• The Federal Trade Commission (“FTC” or “Commission”) accepted two separate settlements on April 1 against companies that deceived Spanish-speaking consumers responding to ads for low-cost computer systems. The settlements are with California-based Unicyber Technology, Inc., and Florida-based Latin Shopping Network. In both cases, the FTC alleged that the defendants engaged in deceptive business practices that violated federal laws. The Unicyber defendants’ ads attracted consumers with offers of guaranteed financing with no credit check. The Latin Shopping Network ads offered computers for cash. The settlements prohibit the defendants from misrepresenting any fact material to a consumer’s decision to buy or accept computers or any other good or service. The Unicyber settlement requires the defendant to pay $100,000 in redress to consumers, to be added to the $400,000 already obtained from the corporate defendants. The Latin Shopping Network defendants must pay $45,000 in redress. The cases are part of the FTC’s Hispanic Law Enforcement and Outreach Initiative – a comprehensive campaign started in early 2003 to identify and stop fraud targeting Spanish-speaking consumers in the United States. The ongoing campaign involves: 1) active monitoring of Spanish-language media and complaints received in Spanish; 2) aggressive law enforcement actions against marketers defrauding Spanish-speaking consumers; and, 3) extensive outreach to Spanish-speaking consumers to prevent fraud from occurring and encourage greater reporting of consumer fraud.
  • FTC Chairman Deborah Platt Majoras appointed Lydia B. Parnes as Director of the Bureau of Consumer Protection (“BCP”) on March 31. Parnes will lead the FTC’s work to protect U.S. consumers from fraud and deception in the marketplace. Current BCP efforts include consumer protection law and trade regulation rule enforcement, individual company and industry investigations, administrative and federal court litigation, rulemaking proceedings, and consumer and business education. Under her leadership, the BCP has recommended a number of important law enforcement actions for Commission prosecution, including cutting-edge spam and spyware cases. Since she was named Acting Bureau Director by then-Chairman Timothy J. Muris last July, the FTC has filed 57 consumer protection actions in federal district court and obtained 67 judgments ordering the return of more than a quarter of a billion dollars in redress to consumers. Parnes joined the FTC in 1981 as an attorney advisor to former Chairman James C. Miller III.
  • Three operations that scammed consumers out of more than one hundred million dollars by falsely promising easy debt relief settled FTC charges on March 30 that their business practices were illegal. According to the FTC, consumers’ debt, interest rates, and penalties increased and some consumers were forced into bankruptcy. The companies and their principals will pay more than $6 million combined in consumer redress and are permanently barred from making deceptive claims about debt-related services. Two of the operations and their principals also are barred from engaging in abusive telemarketing practices, following FTC charges that they repeatedly called consumers on the National Do Not Call Registry. In May 2004, the FTC filed a complaint against a group of companies and individual defendants, fronted by the National Consumer Council (“NCC”), a purported nonprofit organization, which solicited customers through an aggressive telemarketing and direct mail advertising campaign that falsely promised free debt counseling. In fact, NCC’s role in the scheme was simply to generate leads for the other defendants, who then charged consumers thousands of dollars in fees to enroll in their debt negotiation programs.
  • The FTC announced on March 15 that AmeriDebt, Inc. will shut down its debt management operation as part of a settlement of FTC charges that it deceived consumers into paying at least $170 million in hidden fees. The FTC charged the company misrepresented that it was a nonprofit credit counseling organization, which would teach consumers how to manage their finances for no up-front fee. The settlement requires AmeriDebt to transfer all current clients’ accounts to a third party and bars the company from participating in any aspect of the credit counseling business in the future. The settlement does not include the other defendants – the FTC’s case against Andris Pukke, DebtWorks, and the relief defendant, Mrs. Pukke, will continue. In a complaint filed in November 2003, the FTC charged that AmeriDebt, Inc., DebtWorks, Inc., and Andris Pukke deceived consumers with claims that AmeriDebt was a nonprofit organization, which could help consumers get out of debt without an up-front fee. The FTC charged that, rather than operating for charitable purposes as advertised, AmeriDebt was funneling profits to affiliated for-profit entities, including DebtWorks and Andris Pukke. AmeriDebt deceived new clients into making a “voluntary contribution” to enroll in the program. AmeriDebt kept these initial “contributions” as fees without consumers’ knowledge, rather than disbursing the money to consumers’ creditors as promised. The complaint also charged that, despite promises to teach them how to manage their money to avoid future debt, the defendants simply enrolled all customers in debt management plans (“DMPs”). In the DMP, consumers made a single monthly payment to AmeriDebt for all their unsecured debts; the payment was then to be disbursed to the consumers’ creditors.
  • In a comment submitted March 14 to the Department of the Treasury’s U.S. Mint, the staff of the FTC’s BCP, Bureau of Economics, and Office of Policy Planning gave its support to the Mint’s efforts to protect consumers and curb marketers who deceptively advertise collectible coins and medals. The staff supported a proposed rule to assess civil penalties against deceptive marketers who misuse words and symbols related to the U.S. Mint. The staff comment described the FTC’s experience with advertising law and how this experience may assist the Mint in implementing the rule and determining whether advertisements create a false impression of association with the Mint. The comment also briefly outlined First Amendment commercial speech doctrine and its preference for disclosure over banning potentially misleading claims as a means of combating deception. The staff comment then presented the FTC’s approach to reviewing advertising claims, explaining the Commission’s emphasis on considering the “net impression” of the ads. The FTC’s approach considers the context of such an advertising claim, including any qualification to the claim, which is consistent with the First Amendment principles intended to promote the free flow of truthful and non-misleading commercial speech. The comment also noted the FTC’s support for conducting consumer research on the language and format of various disclaimers to determine whether they are effective in preventing deception.

Authored by:
Camelia Mazard