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On February 13, the FTC and California Department of Financial Protection (DFPI) announced that the U.S. District Court for the Central District of California granted their motion for summary judgment against several companies and owners that the agencies alleged were operating a fraudulent mortgage relief operation. As previously covered by InfoBytes, the FTC and DFPI filed a joint complaint against the defendants in September 2022 alleging that the defendants violated the FTC Act, the FTC’s Mortgage Assistance Relief Services Rule (the MARS Rule or Regulation O), the Telemarking Sales Rule, the Covid-19 Consumer Protection Act, and the California Consumer Financial Protection Law. In granting the motion for summary judgment, the court found the defendants violated all five laws. According to the motion, the defendants falsely represented that they could lower homeowners’ interest rates and reduce the principal balances, but, after taking the payment upfront, rarely delivered any agreed-upon services. The defendants also allegedly made misleading claims during telemarketing calls with homeowners regarding home foreclosure and mortgage payments, among other claims, including with homeowners with numbers on the national Do Not Call registry.
The court ordered the defendants to pay approximately $16 million in restitution and $3 million in civil penalties. Further, the court ordered that the defendants are subject to a (i) permanent ban on advertising, promoting, offering for sale, or selling, or assisting others in those acts, any debt relief product or service and all telemarketing; and (ii) prohibition against making misrepresentations or unsubstantiated claims regarding products or services.
On January 2, the FTC filed a complaint against a California-based lead generator (the “Company”), alleging that the Company operated as a “consent farm” that deceived consumers into providing their consent to be contacted for telemarketing purposes, then selling those consents to telemarketers, sellers, or intermediaries. Relying on the Company’s purported consent from consumers, those parties then inundated consumers with telemarketing calls. These calls included robocalls and calls made to telephone numbers on the National Do Not Call Registry. Since 2019, the defendants are alleged to have operated over 50 websites focused on lead generation.
The FTC charged the Company with violating the FTC Act for misrepresenting the collection of consumers’ personal information, and for violating the Telemarketing Sales Rule for assisting and facilitating telemarketers in breaking the Rule.
On the same day the complaint was filed, the FTC announced a proposed settlement in which the Company was ordered to pay $7 million for its alleged use of deception and dark patterns to trick consumers into providing personal information. Additionally, the proposed stipulated order banned the Company from initiating or helping anyone make telemarketing robocalls, calling phone numbers on the National Do Not Call Registry, and selling consumer information connected with lead generation. The stipulated order must first be approved by the court before it comes into effect. The Company neither admits nor denies any of the allegations
On December 27, 2023, the FTC filed a suit in the U.S. District Court of Arizona against a for-profit university for allegedly deceiving students, misrepresenting the university as a nonprofit entity, and committing telemarking abuses. The FTC sued under the FTC Act and Telemarketing Sales Rule (TSR). The complaint alleges that the university in question is a for-profit institution operating as a publicly traded entity, but nonetheless marketed itself as a “nonprofit” university. The complaint further alleges that the university misled students about the cost of its “accelerated” doctoral programs and used abusive telemarketing calls to try to boost enrollment. According to the FTC, the university called those who requested not to be called by the university, as well as consumers on the National Do Not Call Registry. The FTC asserts five claims against the university. The first two counts allege violations of Section 5(a) of the FTC Act for deceptive representations about its non-profit status and for falsely advertising its doctoral programs. The last three counts allege violations of the TSR predicated on deceptive telemarketing acts or practices, contacting those who have requested to not be contacted, and calling people on the National Do Not Call Registry.
On May 8, the FTC announced that the U.S. District Court for the Central District of California recently issued temporary restraining orders (TROs) against two student loan debt relief companies that allegedly tricked consumers into paying for nonexistent repayment and loan forgiveness programs. According to the complaints (see here and here), the defendants allegedly made deceptive claims in order to lure low-income consumers into paying hundreds to thousands of dollars in illegal upfront fees as part of a purported plan to pay down their student loans. The defendants allegedly made consumers believe that they were enrolled in a legitimate loan repayment program, that their loans would be forgiven in whole or in part, and that most or all of their payments would be applied to their loan balances. The FTC alleges that, in reality, the defendants pocketed the borrowers’ payments. The FTC also charged the defendants with falsely claiming to be or be affiliated with the Department of Education and stating that they were purchasing borrowers’ debt from federal student loan servicers in order to secure debt relief on their behalf. When consumers realized the debt relief program did not exist, the defendants allegedly often refused to provide refunds.
According to the FTC, these deceptive misrepresentations violated Section 5 of the FTC Act and the Telemarketing Sales Rule (TSR). The FTC also alleges that the companies violated the Gramm-Leach-Bliley Act (GLBA), by using deceptive tactics to obtain consumers’ financial information, and the TSR, by calling numbers listed on the National Do Not Call Registry and by failing to pay required Do Not Call Registry fees for access. In issuing the TROs (see here and here), which temporarily halt the two schemes and freeze the defendants’ assets, the court noted that, upon “[w]eighing the equities and considering the FTC’s likelihood of ultimate success on the merits,” there is good cause to believe that immediate and irreparable harm will occur as a result of the defendants’ ongoing violations of the FTC Act, the TSR, and the GLBA, unless the defendants are restrained and enjoined.
On May 1, three individuals accused of allegedly participating in a credit card debt relief scheme agreed to court orders permanently banning them from telemarketing and selling debt relief products and services. As previously covered by InfoBytes, last November the FTC filed a lawsuit claiming the defendants and their affiliated companies violated the FTC Act and the Telemarketing Sales Rule by using telemarketers to pitch their deceptive scheme, in which they falsely claimed to be affiliated with a particular credit card association, bank, or credit reporting agency, and promised they could improve consumers’ credit scores after 12 to 18 months. The defendants also allegedly misrepresented that the upfront fee, which in some cases was as high as $18,000, was charged to consumers’ credit cards as part of the overall debt that would be eliminated, and therefore would not actually have to be paid. Without admitting or denying the allegations, the defendants agreed to the court orders (available here, here, and here) imposing numerous conditions, including (i) a permanent ban on advertising, selling, or assisting in any debt relief product or service or participating in telemarketing; (ii) a broad prohibition forbidding defendants from deceiving consumers about any other products or services they sell or market; and (iii) the surrender of certain property interests and assets that will be used to provide restitution to affected consumers. The orders impose a total monetary judgment of approximately $17.5 million, for which each defendant is jointly and severally liable, to be satisfied by defendants’ surrender of certain assets and subject to a partial suspension of the remainder of the judgment pursuant to defendants’ truthfulness regarding their financial status and ability to pay.
On April 17, the DOJ filed a complaint on behalf of the FTC against several corporate and individual defendants for violating the FTC Act and the Telemarketing Sales Rule (TSR) by allegedly engaging in credit card laundering for tech support scams. (See also FTC press release here.) According to the complaint, since at least 2016, the defendants—a payment processing company and several of its subsidiaries, along with the company’s CEO and chief strategy officer—worked with telemarketers who made misrepresentations to consumers about the performance and security of their computers through the use of deceptive pop ups in order to sell technical support scams. Defendants’ involvement included assisting and facilitating the illegal sales and laundering the credit card charges through their own merchant accounts (thus giving the scammers access to the U.S. credit card network) where defendants received a commission for each charge. The complaint maintained that the defendants “engaged in this activity even though it and its officers knew or consciously avoided knowing that its tech support clients were engaged in deceptive telemarketing practices.”
The proposed court orders (see here, here, and here) each impose monetary judgments of $16.5 million and (i) prohibit the defendants from engaging in credit card laundering through merchant accounts; (ii) require the defendants to screen and monitor any high-risk clients and take action if clients should charge consumers without authorization or violate the TSR; and (iii) prohibit the defendants from engaging in payment processing or assisting tech support companies that engage in false or unsubstantiated telemarketing or advertising. According to the DOJ’s announcement the defendants will be required to pay a combined total of $650,000 in consumer redress. This payment will result in the suspension of the total monetary judgment of $49.5 million due to the defendants’ inability to pay.
On April 11, the FTC implemented Project Point of No Entry (PoNE) in an attempt to stop foreign-based scammers and imposters from targeting U.S. consumers with illegal robocalls. The FTC warned “point of entry” or “gateway” VoIP service providers that routing or transmitting illegal call traffic may violate the Telemarketing Sales Rule, which allows the Commission to seek civil penalties, restitution, and injunctions to stop violations. Through Project PoNE, the FTC will identify violators and “pursue recalcitrant providers” by opening enforcement investigations and filing lawsuits, as appropriate. According to the FTC, “Project PoNE has uncovered the activity of 24 target point of entry service providers responsible for routing and transmitting illegal robocalls between 2021 and 2023, in connection with approximately 307 telemarketing campaigns, including government and business imposters, COVID-19 relief payment scams, and student loan debt relief and forgiveness schemes, among others.” The FTC attributed the results to its collaboration with the Industry Traceback Group, the FCC, and state attorneys general, and said it will make publicly available recordings of the robocalls that target providers have allowed into the U.S. to help consumers identify and avoid scams. The announcement highlighted that before being contacted by the FTC, “the targets had a combined total of 1,043 tracebacks,” but that after being warned about the possible illegal conduct, the number decreased to 196 tracebacks. Of these 196 tracebacks, the FTC said “147 are linked to two uncooperative providers, one of which is subject to an FCC law enforcement action.”
On March 24, the FTC announced that a Florida-based group of operators (defendants) faces a permanent ban from the extended automobile warranty industry and will be barred from any further involvement in outbound telemarketing. As previously covered by InfoBytes, the defendants allegedly violated the FTC Act and the Telemarketing Sales Rule by allegedly engaging in deceptive practices when marketing and selling automobile warranties. According to the FTC, the defendants, among other things, (i) misrepresented their affiliation with consumers’ car dealers or manufacturers; (ii) misrepresented warranty coverage; (iii) falsely promised consumers they could obtain a full refund if they cancelled within 30 days; (iv) used remotely created checks, which are illegal in telemarketing transactions; and (v) placed unsolicited calls to numbers on the do not call registry. The proposed stipulated order for permanent injunction, filed in the U.S. District Court for the Southern District of Florida, would require the defendants to pay a $6.6 million monetary judgment and would impose a permanent industry ban. However, the monetary judgment is largely suspended based on the defendants’ inability to pay.
On March 6, the U.S. District Court for the Southern District of Texas entered stipulated orders and permanent injunctions against two individuals who, along with their companies (also named as defendants in the litigation), allegedly operated a massive robocall campaign to sell extended car warranties and health care services. (See orders here and here.) Eight states attorneys general alleged violations of the TCPA and the Telemarketing Sales Rule, as well as various state consumer protection laws, claiming that the defendants initiated millions of robocalls to individuals nationwide without their prior express consent, spoofed caller ID numbers to mislead recipients, and called people whose numbers were on the Do Not Call Registry. Under the terms of the orders, the individual defendants (who neither admitted nor denied the allegations) are permanently banned from initiating or facilitating (or causing others to initiate or facilitate) any robocalls, working in or with companies that make robocalls, or engaging in any telemarketing. The court also ordered each individual defendant to pay a $122.3 million monetary judgment; however, these payments are mostly suspended in favor of the more permanent bans due to their inability to pay. The states noted that they are continuing their cases in the same action against others who allegedly worked with the individual defendants to facilitate the robocalls.
On February 28, the California Department of Financial Protection and Innovation (DFPI) announced a settlement with an unlicensed student debt relief company and its owner. The announcement is part of the DFPI’s continued crackdown on student loan debt relief companies found to have violated the California Consumer Financial Protection Law (CCFPL), the Student Loan Servicing Act (SLSA), and the Telemarketing Sales Rule (TSR). According to the settlement, a DFPI inquiry into the company’s practices found that since at least 2018, the company placed unsolicited phone calls to consumers advertising its student loan forgiveness and modification services. The company allegedly gave borrowers the impression that it was a part of, or affiliated with, an official government agency, and would act “as an intermediary between borrowers and the borrowers’ lenders or loan servicers with the goal of helping those consumers lower or eliminate their student loan debts.” The DFPI found that since 2018 at least 790 California consumers enrolled in the company’s debt relief program, whereby the company collected at least $713,000 through up-front servicing fees ranging from $116 to $2,449 from California consumers. By allegedly engaging in unlicensed student loan servicing activities, engaging in unlawful, unfair, deceptive, or abusive acts or practices with respect to consumer financial products or services, and by charging advance fees for debt relief services, the DFPI claimed the company violated the SLSA, CCFPL, and TSR.
Under the terms of the consent order, the company and owner must desist and refrain from engaging in the alleged conduct, rescind all debt relief, debt management, or debt consulting service agreements, and issue refunds to California consumers. The owner is also ordered to “desist and refrain from owning, managing, operating, or controlling any entity that services student loans, or which offers or provides any consumer financial products or services as defined by the CCFPL, unless and until he or the entity has the applicable approvals from the DFPI and is in compliance with the SLSA, CCFPL, TSR, and the Federal Trade Commission Act.”