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  • Do Not Call Violations Net $280 Million Fine for FTC, States

    Courts

    On June 5, the U.S. District Court for the Central District of Illinois ruled in favor of the Federal Trade Commission (FTC) and the states of California, Illinois, North Carolina, and Ohio resolving Do Not Call litigation against a direct-broadcast satellite service provider. The court found the service provider liable for making millions of calls resulting in violations of the Telemarketing Sales Rule (TSR) and the Telephone Consumer Protection Act, among other things. The $280 million in civil penalties, with a record $168 million going to the FTC, is the largest civil penalty ever awarded for violation of the FTC Act.

    Additionally, the court issued a permanent injunction order against the service provider. Among the requirements in the order, the service provider will show within 90 days of the order effective date that they are “fully complying with the safe harbor provisions” and “have made no prerecorded telemarketing calls at any time during the five (5) years immediately preceding the effective date.” The service provider must also hire an expert to ensure compliance with the injunction and telemarketing laws, provide semi-annual compliance materials, and ensure their compliance with the TSR.

    Courts FTC Mortgages UDAAP DOJ Telemarketing Sales Rule Litigation

  • FTC Enters Settlement Resolving Investigation into “Bogus Online Investment” Telemarketing Scheme

    Privacy, Cyber Risk & Data Security

    On March 13, the FTC announced a $25 million settlement with the operators of a national telemarketing scheme who allegedly stole millions of dollars from consumers in violation of the FTC Act and the Telemarketing Sales Rule. According to the complaint filed by the FTC in 2016, the defendants allegedly sold “bogus online investment opportunities” to consumers nationwide in the form of schemes such as opportunities to buy or invest in e-commerce related websites or credit card company/e-commerce website profit-sharing programs, and then pocketed the payments—some of which exceeded more than $20,000. The defendants did not admit or deny the facts alleged in the complaint in the stipulated final order with the FTC, which imposed a $25 million monetary judgment that was partially suspended.  The order also prohibits the defendants from telemarketing, marketing investment opportunities, and selling or otherwise benefiting from consumers’ personal information.

    Consumer Finance FTC Telemarketing Sales Rule Privacy/Cyber Risk & Data Security

  • FTC Reaches $9 Million Settlement with Nationwide Debt Relief Company

    Financial Crimes

    On March 7, the FTC announced that it had reached a settlement with a debt relief company and its principals over allegations that they mislead consumers and charged illegal advance fees. The FTC claimed that the defendants sent direct mail ads that looked like official attorney or bank documents and exaggerated the amount of money consumers would save and the time it would take them to become debt free. In violation of the FTC’s Telemarketing Sales Rule, the defendants also allegedly charged advance fees before negotiating savings on credit card debts. The stipulated order requires the defendants to pay $9 million (to be partially suspended upon payment of $510,000), a figure that represents the amount of alleged harm to consumers. The defendants are also banned from “making misrepresentations about debt relief and other financial products or services, and making unsubstantiated claims about any products or services.”

    Financial Crimes FTC Telemarketing Sales Rule Debt Relief

  • FTC and 10 States Settle Charges with Remaining Defendants in Illegal Telemarketing Campaign

    Courts

    On February 21, the FTC announced that, along with 10 state attorneys general, it has entered a Stipulated Order for Permanent Injunction and Civil Penalty Judgment against defendants who were allegedly part of an illegal robocall campaign that ran from October 2011 through July 2012. According to the joint complaint filed by the FTC and the states in 2015, the campaign averaged approximately 12 to 15 million illegal sales calls a day asking consumers to complete a political research survey and then connecting them to a live telemarketer who sold cruise packages. The FTC’s 2015 press release noted that while “do-not-call and robocall rules do not prohibit political survey robocalls, the defendants’ robocalls violated federal law because they incorporated a sales pitch.” The 2017 settlement order imposed a $1.35 million fine, to be suspended after they pay $2,500 based on ability to pay, and bars the defendants from: (i) “initiating, or causing anyone else to initiate, any robocalls or helping anyone else make robocalls”; and (ii) “engaging in illegal telemarketing practices.” Certain other defendants reached settlements in 2015, which, in addition to imposing various civil money penalties, prohibited them also from engaging in abusive telemarketing practices.

    Courts FTC State Attorney General Telemarketing Sales Rule

  • CFPB Sues Law Firms for Unlawful Debt Relief Scheme

    Courts

    On January 30, the CFPB announced that it was seeking a permanent injunction against a group of affiliated law firms and their managing attorneys who charged illegal fees to consumers seeking debt relief. In a complaint filed with the Central District of California, the Bureau alleges, among other things, that the firms violated the Telemarketing Sales Rule by (i) collecting improper fees in advance of providing debt relief services; (ii) misrepresenting that advance fees would not be charged; and (iii) providing substantial  assistance to another company it knew or should have known was engaged in acts or practices that violated the rule, because the company had itself been the subject of a $40 million final judgment for similarly deceptive upfront fee arrangements in March 2016. The CFPB contends that the same attorneys from the earlier 2016 action—presently under appeal—took over operations of the firms now targeted.

    Courts Consumer Finance CFPB Telemarketing Sales Rule

  • Federal District Court Holds Claims Brought by CFPB Alleging Deceptive Conduct Must Meet Heightened Rule 9(b) Standard

    Courts

    In a recent case, a California District Court held that CFPB’s claims alleging deceptive conduct under the Telemarketing Sales Rule (“TSR”) against a credit repair company failed to meet the heightened pleading requirement under Fed. R. Civ. P. 9(b), under which a plaintiff must “state with particularity the circumstances constituting fraud” – including pleading “the time, place, and specific content of the false representations.” CFPB v. Prime Marketing Holdings, LLC, CV 16-07111-BRO, Dkt. No. 32 (C.D. Cal. Nov. 15, 2016).

    Specifically, the court in Prime Marketing Holdings concluded that the CFPB’s general allegations of deception “failed to identify any specific instances where the defendant made such a misrepresentation” including, for instance, “what representations were made, when these representations were made and to whom they were made.” Id. at 12-13. Based on this finding, the court dismissed without prejudice the four deception-based claims. Id.

    Courts Consumer Finance Fraud CFPB Telemarketing Sales Rule

  • FCC Enforcement Chief Touts Global Anti-Robocall Push

    Federal Issues

    In an official FCC blog post published November 21, FCC Enforcement Chief Travis LeBlanc re-emphasized the agency’s efforts to work with international law enforcement partners to target fraudsters who might otherwise be outside the FCC’s reach. As explained by Mr. LeBlanc:

    “Unsolicited calls and text messages are more than just a nuisance these days. They are used to perpetrate criminal fraud, phishing attacks, and identity theft schemes all around the world. These calls often overwhelm facilities, including emergency or 911 call centers. Those responsible for sending unwanted calls and texts often operate from outside of the United States, too often allowing them to evade our enforcement. Indeed, it is very easy for these scammers to operate from multiple countries, hide their locations, change their phone numbers between calls, trick caller ID systems into displaying false or trusted numbers, increasingly demand payments in hard-to-trace forms such as cash or gift cards, and move quickly to avoid detection and prosecution in our increasingly mobile world.”

    Earlier this year, the FCC signed a memorandum of understanding with members of the “Unsolicited Communications Enforcement Network,” a global network of law enforcement authorities and regulatory agencies that have agreed to share intelligence, identify common threats, learn from each other’s best practices and assist each other with investigations where permissible to combat unsolicited communications.

    Federal Issues Criminal Enforcement FCC Enforcement Telemarketing Sales Rule

  • FTC Announces Orders Banning Owners of a Debt Relief Operation from Related Activities

    Consumer Finance

    On September 8, the FTC announced that, under separate stipulated final orders (here and here), two owners of a debt relief operation are permanently banned from the debt relief business for violations of the FTC Act, the Telemarketing and Consumer Fraud and Abuse Prevention Act, and the Telemarketing Sales Rule. The FTC’s 2015 complaint alleged that the companies and the owners (collectively, defendants) convinced consumers with payday loan debts to enroll in their “Financial Hardship Program” (Program) by falsely promising to renegotiate the terms of their loans. Consumers were advised to stop making payments to their lenders and pay money to the Program instead, including enrollment and bi-weekly fees. According to the FTC, the defendants “failed to provide the consumers with the promised debt relief, and consumers ended up in deeper financial trouble, having paid hundreds of dollars for no reduction or settlement of their loans.” The stipulated final orders each impose monetary judgments of more than $23.7 million. The judgments will be partially suspended when the individually named owners pay $149,537 and approximately $8,037, respectively. In addition to barring the defendants from the debt relief operation business, the orders further prohibit them from “making representations about financial and other products and services, and from making unsubstantiated claims about any products or services,” and “from profiting from consumers’ personal information and failing to dispose of it properly.”

    FTC Enforcement Telemarketing Sales Rule Debt Settlement

  • FTC Submits Comment to the FCC on Proposal Relating to Debt Collection Robocalls

    Privacy, Cyber Risk & Data Security

    On June 6, the FTC submitted a comment to the FCC on its Notice of Proposed Rulemaking (NPR) regarding the implementation of recent changes to provisions of the Telephone Consumer Protection Act (TCPA) that permit robocalls “made solely to collect a debt owed or guaranteed by the United States.” Recommending that the FCC proceed cautiously with the expansion of permissible robocalling, the FTC instructed the FCC to establish standards for the collection of government debt that are consistent with the FDCPA, Section 5 of the FTC Act, and the Telemarketing Sales Rule (TSR). Specifically, the FTC’s comment advises the FCC to limit permitted robocalls to only (i) those relating to debts in default status; (ii) persons who actually owe the debts; (iii) those relating to the collection of the government debt; and (iv) collection purposes exclusively. In addition, the FTC’s comment on the NPR suggests that the FCC (i) maintain reasonable security practices over the data collected during covered robocalls; (ii) limit robocalls to the hours of 8:00 am to 9:00 pm; and (iii) require covered callers to “transmit caller ID information that includes a caller number that connects to a live agent representing the debt collector.”

    FTC TCPA Debt Collection FCC Telemarketing Sales Rule Agency Rule-Making & Guidance

  • CFPB Enters Proposed Final Judgment Against Student Debt Relief Company

    Consumer Finance

    On March 15, the CFPB filed a proposed Stipulated Final Judgment and Order in a California federal court against a California-based student debt relief company and its owner for alleged violations of the CFPA and the Telemarketing Sales Rule (TSR). In its December 2014 complaint, the CFPB alleged that the company violated the CFPA by (i) falsely misrepresenting itself as an affiliate of the Department of Education; (ii) charging consumers an upfront enrollment fee and a recurring monthly fee for “consultation” services; and (iii) deceiving consumers about the costs of their student loan debt relief services. The CFPB contended that the company violated the TSR by “primarily rel[ying] on a direct mailer and outbound telemarketing to attract consumers.” If approved by the court, the CFPB’s proposed consent order would require the company to (i) cease all operations within 45 days of the order’s effective date; (ii) stop enrolling consumers in its services and notify customers that it is ceasing operations; (iii) stop advertising, marketing, promoting, offering for sale, selling, or providing debt relief and student loan services; and (iv) ensure that borrowers confirm their income-driven repayment plans with the Department of Education and submit any necessary documentation for recertification or renewal. The order also imposes $8.2 million in damages, but the defendants will only be required to pay approximately $326,000 due to their inability to pay. Finally, the company will pay $1 to the CFPB’s Civil Money Penalty Fund, ensuring that consumers affected by the company’s practices are eligible for additional relief, if such relief becomes available in the future.

    CFPB Dodd-Frank Telemarketing Sales Rule Department of Education

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