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FTC Sends More Than $16 Million in Refunds to Consumers Harmed by Tax Relief Scam

The Federal Trade Commission is mailing refund checks totaling more than $16 million to 18,571 consumers who paid money to American Tax Relief, which bilked financially distressed consumers by falsely claiming it could reduce their tax debts. Under a settlement, the defendants turned over millions of dollars in assets the court had frozen, including bank accounts, jewelry, and a Ferrari. The relief defendants, who were the parents of one of the defendants, also turned over bank accounts, jewelry, a Beverly Hills residence, and a Los Angeles condominium.

Affected consumers will receive, on average, 16 percent of the amount they lost. Those who receive checks from the FTC’s refund administrator should cash them within 60 days of the mailing date. The FTC never requires consumers to pay money or to provide information before refund checks can be cashed. Those with questions should call the refund administrator, Gilardi & Co., LLC, at 1-877-430-3699, or visit www.FTC.gov/refunds for more general information.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

FTC Puts Conditions on Akorn, Inc.’s Proposed Acquisition of VersaPharm Inc

Pharmaceutical company Akorn, Inc. has agreed to sell its rights to develop, manufacture, and market the generic injectable tuberculosis drug, rifampin, in order to settle FTC charges that Akorn’s proposed acquisition of VersaPharm Inc. and its parent company, VPI Holdings Corp., would likely be anticompetitive. The FTC’s proposed settlement with Akorn requires the company to divest its Abbreviated New Drug Application for generic injectable rifampin – which is currently pending before the Food and Drug Administration – to Watson Laboratories, Inc. Akorn proposes to acquire VersaPharm for approximately $324 million, under an agreement dated May 9, 2014.

According to the FTC’s complaint, only VersaPharm and two other firms currently have FDA approval to sell generic injectable rifampin. There are no viable substitutes for rifampin as a course of treatment for tuberculosis. Absent the acquisition, Akorn likely would have entered the market for generic injectable rifampin in the near future, resulting in a significant price reduction for the drug. According to the FTC’s complaint, if Akorn were to consummate its acquisition of VersaPharm, as originally proposed, the combined company would likely forego or delay the introduction of Akorn’s generic injectable rifampin.

Under the proposed consent order, an interim monitor will supervise Akorn to ensure that it provides Watson with any information the FDA requests, assists Watson to obtain FDA approval for the pending ANDA, and provides transitional services so that Watson can develop the ability to manufacture generic injectable rifampin independently.

More information about the market for this drug and the consent agreement can be found in the analysis to aid public comment for this matter on the FTC’s website.

The Commission vote to accept the proposed consent order for public comment was 5-0. The proposed settlement is part of the Commission’s ongoing effort to protect U.S. consumers from higher healthcare-related costs.

The FTC will publish the consent agreement package in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through September 3, 2014, after which the Commission will decide whether to make the proposed consent order final. Interested parties can submit written comments electronically or in paper form by following the instructions in the “Supplementary Information” section of the Federal Register notice.

NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $16,000 per day.

The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to antitrust{at}ftc{dot}gov, or write to the Office of Policy and Coordination, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave., NW, Room CC-5422, Washington, DC 20580. To learn more about the Bureau of Competition, read Competition Counts. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

FDIC Announces Youth Savings Pilot Program

FIL-43-2014
August 4, 2014

FDIC Announces Youth Savings Pilot Program

Summary:

FDIC-insured institutions are invited to apply and participate in the FDIC’s Youth Savings Pilot Program, which seeks to identify and highlight promising approaches to offering financial education tied to the opening of safe, low-cost savings accounts for school-aged children. The first phase of the pilot is open to institutions currently working with schools or nonprofit organizations that help students open savings accounts in conjunction with financial education programs. The second phase is expected to target new programs that begin during the 2015–16 school year. Pilot participants will be connected with other participants and technical assistance resources to develop and share best practices. Upon completion of the pilot, the FDIC intends to publish a report to provide financial institutions with best practices on how to work with schools or other organizations to combine financial education with access to a savings account.

Statement of Applicability to Institutions with Total Assets Less Than $1 Billion: This Financial Institution Letter (FIL) applies to all FDIC-insured institutions.

Highlights:

To introduce students to banking services at an early age, many insured financial institutions collaborate with schools to offer financial education and to establish school-based savings programs. These programs help students learn how to more effectively manage their money, encourage developmental savings habits at a formative age, and promote economic inclusion for entire families.
The FDIC plans to conduct a two-phase pilot to learn from school-based savings programs and identify promising bank strategies for working with schools or other organizations that combine financial education with access to a savings account.
The first phase covers programs that will be in place during the 2014–2015 school year. Institutions are invited to participate and apply by August 22, 2014, at http://www.fdic.gov/youthsavingspilot.
The second phase will take place during the 2015–16 school year. A FIL will be forthcoming in April 2015 inviting institutions to participate in the second phase.
Learn more at http://www.fdic.gov/youthsavingspilot.

Staff Report on Mobile Shopping Apps Found Disclosures to Consumers Are Lacking

A new staff report issued by the Federal Trade Commission finds that many mobile apps for use in shopping do not provide consumers with important information – such as how the apps manage payment-related disputes or handle consumer data – prior to download.

The report, “What’s the Deal? An FTC Study on Mobile Shopping Apps,” looked at some of the most popular apps used by consumers to comparison shop, collect and redeem deals and discounts, and pay in-store with their mobile devices. The report builds on the findings of the Commission’s 2012 workshop on mobile payments and the report from that workshop, which raised concerns about consumers’ potential financial liability – as well as the privacy and security of their data – when using mobile payment services.

In this new report, FTC staff surveyed a total of 121 different shopping apps across the Google Play and Apple App Stores. The survey included 47 price comparison apps, which let consumers compare prices on a particular item in real-time; 50 “deal” apps, which provide consumers with coupons or discounts; and 45 in-store purchase apps, which enable consumers to use their phones to pay for goods they purchase in physical stores. Several apps were found in more than one category.

“As mobile apps become more central to the shopping experience, it’s important that consumers have meaningful information about how those apps work before they download them,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “Consumers should not be left in the dark about their potential liability for erroneous or unauthorized charges or about the way shopping apps handle their data.”

The report makes a number of recommendations to companies that provide mobile shopping apps to consumers:

1. Apps should make clear consumers’ rights and liability limits for unauthorized, fraudulent, or erroneous transactions.

The staff report found that, prior to download, the apps reviewed frequently failed to give consumers information about the dispute procedures and consumers’ potential liability in the event something goes wrong with a payment made through the app.

The report recommends that the developers of in-store purchase apps provide clear dispute resolution and liability limits information to consumers, particularly when using a stored value method to process payments, as transactions made using this method may lack the legal protections afforded by credit or debit card transactions.

2. Apps should more clearly describe how they collect, use, and share consumer data.

Privacy considerations are important in mobile commerce apps, the report notes, as the data collected is potentially sensitive. The report finds that a majority of the shopping apps across all three categories had privacy policies disclosing that the apps collected a wide array of information, ranging from consumers’ names and addresses to detailed information on consumers’ purchases, their Social Security numbers, and data provided about the consumers by third parties.

The report finds that the reviewed apps’ privacy disclosures often used vague language, reserving broad rights to collect, use, and share consumers’ information. While almost all of the apps stated that they share personal data, 29 percent of price comparison apps, 17 percent of deal apps, and 33 percent of in-store purchase apps reserved the right to share users’ personal data without restriction, thus making it difficult for consumers to make informed decisions about whether to use the apps based on privacy considerations.

The report recommends that shopping apps clearly describe how they collect, use, and share consumer data. Making that information available will allow consumers to evaluate and compare apps based on how the apps handle their information.

3. Companies should ensure that their data security promises translate into sound data security practices.

The report also recommends that companies, whose apps promise consumer safeguards for their data, follow through on those promises. Specifically, the report recognizes that technology advances found in smartphones can offer the potential for increased data security and encourages all companies to provide strong protections for the data they collect.

Beyond recommendations for companies, the report also urges consumers to closely examine the apps’ stated policies on issues like dispute resolution and liability limits, as well as privacy and data security and evaluate them in choosing which apps to use. The report also notes that when apps do not provide that information, consumers should consider using alternative apps, or in the case of missing dispute resolution policies, limit the dollar amount used to fund stored value accounts.

The report is part of the Commission’s work to ensure that consumers are fully protected in the growing mobile space, which has included workshops and other initiatives to study cutting edge issues in this area, along with a number of law enforcement cases.

The Commission vote to issue the staff report was 5-0.

FTC Charges Payment Processors Involved in I Works Scheme

The Federal Trade Commission has charged seven defendants with illegally processing credit card payments on behalf of a massive Internet scam that allegedly bilked millions of dollars from consumers by repeatedly charging them for “trial” memberships they never ordered. Three of the defendants have agreed to settle the FTC’s charges.

According to a complaint filed by the FTC, the defendants arranged for a deceptive operation known as I Works to obtain and maintain merchant accounts that allowed it to process more than $26 million in illegal credit and debit card payments through the Visa and MasterCard payment networks.

In December 2010, the FTC charged I Works with scamming consumers out of more than $275 million via deceptive “trial” memberships for bogus government-grant and money-making schemes. A federal court subsequently froze I Works’ assets and placed them under the control of a court-supervised receiver. The I Works litigation is ongoing.

Today’s case alleges that the defendants – CardFlex Inc. (formerly operated as CardFlex Financial Services LLC), Blaze Processing LLC, Mach 1 Merchanting LLC, Andrew M. Phillips, John S. Blaugrund, Shane Fisher and Jeremy Livingston – illegally provided the access to payment networks that I Works needed to carry out its deceptive scheme.

In its complaint, the FTC alleged that the defendants knew I Works had been placed on industry lists of high-risk merchants numerous times due to high chargeback rates. In spite of this, the defendants provided I Works with unfettered access to payment networks and failed to engage in their contractually required underwriting process when they opened accounts for I Works, according to the FTC’s complaint.

In fact, the FTC charged, the defendants helped I Works evade the credit card networks’ fraud monitoring programs to help keep I Works’ merchant accounts open. The defendants opened at least 293 accounts in the names of 30 separate shell corporations on I Works’ behalf, and implemented a system that enabled I Works to divide its sales transactions between these accounts in order to avoid reaching the thresholds necessary for its accounts to be monitored by the credit card networks.

According to the FTC’s complaint, CardFlex, as an Independent Sales Organization (ISO), was paid for referring merchants to banks and their payment processors and it received payments based on the volume of transactions processed as well as for processing reversals of charges to credit cards or debits to bank accounts, known as chargebacks. Blaze Processing and Mach 1 Merchanting were sales agents that managed the relationship between CardFlex and I Works.

Blaze Processing, Mach 1 Merchanting, and Shane Fisher have agreed to settle the FTC’s charges. The suit against CardFlex, Andrew Phillips, John Blaugrund, and Jeremy Livingston is ongoing.

The stipulated final order against Shane Fisher, Blaze Processing, and Mach 1 prohibits them from acting as a payment processor, ISO, or sales agent for any third parties. The order also contains a nearly $1 million monetary judgment against the defendants. The FTC will collect $328,607.78, and the remainder of the judgment will be suspended due to an inability to pay.

The Commission vote authorizing the staff to file the complaint was 4-0-1, with Commissioner McSweeny not participating. The Commission vote approving the stipulated final order was 4-0-1, also with Commissioner Terrell McSweeny not participating.

FTC Requests Public Comment on SCI’s Application to Approve Sale of Two Cemeteries in Knoxville, Tennessee to Alliance Funeral Group, Incorporated

The Federal Trade Commission is currently accepting public comments on an application by Service Corporation International (SCI) to sell certain cemetery assets, as required under the FTC’s April 2014 order settling charges that SCI’s acquisition of Stewart Enterprises, Inc. would likely be anticompetitive. In total, the order requires the combined SCI/Stewart to divest 53 funeral homes and 38 cemeteries to ensure competition is maintained in 59 communities throughout the United States.

SCI’s current application petitions the FTC to approve the divestiture of Greenwood Cemetery and New Gray Cemetery, both located in Knoxville, Tennessee, to Alliance Funeral Group, Incorporated.

According to the application, Alliance’s extensive experience in acquiring and operating cemeteries will assure that these two cemeteries remain strong and effective competitors in the Knoxville market.

The Commission will decide whether to approve the proposed divestiture after expiration of a 30-day public comment period. Public comments may be submitted until September 2, 2014. Written comments should be sent to: FTC Office of the Secretary, 600 Pennsylvania Ave., N.W., Washington, DC 20580. Comments can also be filed electronically. Copies of the application can be found on the FTC’s website and as a link to this press release. (FTC File No. 131-0163, Docket No. C-4423; the staff contact is Elizabeth A. Piotrowski, Bureau of Competition, 202-326-2623)

FTC Seeks Public Comment on Its Telemarketing Sales Rule

As part of its ongoing review of the rules and regulations it enforces, the Federal Trade Commission is seeking public comment on its Telemarketing Sales Rule (TSR).

As detailed in the Federal Register notice announcing the rule review, the TSR has been updated regularly since 2000, leading to amendments in 2003 to create the national Do Not Call (DNC) Registry for telemarketers, as well as in 2008 and 2010, when the rule was amended to more specifically address pre-recorded telemarketing calls and debt collection services, respectively. In addition, last year, the Commission proposed amendments to the TSR to ban telemarketers from using certain payment methods often used in defrauding consumers.

The Commission relies on public comments in considering whether and how to amend and improve the TSR and other rules. In the notice, the FTC explains specific changes in the marketplace and legal landscape since the TSR was last amended, focusing on: 1) the use and sharing of pre-acquired account information in telemarketing, and 2) issues raised by the use of negative-option and free-trial offers in combination with general media ads designed to generate inbound telemarketing calls from consumers. In addition, the notice seeks suggestions for specific changes to the rule that will reduce DNC enforcement obstacles encountered when trying to obtain call records from telemarketers.

The notice includes a comprehensive list of questions regarding the TSR, posed in soliciting public comment. Examples include the following:

Has the Rule provision related to “express informed consent” been effective in preventing the use of pre-acquired information for unauthorized billing of consumers’ accounts? If so, why? If not, why not, and how has the prohibition been inadequate?
Should the Commission consider a prohibition on any use of pre-acquired account information in external upsells? If so, why? If not, why not, and what costs and burdens would such a requirement imposed on businesses and consumers?
Should telemarketers and sellers who receive inbound calls from consumers in response to general media ads for a negative-option product or service receive the same disclosures currently required for outbound telemarketing calls? Why or why not?

Background of the TSR. The FTC’s TSR became law in 1995 and applies to virtually all “telemarketing” activities, both in the United States and sales calls from abroad to U.S. citizens. With several notable exceptions, the Rule generally applies only to outbound calls made by telemarketers to consumers, and protects consumers in a range of ways. For example, the TSR requires telemarketers to make certain disclosures and prohibits material misrepresentations during sales calls.

The TSR ensures that telemarketers obtain a consumer’s “express informed consent” before billing or collecting payment, and prohibits telemarketers from requesting advance payments for services, such as credit repair, “guaranteed” loans, recovery services, and debt settlement programs. The Rule also prohibits credit card laundering by or on behalf of telemarketers and prohibits them, with certain exceptions, from calling phone numbers on the DNC Registry, among other things.

The Commission vote approving publication of the notice in the Federal Register was 5-0. Written comments on the TSR must be received no later than October 14, 2014. Information about how to submit comments can be found in the Request for Comments section of the Supplementary Information in the Federal Register notice. Comments can be submitted electronically.

FTC Stops Deceptive Office Supply Scam That Targeted Small Businesses and Nonprofits

At the Federal Trade Commission’s request, a federal court has temporarily halted and frozen the assets of an operation that bilked nonprofits, businesses, and municipalities out of millions of dollars by deceptively sending them overpriced light bulbs and cleaning supplies that they never ordered. The FTC seeks to permanently stop the illegal practices and make the defendants return victims’ money.

“The FTC is committed to taking action against deceptive schemes that take advantage of people who work in nonprofits and small businesses,” said Jessica Rich, director of the Federal Trade Commission’s Bureau of Consumer Protection. “Scam artists who lie to employees about orders and then demand payment are a magnet for FTC enforcement.”

According to a complaint filed by the FTC, the defendants called organizations throughout the country and falsely indicated that they had previously done business with them; that the call was to confirm a shipping or mailing address or follow up on a supposed previous order; that they were offering a free sample, catalog or gift; or that they needed an employee’s name and contact information for some purpose other than a sale. The defendants often did not identify themselves accurately or clearly disclose that it was a sales call, and sent consumers merchandise after misleading them and without their consent.

Many consumers paid the defendants’ invoices, thinking the employee named on the invoice had ordered the merchandise. The person who processed the invoices was often not the same person who received the shipments and did not know the merchandise was never ordered. Consumers who paid thinking they were obligated to do so became targets for future shipments of unordered merchandise. Those who questioned the invoices were often pressured into paying by the defendants’ claiming that they had audio recordings verifying the order (which they failed to produce) or stating they would accept a “discounted” price as payment in full.

The defendants are charged with violating the FTC Act, the Telemarketing Sales Rule and the Unordered Merchandise Statute by shipping and billing for unordered merchandise.

The defendants are Midway Industries Limited Liability Company, also doing business as Midway Industries, Midway Industries LLC, and Midway Industries of Delray Beach LLC; Commercial Industries LLC, also d/b/a Commercial Industries, Commercial Industries of Palm Beach LLC, and State Electric & Power LLC; National LLC, also d/b/a National Distributors, National Lighting & Maintenance, National, and National of Delray Beach LLC; State Power & Lighting LLC; Standard Industries LLC, also d/b/a Standard Industries and Standard Industries, LLC; Essex Industries, LLC; Johnson Distributing Limited Liability Company, also d/b/a Johnson Distributing, Johnson Distributing MD, Johnson Distribution, and Johnson Distributors; Hansen Supply LLC; Environmental Industries LLC; Mid Atlantic Industries LLC; Midway Management, LLC; B & E Industries, LLC; Eric A. Epstein; and Brian K. Wallen.

The Commission vote authorizing the staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the District of Maryland. The court entered a temporary restraining order against the defendants on July 21, 2014.

The FTC appreciates the assistance of the Better Business Bureau of Greater Maryland in helping to investigate and bring this case.

To learn more about scams that target small businesses and nonprofits, read the FTC’s Small Business Scams.

FTC Obtains $26.9 Million Judgment Against Work-at-Home Scammer Who Tried to Hide His Assets from 2010 Court Judgment

At the Federal Trade Commission’s request, a federal court has imposed a $26.9 million judgment against the operator of a phony work-at home scheme who lied about his financial assets in an effort to hide them from the FTC when he agreed to settle with the agency in 2010.

Jonathan Eborn was one of the marketers behind a work-at-home scheme that operated under names such as “Google Money Tree,” “Google Pro” and “Google Treasure Chest” and advertised a low-cost kit, claiming consumers would earn $100,000 in six months. In 2009, the FTC charged Eborn and others with using the scheme to lure consumers into divulging their financial account information and failing to disclose that they would be charged $72.21 a month.

Under the settlement, the defendants were banned from negative option marketing and from making misrepresentations to consumers. In addition, they gave up more than $3.5 million in cash and other assets – the money was returned to consumers in 2012. Eborn was excused from liability for the vast majority of a $29.5 million judgment (the total consumer injury) based on sworn financial statements that purportedly showed his inability to pay. Under the terms of the settlement, if any defendant misrepresented their financial condition, the full judgment would become due.

On June 4, 2014, the U.S. District Court for the District of Nevada found that Eborn hid at least $274,828.80, by failing to report cash and assets and by misrepresenting his control over certain businesses. The court also found that Eborn failed to report his residence and his acquisition of more than $33,100 in personal property. Based on these findings, the court reinstated the full judgment of $26.9 million against Ebon.

“In determining the amount of assets a defendant must provide in settlement, the FTC often relies on a defendant’s sworn financial statements and requires the defendant to agree that any misrepresentations on those statements will trigger a much larger judgment,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “The court’s decision to impose the full judgment should serve as a lesson to all defendants that lying to the FTC has serious consequences.”

FTC and DOJ Extend Public Comment Period for Workshop on Conditional Pricing Practices through September 22, 2014

The Federal Trade Commission and the Department of Justice (DOJ) have extended the deadline for submitting comments on their recent Conditional Pricing Practices Workshop to September 22, 2014. The workshop, held June 23, 2014, explored the economics and legal policy implications of certain pricing practices, such as loyalty and bundled pricing.

Interested parties may submit public comments online. Submitted comments and additional information can be found on the FTC and DOJ websites.

The FTC’s Office of Policy Planning works with the Commission and its staff to develop long-range competition and consumer policy initiatives. The Office of Policy Planning submits advocacy filings; conducts research and studies; organizes public workshops; and issues reports. Like the FTC on Facebook, follow us on Twitter, read our blogs, and subscribe to press releases for the latest FTC news and resources.

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FDIC Announces Youth Savings Pilot Program

Summary:

Highlights:

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