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FTC Action Halts Brooklyn Company from Using Deception, Threats, and Intimidation to Trick Elderly Consumers Into Paying for Unordered Medical Alert Devices

At the Federal Trade Commission’s request, a U.S. district court has temporarily shut down a Brooklyn, New York-based operation that the allegedly used deception, threats, and intimidation to induce elderly consumers to pay for medical alert systems they neither ordered nor wanted.

In its complaint, the FTC charges that telemarketers for Instant Response Systems call elderly consumers – many of whom are in poor health and rely on others for help with managing their finances – and try to pressure them into buying a medical alert service that consists of a pendant that supposedly allows them to get help during emergencies. In numerous instances, Instant Response Systems allegedly has falsely claimed during sales calls that consumers who did not order the medical alert service have, in fact, bought the service and owe the company money — often hundreds of dollars.

The company also allegedly has shipped bogus invoices and unordered medical alert pendants to consumers without their consent, has repeatedly threatened consumers with legal action in order to induce and coerce payment, and has subjected them to verbal abuse. In addition, the FTC contends that Instant Response Systems has illegally made numerous unsolicited calls to consumers whose phone numbers are listed on the National Do Not Call Registry.

According to the FTC’s complaint, consumers who tried to contact the company to dispute the false charges or find out how to return unopened packages often were unable to reach anyone. If they did reach a representative, they allegedly faced threats, verbal abuse, and demands that they pay for the product.

Based on this alleged conduct, the FTC charged the company and its principals with making illegal misrepresentations to consumers, violating the Telemarketing Sales Rule by calling phone numbers on the DNC Registry, and violating the Unordered Merchandise Statute by sending consumers pendants they did not order.

The defendants charged in the case are Instant Response Systems, LLC, also doing business as Response Systems, B.B. Mercantile, Ltd., Medical Alert Industrial, and Medical Alert Services; and Jason Abraham, also known as Yaakov Abraham, individually and as an officer of Instant Response Systems. Abraham was previously sued by the FTC in 2003 for selling international “drivers’ licenses” and phony university diplomas.

The Commission vote approving the complaint was 5-0, with former Chairman Jon Leibowitz and former Commissioner J. Thomas Rosch participating. It was filed under seal in the U.S. District Court for the Eastern District of New York, Brooklyn Division, on February 25, 2013, and the seal was lifted on March 7, 2013.

The FTC appreciates the assistance of the New York State Office of the Attorney General in helping to investigate and bring this case.

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. The complaint is not a finding or ruling that the defendant has actually violated the law. The case will be decided by the court.

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 File No. 122-3041)

FTC Approves Final Order Settling Charges That Non-Compete Agreement Harmed Competition in the Market for Bulk Bleach Used to Disinfect Water

Following a public comment period, the Federal Trade Commission has approved a final order settling charges that a non-compete agreement between bulk bleach producers Oltrin Solutions, LLC and JCI Jones Chemicals, Inc. reduced competition in North Carolina, South Carolina, and southern Virginia.

In settling the FTC’s complaint, Oltrin has agreed to release JCI from an agreement not to sell bleach in North Carolina and South Carolina. The agreement was part of a 2010 transaction between the two firms that the FTC alleges violated antitrust laws.

The Commission vote approving the final order was 4-0-1, with Commisioner Jon Leibowitz not participating. (FTC File No. 111-0078; the staff contact is Eric M. Sprague, Bureau of Competition, 202-326-2101; see press release dated January 18, 2013.)

FTC and DOJ Extend Public Comment Period for PAE Workshop Through April 5, 2013

The Federal Trade Commission and the Department of Justice (DOJ) have extended the deadline for submitting comments on their recent Patent Assertion Entity Activities Workshop to April 5, 2013.

The workshop, held December 10, 2012, explored the impact of patent assertion entity (PAE) activities on innovation and competition and the implications for antitrust enforcement and policy. Additional information about the workshop is available at the FTC and DOJ websites. Comments may be submitted via e-mail at: [email protected].

FTC Cracks Down on Senders of Spam Text Messages Promoting “Free” Gift Cards

The Federal Trade Commission is cracking down on affiliate marketers that allegedly bombarded consumers with hundreds of millions of unwanted spam text messages in an effort to steer them towards deceptive websites falsely promising “free” gift cards.

In eight different complaints filed in courts around the United States, the FTC charged 29 defendants with collectively sending more than 180 million 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.

“Today’s announcement says ‘game over’ to the major league scam artists behind millions of spam texts,” said Charles A. Harwood, Acting Director of the FTC’s Bureau of Consumer Protection. “The FTC is committed to rooting out this deception and stopping it. For consumers who find spam texts on their phones, delete them, immediately. The offers are, in a word, garbage.”

The FTC complaints targeted defendants who sent the unwanted text messages, as well as those who operated the deceptive websites. In addition, the FTC is pursuing a contempt action against a serial text message spammer, Phil Flora, who was barred in 2011 from sending spam text messages and who is accused of being part of this spam texting scheme as well.

The Commission’s complaints seek restraining orders against the defendants preventing them from continuing their alleged deceptive and unfair practices as well as preserving and accounting for their assets.

According to the FTC complaints, the defendants sent text messages to random phone numbers, including to consumers who do not have a text message subscription plan. As many as 12 percent of mobile phone users fall into this category.

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 alleged the information collected was then sold to third parties for marketing purposes, meaning consumers were deceived as to the real use of the information.

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. 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. If a consumer completed all of the “offers,” they were then notified that to get the promised gift card, they had to find three others who also would complete the offers.

The FTC alleged that the operators of these sites violated the FTC Act by failing to tell consumers about all the conditions attached to the “free” gift, including the possibility that consumers would actually be required to spend money to receive the gift.

According to the FTC, the defendants who sent the text messages were paid by the operators of the “free” gift websites based on how many consumers eventually entered their information. The operators of the free gift websites were in turn paid by those businesses who gained customers or subscribers through the “offer” process.

The Commission vote authorizing the staff to file the eight complaints was 4-0-1, with former Chairman Jon Leibowitz not participating.

Seven complaints were filed against the alleged senders of the unsolicited text messages containing deceptive promises of free gifts and prizes:

Superior Affiliate Management, a case against five defendants: Ecommerce Merchants, LLC (also doing business as Superior Affiliate Management); Cresta Pillsbury, Jan-Paul Diaz, Joshua Brewer and Daniel Stanitski. This case was filed in U.S. District Court for the Northern District of Illinois in Chicago.
Rentbro, Inc., a case against three defendants: Rentbro, Inc., Daniel Pessin and Jacob Engel. This case was filed in U.S. District Court for the Northern District of Illinois in Chicago.
Jason Q. Cruz, a case against one defendant, Jason Q. Cruz (also doing business as Appidemic, Inc.) This case was filed in U.S. District Court for the Northern District of Illinois in Chicago.
Rishab Verma, a case against two defendants: Verma Holdings, LLC and Rishab Verma. This case was filed in the U.S. District Court for the Southern District of Texas in Houston.
AdvertMarketing, a case against three defendants: AdvertMarketing, Inc., Scott A. Dalrymple and Robert Jerrold Wence. This case was filed in the U.S. District Court for the Southern District of Texas in Houston.
Henry Kelly, a case against one defendant, Henry Nolan Kelly. This case was filed in the U.S. District Court for the Northern District of Georgia in Atlanta.
Seaside Building Marketing, a case against four defendants: Phillip Flora, Sandra Skipper, Kevin Beans and Dakota Geffre (all of whom are also doing business as Seaside Building Marketing Inc. and SB Marketing). This case was filed in the U.S. District Court for the Central District of California in Los Angeles.

One complaint was filed against the alleged operators of the deceptive websites to which consumers were directed by the spam text messages:

SubscriberBASE Holdings, Inc., a case against ten defendants: SubscriberBASE Holdings, Inc.; SubscriberBASE, Inc.; Jeffrey French; All Square Marketing, LLC; Threadpoint, LLC; PC Global Investments, LLC; Slash 20, LLC; Brent Cranmer; Christopher McVeigh (also doing business as CMB Marketing, Inc.) and Michael Mazzella (also doing business as Mazzco Marketing, Inc.). This case was filed in U.S. District Court for the Northern District of Illinois in Chicago.

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 complaint is not a finding or ruling that the defendant has actually violated the law. The cases will be decided by the court.

Marketers of Alleged “Mass Joinder” and “Forensic Loan Audit” Mortgage Relief Services Scams Settle FTC Charges, Agree to Surrender Assets and Halt Deceptive Conduct

The defendants behind an alleged mortgage relief scam have agreed to settle FTC charges that they deceived cash-strapped consumers into believing they could hold onto their homes and reduce their mortgage payments by either suing their mortgage lenders in so-called “mass joinder” lawsuits or buying “forensic loan audits.”

All of the defendants, including two individuals and seven companies, will surrender assets and be prohibited from making deceptive claims about any product or service, and all but one are banned from marketing mortgage- and debt- relief services.

As part of its continuing crackdown on mortgage relief scams, the FTC filed a complaint in 2012 against Santa Ana, California-based Sameer Lakhany and five companies he controlled. The agency later added three more defendants. The defendants allegedly victimized more than a thousand consumers with two related scams.

In the first alleged scam, Lakhany and defendants Brian Pacios, Precision Law Center, Inc., Precision Law Center LLC, National Legal Network, Inc., and Assurity Law Group, Inc., allegedly held themselves out as a specialty law firm called Precision Law Center, making the false promise to consumers that if they sued their lenders along with other homeowners in so-called “mass joinder” lawsuits, they could obtain favorable mortgage concessions from their lenders or stop the foreclosure process. According to the complaint, they charged $6,000 to $10,000 in advance, but failed to follow through with the suits, all of which were dismissed shortly after filing.

The second alleged scam, involving Lakhany and defendants The Credit Shop, LLC, Fidelity Legal Services LLC, and Titanium Realty, Inc., typically charged consumers between $795 and $1,595 for a so-called “forensic loan audit.” The complaint alleged that these defendants falsely portrayed themselves as nonprofit organizations using the domain names “HouseholdRelief.org,” “MyHomeSupport.org,” and “FreeFedLoanMod.org.” They told consumers the loan audits would find lender violations 90 percent of the time or more, and that this would force lenders to give them better mortgage terms. In fact, the complaint alleged that consumers rarely if ever obtained better mortgage terms as a result of these “forensic loan audits.”

The proposed settlements impose judgments reflecting the total consumer injury attributable to the defendants:

The order against Lakhany and the companies he controlled – The Credit Shop, LLC, Fidelity Legal Services LLC, Titanium Realty, Inc., Precision Law Center, Inc., and Precision Law Center LLC – imposes a $3 million redress judgment. The judgment is partially suspended as to Lakhany based on his inability to pay.
The order against Pacios and his company, National Legal Network, Inc., imposes a $1.75 million redress judgment and requires Pacios and the company to turn over virtually all of their known assets, including a Ferrari and two rental properties in Las Vegas owned by Pacios.
The order against Assurity Law Group Inc. requires it to turn over to the FTC all funds it received in connection with the “mass joinder” scam, which amount to $100,000.

The Commission’s ability to provide redress, and the amount provided, will depend on the amount actually collected from the defendants.

The Commission has advice for consumers faced with possible foreclosure on their homes. For more information see the FTC’s consumer information web pages titled: Facing Foreclosure?, Home Loans, and Mass Joinder Lawsuits.

The FTC filed its complaint againt Lakhany and the five companies he controlled on March 5, 2012 in the U.S. District Court for the Central District of California. On March 22, 2012, it amended the complaint, adding Pacios, National Legal Network Inc., and Assurity Law Group Inc.

The Commission vote approving stipulations for permanent injunction orders to be entered against the defendants was 4-0-1, with Chairman Jon Leibowitz not participating. The proposed orders are subject to court approval. The FTC filed the three separate stipulated orders in the U.S. District Court for the Central District of California with defendants: Sameer Lakhany, The Credit Shop, LLC, Fidelity Legal Services LLC, Titanium Realty, Inc., Precision Law Center, Inc., and Precision Law Center LLC; Brian Pacios and National Legal Network, Inc.; and Assurity Law Group, Inc. The orders were entered by the court on March 1, 2013.

NOTE: These stipulations for preliminary injunction orders are for settlement purposes only and do not constitute admissions by the defendants that the law has been violated. Permanent injunction orders have the force of law when approved and signed by the District Court judge.

(FTC File No. 1123136)

In Comments to the Colorado Public Utilities Commission, FTC Staff Expresses Concerns About Proposed Motor Vehicle Transportation Rules

The Federal Trade Commission staff submitted written comments to the Colorado Public Utilities Commission expressing concern that proposed regulatory changes may hurt competition in the marketplace for passenger vehicle transportation services. In particular, the staff stated that the changes could inhibit the use of mobile smartphone software applications that allow consumers to arrange and pay for transportation services in new ways.

The FTC staff comments were submitted in response to a request by the CPUC for public comments on proposed changes to the Code of Colorado Regulations. One proposed rule change would create a barrier to the entry and operation of independent smartphone applications that match customers with transportation services. According to the staff comments, this change would create an obstacle for applications that are not also motor carriers, and may inhibit, impair, or preclude new and innovative ways in which independent applications might partner with providers of taxicab and other transportation services.

Another proposed change would require charter contract services, such as stretch limousines and executive cars and vans, to use a specific fixed price. As stated in the FTC comments, this change would prevent companies from adopting new forms of variable pricing that might be more responsive to consumer demands for transportation service.

A third proposed change would prohibit stretch limousines and executive cars and vans from stationing themselves within 200 feet of a hotel, motel, restaurant, bar, taxicab stand, or airport passenger pickup point unless a passenger pick-up has been prearranged and a completed charter order is in the vehicle. The comments state that this proposed change likely would prevent many consumers from using a smartphone application to get transportation service quickly, especially in downtown and “urban village” areas.

In contrast to these types of prohibitions, the staff comments recommend that a motor vehicle regulatory framework should be flexible and adaptable in response to new and innovative methods of competition, such as smartphone applications for arranging transportation, while still maintaining appropriate consumer protections. The comments further recommend that CPUC be guided by the principle that any restriction on competition designed to address potential harm should be narrowly crafted to minimize its anticompetitive impact.

The Commission vote approving the comment was 4-0-1, with Commissioner Leibowitz not participating. (FTC File No. V130004; the staff contact is Christopher Grengs, Office of Policy Planning, 202-326-2612).

Court Bans Auto Loan Modification Company from the Debt Relief Services Business

Acting on a Federal Trade Commission complaint, a federal court has banned a California-based company from providing modification services for auto loans and for any other type of debt. The court imposed a $362,388 default judgment against Hope for Car Owners, LLC, a company owned by Patrick Freeman. In December 2012, Freeman settled charges with the FTC in connection with this allegedly fraudulent auto loan modification operation.

The FTC charged Freeman and Hope for Car Owners by falsely promising consumers that Hope for Car Owners could modify auto loans and stop cars from being repossessed. In March 2012, the FTC alleged that Hope for Car Owners and Freeman unlawfully charged hundreds of dollars in up-front fees, and told the consumers to stop paying their auto lenders, which often left them in worse shape than when they began, and increased the risk that their vehicles would be repossessed. The FTC also alleged that once the up-front fees were collected, the defendants did nothing to obtain the promised loan modifications while also denying requests for refunds.

In addition to the ban on loan modification services, the default judgment prohibits Hope for Car Owners from making misrepresentations about any other product or service. It requires the company to back up any claims about the benefits, performance, or efficacy of any product or service, and destroy customer information it obtained in connection with the scheme.

A judge in the U.S. District Court for the Eastern District of California entered the default judgment against Hope for Car Owners on February 21, 2013. The default judgment concludes the case against Hope for Car Owners.

FTC Approves Final Orders Settling Charges Against The Sherwin-Williams Co. and PPG Architectural Finishes, Inc.; Issues Enforcement Policy Statement on “Zero VOC” Paint Claims

Following a public comment period, the Federal Trade Commission approved final orders settling charges that The Sherwin-Williams Co. and PPG Architectural Finishes, Inc made false and unsubstantiated claims that some of their paints contained zero volatile organic compounds (VOCs) after tinting. Based on these cases, the FTC has issued a new enforcement policy statement regarding VOC-free claims for architectural coatings.

VOCs are carbon-containing compounds that easily evaporate at room temperatures. Some VOCs can be harmful to human health and the environment. Historically, interior paints, which are the subject of the FTC’s cases against Sherwin-Williams and PPG, have contained significant levels of VOCs.

In settling the FTC’s complaints, the two companies agreed to orders requiring them to stop making the allegedly deceptive claim that their Dutch Boy Refresh and Pure Performance interior paints, respectively, contain “zero” VOCs. According to the agency, while this may be true for uncolored “base” paints, it is not true for tinted paint, which typically has much higher levels of the compounds, and which consumers usually buy.

The enforcement policy statement clarifies that the operative portion of the first prong of the FTC’s “trace test” is “background level” and not “acknowledged trace” amount for VOCs in paint and coatings. That is, when companies market their paints and coatings as “free of” VOCs, they must comply with the first prong of the agency’s Green Guides’ trace test by showing that “the level of the specified substance is no more than that which would be found” as a background level, and not the acknowledged trace amount.

The FTC also has a new blog post for businesses to help them understand how they can make environmental marketing claims for paint while complying with the FTC’s Green Guides.

The Commission vote approving the final order and a letter to a member of the public who commented on it was 3-0-2, with Commissioners Jon Leibowitz and Joshua D. Wright not participating. The vote to issue the enforcement policy statement was 4-0-1, with Commissioner Leibowitz not participating. (FTC File Nos. 112-3160 and 112-3160; the staff contact is Laura Kim, Bureau of Consumer Protection, 202-326-3734; see press release dated October 25, 2012.)

FTC to Announce Nationwide Crackdown on Text Message Scams

Media Advisory

March 6, 2013

The Federal Trade Commission will host a media availability Thursday, March 7 at 11:30 a.m. ET/10:30 a.m. CT at its Midwest Region Office in Chicago to announce a series of enforcement actions designed to protect consumers nationwide from a pervasive series of scams built on text messages. A call-in line will be available for reporters unable to attend in person. Steve Baker, Director of the FTC’s Midwest Region, will be available to answer questions, as well as other members of the FTC staff.

WHO:	FTC Midwest Region Director Steve Baker
WHAT:	Media availability to announce enforcement actions.
WHEN:	11:30 a.m. ET/10:30 a.m. CT, Thursday, March 7 Phone lines will open at 11:15 a.m. ET/10:15 a.m. CT
WHERE:	FTC Midwest Region Office 55 W. Monroe, Suite 1825, Chicago, Ill. The room will be available 30 minutes before the event for set-up.Reporters can call in with questions using the following information: Teleconference Dial-In Number: 800-230-1951 Confirmation Number: 284546 Host: Bruce Jennings

MEDIA CONTACT:

Contact Information

Jay Mayfield
Office of Public Affairs
202-326-2181

FTC Sends Over $1 Million in Refunds to Consumers Harmed by Mortgage Relief Scheme That Posed as Government Assistance Program

The Federal Trade Commission mailed 17,213 refund checks to consumers who were deceived by an operation that charged an up-front fee for bogus mortgage relief services and posed as a government mortgage assistance program. Under a settlement entered by the court in 2011 as part of the FTC’s continuing crackdown on scams that target homeowners who are behind in their mortgage payments or facing foreclosure, the Residential Relief Foundation defendants were banned from selling debt relief services.

More than $1 million is being returned to consumers, each of whom will receive $62.50. Consumers who receive the checks from the FTC’s refund administrator should cash them within 60 days of the mailing date. The FTC never requires consumers to pay money or provide information before refund checks can be cashed. Those with questions should call the refund administrator, BMC Group, at 1-8662246718, or visit www.FTC.gov/refunds for more general information.

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