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FTC Announces Schedule for Reviewing Regulations (2012)

As part of the Federal Trade Commission’s systematic review of all current FTC rules and guides, the agency is announcing its updated 10-year review schedule. In 2011, the FTC accelerated its regulatory review program, so that by the end of this year more than one-third of its 65 rules and industry guides will have been reviewed or will be under review. The FTC is currently reviewing 22 rules and guides, and will initiate three more reviews this year, to ensure that its rules and guides are up-to-date, effective, and not overly burdensome.

The FTC has been reviewing its rules and guides on a rotating basis since 1992. Rules and guides can be critically important for protecting consumers, but they need to be reviewed periodically. In conducting the reviews and seeking public comment, the agency considers the following questions:

What is the economic impact of the rule or guide?
Is there a continuing need for the rule or guide?
Are there possible conflicts between the rule or guide and state, local, or other federal laws or regulations?
Has the rule or guide been affected by any technological, economic, or other industry changes?

The review schedule is published each year, with adjustments in response to public input, changes in the marketplace, and resource demands.

Upcoming Regulatory Reviews

For 2012, the FTC plans to initiate reviews, and seek public comment on, the following guides:

Guides for the Rebuilt, Reconditioned and Other Used Automobile Parts Industry. The staff contact is Jonathan L. Kessler, 216-263-3436, Federal Trade Commission, East Central Region, 1111 Superior Ave. E # 200, Cleveland, OH 44114-2577.
Guides for the Jewelry, Precious Metals, and Pewter Industries. The staff contact is Reenah Kim, 202-326-2272, Federal Trade Commission, Bureau of Consumer Protection, Division of Enforcement, 600 Pennsylvania Ave., NW, Washington, DC 20580.
Guides for Advertising Allowances and Other Merchandising Payments and Services. The staff contact is Michael Bloom, (202) 326-2475, Federal Trade Commission, Bureau of Competition, 600 Pennsylvania Ave., NW, Washington, DC 20580.

In addition, the FTC is consolidating the reviews of several rules involving the Hart-Scott-Rodino Antitrust Improvements Act (HSR), a federal antitrust law designed to prevent anticompetitive mergers or acquisitions. Specifically, the Commission is consolidating its reviews of the HSR Coverage, Exemption, and Transmittal Rules. The review of these three rules is now scheduled to take place in 2020.

Rules Rescinded Due to the Dodd-Frank Act

The FTC’s rulemaking authority for nine other rules has transferred to the Consumer Financial Protection Bureau under the Dodd-Frank Act. As a result, the FTC is rescinding the following rules:

Disclosure Requirements for Depository Institutions Lacking Federal Deposit Insurance, 16 CFR Part 320 (republished by the CFPB at 12 CFR Part 1009);
Mortgage Acts and Practices-Advertising Rule, 16 CFR Part 321 (republished by the CFPB at 12 CFR Part 1014);
Mortgage Assistance Relief Services Rule, 16 CFR Part 322 (republished by the CFPB at 12 CFR Part 1015);
[Identity Theft] Definitions, 16 CFR Part 603 (republished by the CFPB at 12 CFR 1022.3);
Free Annual File Disclosures Rule, 16 CFR Part 610 (republished by the CFPB at 12 CFR 1022.130);
Prohibition Against Circumventing Treatment as a Nationwide Consumer Reporting Agency, 16 CFR Part 611 (republished by the CFPB at 12 CFR 1022.140);
Duration of Active Duty Alerts, 16 CFR Part 613 (republished by the CFPB at 12 CFR 1022.121);
Appropriate Proof of Identity, 16 CFR Part 614 (republished by the CFPB at 12 CFR 1022.123); and
Procedures for State Application for Exemption from the Provisions of the [Fair Debt Collection Practices] Act, 16 CFR Part 901 (republished by the CFPB at 12 CFR Part 1006).

The CFPB has republished these rules on an interim final basis, and the CFPB’s rules became effective on December 30, 2011. The FTC will continue to enforce these rules.

Retained Rulemaking Authority Regarding Auto Dealers

Although the FTC is rescinding nine rules pursuant to the Dodd-Frank Act, the FTC retains rulemaking authority for six rules issued under the Fair Credit Reporting Act, and one rule under the Gramm-Leach-Bliley Act, as they apply to motor vehicle dealers:

Gramm-Leach-Bliley Act Privacy Rule, 16 CFR Part 313
Risk-Based Pricing, 16 CFR Part 640
Duties of Users of Consumer Reports Regarding Address Discrepancies, 16 CFR Part 641
Prescreen Opt-Out Notice, 16 CFR Part 642
Duties of Furnishers of Information to Consumer Reporting Agencies, 16 CFR Part 660
Affiliate Marketing, 16 CFR Part 680
FCRA Model Forms and Disclosures, 16 CFR Part 698

Additional Rulemaking Authority Retained by the FTC

Under the Dodd-Frank Act, the FTC retains rulemaking authority for the FCRA Disposal Rule (16 CFR, Part 682), the Identity Theft Red Flags Rule (16 CFR, Part 681.1), and the Gramm-Leach-Bliley Act’s Safeguards Rule (16 CFR Part 314).

Other Review Schedule Changes

Due to resource constraints, the FTC is announcing the following changes for matters previously scheduled for review in 2012:

Preservation of Consumers’ Claims and Defenses Rule (Holder in Due Course Rule) will be reviewed in 2013. (This rule preserves consumers’ rights to raise claims and defenses against purchasers of consumer credit contracts.)
Guides Against Deceptive Pricing will be reviewed in 2017.
Guides Against Bait Advertising will be reviewed in 2017. (Bait advertising is an insincere offer to sell a product or service the advertiser does not want to sell, in order to sell something else, usually at a higher price or on a basis more advantageous to the advertiser.)
Guides Concerning Use of the Word “Free” and Similar Representations will be reviewed in 2017.

The Commission votes to publish the proposed Federal Register notices regarding its regulatory review program and rescission of the rules were 4-0.

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 Web site provides free information on a variety of consumer topics. Like the FTC on Facebook and follow us on Twitter.

(Reg Reform Project, Rescission of Nine Rules)
(FTC File Nos. P924214, P072104)

FTC Action Leads to Court Order Banning Final “U.S. Homeowners Relief” Defendants from Debt and Mortgage Relief Business

At the request of the Federal Trade Commission, a federal court has imposed a court order with a $3.89 million judgment against defendant Samuel Paul Bain and three of his companies for their role in an allegedly fraudulent mortgage modification and foreclosure relief scheme.

The court order also bans Bain and his firms from telemarketing, and from providing, or claiming to provide, debt relief and mortgage relief services to consumers. It also bars the defendants from making any unsupported claims about the benefits, performance, and efficacy of financial products, and from misrepresenting any relevant fact about a product or service, or about the terms and conditions of a sale.

This default judgment concludes the FTC’s case against the U.S. Homeowners Relief defendants, six of which have already agreed to settle FTC charges. The settlement orders against those defendants require the payment of millions of dollars in ill-gotten gains, and permanently ban all six from selling any mortgage assistance or debt relief products or services. The action against the U.S. Homeowners Relief defendants is part of the agency’s ongoing crackdown on frauds targeting consumers in financial distress.

The scheme allegedly charged consumers up to $4,250 for a promise to reduce their mortgage payments, interest rates, and sometimes even their loan balances.

The Order against Samuel Paul Bain, U.S. Homeowners Relief, Inc., and two other companies, is the latest development in a series of actions the FTC has taken against scams targeting homeowners behind on their mortgages or facing foreclosure.

The judgment against Bain, U.S. Homeowners Relief, Inc., Waypoint Law Group, Inc., and American Lending Review, Inc. will be referred to the U.S. Treasury Department for collection. The U.S. District Court for the Central District of California entered the default judgment and order. (FTC File No. X100050; the staff contact is David Horn, FTC Northwest Region, 206-220-4483.)

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 and follow us on Twitter.

(FTC File No. X100050)
(U.S. Homeowners Relief NR)

FTC Action Results in Ban Against Couple from Telemarketing, Timeshare Resale Services

The Federal Trade Commission put the telemarketing and timeshare businesses off-limits to a south Florida couple who allegedly operated a deceptive telemarketing scheme that victimized property owners hoping to sell their timeshares.

Pasquale Pappalardo and his wife, Lisa Tumminia-Pappalardo, agreed to settlements with the FTC that permanently ban them from telemarketing and engaging in timeshare resale services. The case against Timeshare Mega Media and Marketing Group, Inc. is part of the FTC’s ongoing effort to crack down on con artists who use fraud and deception to take advantage of consumers in financial distress.

According to the FTC’s complaint, filed in October 2010, the defendants conned consumers by promising that they had buyers lined up and waiting to buy the consumers’ timeshares. The defendants charged consumers an up-front fee, usually $1,996, but promised a full refund upon closing of the timeshare sale. The FTC alleged that, after the consumers paid the fee, they were told to expect a contract from Timeshare Mega Media. What they received turned out to be a contract to market and advertise their timeshare, and not a sales contract, and many consumers signed and returned the contract thinking it was a sales contract, the complaint alleges. Those who questioned its validity allegedly were given the run-around by the company and falsely told that a sales contract would follow. In fact, according to the FTC, the company never had any timeshare buyers lined up and never actually assisted anyone in selling a timeshare. When consumers discovered this and demanded their money back, they found it nearly impossible to get a refund, or even get a call back. The Commission estimates that in the 20 months the defendants operated, thousands of consumers were defrauded out of at least $2.7 million. In October 2010, a federal court halted the operation and froze the defendants’ assets, pending resolution of the case.

In addition to banning Pasquale Pappalardo and Lisa Tumminia-Pappalardo from telemarketing and engaging in timeshare resale services, the settlement orders announced today permanently prohibit them from misrepresenting any product or service, selling or using customers’ personal information, failing to properly dispose of customer information within 30 days of the orders, and attempting to collect payments from past customers.

The order against Pasquale Pappalardo imposes a judgment of almost $2.7 million, which will be suspended when he surrenders the proceeds from the sale of a condominium. The full judgment will become due immediately if he is found to have misrepresented his financial condition. The court also entered a $2.7 million default judgment against Timeshare Mega Media and Marketing Group Inc., Timeshare Market Pro Inc., Tapia Consulting Inc., Joseph Crapella, Pasqualino Agovino, Louis Tobias Duany, and Patricia A. Walker.

To learn how to avoid pitfalls when selling a timeshare unit, read the FTC’s Selling a Timeshare Through a Reseller: Contract Caveats.

The Commission vote approving the proposed consent order against Pasquale Pappalardo was 4-0. The Commission vote approving the proposed consent order against Lisa Tumminia- Pappalardo was 3-1, with Commissioner Rosch voting in the negative. The orders were entered by the U.S. District Court for the Southern District of Florida.

The FTC would like to thank the Florida Attorney General’s Office and the Florida Department of Agriculture and Consumer Services for their assistance in this case.

NOTE: These consent orders are for settlement purposes only and do not constitute an admission by the defendants that the law has been violated. Settlement orders have the force of law when approved and signed by the District Court judge.

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 and follow us on Twitter.

FTC Charges that Auto Loan Schemes Falsely Promised They Could Stop Consumers’ Cars from Being Repossessed

The Federal Trade Commission filed charges and requested that a U.S. district court put a stop to the allegedly deceptive tactics of two California-based auto loan modification operations. The FTC asserted that the two separate operations charged hundreds of dollars in up-front fees, based on bogus promises that they could reduce consumers’ monthly car loan payments and help avoid repossession of their vehicles.

Consumers were instructed to pay fees to the companies, and to stop paying their auto lenders. Subsequently, at least one consumer’s car was repossessed, and one set of defendants told other consumers to “hide [their] car[s] to avoid repossession.”

Promotional slogans used by Hope for Car Owners included “Join the thousands who have already saved”, “Consumer stimulus and bailout assistance”, and “Stop overpaying for a depreciating liability”

Examples of promotional slogans used on the Hope for Car Owners website.

“Now that the FTC and its partners have stopped hundreds of mortgage loan modification scams, fraud artists are moving to another loan modification scam, preying on consumers who are behind on their auto loan payments and facing repossession,” said David Vladeck, director of the FTC’s Bureau of Consumer Protection. “Despite promising to substantially lower consumers’ monthly payments, these schemes charge hundreds of dollars in up-front fees, leaving financially distressed consumers in worse shape than when they began.”

These are the FTC’s first cases against companies offering auto loan modifications. They come at a time when the volume of auto repossessions remains high. Recognizing that a car is second only to a home as the most expensive purchase many consumers make, the FTC has been highly involved in auto-related consumer issues. The agency recently held a recent series of roundtable workshops to gather information on possible consumer protection issues that may arise during the sale, financing, or lease of motor vehicles.

The FTC charged that Hope for Car Owners, LLC, NAFSO VLM, Inc. and Kore Services LLC (doing business as Auto Debt Consulting), and several individual defendants deceived consumers with false promises, and then did not provide promised refunds when they failed to obtain car loan modifications. The FTC has asked the court to order the defendants to stop the allegedly illegal conduct while the FTC moves forward with the cases.

The FTC alleged that the Hope for Car Owners defendants typically promised to reduce consumers’ monthly auto loan payments by 30 to 50 percent, for fees ranging from $200 to $500. One supposed consumer testimonial represented: “I was 4 months late and on the verge of losing my car to the repo man. Hope 4 Car Owners stepped in and not only stopped the repossession, but they negotiated to reduce my payments from $1200 a month to $548!!”

The FTC alleged that the Auto Debt Consulting defendants typically promised to reduce consumers’ monthly auto loan payments by 25 to 40 percent, for fees ranging from $350 to $799. According to one of the defendants’ websites, “If you have engaged the services of Auto Debt Consulting for negotiating with your lender or bank on your behalf, and if for any reason you are dissatisfied with our services or we are unsuccessful in the negotiation process we will provide a 100 percent money back guarantee.”

The complaints are part of the FTC’s ongoing effort to protect consumers in financial distress. They allege that both operations’ deceptive business practices violated the FTC Act.

According to the FTC’s complaints, both groups of defendants marketed their services on company websites, with statements like: “Join the thousands who have already SAVED! (Hope for Car Owners) and “Lower your monthly vehicle payments by as much as 40% regardless of your credit score!” (Auto Debt Consulting).

The FTC alleged that the defendants provided toll-free numbers for consumers to call so that telemarketers could sign them up. Many consumers were told to stop making payments on their auto loans, which increased the risk that their vehicles would be repossessed. But the FTC asserts that once the up-front fees were collected, neither operation did anything to obtain the promised loan modifications, consumers who tried to get refunds were denied, and one consumer’s vehicle was repossessed by the finance company.

The Auto Debt Consulting website offered a free consultation and to “Lower your payments as much as 40 percent regardless of your credit score”

An example page from the Auto Debt Consulting website.

Hope for Car Owners allegedly took $400 from one consumer and told her not to make any more payments on her vehicle. The consumer did not send her next payment to her auto lender, and the lender soon informed her that her vehicle was going to be repossessed.

The FTC has a new publication for consumers who are looking for help managing their auto loans. For more information, see: Ads for Auto Loan Modifications: You May Be Able to Drive a Better Deal with Your Lender.

The Commission vote authorizing the staff to file the Hope for Car Owners complaint was 4-0. The FTC filed the complaint and request for preliminary relief against the Hope for Car Owners defendants in the U.S. District Court for the Eastern District of California. The complaint also names as a defendant Patrick Freeman.

The Commission vote authorizing the staff to file the Auto Debt Consulting complaint was also
4-0. The FTC filed the complaint and request for preliminary relief against the Auto Debt Consulting defendants in the U.S. District Court for the Eastern District of California. The complaint also names as defendants Michael Kamfiroozie and Naythem J. Nafso.

The FTC would like to thank the Better Business Bureau Serving Northeast California for its help in these cases.

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 complaints are not findings or rulings that the defendants have actually violated the law.

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 and follow us on Twitter.

STAFF CONTACT:: Malini Mithal
Division of Financial Practices
202-326-2972

Maureen Ohlhausen Sworn in as Federal Trade Commissioner

Chairman Jon Leibowitz joined Maureen K. Ohlhausen at the Federal Trade Commission today, as she was sworn in as the agency’s newest commissioner. President Obama named Ohlhausen, a Republican, to a term that ends on September 25, 2018. She was unanimously confirmed by the U.S. Senate on March 29, 2012.

“We are very pleased to welcome Maureen back to the FTC,” Chairman Leibowitz said. “She is going to be a terrific Commissioner, with expertise in both protecting consumers and ensuring competition.”

Ohlhausen has been a partner at Wilkinson Barker Knauer, LLP since 2009, focusing on privacy, data protection, and cybersecurity. She previously served for 11 years at the FTC, most recently as Director of the Office of Policy Planning from 2004 to 2008, leading the FTC’s Internet Access Task Force. She also formerly was an attorney advisor for former Commissioner Orson Swindle. Before joining the agency’s General Counsel’s Office in 1997, she spent five years at the U.S. Court of Appeals for the D.C. Circuit, serving as a law clerk for Judge David B. Sentelle. Ohlhausen previously clerked for Judge Robert Yock of the U.S. Court of Federal Claims from 1991 to 1992.

Ohlhausen graduated with distinction from George Mason University School of Law in 1991, having graduated with honors from the University of Virginia in 1984. She previously was a senior editor of the Antitrust Law Journal and a member of the American Bar Association Task Force on Competition and Public Policy.

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 and follow us on Twitter.

FTC Approves Final Order Settling Charges With Upromise

Following a public comment period, the Federal Trade Commission has approved a final order settling charges that Upromise, Inc., a membership reward service aimed at consumers trying to save money for college used a web-browser toolbar to collect consumers’ personal information without adequately disclosing the extent of the information it was collecting.

The settlement order will require Upromise to clearly disclose its data collection practices and obtain consumers’ consent before installing or re-enabling any such toolbar products, and to notify consumers how to disable the data collection tool on their computers. The settlement also will bar misrepresentations about the extent to which the company maintains the privacy and security of consumers’ personal information, and require the company to establish a comprehensive information security program and to obtain biennial independent security assessments for the next 20 years.

The Commission vote to approve the final order with Upromise was 4-0. The order can be found on the FTC’s website and as a link to this press release, and public comment can be found here. (FTC File No. 103-3116 staff contacts are Ruth Yodaiken and Katrina Blodgett, Bureau of Consumer Protection 202-326-2127 or 202-326-3158, see press release dated January 5, 2012)

FTC Charges Payday Lending Scheme with Piling Inflated Fees on Borrowers and Making Unlawful Threats when Collecting

The Federal Trade Commission has taken action against a payday lending operation that allegedly piled on undisclosed and inflated fees, and collected on loans illegally by threatening borrowers with arrest and lawsuits. The FTC has asked a federal court to stop the allegedly illegal business tactics while the agency pursues its case against the defendants.

Like other payday lenders in recent years, this operation has claimed in state legal proceedings that it is affiliated with Native American tribes, and therefore immune from legal action. However, the FTC alleges that the defendants’ claims of tribal affiliation do not exempt them from complying with federal law.

This is the second time in seven months that the FTC has brought suit against a payday lender that has used a tribal affiliation defense against actions by state authorities. The FTC recently expanded its first such case, against Payday Financial, LLC, adding charges that the operation illegally sued debt-burdened consumers in a South Dakota tribal court that did not have jurisdiction over their cases.

Partial screen shot of 500FastCash payday lending website advertising “real solutions for real people” and “60 seconds can make a world of difference. Apply now."

Partial screen shot of one payday lending website involved in the FTC complaint.

In this case, as part of its continuing crackdown on scams that target consumers in financial distress, the FTC filed a complaint in U.S. district court charging that a web of defendants, including AMG Services, Inc., three other Internet-based lending companies, seven related companies, and six individuals, violated federal law by deceiving consumers when providing and collecting on payday loans. One of the defendants who allegedly controlled the lending companies is automobile racer Scott Tucker. According to documents filed with the court, Tucker and his co-defendant and brother, Blaine Tucker, allegedly transferred more than $40 million dollars collected from consumers by the payday lending companies to another company Scott Tucker controls, Level 5 Motor Sports, for “sponsorship” fees that benefit Scott Tucker’s automobile racing.

The Tuckers and the other defendants claimed they would charge borrowers the amount borrowed plus a one-time finance fee. Instead, the FTC alleges, the defendants made multiple withdrawals from borrowers’ bank accounts and assessed a new finance fee each time, without disclosing the true costs of the loan. The defendants also falsely threatened that consumers could be arrested, prosecuted, or imprisoned for failing to pay and that the defendants would sue them if they did not pay, according to the FTC.

According to documents filed by the FTC, over the last five years, the defendants’ deceptive and illegal tactics have generated more than 7,500 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. In one typical example, the defendants allegedly told consumer Eric Barboza 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, and threatened him with arrest when he balked at paying that amount.

The FTC’s complaint alleges that defendants’ misrepresentations and false threats violated the Federal Trade Commission Act. According to the FTC, the defendants also violated the Truth in Lending Act by failing to accurately disclose the annual percentage rate and other loan terms; and violated the Electronic Fund Transfer Act by illegally requiring consumers to preauthorize electronic fund transfers from their accounts.

Consumers are urged to consider the alternatives to payday loans. For more information, see, Fraudulent Online Payday Lenders: Tapping Your Bank Account Again and Again.

The Commission vote authorizing the staff to file the complaint was 4-0. The FTC brought suit in the U.S. District Court for the District of Nevada on April 2, 2012. The complaint names as defendants Scott A. Tucker; Blaine A. Tucker; Timothy J. Muir; Don E. Brady; Robert D. Campbell; Troy L. LittleAxe; AMG Services, Inc.; Red Cedar Services, Inc.; SFS, Inc.; Tribal Financial Services; AMG Capital Management, LLC; Level 5 Motorsports, LLC; LeadFlash Consulting, LLC; PartnerWeekly, LLC; Black Creek Capital Corporation; Broadmoor Capital Partners, LLC; and The Muir Law Firm, LLC. The complaint also names as relief defendants Kim C. Tucker and Park 269 LLC.

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 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 and follow us on Twitter.

(FTC File No. 1123024)

FTC Case Against Deceptive Robocallers Leads to Record $30 Million in Civil Penalties

In response to charges by the Federal Trade Commission, a federal judge has ordered the defendants behind a deceptive robocall scheme to pay a total of $30 million in civil penalties and give up more than $1.1 million in ill-gotten gains for violations of the FTC Act and the Telemarketing Sales Rule. The court order includes a $20 million judgment against Paul Navestad, which is the largest civil penalty against a defendant in an FTC case, and a $10 million judgment against Christine Maspakorn. The $30 million in total fines is, by far, the largest penalty ever imposed for unlawful calls to consumers on the Do-Not-Call Registry.

According to a Decision and Order issued March 23, 2012 by the U.S. District Court for the Western District of New York, Navestad and Maspakorn, operating primarily as the “Cash Grant Institute,” made more than eight million robocalls to consumers, including more than 2.7 million calls to phone numbers on the National Do Not Call Registry. These calls falsely claimed that “cash grants” for consumers were readily available from federal, state, and local governments, private foundations, and “wealthy individuals.” The calls promised consumers that they had already qualified for these “grants,” and that they could receive up to $25,000 to overcome personal financial problems.

The robocalls directed interested consumers to one of Navestad and Maspakorn’s websites, requestagrant.com, which repeated many of the same deceptive claims about the availability of “Free Grant Money.” Another of the defendants’ websites, cashgrantsearch.com, declared that it was the “Source of Free Money from the Government.” It contained pictures of the U.S. Capitol Building and President Obama, and stated, “Did you know that grant money exists for almost any purpose and does not need to be repaid?”

Yet as the FTC demonstrated to the court, government grant money does not exist for almost any purpose, and none of the defendants’ websites actually provided grants. Instead, they merely referred consumers to other grant-related websites that charged a fee for providing general information about how to obtain grants from public or private sources. It was only after consumers had paid the fee that they learned that it was very difficult to obtain cash grants from public or private sources, that very few people qualified for such grants, and that obtaining a grant involves a lengthy, competitive application process.

The FTC filed the case in July 2009 as part of the FTC’s ongoing crackdown on schemes that prey on financially strapped consumers. Shortly after filing, the court halted the defendants’ operation, froze their assets, and appointed a receiver to oversee the business pending litigation.

Navestad and Maspakorn then asserted their Fifth Amendment rights and refused to testify or turn over evidence. Through his attorney, however, Navestad contested the charges, claiming that he was merely a “consultant” for the companies engaged in the deceptive scheme. U.S. District Court Judge Michael Telesca rejected Navestad’s claims and held that the FTC had “submitted copious amounts of evidence” – including 120 exhibits consisting of bank records, contracts, witness statements, depositions correspondence, and photographs – “supporting each and every element” of its case against Navestad and Maspakorn. Judge Telesca then issued orders permanently banning the defendants from marketing grants, grant-procurement goods or services, and credit-related products; from misrepresenting any good or service; and from violating the Telemarketing Sales Rule in any fashion in the future. In addition, the court orders bar the defendants from selling or otherwise benefitting from customers’ personal information, and require them to properly dispose of customers’ personal information within 30 days.

The defendants are Paul Navestad, also known as Paul Richard, and Chintana Maspakorn, also known as Christina Maspakorn, both doing business as, among others, The Cash Grant Institute, Global Ad Agency, Global Advertising Agency, Domain Leasing Company, and/or Cash Grant Search.

For more information on how to avoid scams, read Who’s Calling? Recognize and Report Phone Fraud and Government Grant Telemarketing Scams.

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 and follow us on Twitter.

(Cash Grant Institute)

FTC Closes Eight-Month Investigation of Express Scripts, Inc.’s Proposed Acquisition of Pharmacy Benefits Manager Medco Health Solutions, Inc.

The Federal Trade Commission has closed its investigation of the proposed acquisition of pharmacy benefits manager Medco Health Solutions, Inc. by Express Scripts, Inc. Express Scripts, headquartered in St. Louis, Missouri, and Medco, headquartered in Franklin Lakes, New Jersey, are two of the largest PBMs in the United States.

Under an agreement dated July 20, 2011, Express Scripts intends to acquire Medco for approximately $29 billion. After the proposed deal was announced, the FTC began a comprehensive eight-month investigation into whether the effect of the merger may be to substantially reduce competition for the provision of pharmacy benefit management services within the United States. The FTC also carefully considered whether the merger might unduly increase the merged entity’s bargaining power with pharmacies, and whether the merger might harm consumers of specialty pharmaceuticals for patients with rare, complex or chronic conditions.

The Commission vote on the motion to close the investigation was 3-1, with Commissioner Brill dissenting and issuing a separate statement. Commissioners J. Thomas Rosch and Edith Ramirez and Chairman Jon Leibowitz issued a closing statement on behalf of the Commission. The vote on the motion to issue the Statement of the Commission was 3-0-1, with Commissioner Brill abstaining.

In its statement, the Commission majority explained that the Commission’s investigation “revealed a competitive market for PBM services characterized by numerous, vigorous competitors who are expanding and winning business from traditional market leaders. The acquisition of Medco by Express Scripts will likely not change these dynamics: the merging parties are not particularly close competitors, the market today is not conducive to coordinated interaction, and there is little risk of the merged company exercising monopsony power. Under these circumstances, we lack a reason to believe that a violation of Section 7 of the Clayton Act has occurred or is likely to occur by means of Express Scripts’ acquisition of Medco.”

An earlier motion by Chairman Leibowitz to accept for public comment a proposed consent agreement that would have prohibited Express Scripts from engaging in potentially exclusionary conduct that might have hindered the ongoing expansion of competition failed to receive the support of the majority of the Commission and was withdrawn.

In her dissenting statement, although Commissioner Brill “fully acknowledge[d] that the evidence doesn’t all point towards the same outcome,” she described the merger as an industry “game changer” that creates a “merger to duopoly” between the merged ESI/Medco and CVS Caremark, “with few efficiencies and high entry barriers – something no court has ever approved.” In addition, Commissioner Brill expressed concern about the likelihood of coordinated effects allowing the merged ESI/Medco and CVS Caremark to “pull their competitive punches” when bidding on customer accounts in the future. Commissioner Brill called on the Commission to conduct a retrospective study on the merger in three years’ time.

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 [email protected], or write to the Office of Policy and Coordination, Bureau of Competition, Federal Trade Commission, 601 New Jersey Ave., Room 7117, Washington, DC 20580. To learn more about the Bureau of Competition, read Competition Counts. Like the FTC on Facebook and follow us on Twitter.

(FTC File No. 111-0210)
(ESI-Medco.final)

FTC Chairman Releases 2011-2012 Annual Highlights

Federal Trade Commission Chairman Jon Leibowitz released the agency’s 2011-2012 Annual Highlights today at the spring meeting of the American Bar Association’s Section of Antitrust Law in Washington, DC, recognizing the agency’s continued efforts to protect consumers and promote competition.

The Highlights, published in an online format for the first time this year, focus on the Commission’s work in multiple areas since March 2011, including online privacy, consumer fraud during the economic downturn, health care competition, and safeguarding children.

“This has been an incredibly productive and important year for consumers and for competition. We’re proud that the FTC has been at the forefront of practicing good government, effective law enforcement, and outstanding outreach to consumers, businesses, and our law enforcement partners around the globe, all in a bipartisan, consensus-driven way,” said Leibowitz in a video statement.

The Highlights call to attention the FTC’s work in 10 broad categories, including:

Protecting Consumer Privacy: The FTC continues to raise the profile of privacy practices – online and off – through law enforcement, consumer education, and policy initiatives.
Fighting ‘Last Dollar’ Fraud: The FTC is stopping scammers who take advantage of the nation’s most financially fragile consumers through deceptive mortgage servicing practices, abusive debt collection tactics, bogus credit repair services, sham mortgage, tax, and debt relief offers, and fraudulent job and business opportunity schemes.
Promoting Competition in Health Care and Containing Costs of Prescription Drugs: The Commission works to prevent anticompetitive conduct and mergers involving the health care sector, from hospitals to pharmaceutical companies. One of the FTC’s top priorities continues to be restricting anticompetitive “pay-for-delay” patent settlements.
Trending in Technology: Nearly 100 years of experience gives the FTC a unique perspective when it comes to anticipating and evaluating new technology, and using appropriate measures of enforcement, education, and public engagement to address evolving markets and business models.

The FTC also remains focused on using enforcement, education, and engagement to
safeguard children from unfair and deceptive marketing and advertising and protect kids online.

The Highlights identify the FTC’s work in challenging deceptive advertising and marketing including successfully challenging a number of deceptive claims about disease prevention and health promotion. While monitoring energy markets, the FTC closely scrutinizes mergers and acquisitions in the energy sector, and monitors environmental marketing to make sure it is truthful and based on scientific evidence. The Highlights also note the FTC’s increasing international collaboration with foreign counterparts and how the Commission practices good government through ongoing rule review and other initiatives.

Archives of past Annual Reports are available on the FTC website.

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 1,800 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site 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.

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