Markets Wired

The Federal Trade Commission has released a staff report recommending that coverage of the FTC’s Business Opportunity Rule be expanded to include work-at-home opportunities such as envelope stuffing, medical billing, and product assembly, many of which have not been covered before.  FTC staff also recommends streamlining the disclosures required by the Business Opportunity Rule so that companies or individuals selling business opportunities make important disclosures to consumers on a simple, easy-to-read document.  If adopted, the changes will make it less burdensome for legitimate sellers to comply with the Rule, while still protecting consumers from “widespread and persistent” business opportunity fraud.  Public comments on the staff report will be accepted until January 18, 2011. To file a public comment electronically, please click here and follow the instructions.

The Rule that currently governs business opportunities is an interim rule that dates back to March 2007.  Up until then, the FTC had a single rule – known as the Franchise Rule – that covered both franchises and certain business opportunities.  Franchises typically are expensive, involve complex contractual relationships, and can include the right to use a trademark or other commercial symbol.  In contrast, business opportunities often are less costly, and involve simpler purchase agreements.

In 2006, the FTC proposed creating a Business Opportunity Rule separate from the Franchise Rule.  Since then, it has conducted a public workshop and collected public comments on both the workshop and the Revised Proposed Business Opportunity Rule.  The staff report announced today summarizes the rulemaking record to date, analyzes the various alternatives, and sets forth the staff’s recommendations for the proposed final Business Opportunity Rule and disclosure form. The report and disclosure forms in English and Spanish are available on the FTC’s website and as a link to this press release.

The Commission vote approving issuance of the Federal Register notice was 5-0.  (FTC File No. R511993; the staff contact is Kathleen Benway, Bureau of Consumer Protection, 202-326-2024.)

Copies of the documents mentioned in this release are available from the FTC’s Web site at http://www.ftc.gov and from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580.  Call toll-free:  1-877-FTC-HELP.  The FTC’s Business Center website gives companies the tools they need to understand and comply with the law.  The materials in the Business Center are not under copyright, so businesses can share them with employees, colleagues, and the general public.  It offers practical guidance on advertising, credit, data security, and other need-to-know topics, as well as videos and a blog.

(FYI business opportunity rule staff report)

As part of its ongoing efforts to stop bogus disease treatment claims, the Federal Trade Commission has filed suit against an online marketer that allegedly deceived consumers with baseless claims that its supplements would treat and prevent diabetes.

The FTC will ask a federal judge to permanently bar the company, Wellness Support Network Inc., and its two principals, from making these and other deceptive claims in violation of federal law, and to require the defendants to provide refunds to consumers or give up their ill-gotten gains. 

The FTC complaint challenges claims for two sets of dietary supplements   that the company markets to diabetics.  The Diabetic Pack contains three different products that purportedly contain an array of vitamins, minerals, and plant extracts, and is touted as a treatment for diabetes.  The Insulin Resistance Pack is comprised of the same three products as those in the Diabetic Pack, and the defendants claim it reduces insulin resistance and helps to prevent diabetes.  Both the Diabetic Pack and Insulin Resistance Pack sell online for $76.70 for a 30-day supply.

Advertising primarily online, the defendants market the products on their website, www.realfoodnutrients.com.  The ads describe both products as “Completely Natural!” and refer to each respectively as a “Diabetes Breakthrough” and an “Insulin Resistance Breakthrough.”  To give the appearance of scientific legitimacy, the ads claim that the products are validated by “Nobel Prize-winning technology.” 

The defendants’ advertising also relies heavily on consumer testimonials, such as this one:   

“I was taking 50 units of insulin plus pills twice a day and my blood sugar just kept going up.  I was tired all of the time and could fall asleep as soon as I sat down.  I also kept gaining weight.  Since I’ve been using the Diabetic Pack I have lost 9 pounds, I have all kinds of energy and my sugar is down in the low 100s. Also I don’t take insulin anymore!”

The FTC complaint alleges that these claims made by the marketers are false or unsupported by scientific evidence:

• Diabetic Pack is an effective treatment for diabetes, is proven as an effective treatment for diabetes, reduces or eliminates the need for insulin and other diabetic medications, and is proven to cause an average drop in blood glucose levels of 31.9 percent.
• Insulin Resistance Pack reverses and manages insulin resistance, is proven to be an effective treatment for insulin resistance, prevents diabetes, and is proven to cause an average drop in blood glucose levels of 31.9 percent.

The complaint against Wellness Support Network also names two principals, Robert Held and Robyn Held.  

The Commission vote authorizing the staff to file the complaint was 5-0.  The FTC filed its complaint in the U.S. District Court for the Northern District of California on October 28, 2010.   

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 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 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.

(FTC File No. 0723179)

A credit repair operation has agreed to stop making false claims and stop charging up-front fees under a settlement with the Federal Trade Commission. The settlement is part of an ongoing crackdown on scams that target financially strapped consumers, taking hundreds of dollars of fees to purportedly remove negative information from consumers’ credit reports even if the information is accurate and timely. The FTC filed the action in “Operation Clean Sweep” in October 2008.

According to the FTC’s complaint, James R. Dooley and his company, Nationwide Credit Services, Inc., falsely claimed that bankruptcies, judgments, slow pay history, repossessions, and collection accounts could be “legally erased” from consumers’ credit reports. The defendants allegedly charged up to $150 in advance and debited a monthly fee from some consumers’ bank accounts. The defendants rarely, if ever, delivered the promised results, and in many instances took consumers’ money without providing any services. Consumers often found their cancellation requests ignored, and their refund requests were almost always denied, the FTC complaint alleged.

The settlement order bars the defendants from making misrepresentations about any good or service, such as the ability to improve a consumer’s creditworthiness or remove negative information from their reports. It also prohibits them from charging money up-front for credit repair services, and from collecting payments from consumers who purchased their services before October 20, 2008, when the court froze the defendants’ assets. The order further bars the defendants from disclosing or benefitting from customer information, and from failing to properly dispose of customer information.

The settlement order imposes a judgment of more than $1.3 million that will be suspended once the defendants have surrendered funds frozen by the court. The full judgment will become due immediately if they are found to have misrepresented their financial condition.

The Commission vote to file the stipulated final order was 5-0. The order was filed in the U.S. District Court for the Middle District of Florida, Jacksonville Division.

NOTE: Stipulated court orders are for settlement purposes only and do not constitute an admission by the defendants of a law violation. Stipulated orders have the full force of law when signed by the 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 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.

(FTC File No. X090008)

The Federal Trade Commission is mailing almost 7,000 refund checks to victims of a nationwide operation that falsely claimed it would reduce consumers’ debt, leading many people into financial ruin and bankruptcy. Consumers paid the defendants an up-front fee of about 5 percent of their unsecured debt. The redress fund represents the available assets of the defendants, which include Homeland Financial Services, Prosper Financial Solutions, Dennis Connelly, and Richard Wade Torkelson.

The amount of each check will vary based on the amount of each person’s payments to the defendants. Consumers who receive checks should cash them on or before December 24, 2010. Checks are being mailed by the redress claims administrator, Gilardi & Co. Consumers with questions should visit www.ftc.gov/refunds or call the administrator at 1-877-987-3923. The total amount of money available for redress is about $1.2 million; the average amount of redress per consumer is about $180.

These consumer redress checks can be cashed directly by the recipients of the checks. The FTC never requires the payment of money up-front, or the provision of additional information, before consumers cash redress checks issued to them.

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.

Stories about a “freeze” or “moratorium” on mortgage foreclosures are in the headlines, so it’s no surprise if you’ve heard that some mortgage lenders are stopping foreclosures while their paperwork is investigated to be sure it’s in order. But no matter what you hear on the news, a notice from your bank, mortgage servicer, or the sheriff requires your immediate attention.

This freeze doesn’t necessarily mean that proceedings on your home stop. In fact, homeowners who are on the brink of foreclosure — or already in foreclosure — shouldn’t assume the proceeding is on ice. If you get a notice about your mortgage, pay attention to it. Call the sender — whether it’s your bank, your servicer, or the sheriff — right away.

For more information about dealing with mortgages, foreclosures, and foreclosure rescue scams, visit ftc.gov/YourHome.

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.

Following a public comment period, the Federal Trade Commission has approved a final order settling charges that Air Products and Chemicals Inc.’s potential acquisition of rival firm Airgas, Inc., would be anticompetitive in the U.S. market for certain industrial gases. The FTC order requires Air Products, if it acquires Airgas, to sell 15 air separation units and related bulk liquid oxygen and bulk liquid nitrogen assets currently owned and operated by Airgas.

The Commission vote approving the final order was 5-0. (FTC File No. 101-0093; the staff contact is Gregory Luib, Bureau of Competition, 202-326-3249; see press release dated September 9, 2010, at http://www.ftc.gov/opa/2010/09/airproducts.shtm.)

Copies of the documents mentioned in this release are available from the FTC’s website at http://www.ftc.gov and from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. Call toll-free: 1-877-FTC-HELP.

(FYI 44.2010.wpd)

The Federal Trade Commission has created a guide to help attorneys and victim advocates provide legal assistance to identity theft victims.

Geared toward resolving issues out of court, the Guide for Assisting Identity Theft Victims (http://www.consumer.ftc.gov/articles/pdf-0119-guide-assisting-id-theft-victims.pdf) describes how advocates can intervene with creditors, credit reporting agencies, debt collectors, and others, as well as self-help measures that victims can take. Victims may need an advocate’s help in a variety of situations: their age, health, language skills, or income prevents them from making effective disputes; they’re being pursued for someone else’s debt; they face uncooperative creditors or credit reporting agencies; or their case is complex.

Step-by-step instructions provide best practices for recovering from identity theft involving financial accounts, and incorporate victims’ rights under various federal statutes. The guide also addresses recovery from less common forms of identity theft, such as when a thief commits tax fraud, or obtains a federal student loan or medical services using stolen information. It includes sample dispute letters for victims and sample attorney follow-up letters to address matters victims are unable to resolve. It also provides checklists, an ID Theft Affidavit, a Victim’s Action Log, federal statutes and regulations, consumer education material, and links to online resources.

The FTC developed the guide in response to the 2007 President’s Identity Theft Task Force recommendation that personalized assistance for identity theft victims should be increased, and that “the American Bar Association, with assistance from the Department of Justice, develop a pro bono referral program focusing on assisting identity theft victims with recovery.”

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.

(ID Theft Guide)