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FTC and DOJ Announce Agenda for June 23 Joint Agency Workshop on Conditional Pricing Practices

The Federal Trade Commission and Department of Justice (DOJ) have issued the agenda for their joint public workshop, which will be held on June 23, 2014, to explore the economic and legal analysis of conditional pricing practices among firms in a supply chain. Announced in early May, the workshop will focus on conditional pricing arrangements – practices in which prices are explicitly or effectively contingent on commitments to purchase or sell a specified share or volume of a single product or a mix of multiple products – such as loyalty or bundled pricing.

A principal goal of the workshop will be to advance the economic understanding of the potential harms and benefits of conditional pricing practices and to reexamine their treatment under the antitrust laws. As detailed in the press release first announcing the event, participants will focus primarily on: 1) Economic Learning, and 2) Law and Policy Issues related to conditional pricing practices.

The FTC and DOJ are interested in receiving comments on conditional pricing practices, and will accept written submissions from the public through Aug. 22, 2014, 60 days after the event. Interested parties may submit public comments online. Submitted comments will be made publicly available on the FTC and DOJ websites.

The all-day workshop is free and open to the public. Individuals are encouraged, but not required, to register in advance for the workshop by sending an email to [email protected]. Please include “RSVP” in the subject line. Seating will be on a first-come, first-served basis. It will take place at the FTC’s conference center, at its new satellite location: Constitution Center, 400 Seventh Street, SW, Washington, DC 20024.

Reasonable accommodations for people with disabilities are available upon request. Requests should be submitted by email to [email protected], or by calling Lara Kittelson at 202-326-3388. Requests should be made in advance. Please include a detailed description of the accommodation needed and provide contact information.

The FTC’s Office of Policy Planning works with the Commission and its staff to develop long-range competition and consumer policy initiatives, consistent with the FTC’s unique mission to conduct research and engage in advocacy on issues that affect competition, consumers, and the U.S. economy. The Office of Policy Planning submits advocacy filings; conducts research and studies; organizes public workshops; issues reports; and advises staff on cases raising new or complex policy and legal issues. To reach the Office of Policy Planning, send an e-mail to [email protected]. Like the FTC on Facebook, follow us on Twitter, read our blogs, and subscribe to press releases for the latest FTC news and resources.

U.S. District Judge Finds that Payday Lender AMG Services Deceived Consumers by Imposing Undisclosed Charges and Inflated Fees

The Federal Trade Commission has scored another legal victory in its crackdown against deceptive payday lenders with the latest finding from U.S. District Judge Gloria M. Navarro in the case against AMG Services.

Judge Navarro ruled last week that the defendants deceived consumers about the cost of their loans by imposing undisclosed charges and inflated fees. In many cases, the defendants’ inflated fees left borrowers with supposed debts of more than triple the amount they had borrowed. In one typical example, the defendants allegedly told one consumer that a $500 loan would cost him $650 to repay. But the defendants attempted to charge him $1,925 to pay off the $500 loan. The defendants used deceptive loan documents in connection with at least five million consumer loans.

Adopting an earlier recommendation from Magistrate Judge Cam Ferenbach, Judge Navarro found that the defendants’ lending practices were deceptive because by failing to disclose charges and inflating fees, they hid from consumers the true cost of the payday loans they offered.

Last week’s decision follows another significant ruling in the FTC’s favor. In March, after the defendants claimed their affiliation with American Indian tribes shielded them from federal law enforcement, Judge Navarro ruled against them finding that the FTC Act grants the agency authority to regulate arms of Indian tribes, their employees, and their contractors.

In her latest decision, Judge Navarro noted that the key portions of defendants’ loan documents were “convoluted,” “buried,” “hidden,” and “scattered.” And she further cited evidence indicating that the defendants’ “employees were instructed to conceal how the loan repayment plans worked in order to keep potential borrowers in the dark.”

“Like any other contract, payday lending contracts must disclose the true cost consumers will pay,” said Jessica Rich, Director of the agency’s Bureau of Consumer Protection. “This is especially important because many consumers who take out payday loans calculate the amount they can afford to pay down to the dollar.”

The FTC has sued a number of payday lenders for engaging in unfair and deceptive practices targeting financially distressed consumers who are seeking short-term loans.

When the FTC sued the defendants behind AMG Services in 2012, it alleged that they violated the FTC Act by piling on undisclosed and inflated fees, and by threatening borrowers in debt collection calls with arrest and lawsuits. The defendants violated the Truth in Lending Act by giving inaccurate loan information to borrowers, and the Electronic Fund Transfer Act by requiring consumers to preauthorize electronic withdrawals from their bank accounts as a condition of obtaining credit, according to the FTC.

The Federal Trade Commission reached a partial settlement on other issues last year with the principal AMG defendants. The order bars the settling defendants from using threats of arrest and lawsuits as a tactic for collecting debts, and from requiring all borrowers to agree in advance to electronic withdrawals from their bank accounts as a condition of obtaining credit.

Litigation in the case will continue to determine the liability of each defendant and the damages the court will impose.

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 Testifies on Geolocation Privacy

The Federal Trade Commission testified before Congress on the Commission’s efforts to address the privacy concerns raised by the tracking of information about consumers’ location, as well as proposed legislation to protect the privacy of geolocation data.

Delivering testimony before the Senate Judiciary Committee’s Subcommittee for Privacy, Technology and the Law, Jessica Rich, Director of the FTC Bureau of Consumer Protection, outlined the FTC’s ongoing efforts to protect the privacy of consumers’ geolocation information through enforcement, policymaking, and consumer and business education.

Precise geolocation data is sensitive personal information increasingly used in consumer products and services, the testimony states. These products and services make consumers’ lives easier and more efficient, but the use of geolocation information can raise concerns because it can reveal a consumer’s movements in real time and provide a detailed record of a consumer’s movements over time.

“Geolocation information can divulge intimately personal details about an individual. Did you visit an AIDS clinic last Tuesday? What place of worship do you attend? Were you at a psychiatrist’s office last week? Did you meet with a prospective business customer?” the testimony states.

Geolocation information may be sold to companies to help build profiles about consumers without their knowledge or consent, or it could be accessed by cybercriminals, hackers or through surreptious means such as “stalking apps.”

The FTC has used its enforcement authority under Section 5 of the FTC Act to take action against companies engaged in unfair or deceptive practices involving geolocation information. Last month, for example, the Commission entered into a settlement with the mobile messaging app Snapchat, resolving FTC allegations that Snapchat made multiple misrepresentations to consumers about the disappearing nature of messages sent through its service, as well its transmission of users’ geolocation information. The FTC has raised similar allegations involving undisclosed collection and transmission of location data as part of privacy complaints against a popular flashlight app, as well as a national rent-to-own retailer and one of its software vendors, the testimony states.

In addition to its enforcement activities involving geolocation information, the Commission has conducted studies, held workshops, and issued reports on mobile privacy disclosures, mobile apps directed to kids, and other topics that elucidate best practices for companies collecting, using, and sharing geolocation information, the testimony says.

The testimony also notes the FTC’s ongoing efforts to educate consumers and businesses about protecting the privacy of geolocation information. For instance, the Commission recently released an updated version of ”Net Cetera: Chatting with Kids About Being Online,” and it has released guidance directed to businesses operating in the mobile arena to help educate them on best practices to handle sensitive information, such as geolocation information.

The testimony also provides the Commission’s initial views on the Location Privacy Protection Act of 2014, proposed legislation that seeks to improve the transparency of geolocation services and give consumers greater control over the collection of their geolocation information. The FTC supports the goals of the LPPA, and believes it is an important step forward in protecting consumers’ sensitive geolocation information, the testimony states.

In particular, the testimony highlights three important LPPA provisions that are consistent with the Commission’s views:

The bill defines “geolocation information” as information that is “sufficient to identify the street name and name of the city or town” in which a device is located. This definition is consistent in many respects with the definition of “geolocation information” in the Commission’s COPPA Rule.
The LPPA requires that an entity collecting consumer geolocation information disclose its collection of such information. The Commission has recommended that companies make their data collection practices more transparent to consumers.
The LPPA requires affirmative express consent from consumers before a covered entity may knowingly collect or disclose geolocation information, and the Commission supports that approach.

In addition, the testimony notes that the LPPA gives the Department of Justice sole enforcement authority and rulemaking authority, in consultation with the FTC. As the federal government’s leading privacy enforcement agency, the testimony recommends that the Commission have rulemaking and enforcement authority with regard to the civil provisions of the LPPA, and that DOJ have enforcement authority for the criminal provisions.

The Commission vote approving the testimony and its inclusion in the formal record was 5-0.

FTC Issues Summary of Its 2013 Financial Acts Enforcement and Related Research and Consumer Education

The Federal Trade Commission has issued its summaries of FTC enforcement and related activities during annual year 2013 regarding the Truth in Lending Act (TILA), Consumer Leasing Act (CLA), and Electronic Fund Transfer Act (EFTA); and the Equal Credit Opportunity Act (ECOA). The Commission has submitted the summaries to the Consumer Financial Protection Bureau (CFPB), at its request, so that it may include the FTC’s efforts in the CFPB’s annual report to Congress, which is required under the Dodd-Frank Act. The FTC and the CFPB generally have shared jurisdiction of these statutes, and coordinate their activities accordingly.

The summary on TILA, CLA and EFTA addresses FTC’s enforcement actions related to non-mortgage credit (such as automobile advertising), mortgage lending advertisements, and forensic audit scams; rulemaking, research, and policy development related to truth in lending; and consumer and business education regarding truth in lending requirements. The summary on ECOA concerns the agency’s initiatives on fair lending, including research and policy development, as well as its consumer and business education activities.

The Commission vote, taken before Commissioner Terrell McSweeny joined the agency, to issue the summary regarding ECOA was 4-0. The vote to issue the summary regarding the TILA, CLA and EFTA was 5-0. Copies of the letters also have been provided to the Federal Reserve Board. (FTC File No. P064808; the staff contacts are Carole L. Reynolds and Miya Rahamim, Bureau of Consumer Protection, 202-326-3230 and 202-326-2351)

FTC Charges Operation with Selling Bogus Debt Relief Services

The Federal Trade Commission charged an Irvine, California-based scheme with billing consumers as much as $10,000 after making deceptive claims that it would provide legal advice, settle consumers’ debts, and repair their credit in three years or less. Instead, the scheme often left consumers in financial ruin, the agency charged.

The FTC alleged that the DebtPro 123 LLC defendants told consumers to stop paying and communicating with their creditors. As a result, although consumers hired the defendants in hopes of improving their financial situation, their debt often increased, causing them to lose their homes, have their wages garnished, lose their retirement savings, or file for bankruptcy, according to the complaint. Although the defendants promised to refund unsatisfied customers, they rarely did.

“These defendants said they would get consumers out of debt, but instead they bilked them out of thousands of dollars, often leaving them worse off than they were before,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection.

Ringleader Bryan Taylor and three other individuals, along with DebtPro 123 and five other companies marketed their bogus debt relief services through telemarketing calls, website ads, promotional videos and marketing companies that acted as lead generators, according to the complaint. Promising that in as little as 18 months consumers could “become debt free and enjoy financial independence,” the defendants claimed their “Legal Department” would “leverage their existing relationships with all of the major creditors to negotiate the best possible resolution.” The defendants claimed that consumers could reduce the amount they owed by 30 to 70 percent.

The complaint alleges that the defendants violated the Federal Trade Commission Act, the Telemarketing Sales Rule, and the Credit Repair Organizations Act, not only through their false promises, but also by providing their affiliate marketing companies with deceptive materials to deceive consumers and by collecting an advance fee for their bogus debt relief services.

For more information about how to handle robocalls and debt relief offers, see Robocalls, and Avoiding Debt Relief Scams.

The Commission vote to file the complaint against Bryan Taylor; Kara Taylor; Ryan Foland; Stacey Frion; DebtPro 123, LLC; BET Companies Inc.; Redwave Management Group Inc.; Allstar Debt Relief LLC (California); Allstar Debt Relief LLC (Texas); and Allstar Processing Corp. was 4-0-1, with Commissioner McSweeny not participating. The FTC filed the complaint in the U.S. District Court for the Central District of California on May 2, 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 Approves Franchise Services of North America’s Application to Sell Certain Advantage Rent a Car Locations to Hertz and Avis Budget Group

Following a public comment period, the Federal Trade Commission has approved an application submitted by Franchise Services of North America, Inc. (FSNA) regarding the sale of 22 former Advantage Rent A Car locations, to Hertz Global Holdings, Inc. (Hertz) and Avis Budget Group (Avis).

FSNA acquired the locations under a 2012 FTC settlement to resolve charges that Hertz’s proposed $2.3 billion acquisition of Dollar Thrifty Automotive Group, Inc. would have been anticompetitive. On November 5, 2013, FSNA, through a subsidiary, filed for Chapter 11 bankruptcy protection, and the Catalyst Group LLC was the winning bidder for the Advantage assets. The bankruptcy court approved Catalyst’s acquisition of Advantage, subject to FTC approval, which the FTC granted on January 30, 2014.

Catalyst bid on 40 of the Advantage locations and excluded the remaining 28 locations from its purchase. The bankruptcy court has now approved a request by FSNA to sell 22 of these locations — 10 to Hertz and 12 to Avis.

The Commission vote to approve the application was 3-0-2, with Commissioners Joshua D. Wright and Terrell McSweeny not participating. No comments were received during the public comment period. 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-4376; the staff contact is Daniel P. Ducore, Bureau of Competition, 202-326-2526)

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, 601 New Jersey Ave., N.W., Room 7117, Washington, DC 20001. 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.

Interagency Statement on Increased Maximum Flood Insurance Coverage for “Other Residential Buildings”

FIL-28-2014
May 30, 2014

Interagency Statement on Increased Maximum Flood Insurance Coverage for “Other Residential Buildings”

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FIL-28-2014 – PDF (PDF Help)

Summary:

The FDIC, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the National Credit Union Administration, and the Farm Credit Administration (collectively, the agencies) are issuing an interagency statement regarding the new National Flood Insurance Program (NFIP) maximum limit of flood insurance coverage for non-condominium residential buildings designed for use for five or more families (classified by the NFIP as “Other Residential Buildings”). The guidance discusses the agencies’ expectations and a financial institution’s responsibilities when, as a result of the increase in the maximum limit of building coverage for such properties, a financial institution determines that a building securing a designated loan is covered by flood insurance in an amount less than the amount required under federal flood insurance law.

Statement of Applicability to Institutions With Less Than $1 Billion in Total Assets: This Financial Institution Letter applies to all FDIC-supervised financial institutions.

Highlights:

Under Section 100204 of the Biggert-Waters Flood Insurance Reform Act of 2012, the maximum limit of building coverage available for non-condominium residential buildings designed for use for five or more families, classified as “Other Residential Buildings” by the NFIP, has been increased from $250,000 per building to $500,000. The maximum contents coverage for all policies covering Other Residential Buildings will remain $100,000 per policy.
The new coverage limits are available for new policies, policy renewals, or existing policies with change endorsements that are effective on or after June 1, 2014. The Federal Emergency Management Agency has directed insurers that issue NFIP policies to provide all Other Residential policyholders with a letter informing them prior to June 1, 2014, of the new policy limits.
The increase in the maximum amount of flood insurance coverage available under the NFIP could affect the minimum amount of flood insurance required for both existing and future loans secured by these Other Residential Buildings.
If, as a result of the increase in the maximum limit of building coverage for these buildings, a lender or its servicer determines on or after June 1, 2014, that the building securing the designated loan is now covered by flood insurance in an amount less than required by federal flood insurance regulation, it should take steps to ensure that the borrower obtains sufficient coverage, including force placing insurance pursuant to federal law.

Auto Lender Will Pay $5.5 Million to Settle FTC Charges It Harassed Consumers, Collected Amounts They Did Not Owe

A national subprime auto lender will pay more than $5.5 million to settle Federal Trade Commission charges that the company used illegal tactics to service and collect consumers’ loans, including collecting money consumers did not owe, harassing consumers and third parties, and disclosing debts to friends, family, and employers.

Consumer Portfolio Services, Inc. (CPS), headquartered in Irvine, Calif., agreed to refund or adjust 128,000 consumers’ accounts more than $3.5 million and forebear collections on an additional 35,000 accounts to settle charges the company violated the FTC Act. CPS will pay another $2 million in civil penalties to settle FTC charges that the company violated the Fair Debt Collection Practices Act (FDCPA) and the Fair Credit Reporting Act (FCRA)’s Furnisher Rule.

“At the FTC, we hold loan servicers responsible for knowing their legal obligations and abiding by them,” said Jessica Rich, director, FTC’s Bureau of Consumer Protection. “The law is very clear: Loan servicers can’t charge consumers more than they owe. And they can’t threaten and harass consumers about delinquent debts.”

The order settling the charges requires CPS to change its business practices to comply with the requirements of the appropriate laws. In addition, the company is required to establish and maintain a comprehensive data integrity program to ensure the accuracy, integrity and completeness of its loan servicing processes, and the data and other information it services, collects or sells. CPS must also provide the FTC with periodic independent assessments of its data integrity program for 10 years.

According to the FTC’s complaint, CPS’ loan-servicing violations include:

Misrepresenting fees consumers owed in collection calls, monthly statements, pay-off notices, and bankruptcy filings;
Making unsubstantiated claims about the amounts consumers owed;
Improperly assessing and collecting fees or other amounts;
Unilaterally modifying contracts by, for example, increasing principal balances;
Failing to disclose financial effects of loan extensions;
Misrepresenting that consumers must use particular payment methods requiring service fees; and
Misrepresenting that the company audits verified consumer accounts balances.

The company’s collection violations include disclosing the existence of debts to third parties; calling consumers at work when not permitted or inconvenient; calling third parties repeatedly with intent to harass; making unauthorized debits from consumer bank accounts; falsely threatening car repossession; and deceptively manipulating Caller ID. Because for many of its accounts CPS is a creditor, the complaint charges these practices violated Section 5 of the FTC Act. For those accounts where CPS is a debt collector, the complaint charges these practices violated the FDCPA.

CPS is also charged with failure to establish and implement reasonable written procedures and failure to reasonably investigate and respond timely to consumer disputes under the Furnisher Rule.

Under the order, the company will begin sending refunds to consumers and adjusting affected account balances within 90 days. Consumers with questions about their elgibility for a refund or account adjustment should contact CPS directly via telephone at 1-888-806-2367, email [email protected], or visit the company’s website.

The FTC provides information for businesses regarding debt collection and the Furnisher Rule. For consumers, the FTC has resources on credit and loans and dealing with debt.

The Commission vote to authorize the staff to refer the complaint to the Department of Justice, and to approve the proposed consent decree, was 4-0-1, with Commissioner Terrell McSweeny not participating. The DOJ filed the complaint and proposed consent decree on behalf of the Commission in the Central District of California on May 28, 2014. The proposed consent decree is subject to court approval.

NOTE: The Commission authorizes the filing of 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. Consent decrees have the force of law when signed by the District Court judge.

FTC Wins Default and Contempt Judgments Against Text Spammer Phil Flora

Phil Flora, the operator of a text message spamming operation that sent more than 29 million text messages to consumers promising “free” $1,000 Walmart and Best Buy gift cards, has been ordered to pay $148,309 for his involvement in the scam. Flora, who resides in Orange County, California, has also been found in contempt for violating a prior Federal Trade Commission order.

“When scammers ignore court orders, they do so at their own peril,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “As this case shows, no matter how much scammers may try to hide their involvement, we will work to uncover their role and ensure they give up their ill-gotten gains.”

In March 2013, the FTC named Flora as a defendant in one of several enforcement actions brought across the country against operators of “free” gift card text messaging scams. In November 2013, the U.S. District Court for the Central District of California entered a final order and default judgment against Flora for his involvement in the scam. The final order permanently bans Flora from sending spam text messages and imposes a judgment of $148,309 – an amount equivalent to the money he gained through his illegal scheme.

The court also found Flora in civil contempt because his conduct violated an order from a previous FTC case concerning highly similar illegal practices. In this 2011 case, the FTC alleged that Flora sent millions of unwanted text messages advertising bogus mortgage loan modifications. The stipulated order settling the 2011 case permanently banned Flora from sending spam text messages. The court found that Flora had violated this provision through the conduct that led to the FTC’s 2013 case.

FTC Requests Public Comments on Amended Applications by Fidelity National Financial Inc. for Approval to Divest Oregon Title Plant Assets

The Federal Trade Commission is now accepting public comments on two amended applications by Fidelity National Financial Inc. [Amerititle | Old Republic] to sell Oregon real estate title plant assets, as required by the FTC order settling charges that Fidelity’s acquisition of Lender Processing Services, Inc. (LPS) was likely to harm competition.

On April 24, 2014, Fidelity filed an application seeking approval to divest title plants in six Oregon counties to AmeriTitle, Inc. and a second application seeking approval to divest its interest in the Portland title plant to Old Republic Title Company of Oregon to comply with the FTC’s order. Fidelity has now filed an amended application seeking approval to divest title plants in five Oregon counties to AmeriTitle, excluding the title plant in Polk County; and filed a second amended application seeking approval to divest the Polk County title plant to Old Republic instead of AmeriTitle.

In light of the amended applications received, the FTC has extended the public comment period by two weeks, until June 12, 2014. Written comments should be sent to: FTC Office of the Secretary, 600 Pennsylvania Ave., N.W., Washington, DC 20580. Comments can also be submitted electronically on the proposed sale to both Old Republic Title Company of Oregon and AmeriTitle. Copies of the original and amended applications can be found on the FTC’s website and as a link to this press release. (FTC File No. 131-0159; the staff contact is Naomi Licker, Bureau of Competition, 202-326-2851)

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Interagency Statement on Increased Maximum Flood Insurance Coverage for “Other Residential Buildings”

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Summary:

Highlights:

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