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FTC releases complaint and court’s TRO against an allegedly deceptive e-commerce scheme
On October 21, the U.S. District Court for the Southern District of Florida granted the FTC’s motion for a temporary restraining order (TRO) against several companies and individuals (the defendants) engaged in an allegedly deceptive e-commerce investment scheme. The court found the FTC likely to prevail on the merits after accusing the defendants of using deceptive earnings claims to lure consumers into investing over $12.1 million in e-commerce automation business opportunities. The TRO included an asset freeze, the appointment of a temporary receiver, and immediate access to the defendants’ business premises, among other obligations.
The TRO stemmed from an October 15 complaint the FTC filed against the companies and their principals for alleged violations of Section 5(a) of the FTC Act and the FTC’s Trade Regulation Rule. The FTC’s complaint outlined eight counts against the defendants, including making false or unsubstantiated earnings claims, misrepresenting refund guarantees, and failing to provide mandatory disclosures required by the Trade Regulation Rule.
The complaint highlighted the ongoing risk of harm, noting that the defendants continued their deceptive practices despite numerous consumer complaints and lawsuits. The FTC seeks various forms of relief, including a permanent injunction, monetary relief, and an asset freeze to prevent further consumer harm.
The TRO mandated several actions to prevent further harm, including prohibiting the defendants from making any earnings claims or misrepresentations and requiring them to provide detailed financial disclosures. The court scheduled a preliminary injunction hearing for November 4 to determine whether the temporary measures should be extended.
CFPB Issues Principles Concerning Security and Transparency for Financial Data Sharing and Third-Party Aggregation
On October 18, the CFPB published guidelines entitled “Consumer Protection Principles” (Principles), which are “intended to reiterate the importance of protecting consumers” when companies, including “fintech” firms, banks, and other financial institutions, get authorization from consumers to access their account data that reside in separate organizations to provide products and services. Earlier this year, industry groups responded to a CFPB request for information and weighed in on the benefits and risks associated with consumers authorizing third parties to access their financial and account information held by financial service providers. (See previous InfoBytes summary here.) Along with the Principles, the CFPB published a summary of stakeholder insights, which highlights the feedback received by the Bureau. Separately, on October 16, Senator Edward J. Markey (D-Mass.) sent a letter to Director Richard Cordray raising concerns about data security during the transfer of consumer data to third-party aggregators and highlighting the need for transparency concerning the use of the data.
The Principles address the following areas: (i) data access; (ii) data scope and usability; (iii) control of data and informed consent; (iv) payment authorizations; (v) data security; (vi) transparency on data access rights; (vii) data inaccuracies; (viii) dispute rights and unauthorized access resolution; and (ix) mechanisms for efficient and effective accountability.
Notably, the Bureau recognized that there already exist statutes and regulations that apply to consumer protections in this market. As such, the Principles “are not intended to alter, interpret, or otherwise provide guidance on—although they may accord with—the scope of those existing protections,” and therefore do not establish “binding requirements.”