONSUMER HARASSMENT BY PAYING $5,5 MILLION

FROM:  FEDERAL TRADE COMMISSION 
Auto Lender Will Pay $5.5 Million to Settle FTC Charges It Harassed Consumers, Collected Amounts They Did Not Owe

A national subprime auto lender will pay more than $5.5 million to settle Federal Trade Commission charges that the company used illegal tactics to service and collect consumers’ loans, including collecting money consumers did not owe, harassing consumers and third parties, and disclosing debts to friends, family, and employers.

Consumer Portfolio Services, Inc. (CPS), headquartered in Irvine, Calif., agreed to refund or adjust 128,000 consumers’ accounts more than $3.5 million and forebear collections on an additional 35,000 accounts to settle charges the company violated the FTC Act. CPS will pay another $2 million in civil penalties to settle FTC charges that the company violated the Fair Debt Collection Practices Act (FDCPA) and the Fair Credit Reporting Act (FCRA)’s Furnisher Rule.

“At the FTC, we hold loan servicers responsible for knowing their legal obligations and abiding by them,” said Jessica Rich, director, FTC’s Bureau of Consumer Protection. “The law is very clear: Loan servicers can’t charge consumers more than they owe. And they can’t threaten and harass consumers about delinquent debts.”

The order settling the charges requires CPS to change its business practices to comply with the requirements of the appropriate laws. In addition, the company is required to establish and maintain a comprehensive data integrity program to ensure the accuracy, integrity and completeness of its loan servicing processes, and the data and other information it services, collects or sells. CPS must also provide the FTC with periodic independent assessments of its data integrity program for 10 years.

According to the FTC’s complaint, CPS’ loan-servicing violations include:

Misrepresenting fees consumers owed in collection calls, monthly statements, pay-off notices, and bankruptcy filings;
Making unsubstantiated claims about the amounts consumers  owed;
Improperly assessing and collecting fees or other amounts;
Unilaterally modifying contracts by, for example, increasing principal balances;
Failing to disclose financial effects of loan extensions;
Misrepresenting that consumers must use particular payment methods requiring service fees; and
Misrepresenting that the company audits verified consumer accounts balances.
The company’s collection violations include disclosing the existence of debts to third parties; calling consumers at work when not permitted or inconvenient; calling third parties repeatedly with intent to harass; making unauthorized debits from consumer bank accounts; falsely threatening car repossession; and deceptively manipulating Caller ID. Because for many of its accounts CPS is a creditor, the complaint charges these practices violated Section 5 of the FTC Act. For those accounts where CPS is a debt collector, the complaint charges these practices violated the FDCPA.

CPS is also charged with failure to establish and implement reasonable written procedures and failure to reasonably investigate and respond timely to consumer disputes under the Furnisher Rule.

Under the order, the company will begin sending refunds to consumers and adjusting affected account balances within 90 days. Consumers with questions about their elgibility for a refund or account adjustment should contact CPS directly via telephone at 1-888-806-2367, email FTCsettlement@consumerportfolio.com, or visit the company’s website.

The FTC provides information for businesses regarding debt collection and the Furnisher Rule. For consumers, the FTC has resources on credit and loans and dealing with debt.

The Commission vote to authorize the staff to refer the complaint to the Department of Justice, and to approve the proposed consent decree, was 4-0-1, with Commissioner Terrell McSweeny not participating. The DOJ filed the complaint and proposed consent decree on behalf of the Commission in the Central District of California on May 28, 2014. The proposed consent decree is subject to court approval.

NOTE: The Commission authorizes the filing of a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. Consent decrees have the force of law when signed by the District Court judge.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them.

FDIC, SALLIE MAE SETTLE DECEPTIVE PRACTICES ALLEGATIONS RELATED TO STUDENT LOANS

FROM:  U.S. FEDERAL DEPOSIT INSURANCE CORPORATION 

The Federal Deposit Insurance Corporation (FDIC) today announced a settlement with Sallie Mae Bank, Salt Lake City, Utah, and Navient Solutions, Inc. (formerly known as Sallie Mae, Inc.), subsidiaries of SLM Corporation and Navient Corporation, respectively, and herein collectively referred to as Sallie Mae, for unfair and deceptive practices related to student loans in violation of Section 5 of the Federal Trade Commission Act (Section 5) and for violations of the Servicemembers Civil Relief Act (SCRA).

This action results from an examination of Sallie Mae by the FDIC regarding Sallie Mae's compliance with federal consumer protection statutes, including Section 5 and SCRA, and a companion investigation by the Department of Justice (DOJ) related to the treatment of servicemembers. As part of the settlement, Sallie Mae stipulated to the issuance of Consent Orders, Orders for Restitution, and Orders to Pay Civil Money Penalty (collectively, FDIC orders). The FDIC orders require these entities to pay civil money penalties totaling $6.6 million, to pay restitution of approximately $30 million to harmed borrowers and to fund a $60 million settlement fund with the DOJ to provide remediation to servicemembers. The DOJ has also taken separate action against the entities with regard to violations of the SCRA.

The FDIC determined that Sallie Mae violated federal law prohibiting unfair and deceptive practices in regards to student loan borrowers through the following actions:

Inadequately disclosing its payment allocation methodologies to borrowers while allocating borrowers' payments across multiple loans in a manner that maximizes late fees; and Misrepresenting and inadequately disclosing in its billing statements how borrowers could avoid late fees. The FDIC determined that Sallie Mae violated federal laws regarding the treatment of servicemembers (SCRA and Section 5) through the following actions:

Unfairly conditioning receipt of benefits under the SCRA upon requirements not found in the Act;
Improperly advising servicemembers that they must be deployed to receive benefits under the SCRA;
Failing to provide complete SCRA relief to servicemembers after having been put on notice of these borrowers' active duty status.

In addition to the payment of restitution to harmed borrowers and a civil money penalty, the FDIC orders require Sallie Mae to take affirmative steps to ensure that disclosures regarding payment allocation and late fee avoidance are clear and conspicuous, that servicemembers are properly treated under the SCRA, and that all residual violations be remedied to ensure compliance with applicable laws.

"JERK.COM" OPERATORS CHARGED BY FTC WITH DECEIVING CONSUMERS, HAVESTING PERSONONAL INFORMATION

FROM:  FEDERAL TRADE COMMISSION 

FTC Charges Operators of “Jerk.com” Website With Deceiving Consumers
Company Took Information from Facebook to Label Millions a “Jerk” or “Not a Jerk”

The Federal Trade Commission charged the operators of the website “Jerk.com” with harvesting personal information from Facebook to create profiles labeling people a “Jerk” or “not a Jerk,” then falsely claiming that consumers could revise their online profiles by paying $30. According to the FTC’s complaint, between 2009 and 2013 the defendants, Jerk, LLC and the operator of the website, John Fanning, created Jerk.com profiles for more than 73 million people, including children.

In its complaint, the FTC charges that the defendants violated the FTC Act by misleading consumers that the content on Jerk.com had been created by other Jerk.com users, when in fact most of it had been harvested from Facebook; and by falsely leading consumers to believe that by paying for a Jerk.com membership, they could access “premium” features that could allow them to change their “Jerk” profile.

The FTC is seeking an order barring the defendants’ deceptive practices, prohibiting them from using the personal information they improperly obtained, and requiring them to delete the information.

 “In today’s interconnected world, people are especially concerned about their reputation online, and this deceptive scheme was a brazen attempt to exploit those concerns,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection.

According to the FTC’s complaint, Jerk.com profiles often appeared in search engine results when consumers searched for an individual’s name.  Upon viewing their photos on Jerk.com, many believed that someone they knew had created their Jerk.com profile. Jerk reinforced this view by representing that users created all the content on Jerk.

But in reality, the defendants created the vast majority of the profiles by misusing personal information they improperly obtained through Facebook, the FTC alleged. They registered numerous websites with Facebook and then allegedly used Facebook’s application programming interfaces to download the names and photos of millions of Facebook users, which they in turn used to create nearly all the Jerk.com profiles.

In addition to buttons that allowed users to vote on whether a person was a “Jerk” or not, Jerk profiles included fields in which users could enter personal information about the subject or post comments about them. In some cases, the complaint alleges, the profile comment fields subjected people to derisive and abusive comments, such as, “Omg I hate this kid he\’s such a loser,” and, “Nobody in their right mind would love you … not even your parents love [you].”

The profiles also included millions of photos, including photos of children and photos that consumers claim they had designated on Facebook as private, the FTC complaint alleges. Some of them featured intimate family moments, including children bathing and a mother nursing her child.

The defendants also told consumers they could “use Jerk to manage your reputation and resolve disputes with people who you are in conflict with,” according to the FTC’s complaint. They allegedly charged consumers $25 to email Jerk.com’s customer service department, and also falsely told consumers that if they paid $30 for a website subscription, they could access “premium features,” including the ability to dispute information posted on Jerk.com, and receive fast notifications and special updates. But according to the FTC, in many cases, consumers who paid the customer service or subscription fee often got nothing in return.

The Commission vote to issue the administrative complaint was 4-0. The evidentiary hearing is scheduled to begin before an administrative law judge at the FTC on January 27, 2015.

NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The issuance of the administrative complaint marks the beginning of a proceeding in which the allegations will be tried in a formal hearing before an administrative law judge.

FTC TESTIFIES TO SENATE COMMITTEE REGARDING DATA SECURITY

FROM:  FEDERAL TRADE COMMISSION 
FTC Testifies on Data Security Before Senate Homeland Security and Governmental Affairs Committee
Commission Renews Call for Data Security Legislation

In testimony before Congress today, the Federal Trade Commission provided an update on its efforts to protect consumers’ privacy in the face of growing data breaches and renewed its call for data security legislation.

Testifying on behalf of the Commission before the Senate Committee on Homeland Security and Governmental Affairs, Chairwoman Edith Ramirez told lawmakers that the Commission believed that as more data breaches are revealed, the risk to consumers and businesses becomes clear.

“Consumers’ data is at risk,” the testimony states. “Recent publicly announced data breaches remind us that hackers and others seek to exploit vulnerabilities, obtain unauthorized access to consumers’ sensitive information, and potentially misuse it in ways that can cause serious harm to consumers as well as businesses.”

The testimony highlights the Commission’s wide-ranging efforts in the data security arena, including its enforcement of the FTC Act as well as specific statutes such as the Fair Credit Reporting Act, Children’s Online Privacy Protection Act, and the Gramm-Leach-Bliley Act to encourage companies to make data security a priority. The Commission has settled more than 50 such cases alleging that companies took inadequate measures to protect consumer data.  The testimony calls attention to recent settlements with Fandango and Credit Karma as part of the Commission’s effort to encourage companies to adopt security in the design of their products.

In addition, the testimony outlines the Commission’s policy initiatives related to data security issues, including workshops, seminars and reports on a wide variety of topics that affect the collection, use and security of consumers’ personal information. The testimony also notes the Commission’s ongoing efforts to educate consumers and provide guidance to businesses about issues related to data security.

In calling for legislation, the Commission’s testimony recommends that Congress strengthen its existing authority governing data security tools, and that it require companies in appropriate circumstances to notify consumers affected by a data breach. Specifically, the testimony calls for authority to seek civil penalties to help deter unlawful conduct, rulemaking authority under the Administrative Procedures Act, and jurisdiction over non-profit entities, which are not currently subject to FTC oversight.

The Commission vote approving the testimony and its inclusion in the formal record was 4-0.

FTC GOES AFTER AUTO DEALERS FOR FALSE ADVERTISING

FROM:  FEDERAL TRADE COMMISSION 
FTC Announces Sweep Against 10 Auto Dealers
‘Operation Steer Clear’ Drives Home That Auto Ads Must Be Truthful

The Federal Trade Commission announced today that nine auto dealers agreed to settle deceptive advertising charges, and the agency is taking action against a 10th dealer, in a nationwide sweep focusing on the sale, financing, and leasing of motor vehicles.

According to the complaints, the dealers made a variety of misrepresentations in print, Internet, and video advertisements that violated the FTC Act, falsely leading consumers to believe they could purchase vehicles for low prices, finance vehicles with low monthly payments, and/or make no upfront payment  to lease vehicles. One dealer even misrepresented that consumers had won prizes they could collect at the dealership.

“Buying or leasing a car is a big deal, and car ads are an important source of information for serious shoppers,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “Dealers’ ads need to spell out costs and other important terms customers can count on. If they don’t, dealers can count on the FTC to take action.”

‘Operation Steer Clear’ is the latest effort from the FTC to protect consumers in the auto marketplace. The dealerships that settled are charged as follows:

California

Casino Auto Sales of La Puente, Calif., and Rainbow Auto Sales, of South Gate, Calif., allegedly violated the FTC Act by deceptively advertising that consumers could purchase vehicles at specific low prices when, in fact, the price was $5,000 higher. Both dealers’ ads involved a mix of English and Spanish. Honda of Hollywood, Los Angeles, and Norm Reeves Honda of Cerritos, Calif., violated the FTC Act by deceptively advertising that consumers could pay $0 up-front to lease a vehicle when, in fact, the advertised amounts excluded substantial fees and other amounts. The ads also allegedly violated the Consumer Leasing Act (CLA) and Regulation M, by failing to disclose certain lease related terms. Norm Reeves Honda’s ads also allegedly violated the Truth in Lending Act (TILA) and Regulation Z, by failing to disclose certain credit related terms.

Georgia

Nissan of South Atlanta of Morrow, Ga., allegedly violated the FTC Act by deceptively advertising that consumers could finance a vehicle purchase with low monthly payments when, in fact, the payments were temporary “teasers” after which consumers would owe a different amount. The ads also allegedly violated TILA and Regulation Z, by failing to disclose certain credit related terms.

Illinois

Infiniti of Clarendon Hills of Clarendon Hills, Ill., allegedly violated the FTC Act by deceptively advertising that consumers could pay $0 up-front to lease a vehicle when, in fact, the advertised amounts excluded substantial fees and other amounts. The ads also allegedly violated the CLA and Regulation M, by failing to disclose certain lease related terms.

North Carolina

Paramount Kia of Hickory, N.C., allegedly violated the FTC Act by deceptively advertising that consumers could finance a purchase with low monthly payments when, in fact, the payments were temporary “teasers” after which the consumer would owe a much higher amount, by several hundred dollars. The ads also allegedly violated the TILA and Regulation Z, by failing to clearly and conspicuously disclose certain credit related terms.

Michigan

Fowlerville Ford of Fowlerville, Mich., allegedly violated the FTC Act by sending mailers that deceptively claimed consumers had won a sweepstakes prize, when, in fact, they had not. Some of their ads also allegedly violated TILA and Regulation Z, by failing to disclose certain credit related terms.

Texas

Southwest Kia companies, including New World Auto Imports, Dallas, Texas, New World Auto Imports of Rockwall, Rockwall, Texas, and Hampton Two Auto Corporations, Mesquite, Texas, allegedly violated the FTC Act by deceptively advertising that consumers could purchase a vehicle for specific low monthly payments when, in fact, consumers would owe a final balloon payment of over $10,000. The companies also allegedly deceptively advertised that consumers could drive home a vehicle for specific low up-front amounts and low monthly payments when, in fact, the deal was a lease and they would owe substantially more up-front. The ads also allegedly violated the CLA and Regulation M, by failing to disclose certain lease related terms, and the TILA and Regulation Z, by failing to disclose certain credit related terms.

The proposed consent orders settling the FTC’s charges in the nine cases are designed to prevent the dealerships from engaging in similar deceptive advertising practices in the future. The orders prohibit the dealerships from misrepresenting in any advertisement for the purchase, financing, or leasing of motor vehicles the cost of leasing a vehicle, the cost of purchasing a vehicle with financing, or any other material fact about the price, sale, financing, or leasing of a vehicle. When relevant, the proposed consent orders also address the alleged TILA and CLA violations by requiring the dealerships to clearly and conspicuously disclose terms required by these credit and lease laws. In the case where the dealerships misrepresented that consumers had won a prize, the proposed order also prohibits misrepresenting material terms of any prize, sweepstakes, giveaway, or other incentive.

The FTC would like to thank the Los Angeles Department of Consumer Affairs for its assistance with multiple investigations in California, and the Michigan Department of Attorney General for its assistance with the investigation in Michigan.

The Commission votes to accept the packages containing the nine proposed consent orders and complaints for public comment were 4-0. The agreements will be subject to public comment for 30 days, beginning today and continuing through Feb. 10, 2014, after which the Commission will decide whether to make the proposed consent orders final. Submit a comment electronically:

Casino Auto Sales
Honda of Hollywood
Fowlerville Ford
Infiniti of Clarendon Hills
Nissan of South Atlanta
Norm Reeves Honda Superstore
Paramount Kia
Rainbow Auto Sales
Southwest Kia
Comments in paper form should be mailed or delivered to: Federal Trade Commission, Office of the Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue, N.W., Washington, DC 20580.

In addition, the FTC issued an administrative complaint against Courtesy Auto Group of Attleboro, Mass. The FTC alleges the dealership violated the FTC Act by deceptively advertising that consumers can lease a vehicle for $0 down and specific monthly payments when, in fact, the advertised amounts exclude substantial fees. The ads also allegedly violate the CLA and Regulation M, by failing to disclose or clearly and conspicuously disclose certain lease related terms.

The Commission vote to issue the administrative complaint was 4-0.