Online Advertising, Affiliate Marketing Compliance and Fraud with Pace Lattin

Monthly archive

December 2016

Ashley Madison Doesn’t Have Money to Pay FTC Fine.

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Ashley Madison, the site which promotes cheating and STD sharing, has been under investigation for a breach in its data management system that saw 36 million account details published online but now will only have to pay $1.6 million USD of a $17.5 million settlement to the US Federal Trade Commission.

According to an FTC spokesperson the rest of the settlement was suspended due to parent company Ruby Corp being unable to pay the fine because of financial difficulties. They are facing lawsuits and other investigations into their practices including a major class action lawsuit by consumers.

“I recognize that it was a far lower number frankly than I would have liked,” said Federal Trade Commission chairwoman Edith Ramirez. “We want them to feel the pain. We don’t want them to profit from unlawful conduct. At the same time, we are not going to seek to put a company out of business.”

Due to the lower settlement number, Ashley Madison customers affected by the breach won’t receive any financial compensation. Class action lawsuits are still pending.
Even though the company admits they can’t pay the larger fine, they still came out with the following statement: “The company is stable. We’re very pleased with the outcome,” said Rob Segal, who took over as CEO earlier this year. Founder Noel Biderman left the company to travel the world with the money he made.

Yet, that’s not the only problems: In August, the Privacy Commissioner of Canada and the Office of the Australian Information Commissioner ran a joint investion on Avid Life Media (Ruby Corp’s former name). The investigation found that there were inadequate authentication processes for employees accessing the company’s system remotely, poor key and password management practices, and poor encryption processes.

FTC Providing Over $88 Million in Refunds to Consumers Subjected to Mobile Cramming

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The Federal Trade Commission has announced that it will be providing over $88 million in refunds to more than 2.7 million AT&T customers who had third-party charges added to their mobile bills without their consent, a tactic known as “mobile cramming.” The refunds relate to 2014 settlements with AT&T, and the companies behind two of the cramming schemes, Tatto and Acquinity.

The refunds represent the most money ever returned to consumers in a mobile cramming case. Current customers will receive a credit on their bill, while former customers will receive a check.

“AT&T received a high volume of complaints related to mobile cramming prior to the FTC and other federal and state agencies stepping in on consumers’ behalf,” said FTC Chairwoman Edith Ramirez. “I am pleased that consumers are now being refunded their money and that AT&T has changed its mobile billing practices.”

According to the FTC’s complaint, AT&T placed unauthorized third-party charges on its customers’ phone bills, usually in amounts of $9.99 per month, for ringtones and text message subscriptions containing love tips, horoscopes, and “fun facts.” The FTC alleged that AT&T kept at least 35 percent of the charges it imposed on its customers.

A copy of the settlement, which also involved all 50 states and the District of Columbia, as well as the Federal Communications Commission, can be seen, here.

Contact an advertising compliance attorney if you are the subject of a regulatory enforcement investigation or action, or if you are interested in implementing preventative compliance measures.

HINCH NEWMAN LLP. ADVERTISING MATERIAL. These materials are provided for informational purposes only and are not to be considered legal advice, nor do they create a lawyer-client relationship. No person should act or rely on any information in this article without seeking the advice of an attorney. Information on previous case results does not guarantee a similar future result.

Credit Card Debt Scammers Banned by FTC For Life and Fined $27 Million

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Steven D. Short and his wife Karissa L. Dyar, E.M. Systems & Services LLC, Administrative Management & Design LLC, Empirical Data Group Technologies LLC, Epiphany Management Systems LLC, and KLS Industries LLC, doing business as Satisfied Service Solutions LLC has been sued by the FTC.

Now the Federal Trade Commission (FTC) announced a ban Nov. 30 against a group of fraudulent credit card debt scammers that allegedly bilked more than $12 million from consumers by falsely promising to reduce credit card interest rates.

The group of defendants will be banned from telemarketing and from selling debt relief services for life Additionally, the payment processors who allegedly enabled them will be banned from the payment processing industry.

 “Working with the Florida Attorney General’s Office, the Federal Trade Commission has stopped yet another telemarketing scam that offered bogus solutions to relieve credit card debt,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “People should just hang up the phone when they get this kind of offer.”
 
The FTC voted 3-0 to approve the proposed stipulated final orders. Three separate settlements with different defendants total roughly $27 million, most of which will be suspended upon the surrender of certain assets.

Facebook Stops Student Loan Ads

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Claiming that many of the advertising being run on Facebook for student loans is fake, the Consumer Financial Protection Bureau has put pressure on Facebook to ban them – and it looks like Facebook has complied.

The letters from Rohit Chopra, the CFPB’s student loan ombudsman, say web analytics show stressed-out borrowers are searching on-line for help using those phrases. In the ads and search results that then appear on these advertiser-supported on-line platforms, scammers and dishonest businesses tell the borrowers that for a fee, they can help them enroll in a Department of Education renegotiation program – a program that is actually free.

“While we have warned consumers about these scams we are concerned that unscrupulous companies may be using aggressive advertising through search products to lure distressed borrowers,” Chopra wrote.

In response, Facebook has added the following addition to their policies:

26. Misleading Student Loan Services
Ads must not promote misleading or deceptive services related to student loan consolidation, forgiveness, or refinancing.

The Federal Trade Commission and the State of Florida has also taken action against two operations charged with running phony student loan debt relief schemes, and defendants in a similar FTC action brought earlier this year have agreed to a ban on participating in any debt relief business, as part of a consumer protection crackdown to combat such frauds.

“The FTC is not going to stand on the sidelines when it uncovers evidence of fraudsters targeting students,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Consumers should be wary of any company that claims it can eliminate or greatly reduce debt, especially if they ask for money in advance.”

Florida Attorney General Pam Bondi said, “The Federal Trade Commission has been a steadfast partner in our consumer protection enforcement efforts. These latest joint actions will help protect Floridians, as well as many across the country, from these companies’ unscrupulous debt relief operations and ensure that those responsible will be held accountable.”

FTC Calls ePath Media’s Practices “Illegal”

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A collection of entities known as Consumer Education Group operating out of California and Colorado, has settled Federal Trade Commission charges that, between late 2013 and 2015, it made millions of illegal telemarketing calls to consumers on the national Do Not Call (DNC) Registry — including pre-recorded robocalls — as part of a campaign to generate sales leads for third-parties.

The court order settling the Commission’s complaint bars the defendants from making such illegal telemarketing calls, ensures they will comply with the Telemarketing Sales Rule (TSR), and requires them to pay a $100,000 civil penalty. The U.S. Department of Justice (DOJ) filed the complaint and the order today on the FTC’s behalf.

“These telemarketers and lead generators ignored the Do Not Call Registry and made illegal robocalls,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “It should be clear by now that companies are headed for law enforcement trouble when they use this kind of unlawful campaign to attract customers.”

According to the FTC’s complaint, defendants created websites and landing pages that allowed consumers to complete an online form supposedly to get information about solar panels, reverse mortgages, walk-in bathtubs and other products. Defendants then used the consumers’ names and phone numbers to call the consumers, either by direct dialing or through robocalls, to gauge their interest in these products.

None of the calls placed to consumers identified the operation by a name consumers would recognize as someone they had authorized to call them. More than two million calls were placed to consumers registered on the DNC registry. The FTC alleged that the telemarketing campaign was not to solicit actual sales to consumers but rather designed to collect consumers’ names and phone numbers and sell the information as leads to third party merchants.

Based on this conduct, the FTC charged the defendants with violating the TSR by illegally making telemarketing calls to consumers whose phone numbers are on the DNC Registry and using robocalls in telemarketing. All such pre-recorded calls have been illegal since September 1, 2009, unless the company has an express agreement, in writing, from consumers agreeing to receive them.

The proposed civil penalty order settling the FTC’s charges bars the defendants from violating the TSR by making outbound telemarketing calls to consumers on the national DNC Registry unless they meet certain requirements, making telemarketing calls to consumers who have asked them not to call again, and making pre-recorded telemarketing robocalls to consumers unless they have their express permission to do so.

The proposed order imposes a suspended $2,339,687 civil penalty that is equivalent to the revenue defendants obtained through their illegal acts. The defendants will pay $100,000 to the U.S. Treasury due to their inability to pay the full penalty amount. If they are later found to have misrepresented their financial condition to the FTC, the full amount of the penalty will become due.

The Commission vote authorizing staff to refer the civil penalty complaint proposed consent order to DOJ for filing was 3-0. The DOJ filed the complaint and proposed consent order on behalf of the Commission in U.S. District Court for the District of Colorado on November 1, 2016.

A complete list of the settling defendants can be found in the proposed consent order linked to this press release on the FTC’s website.

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

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Debt Relief and Payment Processor Defendants Stipulate to Bans in FTC Settlements

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Pursuant to settlements with the Federal Trade Commission and the State of Florida, defendants alleged to have falsely promised to reduce consumers’ credit card interest rates will be banned from telemarketing and from selling debt relief services. The payment processors that allegedly enabled the operation will be banned from the payment processing industry.

The settlements resolve actions brought by the consumer protection agencies against the two groups of defendants in 2015 and 2016.

“Working with the Florida Attorney General’s office, the Federal Trade Commission has stopped yet another telemarketing scam that offered bogus solutions to relieve credit card debt,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection.

According to the agencies, the debt relief defendants phoned debt-laden consumers and represented that in exchange for an upfront fee – averaging from $695 to $1,495 – they would reduce consumers’ interest rate and save them thousands of dollars.

The agencies also allege that defendants, including the payment processors, arranged for at least 26 shell merchants to be used to process credit card payments. Respective charges brought against defendants include credit card laundering under the Telemarketing Sales Rule, illegal factoring of credit card transactions under Florida law, violation of the FTC Act and violation of the Florida Deceptive and Unfair Trade Practices Act.

The settlements resolve the charges against all but one defendant.

The stipulated orders can be seen here, here, here, here, here and here.

Respective terms include equitable monetary relief, surrender of frozen assets and various bans, such as selling debt relief services, from outbound telemarketing, from working in the payment processing industry, and from assisting others violate the FTC Act the TSR and the Florida Deceptive and Unfair Trade Practices Act.

The orders prohibit defendants from profiting from consumers’ personal information and failing to dispose of it properly.

Contact a Federal Trade Commission compliance and defense attorney if you are the subject of a regulatory enforcement investigation or action, or if you are interested in implementing preventative compliance measures.

HINCH NEWMAN LLP. ADVERTISING MATERIAL. These materials are provided for informational purposes only and are not to be considered legal advice, nor do they create a lawyer-client relationship. No person should act or rely on any information in this article without seeking the advice of an attorney. Information on previous case results does not guarantee a similar future result.

 

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