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FTC Warns Consumers About Pension Advance Plans

If you’re trying to make ends meet, here’s a pitch that might catch your interest:

“Convert tomorrow’s pension checks into hard cash today.”

Sound tempting? Think again. The Federal Trade Commission, the nation’s consumer protection agency, advises consumers that pension advances, also known as pension sales, loans, or buyouts, come at a very steep price.

Most pension advances require you to sign over all or some of your monthly pension checks for five to 10 years. The lump sum payment you get in return is less than the pension payments you sign over, so you’re signing over money you need to live on. And pension advances often require retirees to buy a life insurance policy – with the pension advance company as the beneficiary – to insure that the repayments continue.

For more information, read the FTC’s Pension Advances: Not So Fast.

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.

At the FTC’s Request, Court Halts Collection of Allegedly Fake Payday Debts

At the request of the Federal Trade Commission, a U.S. district court has halted a Georgia-based operation from using deception and threats to collect $3.5 million in phantom payday loan “debts” that consumers didn’t owe pending trial. The court had previously ordered the defendants’ assets frozen to preserve the possibility that they could be used to provide redress to consumers, and appointed a receiver.

Norcross, Georgia resident John Williams and two companies he controls used a variety of false threats to bully consumers nationwide into paying supposed payday loan debts, the FTC charged. Williams; Williams, Scott & Associates, LLC; and WSA, LLC falsely claimed to be affiliated with federal and state agents, investigators, members of a government fraud task force, and other law enforcement agencies, and pretended to be a law firm, according to the FTC complaint. The defendants also allegedly told consumers their drivers’ licenses were going to be revoked, and that they were criminals facing imminent arrest and imprisonment.

The FTC alleges that many consumers the defendants contacted had inquired about a payday loan online at one time, and submitted contact information, which later found its way into the defendants’ hands.

“Many consumers in this case were victimized twice,” said Jessica Rich, Director of the Federal Trade Commission’s Bureau of Consumer Protection. “First when they inquired about payday loans online and their personal information was not properly safeguarded, and later, when they were harassed and intimidated by these defendants, to whom they didn’t owe any money.”

The FTC alleged that the defendants’ tactics violated the Federal Trade Commission Act and the Fair Debt Collection Practices Act. In addition to the deception and false threats, the defendants violated federal law by telling consumers’ family members, employers, and co-workers about the debt; failing to identify themselves as debt collectors; using profanity; making repeated inconvenient or prohibited calls; failing to provide information in writing about the debt; and making unauthorized withdrawals from consumers’ bank accounts.

This is the FTC’s sixth recent case charging “phantom debt” scams with law violations. Other cases include American Credit Crunchers, LLC, Broadway Global Master Inc., Pro Credit Group, Vantage Funding, also known as Caprice Marketing, and Pinnacle Payment Services, LLC.

For more consumer information on this topic, see Dealing with Debt.

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 Northern District of Georgia, Atlanta Division. On May 28, 2014 the court granted the FTC’s request for a temporary restraining order. It granted the FTC’s request for a preliminary injunction on June 19, 2014.

NOTE: The Commission files a 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. The case will be decided by the court.

FTC Alleges T-Mobile Crammed Bogus Charges onto Customers’ Phone Bills

Note: A conference call for media with FTC Consumer Protection Director Jessica Rich will occur as follows:

Date: July 1, 2014
Time: 2:45 p.m. ET

Call-in lines, which are for media only, will open 15 minutes prior to the start of the call. Jessica Rich and FTC staff will be available to take questions from the media about the case.

In a complaint filed today, the Federal Trade Commission is charging mobile phone service provider T-Mobile USA, Inc., with making hundreds of millions of dollars by placing charges on mobile phone bills for purported “premium” SMS subscriptions that, in many cases, were bogus charges that were never authorized by its customers.

The FTC alleges that T-Mobile received anywhere from 35 to 40 percent of the total amount charged to consumers for subscriptions for content such as flirting tips, horoscope information or celebrity gossip that typically cost $9.99 per month. According to the FTC’s complaint, T-Mobile in some cases continued to bill its customers for these services offered by scammers years after becoming aware of signs that the charges were fraudulent.

Excerpts from an actual T-Mobile bill. Page 1 hides third party charges. Summary item ‘Usage charges’ includes third party charges for ‘Brain Facts’ text alerts. 123 pages later, under Premium Services, Other Service Provider Charges, the ‘Brain Facts’ text alerts show in the Description field as 8888906150 BrnStorm23918, total $9.99.

Excerpts from an actual T-Mobile bill showing cramming charges. (click to view full-size)

“It’s wrong for a company like T-Mobile to profit from scams against its customers when there were clear warning signs the charges it was imposing were fraudulent,” said FTC Chairwoman Edith Ramirez. “The FTC’s goal is to ensure that T-Mobile repays all its customers for these crammed charges.”

In a process known as “third-party billing,” a phone company places charges on a consumer’s bill for services offered by another company, often receiving a substantial percentage of the amount charged. When the charges are placed on the bill without the consumer’s authorization, it is known as “cramming.”

The FTC’s complaint alleges that in some cases, T-Mobile was charging consumers for services that had refund rates of up to 40 percent in a single month. The FTC has alleged that because such a large number of people were seeking refunds, it was an obvious sign to T-Mobile that the charges were never authorized by its customers. As the complaint notes, the refund rate likely significantly understates the percentage of consumers who were crammed. The complaint also states that internal company documents show that T-Mobile had received a high number of consumer complaints at least as early as 2012.

The FTC has made significant efforts to end mobile cramming. In the last year, in addition to holding a public workshop on mobile cramming, the Commission has filed several lawsuits against alleged mobile cramming operations Jesta Digital, Wise Media, and Tatto Inc. According to today’s complaint, T-Mobile billed its customers for the services of these FTC defendants as well as an operation sued by the Texas Attorney General.

The complaint against T-Mobile alleges that the company’s billing practices made it difficult for consumers to detect that they were being charged, much less by whom. When consumers viewed a summary of their T-Mobile bill online, according to the complaint, it did not show consumers that they were being charged by a third party, or that the charge was part of a recurring subscription. The heading under which the charges would be listed, “Premium Services,” could only be seen after clicking on a separate heading called “Use Charges.” Even after clicking, though, consumers still could not see the individual charges.

The complaint also alleges that T-Mobile’s full phone bills, which can be longer than 50 pages, made it nearly impossible for consumers to find and understand third-party subscription charges. After looking past a “Summary” section as well as an “Account Service Detail” section, both of which described “Usage Charges” but did not itemize those charges, a consumer might then reach the section labeled “Premium Services,” where the crammed items would be listed.

According to the complaint, the information would be listed there in an abbreviated form, such as “8888906150BrnStorm23918,” that did not explain that the charge was for a recurring third-party subscription supposedly authorized by the consumer. In addition, the complaint notes that consumers who use pre-paid calling plans do not receive monthly bills, and as a result the subscription fee was debited from their pre-paid account without their knowledge.

When consumers were able to determine they were being charged for services they hadn’t ordered, the complaint alleges that T-Mobile in many cases failed to provide consumers with full refunds. Indeed, the FTC charged that T-Mobile refused refunds to some customers, offering only partial refunds of two months’ worth of the charges to others, and in other cases instructed consumers to seek refunds directly from the scammers – without providing accurate contact information to do so.

The complaint also notes that in some cases, T-Mobile claimed that consumers had authorized the charges despite having no proof of consumers doing so.

The FTC’s complaint seeks a court order to permanently prevent T-Mobile from engaging in mobile cramming and to obtain refunds for consumers and disgorgement of T-Mobile’s ill-gotten gains.

The FTC thanks the Federal Communications Commission and its Enforcement Bureau for their invaluable assistance with and close cooperation and coordination in this matter.

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 Western District of Washington.

Interagency Guidance on Home Equity Lines of Credit (HELOCs) Nearing Their End-of-Draw Period

FIL-33-2014
July 1, 2014

Interagency Guidance on Home Equity Lines of Credit (HELOCs) Nearing Their End-of-Draw Period

Printable Format:

FIL-33-2014 – PDF (PDF Help)

Summary:

The Interagency Guidance on Home Equity Lines of Credit Nearing Their End-of-Draw Period (HELOC guidance) recognizes that some institutions and borrowers may face challenges as HELOCs near their end-of-draw period. Many borrowers will have the financial capacity to meet their contractual obligations as HELOCs transition from the draw period to an amortizing or balloon payment. However, some borrowers may have difficulty meeting higher payments resulting from principal amortization or an interest rate reset, or refinancing an existing loan due to changes in financial circumstances or declines in property values since the HELOC’s origination date. The HELOC guidance provides a framework for managing HELOCs nearing their end-of draw period and communicating and prudently working with HELOC borrowers experiencing financial difficulties.

Statement of Applicability to Institutions Under $1 Billion in Total Assets: This Financial Institution Letter applies to all FDIC-supervised institutions, including community banks, although its application should be commensurate with the size and risk profile of the HELOC portfolio. Community banks with a small portfolio of HELOCs, few portfolio acquisitions, or exposures with lower risk characteristics may be able to use existing, less-sophisticated risk management processes.

Highlights:

The HELOC guidance encourages institutions to work with borrowers to avoid unnecessary defaults and to communicate clearly and effectively with borrowers.
The HELOC guidance:
- Provides core operating principles, including compliance with applicable laws and regulations, which should govern a financial institution’s oversight of HELOCs nearing their end-of-draw period.
- Describes components of a risk management approach that promotes an understanding of potential exposures and consistent, effective responses to HELOC borrowers unable to meet their contractual obligations.
- Addresses appropriate accounting and reporting for HELOCs nearing their end-of-draw period.
Financial institutions should apply the HELOC guidance in a manner commensurate with the size and risk characteristics of a financial institution’s HELOC portfolio. For example:
- Financial institutions with a significant volume of HELOCs, portfolio acquisitions, or exposures with higher risk characteristics generally should have comprehensive systems and procedures to monitor and assess their portfolio.
- Existing processes may be sufficient for community banks with a small portfolio of HELOCs or exposures with lower risk characteristics.

FTC Puts Conditions on Actavis plc’s Acquisition of Forest Laboratories, Inc.

Pharmaceutical companies Actavis plc and Forest Laboratories, Inc. have agreed to sell or relinquish their rights to four generic pharmaceuticals that treat hypertension, angina, cirrhosis, and prevent seizures to settle Federal Trade Commission charges that Actavis’s acquisition of Forest likely would be anticompetitive.

According to the FTC’s complaint, Actavis’s acquisition of Forest, as originally proposed, would violate federal antitrust laws by reducing competition in the markets for three current generic products:

generic diltiazem hydrochloride extended release capsules (AB4) used to treat hypertension and chronic stable angina;

generic ursodiol tablets used to treat primary biliary cirrhosis of the liver; and

generic propranolol hydrochloride extended release capsules used to treat hypertension.

In addition, the FTC’s complaint also alleges that the proposed transaction would delay the introduction of generic competition against Lamictal ODT, the branded lamotrigine orally disintegrating tablets used to prevent seizures, manufactured by Forest and marketed by GlaxoSmithKline plc (GSK). Actavis is the only company to have received FDA approval for a generic version of Forest/GSK’s Lamictal ODT. Unremedied, the acquisition is likely to delay or preclude entirely the entry of Actavis’ generic lamotrigine ODT, thereby insulating the branded product from any generic competition for a period of time.

Under the proposed FTC settlement order, the companies have agreed to relinquish their rights to market generic diltiazem hydrochloride (AB4) to Valeant Pharmaceuticals International, Inc.; sell generic ursodiol and generic lamotrigine ODT to Impax Laboratories, Inc.; and sell generic propranolol hydrochloride to Catalent Pharma Solutions, Inc.

Under the terms of the proposed settlement, Actavis and Forest must ensure the viability, marketability, and competitiveness of the drugs that are being divested until they are sold. To ensure that Actavis and Forest comply with the terms of the proposed order, the FTC has appointed an interim monitor until the divestitures have been completed successfully.

The proposed settlement will preserve competition in the markets for these important drugs and is part of the FTC’s ongoing effort to protect U.S. consumers from higher heath care-related costs. More information about the markets for these drugs can be found in the analysis to aid public comment for this matter.

The Commission vote to accept the consent agreement containing the proposed consent order for public comment was 5-0. The FTC will publish a description of 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 July 30, 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 “Invitation To Comment” part of the “Supplementary Information” section. Comments can be submitted electronically.

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.

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, 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.

L’Oréal Settles FTC Charges Alleging Deceptive Advertising for Anti-Aging Cosmetics

Cosmetics company L’Oréal USA, Inc. has agreed to settle Federal Trade Commission charges of deceptive advertising about its Lancôme Génifique and L’Oréal Paris Youth Code skincare products. According to the FTC’s complaint, L’Oréal made false and unsubstantiated claims that its Génifique and Youth Code products provided anti-aging benefits by targeting users’ genes.

“It would be nice if cosmetics could alter our genes and turn back time,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “But L’Oréal couldn’t support these claims.”

In national advertising campaigns that encompassed print, radio, television, Internet, and social media outlets, L’Oréal claimed that its Génifique products were “clinically proven” to “boost genes’ activity and stimulate the production of youth proteins that would cause “visibly younger skin in just 7 days,” and would provide results to specific percentages of users.

gene science’ and that consumers could ‘crack the code to younger acting skin.’

Portion of L’oreal Youth Code print advertisement. (click to view full ad)

Similarly, for its Youth Code products, L’Oréal touted – in both English- and Spanish-language advertisements – the “new era of skincare: gene science,” and that consumers could “crack the code to younger acting skin.”

Charging as much as $132 per container, L’Oréal has sold Génifique nationwide since February 2009 at Lancôme counters in department stores and at beauty specialty stores. The company has sold Youth Code, which costs up to $25 per container at major retail stores across the United States, since November 2010.

Under the proposed administrative settlement, L’Oréal is prohibited from claiming that any Lancôme brand or L’Oréal Paris brand facial skincare product targets or boosts the activity of genes to make skin look or act younger, or respond five times faster to aggressors like stress, fatigue, and aging, unless the company has competent and reliable scientific evidence substantiating such claims. The settlement also prohibits claims that certain Lancôme brand and L’Oréal Paris brand products affect genes unless the claims are supported by competent and reliable scientific evidence. Finally, L’Oréal is prohibited from making claims about these products that misrepresent the results of any test or study.

The Commission vote to accept the consent agreement package containing the proposed consent order for public comment was 4-0-1, with Commissioner McSweeny not participating.

The FTC will publish a description of the consent agreement in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through July 30, 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 “Supplementary Information” section of the Federal Register notice. Comments should be submitted electronically using the form at this link. Instructions for submitting comments in paper form are listed in the “Accessibility” portion of the form.

FTC Continues Crack Down on Deceptive Debt Collection; Houston-based Defendants Agree to Stop Deceptive Fees and Practices

A Houston debt collection company, RTB Enterprises, Inc., which does business as Allied Data Corporation, and Raymond T. Blair, its president and sole shareholder, have agreed to a federal court order prohibiting them from the allegedly deceptive tactics they have been using to bully English and Spanish-speaking consumers into paying debts and unnecessary fees.

According to a complaint filed by the Federal Trade Commission, the defendants violated the FTC Act and the Fair Debt Collection Practices Act by using false and deceptive methods to collect more than $1.3 million in so-called “convenience fees” and “transaction fees” from consumers who authorized payments by telephone. The defendants allegedly trained their collectors to deceive consumers into believing that payments were not accepted by U.S. mail and that the fees were unavoidable. In some instances, the fees were added to consumers’ accounts without their knowledge or consent, the FTC charged.

The FTC also alleged that the defendants’ collectors deceived both English and Spanish- speaking consumers by falsely claiming to speak for attorneys, falsely threatening to sue consumers who did not pay, and using deceptive schemes to coerce consumers into paying or providing their personal information.

“It’s illegal for debt collectors to lie, make false threats, use a false identity, or trick people into paying a debt or an unauthorized fee,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “The FTC will continue to protect consumers from deceptive or abusive debt collection practices, regardless of whether the deception or abuse occurs in English, Spanish, or any other language.”

The federal court order imposes a penalty of $4 million, which will be partially suspended based on inability to pay once Blair surrenders assets totaling $100,000. The proposed order also requires Blair to relinquish a luxury motor home. The order prohibits Blair and his company from repeating any of the unfair or deceptive practices alleged in the complaint, and it requires them to truthfully disclose information about any fees they charge, and the steps consumers can take to avoid paying.

For consumer information about dealing with debt collectors, see Debt Collection.

The Commission vote authorizing the staff to file the complaint and approving the proposed federal court order was 5-0. The FTC filed the complaint and proposed order in the U.S. District Court for the Southern District of Texas, Houston Division on June 17, 2014.

FTC Approves Final Orders Settling Charges of U.S.-EU Safe Harbor Violations Against 14 Companies

After a public comment period, the Federal Trade Commission has approved final orders that settle charges against 14 companies for falsely claiming to participate in the international privacy framework known as the U.S.-EU Safe Harbor. Three of the companies were also charged with similar violations related to the U.S.-Swiss Safe Harbor.

The FTC previously announced the settlements in January, February and May of 2014 with the following companies:

Under the settlements, the companies are prohibited from misrepresenting the extent to which they participate in any privacy or data security program sponsored by the government or any other self-regulatory or standard-setting organization.

Consumers who want to know whether a U.S. company is a participant in the U.S-EU or U.S.-Swiss Safe Harbor program may visit http://export.gov/safeharbor to see if the company holds a current self-certification.

The Commission vote approving the final orders was 4-0, with Commissioner McSweeny not participating.

Proposed Regulatory Capital Reporting Changes

FIL-32-2014
June 25, 2014

Proposed Regulatory Capital Reporting Changes

Summary:

The federal banking agencies are requesting comments on proposed revisions to the risk-weighted assets portion of Schedule RC-R, Regulatory Capital, of the Consolidated Reports of Condition and Income (Call Report). These proposed reporting changes would incorporate into Part II of Schedule RC-R the standardized approach for calculating risk weighted assets under the agencies’ revised regulatory capital rules. A limited change to Schedule RC-L, Derivatives and Off-Balance Sheet Items, would revise the reporting of securities borrowed. These proposed Call Report changes would take effect March 31, 2015.

Statement of Applicability to Institutions under $1 Billion in Total Assets: This Financial Institution Letter applies to all FDIC-supervised banks and savings associations, including community institutions. Although proposed revised Schedule RC-R, Part II, would include more risk-weight categories than at present in Part II, certain data items in the new risk-weight categories should have limited applicability to community institutions.

Highlights:

The proposed changes to Schedule RC-R, Part II, Risk Weighted Assets, are consistent with the revised regulatory capital rules approved by the banking agencies in July 2013. Drafts of the revised reporting forms and instructions for Schedule RC-R, Part II, and Schedule RC-L are available at www.ffiec.gov/ffiec_report_forms.htm.
In addition to an expanded number of risk-weight categories, other proposed revisions to Schedule RC-R, Part II, include greater detail on loans and new items for reporting securitization exposures under the standardized approach.
Each institution is invited to review and comment on any or all of the proposed Call Report revisions. Comments must be submitted by August 22, 2014.
As previously announced, institutions that are not advanced approaches institutions will continue to complete Schedule RC R, Part I.A, Regulatory Capital Components and Ratios, through December 31, 2014. Part I.A will be removed effective March 31, 2015, and all institutions will then complete Part I of Schedule RC-R, which currently is designated Part I.B.
The banking agencies will conduct a banker teleconference to explain the proposed changes to Schedule RC-R, Part II, and Schedule RC-L and answer questions about the proposal on Friday, June 27, 2014, from 2:00 to 3:30 p.m. Eastern Time. Please refer to FIL-31-2014 at http://www.fdic.gov/news/news/financial/2014/fil14031.html for further information about this event and the proposed Call Report changes.
Resources for community institutions on the revised regulatory capital rules, including an interagency guide and an expanded guide for FDIC-supervised institutions, are available on the FDIC’s Web site at http://www.fdic.gov/regulations/capital/. Institutions with specific questions about the revised rules may send an e-mail to the FDIC at [email protected]

FTC Approves Final Consent Settling Charges that Home Security Company ADT’s Endorsements Deceived Consumers

Following a public comment period, the Federal Trade Commission has approved a final consent order settling charges that the home security company ADT LLC misrepresented that paid endorsements from safety and technology experts who appeared as guests on news programs and talk shows were independent reviews.

First announced in March 2014, the settlement prohibits ADT from misrepresenting paid endorsements as independent reviews, and requires the company to clearly and prominently disclose any material connections in advertising for home security or monitoring products or services, and promptly remove reviews and endorsements that have been misrepresented as independently provided by an impartial expert or have failed to disclose a material connection between ADT and an endorser.

The Commission vote to approve the final order in this case was 4-0-1, with Commissioner McSweeny not participating. (FTC File No. 1223121; the staff contact is Michelle Rusk, FTC Bureau of Consumer Protection, 202-326-3148.)

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Proposed Regulatory Capital Reporting Changes

Summary:

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