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Financial Services Law Insights and Observations

FTC issues warning regarding false money-making claims

Federal Issues FTC Consumer Finance Enforcement UDAP

Federal Issues

On October 26, the FTC announced that it is putting businesses on notice that pitch money-making ventures that deceive or mislead consumers regarding potential earnings. According to the announcement, the FTC utilized its Penalty Offense Authority to remind businesses of the law and deter them from breaking it by sending a Notice of Penalty Offenses to over 1,100 companies. The notice puts these businesses on notice that they may incur significant civil penalties if they or their representatives make claims regarding money-making opportunities that run counter to FTC administrative cases. The Notice of Penalty Offenses permits the FTC to seek civil penalties against a company that engages in conduct it knows is unlawful and has been determined to be unlawful in an FTC administrative order, other than a consent order. The FTC added that the Notice highlighted a number of practices that the FTC determined to be unfair or deceptive in prior administrative actions. In general, the cases determined that it was unlawful to make false, misleading, or deceptive representations regarding the profits or earnings that may be anticipated by a participant in a money-making opportunity, including representations that participants will make a profit. The Notice also outlined other practices that the FTC has decided to be unfair or deceptive, such as falsely telling consumers they do not need experience to earn income or that they must act immediately to participate. Companies receiving the Notice also received a copy of the recently issued Notice of Penalty Offenses concerning endorsements and testimonials, as companies frequently use testimonials to advertise money-making opportunities. The FTC also pointed out that “[a] recipient’s presence on this list does not in any way suggest that it has engaged in deceptive or unfair conduct.”

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