FTC Issues Report on Big Data

On January 6, the FTC published a report titled, “Big Data: A Tool for Inclusion or Exclusion? Understanding the Issues.” The report, which draws from information from a September 2014 FTC workshop, as well as public comments and research, primarily focuses on the final stage in the life cycle of big data use by addressing the commercial use of consumer data and its effect on low-income and underserved populations. According to the report, participants in the 2014 workshop expressed concern that potential inaccuracies and biases from big data may lead companies to “exclude low-income and underserved communities from credit and employment opportunities.” For example, the report states that, “if big data analytics incorrectly predicts that particular consumers are not good candidates for prime credit offers, educational opportunities, or certain lucrative jobs, such educational opportunities, employment, and credit may never be offered to these consumers.” In order to minimize legal and ethical risks, and to avoid possible exclusion and/or discrimination, the report suggests that companies should obtain an understanding of various laws that may apply to their big data practices, including the FCRA, equal opportunity laws, and the FTC Act. Read more…


FTC and Florida AG Take Action Against Payment Processing Operation

On January 8, the FTC and Florida Attorney General Pam Bondi announced an amended complaint against a California-based processing sales organization, its three executives, and three telemarketing company owners (collectively “the defendants”) for alleged violations of the (i) Telemarketing and Consumer Fraud and Abuse Protection Act; (ii) the FTC Act; (iii) the FTC’s Telemarking Sales Rule; and (iv) the Florida Deceptive and Unfair Trade Practices Act. According to the complaint, the defendants operated a nation-wide debt relief scam by cold calling consumers and making false promises that they could “reduce consumers’ interest rates on their credit cards, save consumers thousands of dollars in a short time period, and refund consumers’ money if the promised savings were not realized.” The FTC and AG Bondi allege that, from at least November 2012 to October 2014, the defendants solicited at least 26 “‘straw men’” to act as signatories on “shell businesses and dummy merchant accounts” that were used to process consumer credit card payments. The FTC is seeking injunctive relief, rescission or reformation of contracts, restitution, the refund of monies paid, the disgorgement or ill-gotten monies, and other equitable relief; Florida AG Bondi is seeking injunctive relief, restitution, costs and attorneys’ fees, as well as other equitable relief.


FTC Announces New Enforcement Actions Under the Operation Collection Protection Initiative

On January 7, the FTC announced four separate actions under its Operation Collection Protection initiative against collectors allegedly engaging in abusive and deceptive debt collection practices. It also announced that other federal and state law enforcement officials have taken 12 more actions as part of the initiative. The FTC’s actions targeted the following practices: (i) impersonating investigators, law enforcement agencies, or process servers; (ii) threatening consumers with arrest, lawsuits, or wage garnishment for nonpayment; (iii) failing to inform consumers of the amount of debt and the creditor’s name, as well as their right to dispute the alleged debt, as required by the FDCPA; and (iv) collecting on debts that consumers did not owe. The four actions, each with a separate set of defendants, include the following:

This brings the Operation Collection Protection initiative to a total of 130 actions with more than 70 law enforcement agencies participating in the last year.


FTC Reveals Auto Distribution Workshop Agenda

On January 6, the FTC released the full agenda for its upcoming one-day workshop, “Auto Distribution: Current Issues and Future Trends,” scheduled to take place in Washington, D.C. on January 19. As previously covered in InfoBytes, the panel discussions will examine current issues and future trends related to the distribution of motor vehicles in the U.S., with presentations on the regulation of dealer location, laws relating to reimbursement for warranty services, restrictions on manufacturers’ ability to engage in direct sales to consumers, and new developments affecting auto distribution.


FTC Announces Settlements with Online Payday Lenders Over Alleged Violations of TILA and EFTA

On January 5, the FTC announced separate settlements with two online payday lenders to resolve charges dating back to April 2012 that the defendants violated TILA, the Federal Trade Commission Act (FTC Act), and the Electronic Funds Transfer Act (EFTA). According to the FTC, the defendants (i) violated TILA by failing to accurately disclose information regarding the loan terms, such as the finance charge, annual percentage rate, payment schedule, and the total of payments; (ii) violated the FTC Act’s prohibition on deceptive acts or practices by misrepresenting how much loans would cost consumers; and (iii) violated the EFTA by conditioning extension of credit to consumers on the consumers’ repayment by preauthorized debits from their bank accounts. In addition to prohibiting the defendants from engaging in practices that violate the TILA and EFTA, the FTC’s final orders require the defendants to each pay $2.2 million and collectively waive $68 million in uncollected fees to consumers. Combined with other settlements, the FTC has recovered approximately $25.5 million in connection with its case against several payday lending companies and related individuals.


FTC Reveals Agenda for PrivacyCon

On December 29, the FTC revealed the full agenda for PrivacyCon, a Washington, D.C. conference scheduled to take place on January 14, 2016. Participants will examine current research and trends related to consumer privacy and data security. The event will host panels on the following topics: (i) the current state of online privacy; (ii) consumers’ privacy expectations; (iii) big data and algorithms; (iv) economics of privacy and security; and (v) security and usability.


FTC Announces Record Settlement with Identity Theft Protection Company over Alleged Failures to Adhere to a 2010 Court Order

On December 17, the FTC announced a $100 million settlement with an Arizona-based identity theft protection company for violating the terms of a prior federal court order. In 2010, the District Court of Arizona prohibited the company from engaging in deceptive advertising and required it to secure consumers’ personal information. According to the FTC’s contempt charges, the company violated the terms of the prior order primarily by (i) failing to establish and maintain an adequate information security program to protect consumers’ personal information, such as social security numbers, and credit card and bank account numbers; (ii) falsely advertising that it protected consumers’ sensitive data by using the same sophisticated protections that financial institutions use; (iii)  falsely advertising that it would send consumers alerts “as soon as” it received any indication that the consumer was a victim of identity theft; and (iv) failing to sufficiently create and retain records regarding the sale or provision of products or services related to identity theft.

Read more…


FTC to Host Workshop Regarding Regulatory Environment of the U.S. Auto Distribution System

On December 14, the FTC announced that it will host a one-day workshop, Auto Distribution: Current Issues & Future Trends, to examine current issues and future trends related to the distribution of motor vehicles in the United States. Scheduled to take place on January 19, 2016 in Washington, D.C., the event’s primary focus will be to explore competition within the auto distribution system, including the effects of state regulations and emerging trends. The event will consist of presentations addressing the following four topic areas: (i) regulation of dealer location; (ii) laws relating to reimbursement for warranty services; (iii) restrictions on manufacturers’ ability to engage in direct sales to consumers; and (iv) new developments affecting auto distribution. The FTC announced an invitation for public comment on questions related to the workshop; the comment period will remain open through March 4, 2016.


FTC Announces Settlements with Alleged Mortgage Modification Scammers

On December 15, the FTC announced stipulated court orders banning four individuals from selling debt relief products and services. According to the FTC, the individuals “promised consumers help getting their mortgages modified, but instead stole their mortgage payments, leading some to foreclosure and bankruptcy.” The FTC’s April 2015 complaint states that the defendants targeted homeowners facing foreclosure and “engaged in a course of conduct to advertise, market, sell, provide, offer to provide, or arrange for others to provide [Mortgage Assistance Relief Services], including loan modifications.” The complaint further alleged that consumers never received modifications, lenders did not receive their trial payments, and consumers’ payments were never refunded. The court orders prohibit the individuals from engaging in the practices they respectively exploited, such as telemarketing, selling credit-related financial products and services, using aliases, and using material misrepresentations and unsubstantiated claims to sell financial products and services. Combined, the individuals will pay more than $6,250,000 in monetary judgments.


FTC Settles with Hotel and Resort Chain Over Data Security Practices

On December 9, the FTC announced a settlement with a leading United States-based hotel and resort chain to resolve charges that the company’s data security practices were unfair and deceptive under Section 5 of the FTC Act. The settlement follows the Third Circuit’s August 24 ruling affirming the FTC’s authority to take action against companies with deficient cybersecurity practices that fail to protect consumer data against hackers. The settlement terms require the company for the next 20 years to establish, implement, and maintain a comprehensive information security program that is designed to protect the security, confidentiality, and integrity of cardholder data. In addition, the company must obtain annual written assessments of its information security program. The assessments must certify (i) the “untrusted” status of franchisee networks that may store, process, or transmit cardholder data; (ii) the extent of the company’s compliance with the risk management protocol; and (iii) that the assessments were completed by a qualified and independent auditor free from any conflicts of interest. The settlement also requires that in the event of another data breach affecting more than 10,000 consumers, the company must obtain an assessment of the breach within 180 days and report the findings of the assessment to the FTC within 10 days of its completion.


FTC Announces Settlement with Ohio Auto Dealers

On November 24, the FTC announced that two Ohio auto dealers agreed to settle FTC charges that they deceived consumers with misleading advertisements. Specifically, the FTC alleged that the auto dealers violated the FTC Act and the Consumer Leasing Act by failing to adequately disclose key terms regarding car lease offers, such as (i) the total payment amount due at signing; (ii) whether a security deposit was required; and (iii) credit score requirements. The proposed settlement order will remain in effect for 20 years and prohibits the defendants from advertising misleading lease or financing terms. The defendants are barred from advertising a payment amount, or that any initial payment is required, without disclosing the following: (i) that the transaction is a lease; (ii) the total amount due at consummation or delivery; (iii) the number of payments, their amounts, and timing; (iv) whether or not a security deposit is required; and (v) that consumers may need to pay an extra fee at the end of the lease based on the difference between the vehicle’s residual value and the value at the end of the lease. Finally, the proposed settlement also requires the defendants to “clearly and conspicuously disclose all qualifications or restrictions on a consumer’s ability to obtain the advertised terms.”


FTC Amends Telemarketing Sales Rule, Bans Payment Methods Used by Scammers

On November 18, the FTC announced that it approved, by a 3-1 vote, final amendments to the Telemarketing Sales Rule (TSR) that ban telemarketers from using certain payment methods that are commonly used by scammers. Per the amendments, telemarketers are prohibited from (i) using specific types of checks and “payment orders” that are remotely created by the telemarketer or seller and which permit direct access to consumers’ bank accounts; (ii) receiving payments through traditional “cash-to-cash” money transfers, which allow scammers to easily obtain consumer funds anonymously and without the ability to reverse the transaction; and (iii) accepting as payment “cash reload” mechanisms. The FTC concluded that the aforementioned payment methods constituted abusive practices because they caused or were likely to cause “substantial injury to consumers that is neither reasonably avoidable by consumers nor outweighed by countervailing benefits to consumers or competition.” Finally, according to the FTC, “the amendments address changes in the financial marketplace to ensure consumers remain protected by the TSR’s antifraud provisions, but are narrowly tailored to allow for innovations with respect to other payment methods that are used by legitimate companies.”


FCC and FTC Issue MOU for Continued Cooperation on Consumer Protection Matters

On November 16, the FCC and the FTC executed a Memorandum of Understanding (MOU) on continued cooperative efforts to protect consumers from unfair and deceptive acts and practices involving telecommunications services. In an effort to formalize existing cooperation among the agencies, the MOU outlines the ways in which the two agencies will continue to work together, including: (i) coordinating agency initiatives where one agency’s action will significantly impact the other agency’s authority or programs; (ii) sharing investigative techniques and tools, intelligence, technical and legal expertise, as necessary, in addition to best practices in response to reasonable requests for such assistance; and (iii) collaborating on consumer and industry outreach and education efforts, as appropriate. Moreover, the MOU identifies the scope of each agency’s enforcement authority with respect to common carriers, and confirms that the 2003 MOU regarding Telemarketing Enforcement between the two agencies remains effective, stating that the most recent MOU should not “be construed as altering, amending, or invalidating that [2003] MOU.”

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FTC Signs Memorandum of Agreement to Prevent Fraudulent and Deceptive Practices Against Servicemembers

On November 12, the FTC announced that it signed a Memorandum of Agreement with the Veterans Administration (VA) to provide mutual assistance in preventing fraudulent and deceptive acts by “institutions of higher learning and other establishments that offer training” targeting U.S. servicemembers, veterans, and dependents using military education benefits. In its press release, the FTC warned servicemembers of for-profit schools that may make unrealistic promises and pressure them to enroll in unnecessary courses or take out loans they may not be able to pay off.


FTC Announces Agenda, Panel Topics for Debt Collection Dialogue

On November 12, the FTC announced the topics for its November 18 Debt Collection Dialogue in Atlanta, which will have two panels. The first panel, “State Regulation and Enforcement of Debt Collection,” will include representatives from state law enforcement agencies and industry. The second panel, “Federal Regulation and Enforcement of Debt Collection,” will feature representatives from the FTC, the CFPB, and the OCC. Panelists will discuss enforcement actions, consumer complaints, compliance issues, and industry best practices.