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FTC Approves Final Orders Settling Charges Against Retailers Accused of Marketing Real Fur Products as Fake Fur

The Federal Trade Commission has approved final orders settling charges that retailers Neiman Marcus, DrJays.com and Eminent Inc. sold products containing real fur when they were advertised as containing “faux” fur, and that they did not identify the animal that produced the fur. Neiman Marcus also allegedly labeled a rabbit fur product as containing mink fur, and failed to disclose the country of origin for three fur products as required by the Fur Act and the Fur Rules (formally, the Fur Products Labeling Act and the Rules and Regulations Under the Fur Products Labeling Act).

Under the settlement orders [Neiman Marcus, DrJays.com, Eminent], the respondents are prohibited, for 20 years, from violating the Fur Act and the Fur Rules, including misrepresenting that real fur is fake or faux.

The Commission vote approving the final orders and letters to members of the public who commented was 4-0. (Neiman Marcus , FTC File No. 0823199; DrJays.com, FTC File No. 1223063; Eminent, FTC File No. 1223065; the staff contact is Matt Wilshire, 202-326-2976.)

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 FTC’s Request, Court Orders Halt to Debt Collector’s Illegal Practices, Freezes Assets

At the request of the Federal Trade Commission, a U.S. district court has halted a debt collection operation that allegedly extorted payments from consumers by using false threats of lawsuits and calculated campaigns to embarrass consumers by unlawfully communicating with family members, friends, and coworkers. The court order stops the illegal conduct, freezes the operation’s assets, and appoints a temporary receiver to take over the defendants’ business while the FTC moves forward with the case.

The lawsuit, part of the FTC’s continuing crackdown on scams that target consumers in financial distress, charged four individuals and seven companies. The FTC alleged that the defendants were part of an elaborate debt collection scheme operating from locations in Orange and Riverside counties in California, and that they used various business names including Western Performance Group, as well as fictitious names, which they changed frequently to avoid law enforcement scrutiny.

The FTC alleged that the defendants called consumers and their employers, colleagues, and family members posing as process servers or law office employees, and claimed they were seeking to deliver legal papers that purportedly related to a lawsuit. In some instances, the defendants threatened that consumers would be arrested if they did not respond to the calls. But the debt collectors were not process servers or law office employees, and the defendants did not file lawsuits against the consumers. The FTC charged that the defendants’ false and misleading claims violated the FTC Act and the Fair Debt Collection Practices Act. In addition, the FTC alleged that the defendants violated the Fair Debt Collection Practices Act by:

improperly contacting third parties about consumers’ debts;
failing to disclose the name of the company they represented, or the fact that they were attempting to collect a debt, during telephone calls to consumers; and
failing to notify consumers of their right to dispute and obtain verification of their debts.

The complaint names as defendantsThai Han; Jim Tran Phelps; Keith Hua; James Novella; One FC, LLC, also doing business as Western Performance Group and WPG; Credit MP, LLC, also doing business as AFGA, CMP, AFG & Associates, AF Group, Allied Financial Group, and Allied Guarantee Financial; Western Capital Group, Inc., also doing business as ERA, LMR, WCG, and WC Group; SJ Capitol LLC, also doing business as SCG; Green Fidelity Allegiance, Inc., also doing business as WRA; Asset and Capital Management Group; and Crown Funding Company, LLC.

The Commission vote authorizing the staff to file the complaintwas 4-0. The FTC filed the complaint and the request for a temporary restraining order in the U.S. District Court for the Central District of California. On July 24, 2013, the court granted the FTC’s request for a temporary restraining order. The Federal Trade Commission would like to thank the U.S. Postal Inspection Service for its assistance in bringing this case. For consumer information about dealing with debt collectors, see Debt Collection.

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 Settlement Bans Marketer from Selling Debt Relief Services, Telemarketing, and Robocalling

Under a settlement with the Federal Trade Commission, a telemarketer who allegedly defrauded consumers with false promises of debt relief and charged them without their consent is banned from selling debt relief services, telemarketing, and making robocalls.

The settlement resolves a complaint the FTC filed last year against Jeremy R. Nelson and four companies he controlled. The agency alleged that they violated federal law by making false claims, causing unauthorized debits from consumers’ bank accounts, and illegally charging advance fees.

The FTC also alleged that the defendants called phone numbers on the National Do Not Call Registry, called consumers who had told them not to call, failed to transmit caller identification to consumers’ caller ID service, delivered pre-recorded messages without prior written consent, repeatedly called consumers to annoy them, and delivered pre-recorded messages that failed to identify the seller, the call’s purpose, and the product or service.

In addition to the ban on debt relief sales, telemarketing, and robocalls, the proposed settlement order permanently prohibits the defendants from misrepresenting material facts about any products and services, making unsubstantiated claims, charging consumers’ accounts without their express informed consent, collecting money from customers who agreed to purchase debt relief products or services from the defendants, selling or otherwise benefitting from consumers’ personal information, and failing to properly dispose of customer information.

The order imposes a judgment of more than $4.6 million against the defendants. The judgment against Nelson will be suspended, based on his inability to pay, after he surrenders to the FTC bank accounts and investment assets frozen by the court. The full judgment will become due immediately if he is found to have misrepresented his financial condition.

For information on dealing with debt, read the FTC’s Coping With Debt.

The Commission vote authorizing the staff to file the proposed consent order was 4-0. The consent order was filed in the U.S. District Court for the Central District of California.

NOTE: Consent orders have the force of law when approved and signed by the District Court judge.

FTC Advises Consumers on Preventing, Identifying, and Dealing With Hacked Email or Social Networking Accounts

The Federal Trade Commission has new tips to help people deal with email and social networking hacks, whether it’s lessening the chances of a hack in the first place, or recovering from a hack once it happens.

Hacked Email, new guidance from the FTC, identifies signs an account may have been hacked such as friends and family members receiving messages the user didn’t send, a sent folder emptied, social media posts the user didn’t create, or email or other accounts the user can’t open.

If consumers think they have been hacked, the FTC encourages them to take the following actions:

Make sure security software is up-to-date and delete malware;
Change passwords;
Check with their email provider or social networking site for information about restoring the account;
Check account settings; and
Tell your friends

Using unique passwords for important sites like banking and email and safeguarding user names and passwords can help users protect themselves from hackers. The FTC recommends users turn on two-factor authentication if a service provider offers it; not click on links or open attachments from unknown users; and only download free software from sites a user knows and trusts. When using a public computer, do not let web browsers remember passwords, and log out of all accounts when finished.

The FTC also provides more tips for using public wi-fi networks.

FTC Seeks Contempt Ruling Against Suntasia Telemarketing Defendants

The Federal Trade Commission is seeking a contempt order in federal court against defendants previously involved in a massive, Florida-based marketing scheme, alleging that they violated the terms of a court-ordered permanent injunction by engaging in some of the same deceptive tactics that led to the FTC’s prior charges against them.

In 2007, the FTC took action against the defendants behind Suntasia Marketing, Inc., charging them with deceptively marketing negative option programs to consumers nationwide. According to the agency, the defendants defrauded consumers and charged their bank accounts without consent for various negative option programs, including memberships in discount buyer’s and travel clubs. In a negative option program, a company takes consumers’ silence or failure to cancel the program as acceptance of the offer and permission to debit funds from their accounts.

The defendants agreed to the 2008 injunction in order to settle the FTC’s charges. Under the settlement, 14 defendants involved in the scheme were required to pay more than $16 million. In particular, defendants Bryon Wolf and Roy Eliasson were required to pay over $11 million, and were barred from misrepresenting material facts regarding an offer, failing to disclose material terms of what they sell, debiting consumers’ accounts without their consent, and other unlawful acts.

But according to the FTC, within months of the court’s 2008 order, defendants Bryon Wolf and Roy Eliasson, and their firm Membership Services, LLC, which Wolf and Eliasson control, devised a new plan to defraud consumers. In this scheme, they targeted recent loan applicants with deceptive phone and Internet solicitations that misled consumers to believe the defendants would provide them with cash advances or loans, or general lines of credit. Instead of providing these services, the defendants debited consumers’ accounts for membership in a continuity program. Very few consumers used the program and many cancelled upon discovering their account had been debited by defendants. The continuity plans go under the names “Monster Rewards,” “Mongo,” and “Money on the Go.”

Based on this conduct, the FTC charged the defendants with violating the permanent injunction by making misrepresentations to consumers about their programs, by failing to make key disclosures, by failing to get express informed consent before debiting consumers’ accounts, and by failing to disclose clearly and promptly their programs during telemarketed solicitations. According to the FTC, through their deceptive actions, the defendants have netted over $9 million.

The civil contempt action was filed under seal in the U.S. District Court for the Middle District of Florida, Tampa Division on May 22, 2013, and unsealed by the Court on July 31, 2013. It names as defendants Bryon Wolf, Roy Eliasson, and Membership Services, LLC.

Defendants in Wealth-Building Scheme Banned from Telemarketing, Selling Business Opportunities, and Producing or Distributing Infomercials

Russell and Catherine Dalbey – who allegedly defrauded consumers with promises of making big bucks by brokering seller-financed promissory notes – have settled with the Federal Trade Commission and the Colorado Attorney General.

Using infomercials, print advertising, telemarketing calls, and testimonials, the Dalbeys and the three companies they controlled convinced consumers to part with hundreds and sometimes up to tens of thousands of dollars to participate in the “wealth-building” program “Winning in the Cash Flow Business,” according to the complaint filed by the FTC and the Colorado Attorney General in 2011.

The agreed-upon order bans the Dalbeys from telemarketing; from marketing or selling business opportunities; and from producing or distributing infomercials. The order also prohibits them from making deceptive claims about the efficacy, benefits, price, or availability of any product, program, or service, and bars them from using deceptive endorsements or failing to disclose restrictions regarding any product, program, or service.

Under the settlement, the Dalbeys must disclose their assets in sworn financial statements, repatriate all foreign assets, and cooperate fully as the FTC and the Colorado Attorney General’s office determine how much of an agreed-upon $330 million judgment they can pay. The judgment will be suspended when the defendants surrender those assets.

Almost one million consumers nationwide bought products and services from the Dalbeys’ Westminster, Colorado-based company, Dalbey Education Institute, LLC (DEI ), after seeing an infomercial or receiving a direct mail piece touting the substantial amount of money they could earn brokering seller-financed promissory notes or privately held mortgage loans secured by homes or land. According to the complaint, the infomercials made deceptive claims that consumers would experience quick and easy success using DEI’s three-step program: “Find ‘Em,” “List ‘Em,” and “Make Money.” The defendants’ claims were underscored by allegedly atypical, and sometimes false, testimonials from consumers who claimed to have made “$1.2 million in 30 days,” “$79,000 in a few hours,” and “$262,216 part time,” for example.

The complaint alleged that consumers spent approximately $40 to $160 on the initial program and were encouraged by telemarketers to spend hundreds or thousands of dollars more on additional products or services such as multi-day seminars, coaching sessions, and promissory note holder lead lists. Very few made the money the Dalbeys promised they would.

Under a separate stipulated order against Russell Dalbey’s three companies – DEI, LLLP; Dalbey Education Institute, LLC; and IPME, LLLP – they are jointly and severally liable along with the Dalbeys for the $330 million judgment.

The Commission votes approving the stipulated orders were 4-0.

The order against the three companies was entered by the U.S. District Court for the District of Colorado on July 29, 2013, following approval by the U.S. Bankruptcy Court for the District of Colorado. Having ceased operations shortly after the FTC and Colorado Attorney General filed their complaint, the three companies filed Chapter 7 bankruptcy petitions on September 21, 2011.

The U.S. District Court for the District Colorado entered the stipulated order against the Dalbeys on July 22, 2013.

NOTE: Stipulated orders have the force of law when approved and signed by the District Court judge.

(FTC v. Dalbey, et al.: FTC File No. X110040, Civ. No. 1:11-cv-01396-RBJ–KLM)
(Related Bankruptcy Proceedings: In re DEI, LLLP, Case No. 11-32446-MER (Bankr. D. Colo. Sept. 21, 2011); In re Dalbey Education Institute, LLC, Case No. 11-32445-SBB (Bankr. D. Colo. Sept. 21, 2011); In re IPME, LLLP, Case No. 11-32437-HRT (Bankr. D. Colo. Sept. 21, 2011))

FTC Charges Marketers with Deceiving Small Businesses into Buying Credit/Debit Card Processing Services and Equipment

The Federal Trade Commission has charged an operation that sells credit and debit card payment processing services to small businesses with violating federal law. The defendants allegedly made false and unsubstantiated claims and failed to disclose material facts to storefront businesses and sole proprietorships before they applied for services and equipment to process credit and debit card payments. The FTC seeks to halt the allegedly illegal practices and return money to victims.

The defendants are Merchant Services Direct LLC (MSD), also doing business as Sphyra Inc.; Boost Commerce Inc.; Generation Y Investments LLC; Kyle Lawson Dove; and Shane Patrick Hurley. The Washington State Attorney General’s Office has simultaneously filed an action against these defendants in the Superior Court for Spokane County, Washington.

According to the FTC’s complaint, as an “independent sales organization” (ISO), MSD sells to small local businesses the ability to accept credit and debit card payments. The businesses pay fees whenever their customers pay with a credit or debit card.

As alleged in the complaint, MSD sales agents typically call small businesses and lead them to believe they are associated with the businesses’ current card processor, Visa or MasterCard, or their bank. The sales agents allegedly promise substantial savings on credit and debit card processing. They specify a much lower rate than the businesses currently pay, and quote one fee, a fixed per-transaction cost, without mentioning all the other fees the businesses will have to pay. Merchants who ask if there are other fees allegedly are told there are none.

According to the FTC’s complaint, MSD agents also dupe customers into leasing new card processing terminals for two to four years, falsely claiming their current “swipe” terminals are outdated or incompatible with its services. Sometimes they even claim the terminals are free. Agents persuade merchants to sign fine-print, binding contracts on the spot by telling them the documents are merely applications – a ruse made easier, according to the FTC, by the fact that the contracts are labeled “applications.” Merchants are often falsely told they can cancel any time. Many victims discover their new lease obligation only after being billed, still owing the balance of their previous lease, which can be thousands of dollars.

Defendants also tout on various versions of their website “Guaranteed Lowest Rates,” claiming merchants could “save 30%” with “whole sale [sic] processing” or have “anywhere from 20% to 30% savings when switching to” MSD. In fact, according to the FTC, there are no wholesale rates, as third parties process card payments, not MSD. As alleged in the complaint, those who call MSD’s customer service department reach employees who either do not help them or say they will waive fees or provide refunds but don’t. Customers who were promised they could cancel the “applications” they signed with no penalty are charged substantial cancellation fees, according to the FTC’s complaint. Generally, only in response to complaints filed with the Better Business Bureau and state attorneys general have the defendants refunded money or waived fees.

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 Washington. In addition to filing the lawsuit, the FTC has sought a court order immediately halting the unlawful practices along with an order freezing the defendants’ assets and appointing a receiver over the corporate defendants.

The FTC acknowledges the assistance of the Washington State Attorney General’s Office and the Better Business Bureau of Eastern Washington, North Idaho, and Montana.

Judge Agrees With FTC: Scammers Debited Payday Loan Applicants’ Bank Accounts Without Their Consent; Consumers Entitled to More Than $9.5 Million in Refunds

A federal judge has found in favor of the Federal Trade Commission in its case against an online operation that illegally debited consumers’ bank accounts when they visited the defendants’ websites seeking payday loans. The FTC will seek a court order requiring the defendants to return more than $9.5 million to consumers.

In 2011, the FTC charged Direct Benefits Group LLC, Voice Net Global LLC, Solid Core Solutions Inc., WKMS Inc., Kyle Wood, and Mark Berry with illegally debiting consumers’ bank accounts and failing to disclose that they would use their bank account information to charge them for enrollment in unwanted programs and services. The court froze the defendants’ assets pending resolution of the case.

In a decision announced today, U.S. District Court Judge John Antoon II found that the FTC proved its case, that a permanent injunction to stop the illegal practices is warranted, and that consumers are entitled to the return of more than $9.5 million.

According to the FTC’s complaint,the defendants’ websites asked for consumers’ personal and financial information, and, near the end of the loan application form, offered unrelated programs for food, travel and merchandise discounts, or for long distance calling and Internet access. Many consumers who clicked to “submit” an application were enrolled unwittingly into the programs, which initially charged their bank accounts up to $59.90 per month, and later charged up to $99.90 per year.

As alleged in the complaint, the defendants sent consumers’ bank account information to Landmark Clearing Inc. and other payment processors to electronically generate remotely created payment orders that debited consumers’ bank accounts.

FTC Testifies Before Congress on Standard Essential Patents and How Patent “Hold-Up” Affects Competition

The Federal Trade Commission testified before a Senate subcommittee today on the topic of “patent hold-up” and explained how competition is affected when the owners of critical, standard-essential technology patents engage in this practice. It also described the steps it has taken to ensure that U.S. consumers, product innovation, and the standard setting process are not harmed by patent hold-up.

Suzanne Munck, the agency’s Chief Counsel for Intellectual Property, testified on behalf of the FTC before the Subcommittee on Antitrust, Competition Policy and Consumer Rights. She explained that patent hold-up occurs when the holder of a standard essential patent (SEP), which has previously committed to license that SEP on reasonable and non-discriminatory (RAND) terms, then violates its RAND commitment and uses the leverage of the standard setting process to negotiate higher royalties than it could have before the patent was incorporated into the standard.

The testimony outlines the FTC’s most recent work to mitigate the potential for such hold-up. The agency has “advocated for remedies in district courts and at the International Trade Commission (ITC) to mitigate the potential for patent hold-up,” according to the testimony, and has submitted statements to the ITC and the Federal Circuit outlining its concerns. It also details the FTC’s enforcement actions to address the threat of patent hold-up, including the recent case involving Google and Motorola Mobility (MMI), which led to a final order that will ensure Google lives up to its RAND commitments regarding the SEPs it acquired when it bought MMI.

The testimony concludes that the Commission, “believes that competition and intellectual property laws work well together. Voluntary consensus based standard setting facilitates this purpose; however, including patented technology in a standard creates the potential for patent hold-up.” The RAND commitment is meant to avoid this problem; failing to live up to a RAND commitment, the testimony states, can lead to “patent hold-up.”

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

FTC Acts Against Spam Text and Robocalling Operations

The Federal Trade Commission has moved to shut down an international network of scammers that sent millions of unwanted text messages to consumers, using the lure of “free” gift cards and electronics to entice consumers into an elaborate scheme designed to take their money and target them for illegal robocalls.

In its complaint, the FTC alleges that scammers sent unwanted text messages to consumers, many of whom had to pay for receiving the texts. The messages promised consumers free gifts or prizes, including gift cards worth $1,000 to major retailers such as Best Buy, Walmart and Target.

Consumers who clicked on the links in the messages found themselves caught in a confusing and elaborate process that required them to provide sensitive personal information, apply for credit or pay to subscribe to services to get the supposedly “free” cards. In addition, consumers’ phone numbers were signed up to receive unwanted automated telemarketing calls, also known as robocalls.

This complaint builds on a nationwide sweep conducted by the Commission in March to crack down on scammers who use these spam text messages to deceive consumers.

The FTC complaint names nine defendants who allegedly were involved in various aspects of the operation in violation of the FTC Act and the Telemarketing Sales Rule. It seeks injunctions against the defendants preventing them from continuing their alleged deceptive and unfair practices as well as requiring them to pay monetary relief.

According to the complaint, when consumers followed the links included in the unwanted messages, they were directed to sites that collected a substantial amount of personal information, including in some instances health information, before being allowed to continue toward receiving the supposed gift cards. In many cases, the information was requested under the guise of being shipping information for the supposed gift cards. The Commission alleges that in addition to selling the information for marketing purposes, the defendants also made unwanted automated telemarketing calls to consumers selling products such as home security, satellite television and travel services.

Once consumers entered their personal information, they were directed to another site and told they would have to participate in a number of “offers” to be eligible for their gift card. In some cases, consumers were obligated to sign up for as many as 13 of the offers. These offers frequently included recurring subscriptions for which consumers were required to provide credit card information and pay up front for “shipping and handling” charges. In other cases, they required consumers to submit applications for credit that would be reflected in their credit reports and possibly affect their credit score.

In most, if not all, instances, it would be impossible for a consumer to receive the allegedly “free” merchandise without spending money, according to the complaint.

The defendants in the case are Acquinity Interactive, LLC, located in Deerfield Beach, Fla.; 7657030 Canada Inc., located in Kirkland, Quebec, and also doing business as Acquinity Interactive; Garry Jonas, an officer of Acquinity Interactive; Revenue Path E-Consulting Pvt Ltd, located in Pune, India; Revenuepath Ltd, registered in Nicosia, Cyprus; Worldwide Commerce Associates, LLC, registered in Las Vegas, Nev., and also doing business as WCA; Sarita Somani, an officer of the Revenue Path defendants and Worldwide Commerce Associates; Firebrand Group S.L., LLC, registered in Las Vegas, Nev.; and Matthew Beucler, an officer of Firebrand.

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 Northern District of Illinois.

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