FTC WARNS CONSUMERS ABOUT SCAMS USING FAKE GOVERNMENT AFFILIATION AS MEANS TO ILLICIT MONEY

FROM:  U.S. FEDERAL TRADE COMMISSION 

FTC Warns Against Government Imposter Scams

Can you spot a government imposter?

Even if your phone’s caller ID says “FTC” or “IRS,” or shows Washington, DC’s “202” area code, it could still be a scam. Scammers know how to show fake information on caller ID.

The Federal Trade Commission is warning consumers about scammers who pretend they’re with the government to scare you into sending money. They say you owe taxes or some other debt, and tell you to put money on a prepaid debit card and tell them the number — something no government agency would ask you to do.

Others say you’ve won big money in a sweepstakes the FTC or some other agency is supervising, and that the money will be yours when you pay for shipping, taxes, or some other expense. But it’s just phony baloney. Federal government agencies will never ask you to send money for prizes.

"YOUR BABY CAN READ" DEFENDANTS SETTLE FTC CHARGES OF MAKING BASELESS CLAIMS

FROM:  U.S. FEDERAL TRADE COMMISSION 

Defendants Settle FTC Charges Related to “Your Baby Can Read” Program

Your Baby Can Read creator, Dr. Robert Titzer, and his company, Infant Learning, Inc. d/b/a The Infant Learning Company have settled charges that they made baseless claims about the effectiveness of the Your Baby Can Read program and misrepresented that scientific studies proved the claims.

The program was widely touted in infomercials and on the Internet, and used videos, flash cards, and lift-a-flap books that supposedly taught children as young as nine months old how to read. Two of the four defendants, Hugh Penton, Jr. and Your Baby Can LLC, named in the FTC's 2012 complaint previously settled with the FTC.

The stipulated final order announced today prohibits Titzer and his company from making any unsubstantiated claims about the performance or efficacy of any product that teaches reading. It also prohibits them from using the term “Your Baby Can Read,” bars them from misrepresenting the results of any tests or research, and prohibits Titzer from endorsing any product unless he has a reasonable basis for the claims made. Finally, the order imposes two monetary judgments against Titzer and his company totaling more than $185 million, which will be suspended after he pays $300,000.

“Marketers and expert endorsers must have adequate substantiation for the claims they make, and the FTC will continue to pursue those who fail to abide by this basic rule,” said Jessica Rich, Director of the Commission’s Bureau of Consumer Protection.

According to the FTC’s 2013 amended complaint, beginning in 2008 the marketers of Your Baby Can Read sold the program to parents and grandparents of children between three months and five years old, directly via a toll-free number and through websites, charging about $200 for each kit, and earning more than $185 million.

The amended complaint alleged the defendants failed to have competent and reliable scientific evidence that babies can learn to read using the Your Baby Can Read program, or that children who used the program can read books such as Charlotte’s Web or Harry Potter by age three or four. The amended complaint also charged Titzer with making deceptive expert endorsements for the program.

The Commission vote approving the settlement was 5-0. The FTC filed the proposed final order in the U.S. District Court for the Southern District of California on August 18, 2014, and the court entered it the next day.

NOTE: Stipulated 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 STAFF REPORT ON MOBILE SHOPPING APPS FINDS DISCLOSURES LACKING

FROM:  U.S. FEDERAL TRADE COMMISSION 

Staff Report on Mobile Shopping Apps Found Disclosures to Consumers Are Lacking

Many Apps Fail to Provide Information On Payment Dispute Mechanisms, Privacy

A new staff report issued by the Federal Trade Commission finds that many mobile apps for use in shopping do not provide consumers with important information – such as how the apps manage payment-related disputes or handle consumer data – prior to download.

The report, “What’s the Deal? An FTC Study on Mobile Shopping Apps,” looked at some of the most popular apps used by consumers to comparison shop, collect and redeem deals and discounts, and pay in-store with their mobile devices. The report builds on the findings of the Commission’s 2012 workshop on mobile payments and the report from that workshop, which raised concerns about consumers’ potential financial liability – as well as the privacy and security of their data – when using mobile payment services.

In this new report, FTC staff surveyed a total of 121 different shopping apps across the Google Play and Apple App Stores. The survey included 47 price comparison apps, which let consumers compare prices on a particular item in real-time; 50 “deal” apps, which provide consumers with coupons or discounts; and 45 in-store purchase apps, which enable consumers to use their phones to pay for goods they purchase in physical stores. Several apps were found in more than one category.

“As mobile apps become more central to the shopping experience, it’s important that consumers have meaningful information about how those apps work before they download them,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “Consumers should not be left in the dark about their potential liability for erroneous or unauthorized charges or about the way shopping apps handle their data.”

The report makes a number of recommendations to companies that provide mobile shopping apps to consumers:

1. Apps should make clear consumers’ rights and liability limits for unauthorized, fraudulent, or erroneous transactions.

The staff report found that, prior to download, the apps reviewed frequently failed to give consumers information about the dispute procedures and consumers’ potential liability in the event something goes wrong with a payment made through the app.

The report recommends that the developers of in-store purchase apps provide clear dispute resolution and liability limits information to consumers, particularly when using a stored value method to process payments, as transactions made using this method may lack the legal protections afforded by credit or debit card transactions.

2. Apps should more clearly describe how they collect, use, and share consumer data.

Privacy considerations are important in mobile commerce apps, the report notes, as the data collected is potentially sensitive. The report finds that a majority of the shopping apps across all three categories had privacy policies disclosing that the apps collected a wide array of information, ranging from consumers’ names and addresses to detailed information on consumers’ purchases, their Social Security numbers, and data provided about the consumers by third parties.

The report finds that the reviewed apps’ privacy disclosures often used vague language, reserving broad rights to collect, use, and share consumers’ information.  While almost all of the apps stated that they share personal data, 29 percent of price comparison apps, 17 percent of deal apps, and 33 percent of in-store purchase apps reserved the right to share users’ personal data without restriction, thus making it difficult for consumers to make informed decisions about whether to use the apps based on privacy considerations.

The report recommends that shopping apps clearly describe how they collect, use, and share consumer data. Making that information available will allow consumers to evaluate and compare apps based on how the apps handle their information.

3. Companies should ensure that their data security promises translate into sound data security practices.

The report also recommends that companies, whose apps promise consumer safeguards for their data, follow through on those promises.  Specifically, the report recognizes that technology advances found in smartphones can offer the potential for increased data security and encourages all companies to provide strong protections for the data they collect.

Beyond recommendations for companies, the report also urges consumers to closely examine the apps’ stated policies on issues like dispute resolution and liability limits, as well as privacy and data security and evaluate them in choosing which apps to use. The report also notes that when apps do not provide that information, consumers should consider using alternative apps, or in the case of missing dispute resolution policies, limit the dollar amount used to fund stored value accounts.

The report is part of the Commission’s work to ensure that consumers are fully protected in the growing mobile space, which has included workshops and other initiatives to study cutting edge issues in this area, along with a number of law enforcement cases.

The Commission vote to issue the staff report was 5-0.

FTC GETS COURT TO SHUT DOWN MOBILE CRAMMING OPERATION

FROM:  FEDERAL TRADE COMMISSION 

At FTC’s Request, Court Shuts Down Mobile Cramming Operation That Stuck Consumers with More Than $100 Million in Unauthorized Charges

Over a Million Consumers Were Crammed With Charges for Text Message “Services”

At the request of the Federal Trade Commission, a federal court has temporarily halted a mobile phone cramming scheme that deceptively piled more than $100 million in charges on consumers’ mobile phone bills without their permission. In its complaint, the FTC seeks permanently to shut down the operation and recover money lost by consumers.

The U.S. District Court for the Central District of California issued a temporary restraining order against six companies and six individual defendants behind the scheme, halting the operations and freezing their assets pending litigation.

“This scheme demonstrates the kind of widespread harm that mobile phone cramming can inflict on American consumers,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “It also shows why we’ve made it a priority to crack down on this problem.”

In its complaint, the FTC charged that the defendants used deceptive practices, including fake websites with bogus offers of “freebies” or gift cards, to trick consumers into providing their mobile phone numbers. The defendants then placed monthly subscription fees for a variety of “services” on consumers’ mobile phone bills without their authorization.

The practice, known as mobile cramming, relies on the fact that many consumers often don’t closely examine their monthly statements, or assume that charges are legitimate.

The “services” described in the complaint consisted of subscriptions for text messages sent to consumers’ mobile phones that contained short celebrity gossip alerts, “fun facts,” horoscopes, and other items.  The subscriptions typically cost consumers $9.99 or $14.99 per month and were set to renew automatically each month.

According to the FTC’s complaint, the process of disputing the charges was frustrating and time-consuming for consumers. Some consumers were crammed for multiple months before noticing the charges and, even after significant effort, were unable to obtain a full refund.

According to documents filed in court by the FTC, the defendants continued cramming charges on to consumers’ mobile phone bills even after wireless carriers terminated their billing privileges. For example, two mobile carriers terminated MDK’s billing privileges because of its high refund rates and its association with deceptive websites. In spite of that, MDK continued cramming through use of a fictitious business name.

The defendants in the case are MDK Media Inc.; Tendenci Media LLC; Mindkontrol Industries LLC; Anacapa Media LLC; Bear Communications LLC; Network One Commerce Inc.; Makonnen Demessow Kebede; Sarah Ann Brekke; Christopher Thomas DeNovellis; Wayne Calvin Byrd II; James Matthew Dawson; and Casey Lee Adkisson.

The FTC’s complaint alleges that the defendants violated the FTC Act, through their deceptive tactics and by unfairly billing consumers for unauthorized services.

In recent months, the FTC has brought a number of law enforcement actions in addition to policy and education activities designed to combat mobile cramming that are part of the Commission’s overall work to protect consumers in the mobile environment. Earlier this week, the Commission released a staff report with best practices for companies in the carrier billing industry to help prevent mobile cramming. The Commission voted 5-0 to authorize the staff to file the complaint.

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 case will be decided by the court.

.Contact Information
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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.      

MADE IN USA BRAND, LLC AGREES TO STOP BEING DECEPTIVE

FROM:  U.S. FEDERAL TRADE COMMISSION 

Made in USA Brand, LLC Agrees to Drop Deceptive Certification Claims
Company Claimed to Evaluate Made in USA Claims, but Instead Relied on Companies to Self Certify that Products Met Standard

A company that  provides a “Made in USA” certification seal to marketers has agreed to settle Federal Trade Commission charges that it deceived consumers by allowing companies to use the seal without either independently verifying that those companies’ products were made in the United States, or disclosing that the companies had certified themselves.

The company, Made in USA Brand, LLC, is required under the proposed settlement to stop its deceptive claims.

The FTC’s Enforcement Policy Statement on U.S.-Origin Claims provides that products advertised or labeled as “Made in the USA” must be “all or virtually all” made in the United States. Made in the USA Brand, LLC charges companies to use its certification mark and to be listed in a database of “certified” companies that comply with the FTC’s standard.
The Columbus, Ohio-based Made in the USA Brand, LLC charged $250 to $2,000 for a one-year license to use the certification mark, according to the FTC. But the company did not independently evaluate the products before certifying them, and had no procedures to determine whether marketers complied with the FTC’s Made in USA standard, according to the complaint.

In fact, the FTC charged that Made in the USA Brand has never rejected a company’s application to use its Certification Mark or terminated a company’s use of the mark. Instead, Made in the USA Brand, LLC awarded licenses to any company that self-certified that it was complying with the FTC’s standard.

“Seals can be very helpful when consumers purchase products based on claims that are difficult to verify – like the Made-in-the-USA claim,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “When marketers provide seals without any verification, or without telling consumers the seal is unverified, consumers are deceived and the value of all marketers’ seals is diminished.  This case makes it clear that the FTC will not let that happen.”

In a promotional flyer, Made in the USA Brand, LLC claimed:

“The Made in USA Brand Certification Mark provides a standard symbol for Made in USA product identification . . . When printed on labels by accredited manufacturers, consumers are able to identify at a glance which products are
made in the USA.”

“The Certification Mark is available to be downloaded by U.S. businesses that meet the accreditation standards based on the Federal Trade Commission’s regulations for complying with Made in USA origin claims.”

According to the complaint, Made in the USA Brand, LLC:

falsely advertised that it independently and objectively evaluated whether certified products met its accreditation standard.
made false or unsupported claims that companies listed in its database as certified marketers were in fact selling products that complied with the FTC’s Made in USA standard.
provided the companies it licensed with the means to deceive consumers into believing that the companies were marketing products that were made in the United States.
Under the proposed administrative order, respondent Made in the USA Brand, LLC, is prohibited from:

claiming that any products or companies meet its certification standard unless it either conducts an independent and objective evaluation, or discloses on its logo and all its promotional materials that companies and products are self-certified.
claiming that any product is made in the USA or in any other country unless the claim is true and supported by competent and reliable evidence, or – if the certification mark is used –unless it discloses that companies and products are self-certified.
providing the companies it certifies with the means to deceive consumers.
The Commission vote to accept the consent agreement package containing the proposed consent order for public comment was 5-0.

The FTC will publish a description of the consent agreement in the Federal Register shortly.  The agreement will be subject to public comment for 30 days, beginning today and continuing through August 22, 2014, after which the Commission will decide whether to make the proposed consent order final. Interested parties can submit written comments electronically or in paper form by following the instructions in “Supplementary Information” section of the Federal Register notice. Comments should be submitted electronically using the online form here.

Instructions for submitting comments in paper form are listed in the “Accessibility” portion of the form.

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.  When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $16,000.

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. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

Contact Information
MEDIA CONTACT:
Betsy Lordan
Office of Public Affairs

ASSETS FROZEN OF DEBT COLLECTOR ACCUSED OF USING LIES AND THREATS

FROM:  U.S. FEDERAL TRADE COMMISSION 

Court Halts Debt Collector’s Operations, Freezes Assets

Defendants Behind Buffalo, New York-based Operation Used Lies and Threats to Pursue Fraudulent Debt Collection Strategy, FTC and New York Attorney General Allege

At the request of the Federal Trade Commission and the New York Attorney General’s Office, a U.S. district court halted a Buffalo, NY-based debt collection operation, froze the operation’s assets, and appointed a temporary receiver to take over the defendants’ business pending trial.

In a joint complaint, the FTC and New York Attorney General charged the operation with using lies and threats against consumers in violation of federal and state law. The defendants misrepresented that consumers had committed check fraud or another criminal act; falsely threatened to arrest or imprison consumers, sue them, garnish their wages, or put a lien on their property; failed to back up their claims that consumers owed the debt; charged illegal fees; and improperly revealed consumers’ debts to third parties, according to the complaint.

Operating the scheme since February 2010, the defendants have collected at least $8.7 million dollars in payments for purported debts, according to the complaint. The joint complaint charged that the defendants’ tactics violated the Federal Trade Commission Act, the Fair Debt Collection Act and various New York state laws.

“These debt collectors continued to harass consumers and violate the law after the validity of the debt was called into question, and after the New York Attorney General’s office ordered them to stop,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “By working together with our state partners, we can leverage our resources to stop these illegal tactics.”

“All too often, innocent New Yorkers are relentlessly harassed by predatory, abusive debt collectors,” Attorney General Eric T. Schneiderman said. “My office, along with partners like the Federal Trade Commission, will keep fighting to protect hardworking consumers and put a stop to unfair financial bullying once and for all.”

Part of the FTC’s continuing crackdown on scams that target consumers in financial distress, the agencies have charged three individuals – Joseph C. Bella, III, Diane Bella, Luis A. Shaw – and 9 interrelated companies they control. Going by various names including National Check Registry, the operation began using another name – eCapital Services, LLC – to evade detection and continue its illegal behavior after signing an agreement with New York State authorities in October 2013 that prohibited it from violating federal and state debt collection laws, according to the complaint.

Also, according to the complaint, the defendants:

told one consumer in Washington State that they would have the “Washington County Police” issue a warrant for her arrest, and another serving in the military that they would bring an action against him under the Uniform Code of Military Justice;
said the only way to avoid arrest, imprisonment, lawsuits, wage garnishments, and seized assets would be to make an immediate payment over the phone;
continued to accuse consumers of check fraud and other crimes even after they produced evidence showing they didn’t owe the debt in question;
contacted friends, family members, and co-workers of consumers whom they claimed owed a debt, and in some cases, not only revealed the supposed debt but also said the consumers had committed check fraud, and would be arrested or imprisoned if the debt was not paid;
added an illegal $8 “processing fee” when consumers made payments on supposed debts over the phone;
failed to provide consumers with debt collection notices and disclosures that are required under state and federal law, making it difficult for consumers to determine whether they owed the debt, and how they could dispute its validity; and
continued trying to collect a debt from a consumer who had discharged the debt in bankruptcy.

In addition to Joseph and Diane Bella, Luis A. Shaw, National Check Registry, LLC, and eCapital Services, LLC, the complaint names as defendants Check Systems, LLC, Interchex Systems, LLC, Goldberg Maxwell, LLC, Morgan Jackson, LLC, Mullins & Kane, LLC, Buffalo Staffing, Inc., and American Mutual Holdings, Inc.

The Commission vote authorizing the staff to file the complaint was 5-0. The FTC and the New York Attorney General’s Office filed the complaint and the request for a temporary restraining order in the U.S. District Court for the Western District of New York on June 23, 2014. The court granted the plaintiffs’ request for a temporary restraining order with an asset freeze, the appointment of a receiver, immediate access to the business premises and limited discovery on June 24, 2014, and it approved a stipulated preliminary injunction on July 10, 2014.

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 case will be decided by the court.

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 SAYS IT IS AGGRESSIVELY COMBATING TELEPHONE SCAMS TARGETING SENIORS

FROM:  U.S. FEDERAL TRADE COMMISSION 

FTC Testifies on Efforts to Stop Phone Scams Before Senate Special Committee on Aging

In testimony before Congress today, the Federal Trade Commission described its work to fight telephone scams that harm millions of Americans, especially “grandparent” and other imposter scams where callers trick seniors into sending them money by pretending to be a friend or relative in distress or a representative of a government agency or a well-known company. The testimony outlined aggressive FTC law enforcement, as well as the agency’s efforts to educate consumers about these scams and to find technological solutions that will make it more difficult for scammers to operate and hide from law enforcement.

Testifying on behalf of the Commission before the Senate Special Committee on Aging, Lois Greisman, Associate Director of the FTC’s Division of Marketing Practices, said the FTC has brought more than 130 cases involving telemarketing fraud against more than 800 defendants during the past decade. The Commission has obtained judgments of more than $2 billion from the cases that have been resolved. Despite aggressive enforcement, the prevalence of phone scams remains unacceptably high – the testimony noted that the FTC receives tens of thousands of complaints about illegal phone calls every week, including imposter scams like the “grandparent scam.”

The testimony described the FTC’s interagency work, noting that since 2003, hundreds of fraudulent telemarketers have faced criminal charges and prison time as a result of FTC referrals to criminal law enforcement agencies. A U.S.-Canada operation, Project COLT, has led to 10 recent indictments of grandparent scammers, and information provided by the FTC has helped extradite and prosecute phone fraudsters. With the FTC’s assistance, Project COLT has recovered more than $26 million for victims of telemarketing fraud. In addition, the FTC has supported multiple prosecutions through a U.S.-Jamaica law enforcement task force, Project JOLT, including phone scams that targeted seniors and impersonated government agencies to promote fake lottery schemes.

The testimony outlined FTC education and outreach programs that reach tens of millions of people every year. Among them is the recently created “Pass It On” program that provides seniors with information, in English and Spanish, on a variety of scams targeting the elderly. The testimony also noted the agency’s work with the Elder Justice Coordinating Council to help protect seniors, and with the AARP Foundation, whose peer counselors provided fraud-avoidance advice last year to more than a thousand seniors who had filed complaints with the FTC about certain frauds, including lottery, prize promotion, and grandparent scams.

The testimony also described the FTC’s ongoing work to bring about technological changes that will make it more difficult for fraudsters to use the phone to scam consumers and to hide from law enforcement. Among these initiatives are an effort to make it harder for scammers to fake or “spoof” their caller ID information and the more widespread availability of technology that will block calls from fraudsters, essentially operating as a spam filter for the phone.

The Commission vote approving the testimony and its inclusion in the formal record was 5-0.

PAYDAY LOAN BROKER SCHEMERS SETTLE FTC CHARGES

FROM:  U.S. FEDERAL TRADE COMMISSION 

Phony Payday Loan Brokers Settle FTC Charges

Defendants Will Be Banned From Credit-Related Businesses and Surrender Rolls Royce, Ferrari, and Other Assets

The operators of a Tampa, Florida-based payday loan broker scheme have agreed to settle Federal Trade Commission charges that they falsely promised to help consumers get loans, but instead used consumers’ personal financial data to take money from their bank accounts without their consent.

Claiming to be affiliated with a network of 120 potential payday lenders, defendants Sean C. Mulrooney and Odafe Stephen Ogaga, and five companies they controlled, misrepresented that 80 percent of all applicants got loans within an hour, according to the FTC’s complaint. In reality, the defendants did not lend money to consumers, and there is no evidence that they helped anyone in obtaining a loan.

According to the complaint, the defendants used consumers’ personal financial information it had collected through its websites to withdraw $30 from the bank accounts of tens of thousands of consumers, without authorization and without providing anything of value in return.

“These defendants deceived consumers to get their sensitive financial data and used it to take their money,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “The FTC will continue putting a stop to these kinds of illegal practices.”

The proposed settlement bans the defendants from:

marketing or providing any credit-related products or services, including loans, prepaid credit cards, debt-relief services, and credit repair services;
collecting, selling, or buying consumers’ personal and financial information, except in order to process a specifically authorized transaction; and
processing transactions using remotely created checks or remotely created payment orders.
The settlement imposes a $6.2 million judgment, which is equal to the defendants’ ill-gotten gains. The settlement requires Ogaga to surrender nearly all his assets: $50,000 in cash, and proceeds from the sale of his 2011 Rolls Royce Ghost, 2007 Lexus LS460, and 2006 Ferrari. Once he surrenders these assets, the remainder of the judgment against Ogaga will be suspended. The judgment against Mulrooney is entirely suspended, due to his inability to pay.

Also under the settlement, the defendants are prohibited from misrepresenting the terms and conditions of any service or product they market, and from charging consumers for anything without their consent. The settlement also requires the defendants to dispose of customer information that they have already collected and not to use, disclose, or benefit from, and it.

For more consumer information on this topic, see Online Payday Loans.

In addition to Mulrooney and Ogaga, the complaint named Caprice Marketing LLC; NuVue Partners LLC; Capital Advance LLC; Loan Assistance Company LLC; and ILife Funding, LLC, formerly known as Guaranteed Funding Partners LLC.

The Commission vote approving the proposed stipulated final order was 5-0. The FTC filed the order in the U.S. District Court for the Northern District of Illinois, and the court entered it on July 1, 2014.

ROBOCALL/TEXT SPAM NETWORK RECEIVES ADDITIONAL CRAMMING CHARGE FROM FTC

FROM:  FEDERAL TRADE COMMISSION 

FTC Adds Mobile Cramming to Charges Against Text Spam and Robocall Network

Amended Complaint Charges Unwanted Cell Phone Billing and Adds Five Defendants

The Federal Trade Commission added new charges of mobile cramming to a complaint the agency previously filed against a group of scammers who allegedly sent millions of unwanted text messages and robocalls to consumers.

The amended complaint adds the mobile cramming charges to the Commission’s original complaint allegations that the operation used text messages promising free $1,000 gift cards and iPads as a way to deceive consumers into signing up for costly subscriptions and giving up personal information.

When consumers followed links in the spam text messages, they were prompted to enter personal information, including their mobile phone number.  The defendants told consumers that the personal information was necessary to ship them the free prize.  However, the defendants used the personal information for several other purposes, including placing robocalls to consumers.   Many consumers who entered their personal information allegedly were then prompted to “confirm” their mobile phone number and were then sent a text message telling them to enter a PIN number on the defendants’ website in order to “claim their prize.”

The amended complaint alleges that, in fact, by confirming their mobile phone number and entering the provided PIN, consumers were being signed up for unwanted premium text messaging services, resulting in a charge of $9.99 per month on their mobile phone bill. According to the FTC’s amended complaint, consumers were not given adequate notice that confirming their number would lead to monthly charges – this notice appeared only in small print at the bottom of the screen or in a separate hyperlinked page.

Two defendants, Burton Katz, also doing business as Polling Associates, Inc. and Boomerang International, LLC, and Jonathan Smyth, also doing business as Polling Associates, Inc., are accused of overseeing the mobile cramming operation along with the creators of the websites.

In addition to adding the defendants involved in the mobile cramming, the amended complaint also adds three new defendants to the case who were believed to be responsible for sending millions of spam text messages and operating the websites to which those messages would direct consumers. The additional defendants are Scott Modist, Joshua Greenberg and Gregory Van Horn. All three are named individually and as officers of Acquinity Interactive, LLC; Modist and Greenberg are also named as officers of 7657030 Canada, Inc.

The Commission vote to file the amended complaint was 5-0. The complaint was filed in the U.S. District Court for the Southern District of Florida.

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 case will be decided by the court.

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. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

COURT HALTS ACTIVITY RELATED TO ATTEMPTS TO COLLECT ALLEGED FAKE PAYDAY DEBT

FROM:   U.S. FEDERAL TRADE COMMISSION 
At the FTC’s Request, Court Halts Collection of Allegedly Fake Payday Debts

Defendants Vowed to Revoke Consumers’ Driver Licenses; Made Other Illegal Threats, FTC Alleges

At the request of the Federal Trade Commission, a U.S. district court has halted a Georgia-based operation from using deception and threats to collect $3.5 million in phantom payday loan “debts” that consumers didn’t owe pending trial. The court had previously ordered the defendants’ assets frozen to preserve the possibility that they could be used to provide redress to consumers, and appointed a receiver.

Norcross, Georgia resident John Williams and two companies he controls used a variety of false threats to bully consumers nationwide into paying supposed payday loan debts, the FTC charged. Williams; Williams, Scott & Associates, LLC; and WSA, LLC falsely claimed to be affiliated with federal and state agents, investigators, members of a government fraud task force, and other law enforcement agencies, and pretended to be a law firm, according to the FTC complaint. The defendants also allegedly told consumers their drivers’ licenses were going to be revoked, and that they were criminals facing imminent arrest and imprisonment.

The FTC alleges that many consumers the defendants contacted had inquired about a payday loan online at one time, and submitted contact information, which later found its way into the defendants’ hands.

“Many consumers in this case were victimized twice,” said Jessica Rich, Director of the Federal Trade Commission’s Bureau of Consumer Protection. “First when they inquired about payday loans online and their personal information was not properly safeguarded, and later, when they were harassed and intimidated by these defendants, to whom they didn’t owe any money.”

The FTC alleged that the defendants’ tactics violated the Federal Trade Commission Act and the Fair Debt Collection Practices Act. In addition to the deception and false threats,  the defendants violated federal law by telling consumers’ family members, employers, and co-workers about the debt; failing to identify themselves as debt collectors; using profanity; making repeated inconvenient or prohibited calls; failing to provide information in writing about the debt; and making unauthorized withdrawals from consumers’ bank accounts.

This is the FTC’s sixth recent case charging “phantom debt” scams with law violations.  Other cases include American Credit Crunchers, LLC, Broadway Global Master Inc., Pro Credit Group, Vantage Funding, also known as Caprice Marketing, and Pinnacle Payment Services, LLC.

For more consumer information on this topic, see Dealing with Debt.

The Commission vote authorizing the staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the Northern District of Georgia, Atlanta Division. On May 28, 2014 the court granted the FTC’s request for a temporary restraining order. It granted the FTC’s request for a preliminary injunction on June 19, 2014.

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 case will be decided by the court.

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 WARNS PEOPLE ABOUT PENSION ADVANCES

FROM:  FEDERAL TRADE COMMISSION 

If you’re trying to make ends meet, here’s a pitch that might catch your interest:

“Convert tomorrow’s pension checks into hard cash today.”

Sound tempting? Think again. The Federal Trade Commission, the nation’s consumer protection agency, advises consumers that pension advances, also known as pension sales, loans, or buyouts, come at a very steep price.

Most pension advances require you to sign over all or some of your monthly pension checks for five to 10 years. The lump sum payment you get in return is less than the pension payments you sign over, so you’re signing over money you need to live on. And pension advances often require retirees to buy a life insurance policy – with the pension advance company as the beneficiary – to insure that the repayments continue.

Pension Advances: Not So Fast

“Convert tomorrow’s pension checks into hard cash today.”
If you’re looking for a way to generate cash to make ends meet, a pitch like this may pique your interest. But before you sign on the dotted line, it’s important to know what you’re getting yourself into.


Pension advances, also known as pension sales, loans, or buyouts, require you to sign over all or some of your monthly pension checks for a period of time — typically five to 10 years. In return, you get a lump sum payment, less than the pension payments you sign over. So, unlike other types of cash advances or loans, taking out a pension advance means signing over money you need to live on.

Pension advances aren’t cheap: The transactions often include fees that can push the effective annual percentage rate (APR), the cost of credit on a yearly basis, over 100%. In addition, retirees often are required to buy a life insurance policy — with the pension advance company named as the beneficiary — to insure that the repayments continue.

Questions to Ask

If you’re considering a pension advance loan, get answers to the following questions:

Are you eligible? Depending on the type of pension you have, you may not be able to sign it over. It might be against the law. Check with your pension administrator for details.

What are the costs? Be aware of all costs and fees. Ask for the APR, which is based on several things, including the amount you borrow, the interest rate and credit costs you’re being charged, and the length of your contract. This information may not be disclosed in ads or contracts, so it’s important to ask and get it in writing. In addition, there may be other costs or fees, including commissions and life insurance.

Do you have to buy life insurance? Some pension advance companies may require you to buy a life insurance policy naming them as beneficiary. If you die before all the payments you assigned have been received, funds will be paid out from the life insurance policy to cover any remaining balance.

What are the tax implications? Getting a large lump sum can put you in a higher tax bracket. Consult with a tax advisor for information and advice.

Can you cancel the transaction? Maybe not. Some pension advance companies might not let you cancel once you’ve completed the deal. Make sure you ask the company about its cancellation policy, before you sign the contract, so you know what you’re getting into.

Are there complaints about the company? Your local consumer protection agency, state Attorney General's Office, and the Better Business Bureau can tell you whether any complaints have been filed about a company. Just keep in mind that a lack of complaints doesn’t mean the business is on the up-and-up. You may want to do an internet search with the name of the company and words like review, scam, or complaint. Look through several pages of search results. And check out articles about the company in newspapers, magazines, or online, as well.
Alternatives to Pension Advances

Before you decide to take an advance against your pension, weigh your options.

Consider a small loan from your credit union or a small loan company. Some banks may offer short-term loans for small amounts at competitive rates. A cash advance on a credit card also may be possible, but it may have a higher interest rate than other sources of funds: find out the terms before you decide. In any case, shop first and compare all available offers.

Shop for the offer with the lowest cost. Compare the APR and the finance charges, which includes loan fees, interest and other costs.

If you’re considering a pension advance because you’re having trouble paying your bills, contact your creditors or loan servicer as quickly as possible and ask for more time. Many may be willing to work with consumers whom they believe are acting in good faith. They may offer an extension on your bills; make sure to find out what the charges would be for that service — a late charge, an additional finance charge, or a higher interest rate.

Contact your local, non-profit consumer credit counseling service if you need help working out a debt repayment plan with creditors or developing a budget. These groups offer credit guidance to consumers in every state for no or low cost.

ALLEGED DEBT-COLLECTOR BULLY TO PAY $100,000 AND SURRENDER ASSETS

FROM:  U.S. FEDERAL TRADE COMMISSION 

FTC Continues Crack Down on Deceptive Debt Collection; Houston-based Defendants Agree to Stop Deceptive Fees and Practices

Owner to Pay $100,000, Surrender Assets, Including Luxury Motor Home

A Houston debt collection company, RTB Enterprises, Inc., which does business as Allied Data Corporation, and Raymond T. Blair, its president and sole shareholder, have agreed to a federal court order prohibiting them from the allegedly deceptive tactics they have been using to bully English and Spanish-speaking consumers into paying debts and unnecessary fees.

 According to a complaint filed by the Federal Trade Commission, the defendants violated the FTC Act and the Fair Debt Collection Practices Act by using false and deceptive methods to collect more than $1.3 million in so-called “convenience fees” and “transaction fees” from consumers who authorized payments by telephone. The defendants allegedly trained their collectors to deceive consumers into believing that payments were not accepted by U.S. mail and that the fees were unavoidable. In some instances, the fees were added to consumers’ accounts without their knowledge or consent, the FTC charged.

The FTC also alleged that the defendants’ collectors deceived both English and Spanish- speaking consumers by falsely claiming to speak for attorneys, falsely threatening to sue consumers who did not pay, and using deceptive schemes to coerce consumers into paying or providing their personal information.

“It’s illegal for debt collectors to lie, make false threats, use a false identity, or trick people into paying a debt or an unauthorized fee,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “The FTC will continue to protect consumers from deceptive or abusive debt collection practices, regardless of whether the deception or abuse occurs in English, Spanish, or any other language.”          

The federal court order imposes a penalty of $4 million, which will be partially suspended based on inability to pay once Blair surrenders assets totaling $100,000. The proposed order also requires Blair to relinquish a luxury motor home. The order prohibits Blair and his company from repeating any of the unfair or deceptive practices alleged in the complaint, and it requires them to truthfully disclose information about any fees they charge, and the steps consumers can take to avoid paying.

For consumer information about dealing with debt collectors, see Debt Collection.

The Commission vote authorizing the staff to file the complaint and approving the proposed federal court order was 5-0. The FTC filed the complaint and proposed order in the U.S. District Court for the Southern District of Texas, Houston Division on June 17, 2014.

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 proposed order has the force of law when approved and 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.

FTC SETTLES WITH ALLEGED HOME-BASED BUSINESS SERVICE PROVIDER MISCONDUCT

FROM:  U.S. FEDERAL TRADE COMMISSION 

Defendants Who Allegedly Took Millions from Consumers Trying to Launch Or Succeed in Home-Based Businesses Settle FTC Charges

Tax Club Defendants Will Surrender $15 Million for Return to Consumers

The Federal Trade Commission halted the allegedly deceptive practices of two schemes that targeted consumers hoping to succeed through home-based businesses. The defendants behind both operations have agreed to settlements that will prohibit future misconduct, and in the Tax Club case, they will surrender assets valued at more than $15 million.

The FTC cases against The Tax Club and American Business Builders are part of a federal-state crackdown on scams that falsely promise jobs and opportunities to “be your own boss.” In the Tax Club case, brought by the FTC and the New York and Florida Attorneys General, operators sold services they allegedly falsely claimed would help consumers’ home-based businesses succeed. The operators of American Business Builders allegedly sold a home-based business opportunity where consumers could earn income offering payment processing services, credit card terminals, and merchant cash advances to small businesses.

“Before you put money into a work-at-home business opportunity, ask questions to determine if it is legitimate,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection, adding, “We encourage consumers to read our consumer information to learn how to recognize schemes that promise more than they deliver.”

The Tax Club

According to the complaint filed in January 2013, The Tax Club called consumers and falsely claimed to be affiliated with companies that consumers had already bought services or products from. The complaint alleges that the defendants’ telemarketers pitched business development services such as business coaching services, corporate formation services, and credit development services, falsely claiming the services were essential to the success of consumers’ businesses. The complaint further alleges that after an initial sale, they called consumers numerous times to  sell more “essential” services, typically for several thousand dollars per service, with a large initial fee and recurring smaller monthly “membership” payments. Many of the services offered by the defendants were neither essential nor provided as promised, according to the complaint.

Under settlement orders announced today, the settling defendants are required to surrender assets valued at more than $15 million, and they are banned from selling business coaching services and work-at-home opportunities, subject to certain exemptions. They are also permanently prohibited from misrepresenting material facts about any product or service, selling or otherwise benefitting from consumers’ personal information, violating the Telemarketing Sales Rule, and failing to clearly disclose the seller’s identity, that the purpose of a call is to sell a good or service, and the nature of the good or service.

The order against Edward B. Johnson  also bans him from selling credit development, business planning, and merchant account processing services, and imposes a $115 million judgment that will be suspended upon surrender of certain assets valued at approximately $2.6 million. The assets to be turned over include bank and brokerage accounts, and proceeds from the sale of real and personal property. The full judgment will become due immediately if Johnson is found to have misrepresented his financial condition.

Under a separate settlement order, Brendon A. Pack, Michael M. Savage and all but one of the corporate defendants named in the complaint are also banned from selling credit development services. They are also prohibited from outbound telemarketing unless they have a consumer’s express written agreement to receive calls or they are fulfilling or providing services previously purchased by the consumer. The order imposes a $140 million judgment that will be suspended upon surrender of assets valued at approximately $13 million, including investment accounts and proceeds from the sale of numerous real properties. The full judgment will become due immediately if the defendants are found to have misrepresented their financial condition.

“As a result of this settlement, former Tax Club executives will be giving up a substantial chunk of their personal assets,” said New York Attorney General Eric Schneiderman. “Before turning over your hard-earned money to telemarketers, it’s important to make sure they have a reputation for delivering what they promise.” Florida Attorney General Pam Bondi concurred, stating, “While work-at-home careers are an attractive opportunity for many people, it is imperative that Florida consumers do their research and report any possible scams to my office.”

The Commission vote authorizing the staff to file the proposed stipulated final orders was

5-0. The orders were entered by the U.S. District Court for the Southern District of New York on June 2, 2014.

American Business Builders

According to an FTC complaint filed in November 2012, the American Business Builders defendants falsely claimed that, for a fee ranging from $295 to $495, consumers could make substantial income in several ways, including earning commissions on terminals sold or leased to merchants in consumers’ communities. They also sold sales leads and promised to conduct telemarketing campaigns that would generate customers and income. The defendants charged $10 per lead, with some consumers paying up to $40,000, but they failed to provide the promised customer leads for the consumers, and the consumers did not earn any income. The court subsequently halted the operation, froze its assets, and put the companies into receivership.

Under the settlements in the American Business Builders case, defendants are banned from selling business and work-at-home opportunities and related services. In addition to the business and work-at-home opportunity ban, the settlement orders permanently prohibit the defendants – American Business Builders LLC, UMS Group LLC,  United Merchant Services LLC, Unlimited Training Services LLC, Shane Michael Hanna, also known as Shane Michael Romeo, Stephen Spratt, Universal Marketing and Training LLC, and ENF LLC, also doing business as Network Market Solutions – from misrepresenting that consumers are likely to earn money and misrepresenting any material fact about a product or service. The defendants also are barred from selling or otherwise benefitting from consumers’ personal information, and failing to properly dispose of customer information.

The orders impose a judgment of more than $5.4 million, which will be suspended upon surrender of certain bank accounts and real and personal property, including a 2013 Cadillac Escalade ESV. The full judgment will become due immediately if the defendants are found to have misrepresented their financial condition.

The Commission vote authorizing the staff to file the proposed stipulated final orders was 5-0. The orders were entered by the U.S. District Court for the District of Arizona on May 19, 2014.

FTC TESTIFIES BEFORE SENATE ON DECEPTIVE CLAIMS IN THE WEIGHT-LOSS INDUSTRY

FROM:  U.S. FEDERAL TRADE COMMISSION 

FTC Testifies Before Senate Commerce Subcommittee on Agency Efforts to Combat Fraudulent and Deceptive Claims for Weight-Loss Products

The Federal Trade Commission testified before Congress about its ongoing efforts to combat fraudulent and deceptive claims for weight-loss products through law enforcement, media outreach, and consumer education.

Testifying on behalf of the FTC before the Committee on Commerce, Science, and Transportation, Subcommittee on Consumer Protection, Product Safety, and Insurance, Mary Engle, Associate Director for Advertising Practices at the Federal Trade Commission, said that amid an ongoing obesity epidemic – in which nearly 70 percent of U.S. adults are obese or overweight – the FTC’s most recent fraud study shows that more consumers were victims of fraudulent weight-loss claims than of any other specific fraud type covered by the survey.

The testimony also noted that despite consumer spending of $2.4 billion on weight-loss products and services last year, there is very little evidence that pills or supplements alone will cause sustained, meaningful weight loss – without changes to diet and lifestyle. According to the testimony, consumers are especially susceptible to weight-loss fraud, there is an enormous amount of money to be made in the diet industry, and fraudsters will continue to gravitate toward the money.

“The endless flood of unfounded claims being made in the weight-loss industry vividly illustrates the challenges we, and consumers, are up against,” the testimony stated.

The FTC’s program to combat fraud in the weight-loss industry includes:

Law enforcement: In the past 10 years, the FTC has brought 82 weight-loss-related law enforcement actions, and since 2010, it has collected nearly $107 million for consumer restitution. Early this year, the agency announced Operation Failed Resolution, targeting new weight-loss fads that include food additives, human hormones, skin creams and acai berries.

The Commission has also noted several disturbing developments in weight-loss advertising:

reliance on proprietary studies using erroneous or fabricated data.
marketers capitalizing on weight-loss fads propelled to popularity by trusted spokespeople such as one recent FTC case involving marketers of the Pure Green Coffee dietary supplement. Within weeks of an April 2012 Dr. Oz Show touting green coffee bean extract, these marketers were making overblown claims about the supplement online, such as, “lose 20 pounds in four weeks” and “lose 20 pounds and two to four inches of belly fat in two to three months.”
Media Outreach: To combat the promotion of fraudulent weight-loss products in respected media outlets, the FTC recently issued a “Gut Check” reference guide that advises media outlets on seven claims in weight-loss ads that experts say simply cannot be true and that should cause media outlets to think twice about running the ads.

Consumer Education: Recent FTC brochures, articles, and blog posts geared toward consumers hammer home the message that the only thing they will lose is money if they fall for ads promising quick weight loss without diet or exercise. The FTC also has created teaser websites designed to reach people who are surfing online for weight-loss products.

Today, the agency is also launching a new consumer video and game – the FTC Weight Loss Challenge. The Challenge is an interactive game designed to help consumers think critically about weight-loss products and claims. Available in English and Spanish, the game separates fact from fiction in ads for products touting fast weight loss without the need for diet and exercise.

The Commission vote approving the testimony and its inclusion in the formal record was 5-0.

FTC ANNOUNCES $10 MILLION SETTLEMENT IN ALLEGED MOBILE CRAMMING SCHEME CASE

FROM:  U.S. FEDERAL TRADE COMMISSION 

Operators of Massive Mobile Cramming Scheme Will Surrender More Than $10M in Assets in FTC Settlement

The operators of a massive mobile cramming scheme have agreed to surrender more than $10 million in assets to settle Federal Trade Commission charges, including the contents of numerous bank accounts; real estate in Los Angeles, Beverly Hills and Chicago; and a number of cars and pieces of jewelry.

“Cramming unauthorized charges on consumers’ phone bills is unlawful, and this settlement shows the FTC is committed to making sure that anyone who does it won’t be able to keep their ill-gotten gains,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Consumers have the right to know what they are being charged.”

Under the terms of the settlement, Lin Miao and the corporate defendants will be permanently banned from placing any charges on consumers’ phone bills, making any misrepresentations to consumers about a product or service or a consumers’ obligation to pay, and will also be prohibited from charging consumers for a product or service without their express consent.  The settlement includes a monetary judgment of more than $150 million, which is partially suspended based on Miao’s inability to pay the full amount after he turns over nearly all of his and the companies’ assets.

Among the assets Miao and the corporate defendants will be required to surrender under the terms of the settlement are:

the contents of 14 bank accounts and one life insurance policy, less $5,000;
five real estate properties, including three in Chicago and one in each in Los Angeles and Beverly Hills;
four vehicles, including a 2013 Mercedes SUV, a 2014 Range Rover SUV, a 2011 Audi and a 2008 Bentley; and
numerous items of jewelry, including three Patek Phillippe watches, a Tiffany watch, two Tiffany rings with 10 and eight carat diamonds, a pair of six-carat Tiffany  earrings, and a Tiffany necklace, bracelet and diamond bracelet.
The FTC filed its complaint against Miao, along with the corporate defendants Tatto, Inc., Shaboom Media, LLC, Bune, LLC, Mobile Media Products, LLC, Chairman Ventures, LLC, Galactic Media, LLC, and Virtus Media, LLC, in December 2013.

The complaint alleged that Miao and the other defendants pitched text message services offering “love tips,” “fun facts,” and celebrity gossip alerts, but placed charges for these services – typically $9.99 a month – on consumers’ bills without their permission -- a practice known as mobile cramming. They also allegedly used deceptive websites designed to collect consumers’ mobile phone numbers that would then be billed for the services.

The charges appeared on consumers’ phone bills under confusing names such as “77050IQ12CALL8663611606” and “25184USBFIQMIG” and in many instances, consumers did not notice the variations in the amount of their bills from month to month. When consumers did notice the charges and attempted to seek refunds, the process was often highly cumbersome, with some promised refunds from the defendants never arriving, or consumers receiving only partial refunds from their phone company.  

The Commission vote approving the proposed stipulated order was 5-0. The FTC filed the proposed order in the U.S. District Court for the Central District of California, and it was entered by the court on June 11, 2014.

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

FTC PROPOSES IMPROVING ENERGY LABELS

FROM:  FEDERAL TRADE COMMISSION 

FTC Proposes Improvements to Energy Labels for Consumers

The Federal Trade Commission is seeking public comment on a variety of proposed changes to its Energy Labeling Rule affecting labels for light bulbs, appliances, room air conditioners, ceiling fans, refrigerators, and furnaces.

Under the Rule, manufacturers must attach yellow EnergyGuide labels to certain products, stating an annual operating cost and an energy consumption rating, and a range for comparing the highest and lowest energy consumption for all similar models.  The labels appear on clothes washers, dishwashers, refrigerators, freezers, water heaters, room air conditioners, central air conditioners, furnaces, boilers, heat pumps, pool heaters, and  televisions.

In March 2012, as part of its systematic review of all FTC rules and guides, the agency sought public comments on proposed improvements to the labeling requirements under the Rule. In January 2013, the FTC issued final amendments to streamline data reporting and improve online disclosures, and proposed new labels to help consumers comparison shop for refrigerators and clothes washers under new Department of Energy test procedures. In July 2013, it issued final amendments for those issues, and updates to comparability ranges.

The FTC now seeks comments on several proposed amendments for expanded light bulb label coverage, an online label database, more durable labels for appliances, room air conditioner labels on boxes, improved ceiling fan labels, consolidated ranges on refrigerator labels, and updates to furnace labels.

For more information about EnergyGuide labels, read Shopping for Home Appliances? Use the EnergyGuide Label.

The Commission vote approving the Federal Register Notice was 5-0.  It is available on the FTC’s website and as a link to this press release and will be published in the Federal Register soon.  Instructions for filing comments appear in the Federal Register.

FALSE PROMISES SPAMMERS SETTLE CHARGES WITH FEDERAL TRADE COMMISSION

FROM:  FEDERAL TRADE COMMISSION 

Scammers Settle FTC Charges They Sent Millions of Spam Text Messages

Deceptive Messages Promised “Free” $1,000 Gift Cards to Major Retailers

Two affiliate-marketing scammers and their company have agreed to settle Federal Trade Commission charges that they sent millions of unwanted text messages to consumers across the U.S. with false promises of $1,000 gift cards to retailers like Best Buy, Target and Walmart.

Under the terms of their settlement with the FTC, Scott A. Dalrymple of Pennsylvania and Robert Jerrold Wence of Texas, who operated a company called Advert Marketing, Inc., will be permanently banned from sending unwanted or unsolicited commercial text messages or assisting others in doing so. In addition, the two will also be prohibited from misrepresenting to consumers whether a product is “free,” whether they have won a prize or been selected for a gift, or other behavior related to the nature of the scam.

Dalrymple, Wence and Advert Marketing were among the defendants named in the FTC’s 2013 enforcement sweep against text message spammers and affiliate marketers who used false promises of free gift cards to draw consumers into websites that asked them to provide credit card information to sign up for trial offers.

The settlement contains a monetary judgment for $4.2 million, which is partially suspended due to the defendants’ inability to pay. Under the terms of the settlement, Dalrymple and Wence will be required to pay $15,000 each to the Commission, and will be required to destroy any consumer data they may have collected while conducting the text message spam operation.

The Commission vote approving the proposed stipulated final judgment was 5-0. The FTC filed the proposed stipulated final judgment in the U.S. District Court for the Southern District of Texas, Houston Division, and the Court entered the stipulated final judgment on June 10, 2014.

NOTE: Stipulated final judgments have the force of law when approved and 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.

FTC CHARGES SUPPLEMENT MARKETERS WITH MAKING DECEPTIVE CLAIMS

FROM: U.S. FEDERAL TRADE COMMISSION 

Supplement Marketers Settle FTC Charges that “BrainStrong Adult” Memory Improvement Claims Are Deceptive

Supplement marketers i-Health, Inc. and Martek Biosciences Corporation have agreed to settle FTC charges of deceptive advertising for claiming that their BrainStrong Adult dietary supplement will improve adult memory and prevent cognitive decline. The complaint also alleges the marketers falsely claimed they had clinical proof that BrainStrong Adult improves adult memory.

“Supplement marketers must ensure that adequate scientific proof supports their specific advertising claims,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection.  “When the results of a scientific study don’t match the hype, consumers are likely to be misled.”

Since at least March 2011, i-Health and Martek have sold BrainStrong Adult for about $30 for a 30-day supply at major retail stores, including CVS Pharmacy, Walmart, Walgreens, and Rite Aid; and online through drugstore.com and Amazon.com.  They advertised the product – which contains the Omega-3 fatty acid DHA – on television, on Twitter, and at brainstrongdha.com.

In the television ad, a woman forgets why she walked into a room. Through a voice over, her dog tells the audience she is there to find her sunglasses, which are sitting on top of her head.  Another voice over then asks, “Need a memory boost?  Introducing BrainStrong…Clinically shown to improve adult memory.”

The proposed administrative settlement covers any dietary supplement, food, or drug promoted to prevent cognitive decline or improve memory, or containing DHA. It bars the companies from claiming that any such product prevents cognitive decline or improves memory in adults unless the claim is truthful and supported by human clinical testing. The settlement also prohibits claims about the health benefits, performance, safety, or effectiveness of these products unless the claims are backed up by competent and reliable scientific evidence. Finally, the companies cannot claim they have clinical proof to support their claims when they do not.

For consumer information see: What’s in a health claim? Should be a healthy dose of proof.

The Commission vote to accept the agreement containing the proposed consent order for public comment was 3-1-1, with Commissioner Ohlhausen voting no, and Commissioner McSweeny not participating. Chairwoman Ramirez and Commissioner Brill issued a joint concurring statement, Commissioner Wright issued a separate concurring statement, and Commissioner Ohlhausen issued a dissenting statement.

The FTC will publish a description of the consent agreement in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through July 9, 2014, after which the Commission will decide whether to make the proposed consent order final. Interested parties can submit written comments electronically or in paper form by following the instructions in “Supplementary Information” section of the Federal Register notice. Comments should be submitted electronically using this form. Instructions for submitting comments in paper form are listed in the “Accessibility” portion of the form.

NOTE: When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $16,000.

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.