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FTC and Florida AG Shut Down Massive Debt Relief Scam in Florida

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Florida Attorney General Pam Bondi and the Federal Trade Commission jointly obtained a court order against a debt relief operation that they allege bilked millions of dollars from customers.

According to their complaint, filed in the U.S. District Court in the Southern District of Florida, Jeremy Lee Marcus, Craig Davis Smith and Yisbet Segrea set up 11 debt relief companies, which all listed their address at 1410 S.W. Third St. in Pompano Beach.

The defendants allegedly persuaded consumers to pay hundreds or thousands of dollars a month by falsely promising to pay, settle or obtain dismissals of consumers’ debts and improve consumers’ credit.

“Despite alleged promises, the victims of this scam ended up with little or nothing to show for their payments and were made worse off financially,” Bondi said in a statement. “I will continue to work with our federal partners to stop scammers targeting and exploiting consumers in search of financial help.”

The defendants promised guaranteed debt consolidation loans with attractive interest rates and significantly lower monthly payments, the complaint alleged. In addition, the complaint said that the defendants falsely claimed nonprofit status to appear more legitimate.

The court order prohibits the three defendants and their companies from misrepresenting their services to clients, claiming to be a nonprofit or claiming a debt relief program will improve consumers’ creditworthiness.

The defendants are all alleged in the complaint to have violated the Florida Deceptive and Unfair Trade Practices Act, the FTC Act and the FTC’s Telemarketing Sales Rule.

FTC Returns Money to Victims of Biz Opp Scheme

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In 2015, the Federal Trade Commission obtained court orders banning a group of marketers that allegedly cheated American and Canadian consumers out of more than $7 million from selling business or work-at-home opportunities.

The orders resolved charges that the defendants conned consumers into believing they could make money by referring merchants in their area to a non-existent money-lending service.  Victims included financially vulnerable seniors.

The FTC’s complaint, filed in August 2013, alleged false claims that consumers would earn up to $3,000 per month by referring small businesses to the defendants to obtain loans.  After consumers paid up to $499 to purchase the business opportunity, the defendants allegedly told them that, to succeed, they had to buy sales leads that cost tens of thousands of dollars but turned out to be worthless.

The defendants purportedly attempted to avoid detection by changing product names, office locations and merchant identities.

The 2015 announcement described the court’s summary judgment orders against three defendants, settlements with others, and default judgment against the remaining defendants.

The various judgments and settlements imposed a ban on selling business or work-at-home opportunities on a number of defendants.   Some defendants were also banned from telemarketing.  In addition, the judgments and settlements include provisions that apply specifically to certain defendants, prohibiting them from engaging in the types of misconduct alleged by the FTC.

The judgments and settlements also imposed monetary judgments of $7.3 million against 12 defendants, and smaller judgments against others.  The judgments against some defendants were suspended due to their inability to pay and, in some cases, pending the transfer of assets frozen by the court or held in receivership. The full judgments will to become due immediately if the defendants are found to have misrepresented their financial condition.

On February 17, 2017, the Commission announced that it would be mailing checks totaling more than  $436,000 to people who lost money to the alleged scheme.  The Commission states that people who lost money will receive an average of $214.68.  Recipients should deposit or cash checks within 60 days. The FTC never requires people to pay money or provide account information to cash refund checks.

Contact an FTC lawyer if you are the subject of a local, state AG or federal regulatory enforcement investigation or action.
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.

FTC and NYS Charge Marketers of Cognitive Enhancement Supplement with Deceptive Advertising

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The Federal Trade Commission and New York State Attorney General recently charged the marketers of the dietary supplement Prevagen with making false and unsubstantiated claims that the product improves memory, provides cognitive benefits and is “clinically shown” to work.

As part of its extensive national advertising campaign, the marketers feature charts depicting dramatic improvement in memory for product users. The complaint alleges, in part, that the marketers relied upon a study that failed to substantiate that the product works better than a placebo on any measure of cognitive function.

According the complaint, the defendants enticed consumers to spend anywhere from $24 to $68 for bottles of 30 supplement pills by touting the product’s active ingredient – a protein derived from jellyfish – to improve memory and reduce memory problems associated with aging.

“The marketers of Prevagen preyed on the fears of older consumers experiencing age-related memory loss,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “But one critical thing these marketers forgot is that their claims need to be backed up by real scientific evidence.”

The agencies allege that the defendants’ marketing claims have violated the FTC Act and New York state laws.

“The marketing for Prevagen is a clear-cut fraud, from the label on the bottle to the ads airing across the country,” said New York Attorney General Eric Schneiderman. “It’s particularly unacceptable that this company has targeted vulnerable citizens like seniors in its advertising for a product that costs more than a week’s groceries, but provides none of the health benefits that it claims.”

A copy of the complaint can been seen, here.

Contact an FTC defense lawyer 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.

 

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.

 

Feds Say Homeopathic Products Must Be Labeled Bullshit

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The Feds have decided to go after the advertisers of homeopathic medicine, the stuff like nerve tonics, pain relievers, penis growing pills, claiming that most of their claims are absolute and total bullshit. The FTC says will either have to get scientific backing for the efficacy of their health claims or “effectively communicate the lack of scientific evidence backing them and that their claims are based only on theories of homeopathy from the 1700s that are not accepted by most modern medical experts.”

“This is a real victory for reason, science, and the health of the American people,” said Michael De Dora, public policy director for the Center for Inquiry, which had urged the FCC to crack down on what it said was false advertising of homeopathic products. “The FTC has made the right decision to hold manufacturers accountable for the absolutely baseless assertions they make about homeopathic products.”

Consumers are constantly being misled about homeopathics,” Edzard Ernst, an emeritus professor of complementary medicine at the University of Exeter in the United Kingdom, told BuzzFeed News. “They believe that they are natural, safe, and effective — none of this is true.”

Homeopathic products can also pose rare safety risks, according to the FDA. In 2009, for example, the agency received more than 130 accounts of people who lost their sense of smell after taking Zicam homeopathic cold remedies. One expert testified to the FDA that those accounts raised concerns about toxic levels of zinc.

Michelle Rusk, senior staff attorney in the FTC advertising practices division, said in a public hearing Sept. 21 on over-the-counter homeopathic products that advertisements lauding the health benefits of medical products need to be based on competent, reliable, and rigorous scientific support.

“As a general rule, for treatment claims, we expect randomized, double-blind, placebo-controlled human clinical studies—not in vitro studies, not animal studies, not anecdotal evidence, no matter how compelling it is,” she said. “Second, we expect the studies to be internally valid. That means well-designed, reliably conducted, using procedures accepted in the field of research. It also means that results are not just statistically significant but also strong enough to be clinically meaningful.

The law enforcement agency is responding to decades of growth in the market for over-the-counter homeopathy products. And its examination coincides with the Food and Drug Administration’s reconsideration of a 1988 policy that allows, without FDA approval, the manufacture and sale of products listed in the Homoeopathic Pharmacopoeia of the United States.

FTC Hammers Operators of Money-Making Opportunity Telemarketing Scheme

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The Federal Trade Commission has charged numerous individuals and an interrelated network of companies with selling worthless money-making opportunities via an alleged phony grants program.

According to the FTC’s complaint, the defendant telemarketers misrepresent to seniors, veterans and indebted consumers that they represent Amazon and offer – for hundreds or thousands of dollars – to create a website for them linked to Amazon.com.  In doing so, according to the FTC, the defendants claim that consumers will earn thousands of dollars every month in commissions for sales via the website and falsely offer to advertise the website via multiple means.

The Commission also alleges that the defendant telemarketers phone consumers from various call centers and falsely claim to represent the government, telling consumers that they can obtain government and corporate grants to help pay for home repairs, medical costs and debt reduction.

To allegedly determine the amount for which consumers are eligible, the defendants ask for information regarding income, employment, age, veteran status, home value and equity, savings and retirement funds, debt, drivers’ license and credit and debit card numbers.

According to the FTC, the defendants seek thousands of dollars, up-front, and falsely promise that consumers will receive grants worth tens of thousands of dollars within 60-90 days.

According to the FTC, the defendants also attempt to extract even larger payments from many of these same consumers using a tactic known as “reloading” – offering to sell them additional phony grants and typically promising that they can qualify for larger grants by forming a limited liability company.

The FTC alleges that consumers receive no money from these schemes and are not provided refunds.

The action has been brought under the Federal Trade Commission Act, and the Telemarketing and Consumer Fraud and Abuse Prevention Act.  The Commission seeks injunctive relief, rescission or reformation of contracts, restitution, the refund of monies paid, disgorgement of alleged ill-gotten monies, the appointment of a receiver, an asset freeze, and other equitable relief for defendants’ purported practices.

The TSR prohibits sellers and telemarketers from misrepresenting, directly or by implication, in the sale of goods or services, any material aspect of the performance, efficacy, nature, or central characteristics of goods or services that are the subject of a sales offer.

Likewise, the TSR prohibits sellers and telemarketers from making any false or misleading statements to induce a person to pay for goods or services.

A violation of the TSR constitutes an unfair or deceptive act or practice in or affecting commerce, in violation of the FTC Act.

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

Richard B. Newman is an advertising compliance lawyer at Hinch Newman LLP focusing on internet marketing and digital media matters. His practice includes conducting legal compliance reviews of advertising campaigns across all media channels, representing clients in investigations and enforcement actions brought by the Federal Trade Commission and state Attorneys General, commercial litigation, advising clients on promotional marketing programs, and negotiating and drafting legal agreements.

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.

FTC Complaint Filed Over Google “Influencer Marketing” to Kids

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Influencer prmarketing joins both customary and digital media strategies. Organizations advance their brands and items through purported influencers — people with a significant web-based social networking or online movement draw. The problem is that most “influencer marketers” don’t disclose the relationship between the “influencer” and the company they are promoting. Even worse, when it comes to kids, there are other laws that need to be considered.

The Center for Digital Democracy, Campaign for a Commercial-Free Childhood and Public Citizen filed a complaint with the Federal Trade Commission (FTC) against Google, Disney’s Maker Studios, DreamWorks (owned by Awesomeness TV) and two other companies. The groups allege these firms’ practice of targeting influencer marketing toward children is unfair and deceptive.

Filed on Oct. 21, the complaint alleges that several marketing companies (Collab Creators, Wild Brain, Maker Studios and AwesomenessTV) produce and distribute ads and other commercial material targeted to children that appear as content. The groups say Google both encourages and benefits from the production of child-directed influencer videos and distributes them to children on YouTube and YouTube Kids.

The advocacy groups called on the FTC to investigate and take action against companies that “create and distribute child-directed ‘influencer’ marketing.” They also called on the federal agency to release policy guidance making it clear that using influencer marketing to persuade children to buy a product (or urge their parents to buy it for them) is an “unfair and deceptive marketing practice prohibited by Section 5 of the Federal Trade Commission Act.” In other words, influencer marketing aimed at children violates federal law.

“Child-directed influencer marketing is misleading to children because their developing brains do not process or understand advertisements the way adults do—especially advertisements disguised as content,” Laura Moy, director of the Institute for Public Representation at Georgetown University Law Center, which represents the groups, said in a statement.

“Corporate predators are using young Internet influencers, admired by kids, to hawk their wares to children, even to young children,” added Rob Weissman, president of Public Citizen. “The marketers and the advertising platforms enabling and promoting this activity should be ashamed. But since they’re not, we need the FTC to act to end their outrageous practice.”

Children have buying power of about $1.2 trillion, either through what they buy themselves or what they persuade their parents to buy. So, companies are tripping over themselves to reach children and influence them to buy their products. The complaint cites several cases of how companies target children with influencer marketing. One case involves the Collab Creators who make videos with influencers, including Baby Ariel who has 1.6 million subscribers on YouTube. In a few videos, Baby Ariel “unboxes and touts toys and games for children in a fun and entertaining manner,” the complaint describes.

Other cases include:

Disney’s Maker Studios has a popular YouTube influencer show called EvanTubeHD, which features 8-year-old Evan and his 5-year-old sister Jillian “as they review and play with the most popular kids toys currently on shelves.” They also taste test and review snack foods. The show’s videos “blur the line between commercial and non-commercial content, targeting young children,” the groups allege.

DreamWorks, owned by AwesomenessTV, has a show on YouTube called Swamp Talk which features the animated character Shrek. Life Hacks for Kids is another show that features “life hacks” designed for kids, and many of the show’s videos include product placements.

Online advertising as a whole is a game-changer. Or as Common Sense Media described it in a 2014 report, online advertising “has fundamentally changed the nature of marketing to children and youth.” The company-funded YouTube shows targeted to children demonstrate just what a game-changer online advertising really is and how it is geared to influencing kids to buy toys and junk food. When it comes to junk food, those YouTube shows can contribute to the childhood obesity epidemic. And on the whole, they may run afoul of the law. Stay tuned.

FTC Bans Owners of Debt Relief Operation

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In 2015, the Federal Trade Commission filed a complaint alleging that numerous individuals and entities, doing business as “Payday Support Center” or “Infinity Client Solutions,” deceptively promised to resolve consumers’ loans via a “hardship program.” According to the FTC, the business targeted consumers with outstanding payday loans.

Upon enrollment, consumers ceased making payments to their lenders. The Commission alleges that the defendants, however, failed to deliver the promised debt relief services, worsening consumers’ financial difficulties after having spent hundreds of dollars for no loan reduction or settlement.

Pursuant to two stipulated final orders announced last week, the defendants are banned from all debt relief-related activities and are otherwise prohibited from misrepresenting the characteristics about any products and services. The defendants are also barred form profiting from consumers’ personal information and failing to dispose of it in a proper manner.

Given the defendants’ financial condition and inability to pay, each order imposes a partially suspended judgment of more than $23.7 million. The full judgments are due immediately in the event that the FTC determines that the defendants misrepresented their financial situation.

The debt settlement industry remains in the regulatory crosshairs following recent sweeps. Marketers must remain diligent with respect to policing their own and end-user advertising partner compliance.

Contact an FTC and state attorney general defense lawyer if you are the subject of a regulatory enforcement investigation or action, or if you are interested in implementing preventative compliance measures.

Richard B. Newman is an Internet law, online marketing compliance, telemarketing compliance and regulatory defense attorney at Hinch Newman LLP focusing on advertising and digital media matters. His practice includes conducting legal compliance reviews of advertising campaigns across all media channels, regularly representing and defending clients in investigations and enforcement actions brought by the Federal Trade Commission and state Attorneys General, complex commercial litigation defense, SPAM law compliance and litigation defense, intellectual property transactional and litigation matters, advising clients on promotional marketing programs, and negotiating and drafting legal agreements.

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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