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  • FTC settles with e-commerce telemarketers for $1.2 million

    Federal Issues

    On May 13, the FTC announced a $1.2 million settlement with a group of telemarketing companies and their owners (collectively, “defendants”) for an allegedly deceptive e-commerce scheme in violation of the FTC Act, the Telemarketing Sales Rule (TSR), and the Consumer Review Fairness Act (CRFA). According to the complaint filed in the U.S. District Court for the Western District of Washington, the defendants sold products and services to consumers trying to start at-home internet-based businesses, which the defendants claimed would “substantially increase the visibility of and drive customer traffic to consumers’ ecommerce websites on the Internet.” The defendants would allegedly obtain leads by using a service that produces leads of consumers who have recently registered websites. The defendants would contact the consumers by telephone to sell services and would typically continue to call consumers to “upsell” additional products. The FTC argues that “[c]ontrary to [d]efendants’ representations, many consumers who purchase [d]efendants’ products and services do not end up with a functional website, earn little or no money, and end up heavily in debt.” The complaint alleges that the defendants violated the FTC Act, the TSR, and the CRFA by, among other things, (i) making unsubstantiated and false earnings and product claims; (ii) making false claims about business affiliations; and (iii) using contract provisions that restrict consumers’ ability to review or complain about purchased products or services.

    The settlement with two of the entities and one owner includes a monetary judgment of over $16 million, which is partially suspended due to an inability to pay, and requires the defendants to surrender over $900,000. In separate settlements with the other two owners, large monetary judgments are also partially suspended due to an inability to pay, with one required to surrender over $100,000, and the other required to surrender over $200,000.

    Federal Issues FTC Act Enforcement Telemarketing Sales Rule Deceptive Settlement UDAP

  • Credit card launderer settles FTC charges for $6.75 million

    Federal Issues

    On April 22, the FTC filed a complaint against a Canadian company and its CEO (defendants) for allegedly participating in deceptive and unfair acts or practices in violation of the FTC Act and the Telemarketing Sales Rule (TSR) by, among other things, laundering credit card payments for two tech support scams that were sued by the FTC in 2014. The FTC alleges in its complaint that the defendants entered into contracts with payment processors to obtain merchant accounts to process credit card charges. While these contracts prohibited the defendants from submitting third-party sales through its merchant accounts, the FTC claims that the defendants used the accounts to process millions of dollars of consumer credit card charges on behalf of the two tech support operators and also processed charges for lead generators that directed consumers to the tech support scam. The FTC alleges that the defendants were aware of the unlawful conduct of at least one of the two operators and attempted to hide these charges from the payment processors.

    Under the proposed settlement, the defendants neither admitted nor denied the allegations, except as specifically stated within the settlement, and (i) will pay $6.75 million in equitable monetary relief; (ii) are permanently enjoined from engaging in any further payment laundering or violations of the TSR; and (iii) will screen and monitor prospective high risk clients.

    Federal Issues FTC Enforcement Credit Cards FTC Act Telemarketing Sales Rule UDAP Deceptive Unfair Payment Processors

  • FTC obtains default judgment in student debt relief operation

    Federal Issues

    On March 10, the FTC announced that it obtained default judgments of over $10.7 million against three defendants in a student loan debt relief operation that the FTC alleged violated the FTC Act and the Telemarketing Act. The defendants were alleged to have deceptively marketed services to reduce or eliminate student loan debt and to have tricked borrowers into paying illegal upfront fees for these services. In its order granting the default judgment, in addition to the monetary penalties, the court permanently enjoined the defendants from (i) participating in telemarketing; (ii) selling secured and unsecured debt relief products and services; and (iii) making misrepresentations related to financial products and services.

    Federal Issues FTC Enforcement Student Lending Debt Relief FTC Act UDAP TSR Telemarketing Sales Rule

  • New York AG settles with student debt relief companies

    State Issues

    On February 18, the U.S. District Court for the Southern District of New York approved a settlement between the State of New York and a student loan debt relief operation including five debt relief companies and one individual (defendants) in order to resolve allegations that the defendants violated the Telemarketing Sales Rule, the Federal Credit Repair Organizations Act, TILA, state usury laws, and various other state laws. As previously covered by InfoBytes, the New York attorney general brought the lawsuit in 2018 alleging that the defendants “engag[ed] in deceptive, fraudulent and illegal conduct…through their marketing, offering for sale, selling and financing” of debt relief services to student loan borrowers. The AG claimed that, among other things, the defendants allegedly (i) charged consumers who purchased the debt relief services illegal upfront fees; (ii) misrepresented that they were part of or working with the federal government; (iii) falsely claimed that fees paid by borrowers would be applied to borrowers’ student loan balances; and (iv) induced borrowers to enter into usurious financing contracts to pay for the debt relief services.

    Under the terms of the agreement, the defendants—without admitting or denying the allegations—agreed to a judgment of $2.2 million, which will be suspended if the defendants promptly pay $50,000 to the State of New York and comply with all other provisions of the agreement. The defendants are also permanently banned from advertising, marketing, promoting, offering for sale, or selling any type of debt relief product or service—or from assisting others in doing the same. Additionally, the defendants must request that any credit reporting agency to which the defendants reported consumer information in connection with the student loan debt relief services remove the information from those consumers’ credit files. The defendants also agreed not to sell, transfer, or benefit from the personal information collected from borrowers. According to the settlement, six additional defendants were not included in the agreement and the AG’s case against them continues.

    State Issues State Attorney General Courts Student Lending Debt Relief Usury Telemarketing Sales Rule TILA Settlement

  • FTC settles with credit repair companies

    Federal Issues

    On January 17, the FTC announced it had reached settlements with a number of defendants alleged to have operated “an unlawful credit repair scam that has deceived consumers across the country.” According to the FTC’s complaint, the defendants purportedly made false representations to consumers regarding their abilities to improve credit scores, falsely promised to remove any negative entries on the consumers’ credit reports, illegally collected upfront fees from consumers before the services were fully performed, and used threats and coercion to intimidate consumers from disputing charges. The FTC alleged these misleading statements and illegal actions violated TILA, the FTC Act, the Telemarketing Act, and the Credit Repair Organizations Act, among other things. Additionally, the FTC claimed that the defendants “routinely engage in electronic fund transfers from consumers’ bank accounts without obtaining proper authorization, and use remotely created checks to pay for credit repair services they have offered through a telemarketing campaign, in violation of the TSR.” The defendants, without admitting or denying the allegations, agreed to settlements that ban the defendants from offering credit repair services through “advertising, marketing, promoting, offering for sale, or selling,” impose a total monetary penalty of nearly $14 million, and require several defendants to turn over the contents of bank and merchant accounts as well as investment and cryptocurrency accounts. See the settlements here, here, and here.

    Federal Issues Agency Rule-Making & Guidance Settlement Enforcement FTC FTC Act TILA TSR CROA Telemarketing Sales Rule Telemarketing and Consumer Fraud and Abuse Prevention Act Credit Repair

  • After settlement, six remain in FTC robocalling suit

    Federal Issues

    On January 10, the FTC announced that it entered into two settlement agreements: one with a call center and two individuals, and one with an additional individual (together, “the settling defendants”) that it claims made illegal robocalls to consumers as part of a cruise line’s telemarketing operation allegedly aimed at marketing free cruise packages to consumers. According to the two settlements (see here and here), the settling defendants “participated in unfair acts or practices in violation of . . . the FTC Act, and the FTC’s Telemarketing Sales Rule [(TSR)]” by “(a) placing telemarketing calls to consumers that delivered prerecorded messages; (b) placing telemarketing calls to consumers whose telephone numbers were on the National Do Not Call Registry; and (c) transmitting inaccurate caller ID numbers and names with their telemarketing calls.” The defendants are permanently banned from making telemarketing robocalls, and have been levied judgments totaling $7.8 million, all but $2,500 of which has been suspended due to the defendants’ inability to pay.

    Also on January 10, the FTC filed a complaint in the U.S. District Court for the Middle District of Florida against the remaining six defendants allegedly involved in the telemarketing operation, for violations of the FTC Act and TSR based on the same actions alleged against the settling defendants.

    Federal Issues Robocalls FTC Telemarketing Sales Rule FTC Act Settlement Enforcement

  • CFPB denies petitioner’s request to postpone CID pending Seila decision

    Federal Issues

    On December 26, the CFPB denied a petition by a student loan relief company to modify or set aside a civil investigative demand (CID) issued by the Bureau last October. According to the company’s petition, the CID requested information as part of an investigation into the company’s promotion of student loan debt relief programs. As previously covered by InfoBytes, stipulated orders were entered against the company by the FTC and the Minnesota attorney general for violations of TILA and the assisting and facilitating provision of the Telemarketing Sales Rule, which resulted in the company being permanently banned from engaging in transactions involving debt relief products and services or making misrepresentations regarding financial products and services. In its petition, the company argued that the CFPB’s requests were duplicative of the FTC’s earlier investigation. The company also argued that the documents and materials sought in the CID were overly burdensome and the time frame to respond was too short. Furthermore, the company stated that until the U.S. Supreme Court issues a decision in Seila Law v. CFPB on whether the Bureau’s structure violates the Constitution’s separation of powers under Article II, the CID should either be withdrawn or stayed because of the uncertainty surrounding the Bureau’s ability to proceed with enforcement actions.

    The Bureau denied the petition, arguing that “the administrative CID petition process is not the proper forum for raising and deciding constitutional challenges to provisions of the Bureau’s statute.” The Bureau also noted that the company failed to show that it engaged with Bureau staff on ways to alleviate undue burden, such as proposing modifications to the substance of the requests, and that even though the Bureau proposed an extension to the CID deadline, the company did not seek such an extension.

    Federal Issues CFPB CIDs Single-Director Structure Enforcement Seila Law FTC State Attorney General TILA Telemarketing Sales Rule Debt Relief

  • CFPB files claims against debt relief companies

    Federal Issues

    On January 9, the CFPB announced that it filed a complaint in the U.S. District Court for the Central District of California against a mortgage lender, a mortgage brokerage, and several student loan debt relief companies (collectively, “the defendants”), for allegedly violating the FCRA, TSR, and FDCPA. In the complaint, the CFPB alleges that the defendants violated the FCRA by, among other things, illegally obtaining consumer reports from a credit reporting agency for millions of consumers with student loans by representing that the reports would be used to “make firm offers of credit for mortgage loans” and to market mortgage products. The Bureau asserts that the reports of more than 7 million student loan borrowers were actually resold or provided to companies engaged in marketing student loan debt relief services.

    According to the complaint, “using or obtaining prescreened lists to send solicitations marketing debt-relief services is not a permissible purpose under FCRA.” The complaint alleges that the defendants violated the TSR by charging and collecting advance fees before first “renegotiat[ing], settl[ing], reduc[ing], or otherwise alter[ing] the terms of at least one debt pursuant to a settlement agreement, debt-management plan, or other such valid contractual agreement executed by the customer,” and prior to “the customer ma[king] at least one payment pursuant to that settlement agreement, debt management plan, or other valid contractual agreement between the customer and the creditor or debt collector.” The CFPB further alleges that the defendants violated the TSR and the CFPA when they used telemarketing sales calls and direct mail to encourage consumers to consolidate their loans, and falsely represented that consolidation could lower student loan interest rates, improve borrowers’ credit scores, and change their servicer to the Department of Education.

    The Bureau is seeking a permanent injunction to prevent the defendants from committing future violations of the FCRA, TSR, and CFPA, as well as an award of damages and other monetary relief, civil money penalties, and “disgorgement of ill-gotten funds.”

    Federal Issues CFPB Debt Relief Consumer Finance Telemarketing Sales Rule Student Lending CFPA Courts FCRA UDAAP

  • TRO issued against VoIP service provider in card interest reduction scam

    Federal Issues

    On December 5, the FTC and the Ohio attorney general announced that the U.S. District Court for the Western District of Texas issued a temporary restraining order (TRO) against a VoIP service provider and its foreign counterpart for facilitating (or consciously avoiding knowing of) a “phony” credit card interest rate reduction scheme committed by one of its client companies at the center of a joint FTC/Ohio AG action. As previously covered by InfoBytes, the original complaint alleged that a group of individuals and companies—working in concert and claiming they could reduce interest rates on credit cards—had violated the FTC Act, the Telemarketing Sales Rule, and various Ohio consumer protection laws. In addition to obtaining a TRO against the most recent alleged participants, the FTC and Ohio AG amended their July complaint to add the telecom companies as defendants alleging the companies “played a key role in robocalling consumers to promote a credit card interest reductions scheme.”

    Federal Issues FTC State Attorney General Consumer Finance Robocalls Credit Cards TRO Courts FTC Act Telemarketing Sales Rule

  • Regulators tackle company offering relief from student loans

    Federal Issues

    On October 30, the CFPB, along with the Minnesota and North Carolina attorneys general, and the Los Angeles City Attorney (together, the “states”), announced an action against a student loan debt relief operation for allegedly deceiving thousands of student-loan borrowers and charging more than $71 million in unlawful advance fees. In the complaint filed October 21 and unsealed on October 29 in the U.S. District Court for the Central District of California, the Bureau and the states alleged that since at least 2015 the defendants have violated the Consumer Financial Protection Act, the Telemarketing Sales Rule, and various state laws by charging and collecting improper advance fees from student loan borrowers prior to providing assistance and receiving payments on the adjusted loans. In addition, the Bureau and the states claim the defendants engaged in deceptive practices by misrepresenting (i) the purpose and application of fees they charged; (ii) their ability to obtain loan forgiveness; and (iii) their ability to actually lower borrowers’ monthly payments. The defendants also allegedly failed to inform borrowers that they automatically requested that the loans be placed in forbearance and submitted false information to student loan servicers to qualify borrowers for lower payments. The complaint seeks injunctive relief, as well as damages, restitution, disgorgement, and civil money penalties.

    On November 15, the court entered a preliminary injunction enjoining the alleged violations of law in the complaint, continuing the asset freeze, and appointing a receiver against the defendants. 

    Federal Issues CFPB Student Lending Debt Relief Courts State Attorney General CFPA Telemarketing Sales Rule UDAAP

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