Maybe it’s because there’s a new chief commissioner, but lately, the FTC is behaving like a trust fund kid seeking his absent father’s approval. The nation’s consumer watchdog is not only knocking on Google’s door, again, but they’re also trolling work-at-home biz opps, robocall operations, debt collectors and “free offer” marketers. Plans are afoot to amend the Telemarketing rules, and word on the street is that another online marketing compliance sweep, a la the Acai berry dragnet in 2011, is on the way. So, if you do business online – especially if you use any of the marketing techniques below – it’s time to ensure you’re FTC compliant.
Work-at-home businesses banned from selling biz opps
Last year, new biz opp rules went into effect. Now, the FTC is on the hunt for operations violating those rules.
Recently, the commission targeted 20 companies peddling “webdev and hosting” work-at-home opportunities. After a thorough investigation, the FTC won 7 regulatory settlements. Censured companies were found to have:
- Misrepresented material facts in promoting their biz opp;
- Collected money illegally from buyers;
- Sold customers personal information outside of allowable parameters;
- Improperly disposed of customer information;
- Promised buyers assistance and “marketing expertise” but didn’t deliver on the promise.
As is common in FTC rulings, the responsible parties are forbidden from engaging in the same types of activities in the future. Individuals cited under the action are also prohibited from ever making money off the sale of consumers’ personal information – presumably even if it’s a legal operation.
Fines were levied in this instance, but suspended because the chastised parties didn’t have the money. The FTC swore, however, that if additional funds are discovered, the FTC will collect. It’s not an idle threat, either. Just recently, the FTC moved to claim family assets of people found in violation of FTC regulations.
Expert Global Solutions, a Plano, TX, debt collection agency with 32,000 employees and a $1.2 billion bottom line, got hit with the FTC hammer this summer. The debt collection behemoth must fork over $3.2 million for “harassing consumers.” It’s the largest FTC fine against a debt collector.
What got them in trouble? Expert Global called people several times a day – early in the morning, late in the evening and at work. According to records, even after debts were paid in full, members of the Expert Global team would keep calling names on their lists to determine if the debt still existed.
If you run an online debt collection operation, be on the lookout for snoops poking around your business. But most importantly, review your procedures to ensure you’re compliant. (Of course, you can get in touch with us if you’re not sure.)
The FTC is also keen to snuff out sketchy, pre-recorded robocalls. Last year, the commission conducted a crackdown, and A+ Financial Center got hit hard. A financial services company, A+ Financial used robocalls as a marketing technique. Presumably, thousands of people received calls, generated at A+ facilities, from “Rachel” at “Cardholder Services,” who wanted to talk about interest rate reductions for credit cards. If the call recipient agreed, A+ would collect an initial fee and promise to help reduce their credit card rates. The problem was that A+ would do little to nothing to help customers land lower rates or sustain long term savings.
In addition to the usual marketing prohibitions placed on FTC violators, A+ was slapped with a $9,238,155 judgment. Though much of the fine is suspended due to insufficient funds on the part of the perpetrators, the FTC is taking possession of a 2007 Mercedes Benz and two boats as a means of partially fulfilling the monetary fine.
New Amendments to Telemarketing Rules
New Telemarketing Consumer Fraud and Abuse Prevention Act rules are on the way. Passed in 1994, the law gives the Federal Trade Commission authority to enact programs that “prohibit deceptive telemarketing acts or practices.” As such, the commission is exercising its power by tightening regulations for both inbound and outbound telemarketers.
The Telemarketing Consumer Fraud and Abuse Prevention Act rule proposal changes prohibit inbound and outbound telemarketers from:
- Accepting or requesting “remotely created checks” (draft transactions from a checking accounts; digital payments to creditors; purchasing items via phone or online; compensation for insufficient funds; debt collectors fees to establish payment plans).
- Accepting remotely created payment orders, money transfers and cash re-load mechanisms as payment.
The draft amendments specifically mention curtailing “novel payment methods” — like using bank routing numbers to withdraw funds without authorization. Judging from available information, it also appears that the proposed new rules will address the use of VoIP technology to disguise a caller’s location.
“Free iPad” Schemes
Henry Nolan Kelly, an Internet marketer, was also hit by the FTC this month. Over time, Kelly sent out about 20 million text messages indicating the recipient was eligible for a free iPhone or iPad. However, Kelly never actually gave anybody a free anything. As such, the Federal Trade Commission fined the Apple product promiser a cool $60,950 “for running a large text message based scam.”
Since Henry doesn’t have the funds to pay the penalty, he is being forced to cooperate with the FTC in an effort to identify and catch other internet marketers using the same techniques as himself.
As you can see, the FTC is busy this summer – and the trend is expected to continue into the fall and winter. So, if you engage in online marketing of any kind, get in touch with an Internet advertising attorney and get a compliance audit. The amount it will cost to ensure you’re operating on the right side of the law is peanuts compared to what you could lose if you wind up in the FTC’s crosshairs.