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Acting at the request of the Federal Trade Commission the Solicitor General of the United States petitioned the U.S. Supreme Court to review a recent federal appeals court ruling concerning Phoebe Putney Health System’s acquisition of Palmyra Park Hospital in Albany, Georgia. The filing, known as a petition for certiorari, was made with the Court today.
On April 20, 2011, the FTC filed a complaint in federal district court against Phoebe Putney’s acquisition of Palmyra seeking to block the proposed combination of the only two hospitals in Albany, alleging that the deal would reduce competition significantly and allow the combined Phoebe/Palmyra to raise prices for general acute-care hospital services charged to commercial health plans, harming patients and local employers and employees. On June 27, 2011, the U.S. District Court for the Middle District of Georgia, Albany Division, dismissed the FTC’s complaint and denied its motion for a preliminary injunction to stop the deal from going forward. The FTC then appealed the district court decision to the U.S. Court of Appeals for the 11th Circuit, which affirmed the judgment of the district court on December 9, 2011.
The Commission vote authorizing the staff to request that the Solicitor General file the petition for certiorari with the Supreme Court was 4-0.
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.
(Phoebe Cert.final)
(Civ. No. 1:11-cv-58 (WLS)
At the request of the Federal Trade Commission, a U.S. district court has halted an operation that took in more than $1 million by allegedly selling homeowners bogus mortgage relief and foreclosure rescue products, including a scam that falsely promised to get help for homeowners who joined others to file so-called “mass joinder” lawsuits against their lenders. This is the FTC’s first case against alleged scammers who pitch these kinds of lawsuits.
The order also freezes the operation’s assets and appoints a permanent receiver to run it while the FTC moves forward with the case. Among other things, the agency will seek money for possible refunds for consumers.
As part of its continuing crackdown on mortgage relief scams, the FTC filed a complaint against Santa Ana, California-based Sameer Lakhany and five companies he controlled. Lakhany also did business using three websites, HouseHoldRelief.org, FreeFedLoanMod.org, and MyHomeSupport.org. The complaint charges that the defendants victimized hundreds of consumers with two related scams.
In one scam, the FTC claims the defendants masqueraded as a specialty law firm, Precision Law Center, and sent out direct mail resembling a class action settlement notice, holding out 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. In fact, the defendants allegedly operated a sham law firm and only engaged attorneys briefly to file the lawsuits, after which either the defendants neglected the suits, or the suits were dismissed. According to the FTC, they charged $6,000 to $10,000 in advance, but failed to get the results they promised.
The FTC alleges that to convince consumers that they should hire Precision Law Center, telemarketers followed up by mailing material to them promising that the mass joinder suit would result in:
The material also allegedly claimed that 80 to 85 percent of these suits are successful, and that consumers might also: receive their homes free and clear; have their principal balance reduced to 70 percent of the current value and their interest rate reduced by half; be refunded any accrued interest, penalties, and charges; improve their standing with credit reporting agencies; and receive monetary damages.
In the other scam, the defendants allegedly promised but failed to deliver relief from affordable mortgages and foreclosures, typically charging consumers between $795 to $1595 each for a so-called “forensic loan audit. According to the FTC, the defendants told consumers these audits would find lender violations 90 percent of the time or more, and that the resulting legal leverage would force theirlender to give them a loan modification that would substantially improve their mortgage terms. The defendants falsely portrayed themselves as non-profit, free, accredited, or HUD-certified housing counselors with special qualifications to help obtain mortgage loan modifications and avoid foreclosure. They promised consumers that the forensic loan audit would be the only charge not covered by their “free” service, and that if the “audit” did not turn up any violations, consumers could get a 70 percent refund and still obtain a loan modification. They also told consumers their loan modification requests would be seriously delayed without the audit, according to the complaint.
In its complaint, the FTC charged the defendants with violating the Federal Trade Commission Act and the Mortgage Assistance Relief Services Rule, now known as Regulation O.
The Commission has new advice for consumers faced with possible foreclosure on their homes. For more information see: Mass Joinder Lawsuits: A New Twist on Foreclosure Rescue Scams.
The Commission vote authorizing the staff to file the complaint was 4-0. The FTC filed the complaint and the request for a temporary restraining order in the U.S. District Court for the Central District of California on March 5, 2012. On March 7, 2012, the court granted the FTC=s request for a temporary restraining order with an asset freeze as to the corporate defendants and the appointment of a temporary receiver. On March 19, 2012, the Court entered a stipulated Preliminary Injunction Order with asset freeze against Defendant Lakhany and three of the corporate defendants. On March 21, 2012, the Court entered a similar order against the rest of the defendants. Besides Lakhany, the complaint names as defendants Credit Shop, Fidelity Legal, Titanium Realty, Precision Law Center, Inc., and Precision Law Center 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. 1123136)
(Household Relief NR)
Two more online marketers have agreed to settlements with the Federal Trade Commission that will permanently halt their allegedly deceptive practice of using fake news websites to promote acai berry supplements and so-called “colon cleansers” with deceptive claims that consumers could use them to lose weight.
In the first case, the FTC settlement with Intermark Communications, Inc., doing business as Copeac and several other defendants allegedly involved in the scheme results from the first FTC suit against an affiliate network. As an affiliate network, Copeac not only operated its own fake news sites, it also recruited an entire network of affiliates that used fake news sites to promote products with allegedly deceptive claims.
The FTC’s original complaint against the New York-based Copeac was part of a law enforcement sweep the agency conducted last year against 10 alleged operators of fake news sites. The FTC charged all of them with deceptive advertising for portraying the sites as legitimate news sites; making false and unsupported weight-loss claims; and failing to disclose that they were being paid by the merchants of their so-called weight-loss products. In settling with the Copeac defendants, the FTC amended its complaint by adding allegations that the operation developed an affiliate network, and by adding three individual defendants.
Under the settlement, the Copeac defendants will pay more than $1.3 million, which represents revenues they received from deceptive fake news site ads for acai berries, colon cleansers, and other supposed weight-loss dietary supplements; and revenues they received for other products marketed on fake news sites. The settlement also requires Copeac to monitor all its affiliate marketers when selling any good or service, obtain adequate information about the affiliate marketers it hires, approve their advertisements, and immediately stop processing payments generated by any affiliate marketer using deceptive advertisements.
In the second case, under the terms of the settlement with Coulomb Media, Inc., and Cody Low, also known as Joe Brooks, the defendants’ $2.7 million judgment will be suspended after they pay $170,000 in cash, proceeds from the sale of Low’s 2010 Chevrolet Tahoe, and a certificate of deposit.
As part of the FTC’s ongoing crackdown on bogus health claims, the proposed settlements with the Copeac and Coulomb defendants will require the operators to make clear when their commercial messages are advertisements rather than legitimate journalism, and will bar the defendants from further deceptive claims about health-related products such as the acai berry weight-loss supplements and colon cleansers they marketed. The defendants also are required to disclose any material connections they have with merchants, and will be barred from making deceptive claims about other products.
With these two settlements, eight of the 10 fake news site cases the FTC brought in 2010 have been resolved, and all the fake news sites affiliated with the eight operations have been permanently shut down.
When federal courts temporarily halted all 10 fake news operations last year at the FTC’s request, the agency alleged that their websites were designed to falsely appear as if they were part of legitimate news organizations, but were actually nothing more than advertisements deceptively enticing consumers to buy the featured acai berry weight-loss products from online merchants. With titles such as “News 6 News Alerts,” “Health News Health Alerts,” or “Health 5 Beat Health News,” the sites often falsely represented that the reports they carried had been seen on major media outlets such as ABC, Fox News, CBS, CNN, USA Today, and Consumer Reports. Investigative-sounding headlines presented stories that purported to document a reporter’s first-hand experience with acai berry supplements – typically claiming to have lost 25 pounds in four weeks, according to the FTC complaints.
In pitching the acai weight-loss products, the defendants posted attention-grabbing ads on search engines and high volume websites, such as “Acai Berry EXPOSED – Health Reporter Discovers the Shocking Truth,” driving traffic to the fake news sites and ultimately to the sites where merchants sell the products, according to the complaints. The FTC received numerous complaints from consumers who paid between $70 and $100 for weight-loss products after having been deceived by fake news sites.
Derived from acai palm trees that are native to Central and South America, acai berry supplements often are marketed to consumers who hope to lose weight. In recent settlements with other online acai berry marketers, defendants in the Central Coast Nutraceuticals case were required to pay $1.5 million, and Jesse Willms was required to surrender corporate and personal assets, including bank account funds, a Cadillac Escalade, a fur coat, and artwork. In 2011, the Commission brought a suit against another online acai berry marketer, LeanSpa, LLC, which the Commission sued in conjunction with the State of Connecticut. In that case, the FTC obtained a preliminary injunction barring the defendants from engaging in the charged deceptive practices.
The FTC helps consumers recognize and avoid deceptive claims made by fake news sites that market acai berries for weight loss. To learn more, see the consumer alert THIS JUST IN: Fake News Sites Promote Bogus Weight Loss Benefits of Acai Berry Supplements, and the video Free Trial Offers, which explains how free trials are often used to market acai berry supplements and other products.
The amended complaint and proposed settlement against Copeac also name as defendants Timothy McCallan, Michael Krongel, and Danielle Krongel.
The Commission vote approving the amended complaint and proposed consent decree against the Copeac defendants was 4-0. The FTC filed the complaint and proposed consent decree in the U.S. District Court for the Northern District of Illinois, Eastern Division, on March 1, 2012, and it was entered by the court on March 15, 2012. The FTC thanks the Florida Attorney General’s office for its assistance in the Copeac matter.
The Commission vote approving the proposed consent decree for the Coulomb defendants was 3-1, with Commissioner J. Thomas Rosch voting no. The FTC filed the proposed consent decree in the U.S. District Court for the Eastern District of Michigan on March 14, 2012, and it was entered by the court on March 21, 2012.
NOTE: These consent decrees are for settlement purposes only and do not constitute an admission by the defendant that the law has been violated. Consent decrees 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 File No. X110023) (Copeac)
FTC File No. X110037) (Coulomb Media, Inc.)
(Two Fake News Settlements NR)
The Federal Trade Commission stepped up enforcement of the Fair Debt Collection Practices Act in the last year by cracking down on collectors who allegedly used abusive tactics to intimidate consumers, misled consumers while seeking payment on time-barred debts, used faulty data to identify debtors and the amount they owe, used deceptive tactics to collect on payday loans, and otherwise committed egregious violations of the Act and other federal laws, according to a letter the FTC sent to the Consumer Financial Protection Bureau.
“Protecting consumers from deceptive or abusive debt collectors is one of the most important things the FTC does,” said David Vladeck, Director of the agency’s Bureau of Consumer Protection.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB is required to submit annual reports to Congress on the Fair Debt Collection Practices Act, a task previously assigned to the FTC. The first CFPB report is due on March 20, 2012, and to assist the CFPB in preparing its report, the FTC’s letter summarizes its own recent work on debt collection issues.
Over the past year, the FTC has brought or resolved seven debt collection cases affecting hundreds of thousands of consumers. This is the highest number that it has brought or resolved in any single year. In two cases that included civil penalties, the FTC obtained $2.8 million and $2.5 million, respectively, for West Asset Management, Inc., and Asset Acceptance, LLC, the two largest civil penalty amounts the agency has ever obtained for alleged violations of the Fair Debt Collection Practices Act.
The FTC also filed actions against payday lenders American Credit Crunchers, LLC for allegedly making misrepresentations to collect on payday loan debts that they in fact weren’t authorized to collect on, or that consumers did not owe; and LoanPoint, LLC and Payday Financial, LLC for allegedly misrepresenting that they could lawfully garnish supposed debtors’ wages without obtaining a valid court order. The FTC charged two other debt collectors with especially egregious practices: Defendants in Forensic Case Management Service, Inc., doing business as Rumson, Bolling & Associates, allegedly threatened physical harm to consumers, desecration of their deceased family members, and killing of their pets to persuade consumers to pay. They also allegedly retained more fees from their clients than they had agreed to take. Defendants in Rincon Debt Management Services, LLC targeted English- and Spanish-speaking consumers, impersonating process servers and other officials, and falsely threatening to sue and arrest those whom they claimed owed money, the FTC alleged.
In outlining the FTC’s other debt collection enforcement efforts, the Commission noted its new policy statement addressing whom debt collectors can contact if an alleged debtor has died and what collectors can do in collecting on debts in these circumstances. The FTC also filed two “friend of the court” briefs in federal court. The first amicus brief opposing a proposed class action settlement with debt buyer Midland Funding LLC argued that the settlement would require consumers to surrender important protections provided by the Fair Debt Collection Practices Act in exchange for a minimal payment. The FTC also joined the Solicitor General’s office in filing an amicus brief in Fein, Such, Kahn, & Shepard PC advocating that the U.S. Supreme Court decline to hear an appeal from an appellate court decision addressing whether the Fair Debt Collection Practices Act applies to collector communications with consumers’ attorneys.
The letter also references the FTC’s consumer education work, as well as its 2011 Debt Collection 2.0 workshop on protecting consumers amid technological change in the industry, a pending study of the debt buying industry, and follow-up work from the agency’s 2010 report on debt collection litigation and arbitration, Repairing A Broken System: Protecting Consumers in Debt Collection Litigation and Arbitration.
The Commission vote approving the report was 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 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. P064803)
Star Pipe Products, Ltd., a leading supplier of ductile iron pipe fittings, which are used in municipal water systems around the United States, has agreed to settle Federal Trade Commission charges that it conspired with the two other largest manufacturers to increase the prices at which pipe fittings were sold nationwide. Under a proposed order settling the FTC’s charges, Star will be barred from similar anticompetitive conduct in the future.
The FTC’s settlement with Star resolves charges that beginning in 2008 Star participated in an illegal conspiracy with McWane Inc. and Sigma Corporation to fix the price at which imported ductile iron pipe fittings are sold in the United States. The case is part of the FTC’s ongoing efforts to promote competition, benefitting U.S. consumers by keeping prices low and the quality and choice of goods and services high.
In January 2012, the FTC charged that the three companies illegally conspired to set and maintain prices for pipe fittings, and that McWane illegally maintained its monopoly power in the market for U.S.-made pipe fittings. At the same time as the complaint was filed, Sigma settled the FTC’s charges, and has agreed not to engage in similar anticompetitive tactics. With Star’s agreement to settle, only the FTC’s case against McWane remains ongoing.
Ductile iron pipe fittings, known as DIPF, are used by municipal water systems to change the diameter and direction of pipelines carrying drinking and wastewater, and are sold by McWane, Star, and Sigma through specialty wholesale distributors. McWane and its largest competitors in the DIPF market, Sigma and Star, all sell imported DIPF. In addition, McWane was the only domestic producer of a full line of small and medium-sized DIPF until Star entered the market for U.S.-made DIPF in 2009.
In its complaint, the FTC charged that Star and Sigma were invited by McWane to collude with it beginning in early 2008, when it communicated to them a plan to raise and fix prices for imported DIPF. Star, along with Sigma, accepted McWane’s invitation to collude, the FTC alleges, and to further the conspiracy, Star and Sigma each raised its prices for imported DIPF in January 2008 and again in June 2008. Between June 2008 and January 2009, according to the FTC, the three firms exchanged information documenting the volume of their monthly sales through a trade association called the Ductile Iron Fittings Research Association (DIFRA), and each company used this information to monitor whether the other co-conspirators were adhering to the terms of their collusive arrangement.
The proposed settlement order against Star is designed to prevent a recurrence of its anticompetitive tactics. It contains provisions similar to the January 2012 order against Sigma, and would prohibit Star from:
Under the proposed order, the prohibitions on Star’s communication of competitively sensitive information with competitors contains one exception. Star may participate in an information exchange with competitors in the DIPF market if the information is structured in such a way that it will minimize the risk that it will facilitate collusion among competitors. For example, Star may participate in an information exchange if: 1) the submitted data and related industry statistics being exchanged relate solely to transactions that are least six months old; 2) the industry statistics being exchanged are sufficiently aggregated or anonymous so that no competitor receiving such statistics can, directly or indirectly, identify the data submitted by any other competitor; and 3) other conditions are met, as described in the order.
The Commission vote to accept the consent agreement package containing the proposed consent order for public comment was 4-0. The FTC will publish a description of the consent agreement package in the Federal Register shortly. The agreement will be subject to public comment for 30 days, through April 20, 2012, after which the Commission will decide whether to make the proposed consent order final.
Interested parties can submit written comments electronically or in paper form by following the instructions in the “Invitation To Comment” part of the “Supplementary Information” section. Comments can be submitted electronically. Comments in paper form should be mailed or delivered to: Federal Trade Commission, Office of the Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC is requesting that any comment filed in paper form near the end of the public comment period be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions.
NOTE: A consent agreement is for settlement purposes only and does not constitute an admission by the respondent that the law has been violated. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $16,000.
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 Docket No. 9351)
(Star Consent.final)
Following a public comment period, the Federal Trade Commission has approved an application by The Dow Chemical Company to sell a chemical production facility and associated property in Torrance, California, to Hager Pacific Acquisitions LLC. The sale is required by a 2009 settlement order resolving the FTC’s concerns that Dow’s acquisition of Rohm & Haas Company would lessen competition in markets for acrylic acid, latex polymers, and other products used to make coated paper, paints and coatings, and adhesives.
The 2009 settlement order includes a requirement that Dow sell all of its interest in the Torrance site. Arkema Inc., the FTC-approved buyer of Dow’s acrylic acid business and the latex polymers business, chose to lease rather than buy the Torrance plant and some of the associated property. In 2010, the FTC approved the lease to Arkema and gave Dow one more year to find a buyer for the entire Torrance site, including the plant and land leased by Arkema.
In August 2011, Dow submitted an application to sell the Torrance site to Hager Pacific Acquisitions, a subsidiary of Hager Pacific Properties LLC. The FTC has now approved that application. Arkema will continue to operate the Torrance facility, but will lease it from an affiliate of Hager Pacific Acquisitions. Dow will not own any interest in the Torrance site.
Denial of Dow’s Previous Application. In February 2011, before identifying Hager Pacific Acquisitions as a purchaser of the Torrance site, Dow applied to the FTC to reopen and modify the settlement order in this case to terminate its obligation to sell the Torrance site. The FTC denied Dow’s application in June 2011. The FTC found that Dow had not demonstrated that there were no acceptable buyers for the property, or that allowing Dow to retain the property was required by the public interest.
Now that the FTC has approved the property’s sale to Hager Pacific Acquisitions, it has posted its letter denying Dow’s February 2011 petition, including information that is no longer confidential.
The vote approving Dow’s divestiture application was 4-0. The vote denying Dow’s application to modify the order, which was taken before Commissioner William E. Kovacic left the FTC, was 5-0. (FTC File No. 081-0214, Docket No. C-4243; the staff contact is Roberta S. Baruch, Bureau of Competition, 202-326-2861; see press release dated February 28, 2011).
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.
(FYI 11.2012.wpd)
Following a public comment period, the Federal Trade Commission has approved an application by Healthcare Technology Holdings, Inc., in which the company requested approval to sell two audit businesses of SDI Health LLC to inVentiv Health, Inc. The divestiture is required by the final FTC settlement order allowing Healthcare Technology’s subsidiary IMS Health Inc. to acquire SDI Health.
According to the application, the sale of SDI Health’s audit businesses would satisfy the terms of the FTC’s final order, which settled FTC charges that the underlying transaction would have been anticompetitive and in violation of the FTC and Clayton Acts. The audit businesses include SDI’s promotional and medical audit businesses.
The Commission vote approving the application was 4-0. (FTC File No. 111-0097, Docket No. C-4340; the staff contact is Roberta S. Baruch, Bureau of Competition, 202-326-2861; see press release dated October 28, 2011.)
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.
(FYI 10.2012.wpd)
Two men who worked for an allegedly abusive and deceptive debt collection operation will be banned from the business as part of settlements reached with the Federal Trade Commission.
The settlement orders against the two employees of the debt collection firm doing business as Rumson, Bolling & Associates are part of the FTC’s efforts against illegal debt collection practices. The two men, both of whom were managers in the operation, will surrender assets and are barred from misrepresenting any claim, including those related to providing debt relief, mortgage modification, and credit repair services to consumers. They also are barred from disclosing any consumer information they may have obtained, and are ordered to destroy it.
If the FTC finds that either defendant has misrepresented his assets, the full amount of his judgment will immediately become due.
At the FTC’s request last fall, a U.S. district court halted the activities of California-based Rumson, Bolling & Associates. The order froze the assets of the company, and appointed a receiver to run it. Lindstrom, Medley, and four other people, along with three companies, were charged with multiple violations of the FTC Act and the Fair Debt Collection Practices Act.
According to the complaint, the defendants harassed and abused consumers by threatening physical harm and death to them and their pets, threatening to desecrate the bodies of deceased relatives, and using obscene and profane language. The defendants also allegedly improperly revealed consumers’ debts to third parties, such as the consumers’ employers, co-workers, neighbors, and family members; falsely threatened consumers with lawsuits, arrest, seizure of their assets, or wage garnishment; and falsely claimed that consumers would be liable for legal fees incurred in the collection of the debt.
Using the slogan “no recovery, no fee,” the defendants allegedly deceived small businesses and other clients and potential clients by claiming that they would collect debts on contingency – charging a fee only when they successfully collected a debt, according to the FTC complaint. But often, the defendants collected money from consumers on a client’s behalf and then allegedly kept more than they were entitled to, sometimes keeping all the money for themselves, instead of forwarding what was owed to the client. At times, the defendants asked clients for additional fees, purportedly for legal expenses in filing a lawsuit that would “guarantee” the successful collection of a debt, the complaint stated. According to the complaint, many clients paid these fees, but the defendants often failed to file the promised lawsuits and the clients never received any money in satisfaction of the debt in question.
For consumer information about dealing with debt collectors, see Debt Collection FAQs: A Guide for Consumers.
The Commission vote approving the proposed consent decrees against Frank E. Lindstrom, Jr. and Kevin Medley was 4-0. The consent decrees are subject to court approval. The FTC filed the proposed consent decrees in the U.S. District Court for the Central District of California on March 8, 2012. The court entered the Lindstrom consent decree March 13, 2012.
The complaint naming Lindstrom and Medley also named as defendants Forensic Case Management Services, Inc. (doing business as Rumson, Bolling & Associates, FCMS, Inc., Commercial Recovery Solutions, Inc., and Commercial Investigations, Inc.), Specialized Recovery, Inc. (doing business as Joseph, Steven & Associates and Specialized Debt Recovery), Commercial Receivables Acquisition, Inc. (doing business as Commercial Recovery Authority, Inc. and The Forwarding Company), David M. Hynes II, James Hynes, Heather True, and Lorena Quiroz-Hynes. Litigation continues against these defendants.
NOTE: These consent decrees are for settlement purposes only and do not constitute an admission by the defendant that the law has been violated. Consent decrees 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 File No. X110053)
(Rumson NR)
Five car dealers around the country have agreed to Federal Trade Commission settlement orders that require them to stop running ads in which they promise to pay off a consumer’s trade-in no matter what the consumer owes on the vehicle.
The FTC charged that the ads, which ran on the dealers’ websites and on sites such as YouTube.com, deceived consumers into thinking they would no longer be responsible for paying off the loan balance on their trade-in, even if it exceeded the trade-in’s value (i.e., the trade-in had “negative equity”). Instead, the dealers rolled the negative equity into the consumer’s new vehicle loan or, in the case of one dealer, required consumers to pay it out of pocket.
The proposed settlements, reached as part of the FTC’s ongoing efforts to protect consumers in financial distress, bar all of the dealers from making similar deceptive representations in the future. The cases are the first of their kind brought by the FTC. The Commission also issued a new consumer education publication titled “Negative Equity Ads and Auto-Trade-ins” to help consumers understand these types of ads.
“Buying a new car or truck is a major financial commitment, and the last thing consumers need is to be tricked into thinking that a dealer will ‘pay off’ what they owe on their current vehicle, when they really won’t,” said David Vladeck, Director of the FTC’s Bureau of Consumer Protection. “The Federal Trade Commission is constantly on the lookout for potentially deceptive ads, and brings actions to stop them when appropriate.”
The dealers named in the FTC’s complaints are: 1) Billion Auto, Inc., in Sioux Falls, South Dakota; 2) Frank Myers AutoMaxx, LLC, in Winston-Salem, North Carolina; 3) Key Hyundai of Manchester, LLC and Hyundai of Milford LLC, in Vernon and Milford, Connecticut, respectively, and which advertise jointly; 4) and Ramey Motors, Inc., in Princeton, West Virginia.
The FTC’s complaints allege that despite the dealers’ claims, consumers still end up being responsible for paying the difference between the trade-in loan balance and the vehicle’s value. The complaints charge that the dealers’ representations that they will “pay off” what the consumers owe are false and misleading, and violate the FTC Act. Examples of the allegedly deceptive advertisements include:
In addition, the complaints in three of the cases allege violations of the Truth in Lending Act (TILA) and its implementing Regulation Z for failing to disclose certain credit-related terms, and the complaints in two of the cases allege violations of the Consumer Leasing Act (CLA) and its implementing Regulation M for failing to disclose certain lease related terms.
The proposed orders settling the FTC’s charges against the dealers are designed to prevent them from engaging in similar deceptive advertising practices in the future. First, each order prohibits the dealer from misrepresenting that it will pay the remaining loan balance on a consumer’s trade-in, so the consumer will have no further obligation for any amount of that loan. It also prohibits the dealer from misrepresenting any other facts related to leasing or financing a vehicle.
The proposed orders against Billion Auto, Key Hyundai, Hyundai of Milford, and Ramey Motors require these dealers to comply with TILA and Regulation Z, and to make clear and conspicuous disclosures when advertising certain terms related to issuing consumer credit. It also requires that if any finance charge is advertised, the rate must be stated as an “annual percentage rate” or as the “APR.” In addition, the proposed orders against Billion Auto, Key Hyundai, and Hyundai of Milford require these dealers to clearly and conspicuously make all lease related disclosures required by the CLA and Regulation M, including the monthly lease payment.
The proposed orders also require each of the dealers to keep copies of relevant advertisements and materials substantiating claims made in their advertisements, and to provide copies of the order to certain employees. Finally, the dealers are required to file compliance reports with the FTC to show they are meeting the terms of the orders, which will expire in 20 years.
The misrepresentation alleged in these cases was one of the topics raised at the FTC’s 2011 public roundtables regarding consumer protection issues that may arise in the sale, financing or lease of motor vehicles. For many consumers, buying or leasing a car is their most expensive financial transaction aside from owning a home. As the nation’s consumer protection agency, the Commission is committed to protecting consumers in connection with these financial transactions.
The Commission vote to issue the administrative complaints and accept the consent agreement packages containing the proposed consent orders for public comment was 4-0. The FTC will publish a description of the consent agreement packages in the Federal Register shortly. The agreements will be subject to public comment for 30 days, beginning today and continuing through April 16, 2012, after which the Commission will decide whether to make the proposed consent orders final.
The FTC acknowledges the valuable assistance of the Iowa Attorney General’s Office in the investigation of this matter.
Interested parties can submit written comments electronically or in paper form by following the instructions in the “Invitation To Comment” part of the “Supplementary Information” section. Comments in electronic form should be submitted using the following web links and following the instructions on the web-based form:
Comments in paper form should be mailed or delivered to: Federal Trade Commission, Office of the Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC is requesting that any comment filed in paper form near the end of the public comment period be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions.
NOTE: The Commission issues an administrative 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 respondent has actually violated the law. A consent agreement is for settlement purposes only and does not constitute an admission by the respondent that the law has been violated. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $16,000.
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 Nos. 1123209, Billion Auto, Inc.; 1123206, Frank Myers AutoMaxx, LLC; 1123204, Key Hyundai of Manchester, LLC; and 1123207, Ramey Motors, Inc.)
