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Financial Services Law Insights and Observations


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  • Feds, states launch “Operation Stop Scam Calls”

    Federal Issues

    On July 18, the FTC, along with over 100 federal and state law enforcement partners nationwide, including the DOJ, FCC, and attorneys general from all 50 states and the District of Columbia, announced a new initiative to combat illegal telemarketing calls, including robocalls. The joint initiative, “Operation Stop Scam Calls,” targets telemarketers and the companies that hire them, lead generators that provide consumers’ telephone numbers to robocallers and others who falsely represent that consumers consented to receive the calls. The initiative also targets Voice over Internet Protocol (VoIP) service providers that facilitate illegal robocalls, many of which originate overseas.

    In connection with Operation Stop Scam Calls, the FTC has initiated five new cases against companies and individuals allegedly responsible for distributing or assisting in the distribution of illegal telemarketing calls to consumers across the country. According to the announcement, the actions reiterate the FTC’s position “that third-party lead generation for robocalls is illegal under the Telemarketing Sales Rule (TSR) and that the FTC and its partners are committed to stopping illegal calls by targeting anyone in the telemarketing ecosystem that assists and facilitates these calls, including VoIP service providers.” The announcement also states that more than 180 enforcement actions and other initiatives have been taken by 48 federal and 54 state agencies as part of Operation Stop Scam Calls.

    Among the new actions announced a part of Operation Stop Scam Calls is a complaint filed against a “consent farm” lead generator, which allegedly uses “dark patterns” to collect consumers’ broad agreement to provide their personal information and receive robocalls and other marketing solicitations through a single click of a button or checkbox via its websites. Under the terms of the proposed order, the defendant would be required to pay a $2.5 million civil penalty and would be banned from engaging in, assisting, or facilitating robocalls. The defendant would also be required to implement measures to limit its lead generation practices, establish systems for monitoring its own advertising and that of its affiliates, comply with comprehensive disclosure requirements concerning the collection of consumers’ consent to the sale of their information, and delete all previously collected consumer information.

    Other actions were taken against a California-based telemarketing lead generator, a telemarketing company that provides soundboard calling services to clients who use robocalls to sell a range of products and services, a New Jersey-based telemarketing outfit that placed tens of millions of calls to consumers whose numbers are listed on the National Do Not Call Registry, and Florida-based defendants accused of assisting and facilitating the transmission of roughly 37.8 million illegal robocalls by providing VoIP services to over 11 foreign telemarketers.

    Federal Issues State Issues Courts FTC Enforcement Robocalls Consumer Protection State Attorney General TSR Telemarketing Lead Generation DOJ FCC

  • FTC bans operators of auto-warranty scam

    Agency Rule-Making & Guidance

    On July 6, the FTC announced that it reached an agreement on a stipulated order to resolve a lawsuit against the operators of a telemarketing scam that pitched “extended automobile warranties” to hundreds of thousands of consumers nationwide.  The stipulated order, which has been approved by the U.S. District Court for the Southern District of Florida, imposes a lifetime ban against a consulting group and its owner from any outbound telemarketing business and any involvement with extended automobile warranty sales. In February 2022, the FTC sued several companies—including the consulting group and its owner—in connection with their alleged involvement in the telemarketing scam, alleging that they had defrauded consumers out of millions of dollars. The complaint alleged that the companies made numerous unsolicited calls, falsely claiming to be affiliated with vehicle manufacturers and inaccurately promoting their products as offering comprehensive “bumper-to-bumper” protection.  

    In addition to the lifetime ban, the stipulated order includes a monetary judgment of $6.5 million, which is partially suspended based on the defendants’ alleged inability to pay. The FTC reached a separate settlement with three of the other original defendant companies and their owners in March 2023.

    Agency Rule-Making & Guidance FTC Telemarketing Consumer Protection Deceptive

  • FTC obtains permanent ban against debt relief operators

    Federal Issues

    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.

    Federal Issues FTC Enforcement Debt Relief Telemarketing FTC Act Telemarketing Sales Rule

  • FTC, DOJ sue telemarketers of fake debt relief services

    Federal Issues

    On February 16, the DOJ filed a complaint on behalf of the FTC against several corporate and individual defendants for alleged violations of the FTC Act and the Telemarketing Sales Rule (TSR) in connection with debt relief telemarketing campaigns that delivered millions of unwanted robocalls to consumers. (See also FTC press release here.) According to the complaint, filed in the U.S. District Court for the Southern District of California, the defendants are interconnected platform providers, lead generators, telemarketers, and debt relief service sellers. Alleged violations include: (i) making misrepresentations about their debt relief services; (ii) initiating telemarketing calls to numbers on the FTC’s Do Not Call Registry, as well as calls in which telemarketers failed to disclose the identity of the seller and services being offered; (iii) initiating illegal robocalls without first obtaining consent; (iv) failing to make oral disclosures required by the TSR, including clearly and truthfully identifying the seller of the debt relief services; (v) misrepresenting material aspects of their debt relief services; and (vi) requesting and receiving payments from customers before renegotiating or otherwise altering the terms of those customers’ debts. The complaint seeks permanent injunctive relief, civil penalties, and monetary damages. Two of the defendants (a debt relief lead generator and its owner) have agreed to a stipulated order that, if approved, would prohibit them from further violations and impose a monetary judgment of $3.38 million, partially suspended to $7,500 to go towards consumer redress due to their inability to pay.

    Federal Issues FTC DOJ Enforcement Robocalls Debt Relief Consumer Finance FTC Act Telemarketing Sales Rule Telemarketing

  • Pennsylvania sues lead generator for facilitating telemarketers’ robocalls

    State Issues

    On November 3, the Pennsylvania attorney general announced a lawsuit against a New York-based lead generation company that connects advertisers to potential new customers through the consumers’ personal data for allegedly causing hundreds of thousands of robocalls to be placed to consumers in the Commonwealth. The defendant, along with several of its subsidiaries, allegedly collected personal information, including phone numbers and personal information of consumers on Pennsylvania’s Do Not Call List, that was then sold to telemarketing companies. According to the complaint, the defendants allegedly engaged in deceptive and misleading business practices in connection with their lead-generation practices, by obtaining consumers’ information through various promotional opportunities without clearly disclosing that by providing their contact information, consumers were consenting to receiving telemarketing calls from hundreds of potential sellers. The complaint alleges that from 2018 to 2021, over 4.2 million Pennsylvania consumers registered their information on one of the defendants’ websites. “Under the [Telemarketing Sales Rule (TSR)], a consumer’s express agreement to accept calls delivering a prerecorded message may not be obtained by a lead generator, who is not a seller or a telemarketer. The express agreement must be obtained directly by the seller or telemarketer from the consumer,” the complaint said. Moreover, even if the defendants were not directly making the telemarketing calls themselves, assisting and facilitating the calls is itself a violation of the rules, the complaint noted.

    The defendants are charged with violating several federal and state telemarketing laws, including the TSR, and Pennsylvania’s Telemarketer Registration Act (TRA) and Pennsylvania’s Unfair Trade Practices and Consumer Protection Law. The AG’s office seeks a declaration permanently enjoining the defendants from violating the telemarketing and consumer protection laws, along with civil penalties of $1,000 per violation and $3,000 per violation involving a victim age 60 or older. The suit also seeks disgorgement, costs, and a permanent bar on selling consumer data collected in violation of the TSR and TRA.

    State Issues State Attorney General Pennsylvania Telemarketing Robocalls Lead Generation Do Not Call Registry Telemarketing Sales Rule Enforcement

  • 9th Circuit says telemarketing texts sent to mixed-use cells phones fall under TCPA


    On October 12, a split U.S. Court of Appeals for the Ninth Circuit reversed a district court’s dismissal of a TCPA complaint, disagreeing with the argument that the statute does not cover unwanted text messages sent to businesses. Plaintiffs (who are home improvement contractors) alleged that the defendants used an autodialer to send text messages to sell client leads to plaintiffs' cell phones, including numbers registered on the national do-not-call (DNC) registry. The plaintiffs contented they never provided their numbers to the defendants, nor did they consent to receiving text messages. The defendants countered that the plaintiffs lacked Article III and statutory standing because the TCPA only protects individuals from unwanted calls. The district court agreed, ruling that the plaintiffs lacked statutory standing and dismissed the complaint with prejudice.

    On appeal, the majority disagreed, stating that the plaintiffs did not expressly consent to receiving texts messages from the defendants and that their alleged injuries are particularized. In determining that the plaintiffs had statutory standing under sections 227(b) and (c) of the TCPA, the majority rejected the defendants’ argument that the TCPA only protects individuals from unwanted calls. While the defendants claimed that by operating as home improvement contractors the plaintiffs fall outside of the TCPA’s reach, the majority determined that all of the plaintiffs had standing to sue under § 227(b), “[b]ecause the statutory text includes not only ‘person[s]’ but also ‘entit[ies].’” With respect to the § 227(c) claims, which only apply to “residential” telephone subscribers, the appellate court reviewed whether a cell phone that is used for both business and personal reasons can qualify as a “residential” phone. Relying on the FCC’s view that “a subscriber’s use of a residential phone (including a presumptively residential cell phone) in connection with a homebased business does not necessarily take an otherwise residential subscriber outside the protection of § 227(c),” and “in the absence of FCC guidance on this precise point,” the majority concluded that a mixed-use phone is “presumptively ‘residential’ within the meaning of § 227(c).”

    Writing in a partial dissent, one judge warned that the majority’s opinion “usurps the role of the FCC and creates its own regulatory framework for determining when a cell phone is actually a ‘residential telephone,’ instead of deferring to the FCC’s narrower and more careful test.” The judge added that rather than “deferring to the 2003 TCPA Order which extended the protections of the national DNC registry to wireless telephones only to the extent they were similar to residential telephones, a reasonable interpretation of the TCPA, the majority has leaped over the FCC’s limitations to provide its own, much laxer, regulatory framework and procedures that broadly allow anybody who owns a cell phone to sue telemarketers under the TCPA.” 

    Courts Appellate Ninth Circuit Autodialer TCPA FCC Telemarketing

  • FTC takes action against telemarketing operation

    Federal Issues

    On May 25, the FTC announced an action resolving allegations against a subscription scam operation and its officers (collectively, “defendants”) that allegedly deceptively used telemarketing schemes on consumers. According to the complaint, which was filed in the U.S. District Court for the District of Nevada, the defendants allegedly violated the FTC Act and the Telemarketing Sales Rule (TSR) by calling consumers to claim that they were conducting a survey and offering “free” or low-cost magazine subscriptions. After the survey, the defendants allegedly sent consumers a bill falsely stating that they agreed to pay several hundred dollars for the magazine subscriptions. According to the FTC, there was a “no-cancellation policy,” and the defendants allegedly harassed consumers when they refused to pay the exorbitant bills, including by threatening to initiate collection actions or threatening to submit derogatory information about them to the major credit bureaus. The proposed order follows a 2010 permanent injunction that was entered against the same defendants, which prohibited them from committing future violations. The recent order requires the defendants to pay a suspended judgment of $14.4 million and requires them to give up all claims to money already paid to the FTC. Additionally, the defendants are required to monitor their compliance with the proposed order “and may face significant contempt remedies if they violate its terms.” The FTC noted that the original monetary relief was vacated after the Supreme Court’s decision in AMG Capital Management LLC v. FTC, which limited the FTC’s ability to obtain monetary relief in federal court (covered by InfoBytes here). The FTC pointed out that the “settlement of this matter for a suspended judgment of $14.47 million, after originally having been awarded $24 million at trial, demonstrates the challenges since the Supreme Court’s AMG decision.”

    Federal Issues FTC Telemarketing Deceptive UDAP Enforcement FTC Act TSR

  • FTC proposes TSR amendments to extend robocall protections

    Agency Rule-Making & Guidance

    On April 28, the FTC proposed rulemakings to extend protections for small businesses against telemarketing business-to-business schemes and strengthen safeguards to protect consumers from other telemarking scams. Both the notice of proposed rulemaking (NPR) and advance notice of proposed rulemaking (ANPRM) stem from the FTC’s regulatory review of the Telemarketing Sales Rule (TSR) and address public comments received as part of the review.

    The NPR proposes to amend TSR recordkeeping requirements to require telemarketers to retain seven new categories of information related to their telemarketing activities, including records concerning each unique prerecorded message, records sufficient to show the established business relationship between a seller and a consumer, records of the service providers used by a telemarketer to deliver outbound calls, and records of the FTC’s Do Not Call Registry that were used to ensure compliance with this rule. Additionally, the NPR seeks comments on whether the FTC should amend the TSR to prohibit material misrepresentations and false or misleading statements in business-to-business telemarketing transactions to prevent harm caused by deceptive telemarketing, and proposes adding a definition of “previous donor” related to charitable donation solicitations.

    The ANPRM seeks comments on a range of issues related to whether calls related to tech-support scams should be covered by the TSR, whether telemarketers should be required to provide consumers with a simple click-to-cancel process when they sign up for subscription plans, and whether the TSR should stop treating telemarketing calls made to businesses differently from those made to consumers. According to the FTC, robocalls made to businesses are generally exempt from certain TSR provisions.

    Comments on both proposed rulemakings are due 60 days after publication in the Federal Register.

    Agency Rule-Making & Guidance Federal Issues FTC Small Business Telemarketing Telemarketing Sales Rule Robocalls

  • FTC takes action against day-trading company for deceptive sales techniques

    Federal Issues

    On April 19, the FTC filed a complaint against a day-trading investment company and its CEO alleging the defendants violated the FTC Act and the Telemarketing Sales Rule (TSR) in connection with the company’s investment opportunities. According to the complaint, the Massachusetts-based defendants promote day-trading investments online and sell programs promising to show consumers how to earn substantial profits in a short time period. The FTC contends that the defendants promote these so-called “profitable” and “scalable” trading strategies to consumers through allegedly deceptive sales pitches and inform consumers that their strategies are effective even with initial investments as small as $500. However, the FTC claims that 74 percent of customers’ accounts actually lost money and that only 10 percent of the accounts earned more than $90.

    Under the terms of the proposed stipulated order, the defendants are required to pay $3 million in consumer redress and are permanently restrained and enjoined from making unsubstantiated earnings claims concerning consumers’ potential to earn money using their trading strategies regardless of the amount of capital invested or the amount of time spent trading. Defendants are also prohibited from violating federal law, or from making any misrepresentations about investment opportunities, including misrepresentations in connection with telemarketing regarding the amount of “risk, liquidity, earnings potential, or profitability of goods or services that are the subject of a sales offer.”

    Federal Issues FTC Enforcement FTC Act UDAP Deceptive Telemarketing Telemarketing Sales Rule

  • 11th Circuit affirms $23 million judgment against founder of debt relief operation


    On March 9, the U.S. Court of Appeals for the Eleventh Circuit affirmed summary judgment in favor of the FTC and the Florida attorney general after finding that an individual defendant could be held liable for the actions of the entities he controlled. As previously covered by InfoBytes, the FTC and the Florida AG filed a complaint in 2016 against several interrelated companies and the individual defendant who founded the companies, alleging violations of the FTC Act, the Telemarketing Sales Rule, and the Florida Deceptive and Unfair Trade Practices Act. The complaint alleged that the defendants engaged in a scheme that targeted financially distressed consumers through illegal robocalls selling bogus credit card debt relief services and interest rate reductions. Among other things, the defendants also claimed to be “licensed enrollment center[s]” for major credit card networks with the ability to work with a consumer’s credit card company or bank to substantially and permanently lower credit card interest rates and charged up-front payments for debt relief and rate-reduction services. In 2018, the court granted the FTC and the Florida AG’s motion for summary judgment, finding there was no genuine dispute that the individual defendant controlled the defendant entities, that he knew his employees were making false representations, and that he failed to stop them. The court entered a permanent injunction, which ordered the individual defendant to pay over $23 million in equitable monetary relief and permanently restrained and enjoined the individual defendant from participating—whether directly or indirectly—in telemarketing; advertising, marketing, selling, or promoting any debt relief products or services; or misrepresenting material facts.

    The individual defendant appealed, arguing that there were genuine disputes over whether: (i) he controlled the entities; (ii) he had knowledge that employees were making misrepresentations and failed to prevent them; (iii) employee affidavits “attesting that they had saved customers money created an issue of fact about whether his programs did what he said they would do”; and (iv) he had knowledge of “rogue employees” violating the “do not call” registry to solicit customers.

    On appeal, the 11th Circuit determined that the facts presented by the individual defendant did not create a genuine dispute about whether he controlled the entities, and further stated that the individual defendant is liable for the employees’ misrepresentations because of his control of the entities and his knowledge of those misrepresentations. The appellate court explained that while the individual defendant argued that he could not be liable because he did not participate in those representations, he failed to present any evidence in support of that argument and, even if he had, “it wouldn’t matter, because [the individual defendant’s] liability stems from his control of [the companies], not from his individual conduct.” Additionally, the appellate court held that whether the services were helpful to customers was immaterial and did not absolve him of liability, because liability for deceptive sales practices does not require worthlessness. As to the “do not call” registry violations, the appellate court disagreed with the individual defendant’s claim that an “outside dialer or lead generator”—not the company—placed the outbound calls, holding that this excuse also does not absolve him of liability.

    Courts Appellate Eleventh Circuit Telemarketing Enforcement Debt Relief State Issues State Attorney General Florida FTC Act TSR


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