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U.S. District Judge Finds that FTC Can Sue Deceptive Payday Loan Business Regardless of American Indian Tribal Affiliation

U.S. District Judge Gloria M. Navarro handed the Federal Trade Commission a significant victory in its crackdown on deceptive payday lenders, affirming a magistrate judge’s finding that the defendants in its AMG Services case are within the reach of FTC enforcement actions, even if they are affiliated with American Indian tribes.

District Judge Navarro ruled that Magistrate Judge V. Cam Ferenbach, of the U.S. District Court for the District of Nevada, correctly found that the FTC Act “grants the FTC authority to regulate arms of Indian tribes, their employees, and their contractors.”

“This ruling makes it crystal clear that the FTC’s consumer protection laws apply to businesses that are affiliated with tribes,” said Jessica Rich, Director of the agency’s Bureau of Consumer Protection. “It’s a strong signal to deceptive payday lenders that their days of hiding behind a tribal affiliation are over.”

The FTC has sued a number of payday lenders for engaging in unfair and deceptive practices against consumers. The FTC alleged that these lenders, like AMG Services, have employed deception and other illegal conduct to take advantage of financially distressed consumers seeking loans.

When the FTC sued the defendants behind AMG Services in 2012, they argued that they were exempt from FTC enforcement because of their affiliation with American Indian tribes. They argued that the FTC lacked authority to enforce the FTC Act, the Truth in Lending Act (TILA), and Electronic Fund Transfer Act (EFTA) against tribes and tribal businesses. The AMG defendants have likewise previously claimed immunity from state legal proceedings, despite their tenuous connections to American Indian tribes.

But in a report and recommendation issued in July 2013, Magistrate Judge Ferenbach disagreed. Magistrate Judge Ferenbach found that payday lenders cannot avoid key federal consumer protection statutes simply by aligning themselves with American Indian tribes. He concluded that the FTC Act has “broad reach” and applies generally, giving the agency “the authority to bring suit against Indian Tribes, arms of Indian Tribes, and employees and contractors of arms of Indian Tribes.” The magistrate judge likewise found that the FTC has authority to bring its TILA and EFTA claims. The March 7, 2014 ruling by Judge Navarro affirms the magistrate judge’s findings.

The FTC alleged that the defendants violated the FTC Act by piling on undisclosed and inflated fees, and by threatening borrowers in debt collection calls with arrest and lawsuits. The FTC also alleged that the defendants violated TILA by giving inaccurate loan information to borrowers, and violated EFTA by requiring consumers to preauthorize electronic withdrawals from their bank accounts as a condition of obtaining credit. According to documents filed by the FTC, the defendants’ deceptive and illegal tactics generated thousands of complaints to law enforcement authorities. In many cases, the defendants’ inflated fees left borrowers with supposed debts of more than triple the amount they had borrowed.

The Federal Trade Commission reached a partial settlement on other issues last year with the principal AMG defendants. The settlement 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. The FTC continues to litigate other charges against the AMG defendants, including allegations that they deceived consumers about the cost of their loans by charging undisclosed charges and inflated fees. In a separate decision issued on January 28, 2014, Magistrate Judge Ferenbach found that AMG’s loan documents were deceptive and violated the FTC Act and TILA. That ruling is now before District Judge Navarro.

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 Staff Advises Massachusetts Department of Public Utilities On Dynamic Pricing Proposal for Residential Electricity Customers

The Federal Trade Commission staff submitted a comment in response to a request from the Commonwealth of Massachusetts Department of Public Utilities (Mass. DPU) for comments on its investigation of dynamic pricing for residential electricity customers. Dynamic prices are rates that vary over time, based on wholesale electricity prices and transmission congestion conditions.

According to the FTC staff comment, with dynamic pricing, customers who respond to incentives to trim demand for power during peak demand periods can save money, lessen environmental impacts, and reduce the costs and improve the reliability of the electric system. Such actions benefit all customers, even those who do not respond to the incentives.

The staff comment identifies fundamental difficulties in reconciling the “basic” rate-regulated service in Massachusetts with rapid innovations in services and equipment – such as “smart” appliances and electric cars – which enable customers to respond to incentives to reduce electricity consumption during peak demand. To reach this goal, the comment recommends that the Mass. DPU adopt a peak-time rebate plan similar to that adopted by Baltimore Gas & Electric once appropriate electric meters – and consumer education and consumer protection programs – are in place.

The staff comment urges the Mass. DPU “to guard against authorizing public consumer education programs that focus exclusively on the virtues of any distribution utility’s time-varying rates and may provide consumers with incomplete or misleading information about offers from competing marketers.” It also urges the Mass. DPU to “ensure that proper safeguards are in place with respect to the personal information that smart meters generate about customers and make available to marketers,” and that “distribution utilities inform their basic service customers that they are using their data for purposes of implementing time-varying rates.”

The Commission vote approving the comment was 4-0. (FTC File No. V140003; the staff contact is John H. Seesel, Associate General Counsel for Energy, Office of the General Counsel, 202-326-2702).

How To Submit Your Alternative Scoring Questions During FTC Workshop

The Federal Trade Commission is hosting a seminar on alternative scoring products in Washington, D.C., on March 19, 2014, and invites webcast viewers to submit questions online. Staff will live-tweet the seminar, and take questions via Twitter, Facebook, and email.

The seminar, which is part of the FTC’s spring privacy series, will take a closer look at the growing field of alternative scoring, in which companies use data about consumers to create scores designed to predict consumer behavior. Speakers and panelists will examine the privacy questions and possible benefits to consumers from these alternative scoring products.

The live webcast will begin at 10 a.m. EDT. Viewers can submit questions throughout the day via the following channels:

Twitter: Commission staff will tweet workshop highlights from the @FTC Twitter account and use the hashtag #FTCpriv.

Facebook: Post questions to the FTC’s Facebook page in the seminar status thread.

Email: Submit questions via email to [email protected].

Staff will do their best to answer as many questions from the audience and online during the seminar.

Note: The link for the webcast will be active five minutes before the seminar start time.

FTC Charges Arkansas Car Dealer with Not Displaying ‘Buyers Guides’

The Federal Trade Commission has charged an Arkansas auto dealer, Abernathy Motor Company, and its two principals, with failing to display a “Buyers Guide” on used vehicles offered for sale, as required by the FTC’s Used Car Rule. Each violation could result in a civil penalty of up to $16,000.

“Used car dealers are required to post a Buyers Guide providing warranty and other important information on the cars they offer for sale. That’s the law,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Consumers have a right to receive this information up-front to help them make an informed buying decision.”

The FTC’s Used Car Rule, which took effect in 1985 specifically requires used car dealers to disclose whether the car comes with a dealer’s warranty or is being sold “as is.” If the car is sold with a dealer’s warranty, the Rule requires the Buyers Guide to list its basic terms and conditions, including the duration of coverage, the percentage of total repair costs to be paid by the dealer, and the exact systems covered by the warranty.

In January 2013, the FTC announced that its Southwest Region Office had warned 11 used car dealerships in Jonesboro, Arkansas, that their sales practices violated the Used Car Rule. All but Abernathy Motor Company subsequently came into compliance.

Abernathy Motor Company has four used car sales locations in Arkansas: two in Blytheville, one in West Memphis, and one in Jonesboro. The FTC’s complaint also names the company’s owners, Wesley Abernathy and David Abernathy, and an affiliated dealership, Ab’s Best Buys AMC Inc., as defendants.

According to the complaint, the FTC visited the Abernathy dealership in Jonesboro in November 2012, and found that none of the vehicles offered for sale displayed a Buyers Guide. The agency informed the dealership of that fact, and sent the dealership a copy of the Guide and the FTC publication, A Dealer’s Guide to the Used Car Rule. In May 2013, the FTC re-visited the Abernathy dealership, and visited Ab’s Best Buys AMC Inc., and found both dealerships were offering used vehicles for sale that did not display a Buyers Guide.

The FTC appreciates the assistance of Legal Aid of Arkansas in this matter.

The Commission vote authorizing the staff to file the complaint was 4-0. The complaint was filed in the U.S. District Court for the Eastern District of Arkansas, Jonesboro Division.

FTC Issues Changes to Textile Labeling Rules

The Federal Trade Commission has issued final amendments to its Textile Labeling Rules, addressing fiber content and country-of-origin disclosures.

The Rules implement the Textile Fiber Products Identification Act, which requires that certain textiles sold in the United States carry labels disclosing the generic names and percentages by weight of the fibers in the product, the manufacturer or marketer name, and the country where the product was processed or manufactured.

In May 2013, the FTC proposed changes to the Rules and sought public comment. Based on comments received, the agency proposed amendments to the Rules and sought public comments. After weighing the comments it received, the Commission approved the changes announced today, including amendments that would:

incorporate the updated International Organization for Standardization standard establishing generic fiber names for manufactured fibers;

allow certain hang-tags disclosing fiber names and trademarks, and performance information, without the need to disclose the product’s full fiber content;

clarify that an imported product’s country of origin is the country where it was processed or manufactured, as determined under laws and regulations enforced by U.S. Customs and Border Protection;

better address electronic commerce with revised definitions of “invoice” and “invoice or other paper,”

replace the requirement that guarantors sign continuing guarantees under penalty of perjury with a requirement that they acknowledge that providing a false guaranty is unlawful, and certify that they will actively monitor and ensure compliance with the applicable law; and

clarify the provision identifying textile fiber product categories and products that are exempt from the Act’s requirements.

Based on the comments received, the Commission decided not to adopt its proposal to make continuing guaranties effective for one year unless revoked earlier. Thus, continuing guaranties filed with the Commission will remain effective until revoked.

The Commission vote to publish the Federal Register Notice amending the Rules and Regulations under the Textile Fiber Products Identification Act was 4-0. It will be published in the Federal Register soon. The amended Rules will become effective 30 days after the Federal Register Notice is posted. (FTC File No. P948404; the staff contact is Robert M. Frisby, Bureau of Consumer Protection, 202-326-2098.)

FTC Announces Agenda, Panelists for Alternative Scoring Seminar

The Federal Trade Commission has announced the agenda and panelists for its upcoming privacy seminar examining the scope and effects of alternative scoring products, which will take place March 19 from 10 a.m. to noon.

The seminar is free and open to the public, and will be held at the FTC Conference Center at 601 New Jersey Ave., NW, in Washington.

The agenda and panelists are as follows:

9 a.m.	Registration/Doors Open
10 a.m.	Welcome
10:05 a.m.	Overview of Predictive Analytics Claudia Perlich, Chief Scientist, Dstillery
10:20 a.m.	Panel Discussion Moderators: Katherine Armstrong and Andrea Arias, FTC Attorneys Pamela Dixon, Founder, World Privacy Forum Edmund Mierzwinski, Consumer Program Director and Senior Fellow, U.S. Public Interest Research Group Claudia Perlich, Chief Scientist, Dstillery Stuart Pratt, President and CEO, Consumer Data Industry Association Ashkan Soltani, Independent Researcher and Consultant Rachel Nyswander Thomas, Executive Director of the Data-Driven Marketing Institute and Vice President of Government Affairs, Direct Marketing Association Joseph Turow, Professor, Annenberg School for Communication, University of Pennsylvania
11 a.m.	Emerging Trends in Online Pricing Ashkan Soltani, Independent Researcher and Consultant
11:15 a.m.	Panel Discussion
12 p.m.	Adjourn

FTC Testifies Before Congressional Subcommittee on Improving Sports Safety

The Federal Trade Commission testified before Congress today on actions it has taken to help ensure that concussion protection claims made for football helmets and other sports equipment are truthful and supported by reliable scientific evidence.

Testifying on behalf of the Commission before the House Energy and Commerce Committee’s Subcommittee on Commerce, Manufacturing and Trade, Richard Cleland, Assistant Director for Advertising Practices in FTC’s Bureau of Consumer Protection, outlined the agency’s enforcement efforts. The testimony notes that as awareness of the danger of concussions has grown, manufacturers have started making concussion-protection claims for an increasing array of sports-related products.

“Given the dangers that concussions pose for young athletes engaged in sports, it is essential that advertising for products claiming to reduce the risk of this injury be truthful and substantiated,” the testimony states.

The testimony points out that in August 2012 the Commission announced a settlement with the marketers of the Brain-Pad mouth guard. The Commission alleged that Brain-Pad, Inc. and its president lacked a reasonable basis for their claims that Brain-Pad mouth guards reduced the risk of concussions, especially those caused by lower jaw impacts, and that they had falsely claimed that scientific studies proved that those mouth guards did so. The order in that case prohibits these and other deceptive claims.

In November 2012, after the order in the Brain-Pad case became final, the Commission staff sent out warning letters to 18 other manufacturers of sports equipment, advising them of the Brain-Pad settlement and warning them that they might be making deceptive concussion protection claims for their products, according to the testimony.

The Commission staff also investigated concussion risk reduction claims made by three major manufacturers of football helmets: Riddell Sports Group, Inc., Schutt Sports Inc., and Xenith, LLC. The staff closed the investigations without taking formal action. All three companies discontinued potentially deceptive claims in their advertising, or had agreed to do so, the testimony stated.

The Commission will continue monitoring the market to ensure that advertisers do not mislead consumers about their products’ concussion-protection capabilities, or the science behind them. The Commission’s approach will be balanced, to avoid inadvertently chilling research or impeding development of new technologies and products that truly do provide concussion protection, the testimony concluded.

The Commission vote approving the testimony and its inclusion in the formal record was 4-0.

At FTC’s Request, Court Halts Debt Collector’s Allegedly Deceptive and Abusive Practices, Freezes Assets

At the request of the Federal Trade Commission, a U.S. district court halted a debt collection operation that the agency charged with violating the Federal Trade Commission Act and the Fair Debt Collection Act by misrepresenting that they were with the government, falsely accusing consumers of committing check fraud, and then threatening consumers with arrest.

The court order stops the illegal conduct, freezes the operation’s assets, and appoints a temporary receiver to take over the defendants’ business, pending a hearing scheduled for March 17.

“These debt collectors took deception to new lows,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “They bullied consumers, falsely accused them of crimes, and pretended to be government officials. Stopping their illegal activity is a real victory for consumers.”

Part of the FTC’s continuing crackdown on scams that target consumers in financial distress, the lawsuit charged two individuals – Mark Briandi and William Moses – and 13 interrelated companies in connection with the case. Another company – that was not actively involved, but profited from the scheme – was charged as a relief defendant. The defendants allegedly bought debts and collected debts owed to other companies, and much of the debts the defendants collected on had originated from payday loans.

Operating the scheme since at least May of 2010, the defendants portrayed themselves as representatives of the government by using company names that suggested a government affiliation or national presence, such as Federal Recoveries, LLC, Federal Check Processing, Inc, Federal Processing Services, Inc., Nationwide Check Processing, and State Check Processing, Inc.. The defendants threatened consumers with dire consequences – such as lawsuits, arrest and imprisonment or seizure of assets – unless consumers paid the debt immediately.

The defendants repeated these deceptive claims to consumers’ family members, friends, coworkers, and employers, and revealed the consumers’ debts to these third parties as well, the complaint stated. According to consumers interviewed by the FTC, the defendants routinely refused to provide information about the debt, as required by federal law, or to investigate the debt’s legitimacy – even after some consumers explained that they did not owe the debt, the debt had been paid in full, or the defendants did not have the authority to collect on the debt. The defendants allegedly collected millions of dollars from consumers using these unlawful tactics.

In addition to Briandi and Moses, the complaint names as defendants Federal Check Processing, Federal Recoveries, Federal Processing, Federal Processing Services, United Check Processing, Central Check Processing, Central Processing Services, American Check Processing, State Check Processing, Check Processing, Nationwide Check Processing, US Check Processing, and Flowing Streams. The complaint names Empowered Racing LLC as a relief defendant.

The FTC would like to thank the Buffalo Regional Office of the New York State Attorney General and the Consumer Protection Section of the Colorado Department of Law for their assistance with the investigation.

The Commission vote authorizing the staff to file the complaint was 4-0. The FTC filed the complaint and the request for a temporary restraining order in the U.S. District Court for the Western District of New York. On February 24, 2014, the court granted the FTC’s request for a temporary restraining order with an asset freeze, the appointment of a receiver, immediate access to the business premises and limited discovery.

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 Announces Agenda for March 20-21 Workshop Examining U.S. Health Care Competition Issues

The Federal Trade Commission has announced the agenda for the upcoming public workshop on “Examining U.S. Health Care Competition.” The workshop will be held in the FTC Conference Center at 601 New Jersey Ave., N.W., in Washington, DC, on March 20 and 21, 2014.

Health care spending accounts for a large part of federal, state, and consumer budgets. The FTC focuses its resources to ensure that health care markets benefit from competition and innovation, both of which can reduce costs and increase the quality and accessibility of health care for consumers.

The health care industry has evolved significantly in recent years. While some changes have related to implementation of health care reform legislation, many other developments have reflected general and longstanding concerns about cost, quality, access, and care coordination. The proposed workshop will focus on these broader developments. The goal of the workshop is to enhance the Commission’s expertise and knowledge base regarding competitive dynamics in this critical sector of the economy, in support of the Commission’s enforcement, advocacy, and consumer education efforts.

This workshop will address five key topics related to health care competition, each of which is listed below. Additional details and proposed questions can be found in the Federal Register notice announcing the event.

Professional Regulation of Health Care Providers;
Innovations in Health Care Delivery;
Advancements in Health Care Technology;
Measuring and Assessing Quality of Health Care; and
Price Transparency of Health Care Services.

The FTC’s health care competition workshop is free and open to the public. It will also be webcast on the FTC’s site. As of March 10, pre-registration for this event is closed, as we have reached our limit for pre-registrants. Due to the anticipated popularity of this event, people are encouraged to watch the live webcast. Seating is limited, and seats are available on a first-come, first-served basis.

Please arrive at the Conference Center a full hour before the event, and no less than 30 minutes before. If you emailed a pre-registration request by March 10, you are on the pre-registration list, but this does not guarantee you a seat at the workshop. It is still important to arrive early, as seats are available only until we reach capacity. You must have a valid government issued photo ID (government badge, license, passport, etc.). The security processing will include a metal detector and X-ray screening of all hand carried items.

In addition, any interested person may submit written comments on issues raised in the notice or during the workshop through April 30, 2014. Instructions about how to submit comments can be found in the Federal Register notice. The workshop will be webcast on the FTC’s site. FTC staff will live-tweet the workshop. Follow @FTC and tweet your questions with #FTChealthcare.

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.

FTC Seeks Public Comment on iKeepSafe’s Proposed Safe Harbor Program Under the Children’s Online Privacy Protection Rule

The Federal Trade Commission is seeking public comment on a proposed safe harbor program that the Internet Keep Safe Coalition (iKeep Safe) has submitted for Commission approval under the agency’s Children’s Online Privacy Protection Rule.

The FTC’s COPPA Rule includes a “safe harbor” provision designed to encourage increased industry self-regulation in this area. Under this provision, industry groups and others may ask the Commission to approve self-regulatory guidelines that implement the protections of the Rule. Companies that comply with the FTC-approved guidelines receive safe harbor from agency enforcement action under the Rule.

The Rule requires that operators of commercial websites and online services directed to children under the age of 13, or general audience websites and online services that knowingly collect personal information from children under 13, must post comprehensive privacy policies on their sites, notify parents about their information practices, and obtain parental consent before collecting, using, or disclosing any personal information from children under the age of 13. Since the Rule took effect on April 21, 2000, six groups – Aristotle Inc., the Children’s Advertising Review Unit of the Council of Better Business Bureaus, the Entertainment Software Rating Board, TrustE, PRIVO, and KidSAFE – have received Commission approval for their safe harbor programs.

In a Federal Register Notice to be published shortly, the FTC is seeking public comment about the proposed iKeepSafe program; whether the proposed program provides “the same or greater protections for children” as those contained in the Children’s Online Privacy Protection Rule; whether the mechanisms used to assess operators’ compliance are effective; whether incentives for operators’ compliance with the guidelines are effective; and whether the program provides adequate means for resolving consumer complaints. The comment period will last for 30 days, until April 21, 2014.

NOTE: Publication of this Federal Register notice does not indicate Commission approval of the safe harbor application. The Commission has 180 days to review proposed self-regulatory guidelines and must set forth its conclusions in writing.

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