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Federal Trade Commission staff has filed comments with the Federal Financial Institutions Examination Council (FFIEC) supporting a measure designed to protect consumers from deceptive claims and to help them make better-informed decisions about whether to obtain a reverse mortgage. Reverse mortgages, typically available only to borrowers age 62 or older, allow them to “spend down” the equity in their home while they live there. A reverse mortgage is a home-secured loan that becomes due when the homeowner moves, sells the home, dies, or fails to meet loan terms such as paying property tax or homeowners insurance. Although reverse mortgages have assisted many elderly consumers in drawing on the equity in their homes, some consumers may not fully understand these complex products or may be deceived by advertising claims made about them.

In December 2009, the FFIEC issued proposed guidance for its members on how to deal with reverse mortgages. FFIEC members include the federal banking agencies – Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Office of Thrift Supervision, National Credit Union Administration – and the State Liaison Committee, which includes representatives from the Conference of State Bank Supervisors, American Council of State Savings Supervisors, and National Association of State Credit Union Supervisors.

The comments announced today, prepared by the staff of the FTC’s Bureaus of Consumer Protection and Economics and its Office of Policy Planning, describe FTC work in this area, including forming a federal-state working group to strengthen law enforcement efforts against illegal practices. The comments also note FTC consumer and business education efforts, such as including a revised consumer brochure, “Reverse Mortgages: Get the Facts Before Cashing in on Your Home’s Equity,” a new business alert to help housing counselors spot and report potentially deceptive claims, and presentations to reverse mortgage industry groups.

FTC staff specifically supports the FFIEC’s efforts to advise lenders of the importance of not making deceptive claims for reverse mortgages and to provide them with concrete guidance as to the circumstances under which claims may be deceptive in violation of Section 5 of the FTC Act. The comments also encourage reverse mortgage lenders and brokers under the FTC’s jurisdiction to review and consider the proposed guidance’s advice and examples relating to deceptive claims. The comments further note the value of testing disclosures and other measures in certain circumstances to confirm that they are clear and useful and do not create unintended consequences.

The Commission vote to file the staff comment with the Federal Financial Institutions Examination Council was 4-0. Copies of the comment are available as a link to this press release. (FTC File No. P084811; the staff contact is Heather Allen, Bureau of Consumer Protection, 202-326-3224)

A promoter of credit repair and debt relief services has agreed to settle Federal Trade Commission charges that he deceived consumers into paying thousands of dollars based on false promises that he could help solve their credit and debt problems.

According to the FTC, the promoter falsely told consumers he could improve their credit reports by removing negative information such as judgments, foreclosures, tax liens, bankruptcies, repossessions, and child support delinquencies, from the reports regardless of how old or accurate the information is. The FTC’s complaint also alleged that he and his lawyer falsely told consumer reporting agencies, as a reason to dispute negative items, that consumers were identity theft victims.

The FTC complaint charged that the marketer, Sam Tarad Sky, and his companies illegally charged consumers up to $2,199 before performing any services and failed to tell customers they could cancel the contract within three business days. He also falsely told consumers who bought debt relief services that they could satisfy their debt by paying much less than the full amount owed, such as 30 cents on the dollar.

The proposed settlement order against Sky and his companies bars them from deceiving consumers about any credit repair or financial good or service, and requires them to back up any debt relief claims they make, inform consumers that they have a right to cancel, and tell past clients how to have their escrowed funds returned. The order against Sky’s attorney, Kurt A. Streyffeler, and Streyffeler’s law firm, Kurt A. Streyffeler, P.A., bar them from misrepresenting any credit repair or financial good or service, and from violating the Credit Repair Organizations Act. All of the defendants are barred from selling or otherwise disclosing customer information.

The orders impose judgments of almost $2.5 million against Sky, Credit Restoration Brokers LLC, and Debt Negotiations Associates LLC, and $100,000 against Streyffeler and his law firm. The judgments will be suspended because of their inability to pay. The full judgments will become due immediately if they are found to have misrepresented their financial condition.

The Commission vote to authorize the complaint and stipulated final orders for filing was 4-0. The documents were filed in the U.S. District Court for the Middle District of Florida, Fort Myers Division.

NOTE: The Commission authorizes the filing of a complaint when it has “reason to believe”
that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendants have actually violated the law. Stipulated court orders are for settlement purposes only and do not necessarily constitute an admission by the defendants of a law violation. Stipulated orders have the 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. 0823001)
(Credit Restoration Brokers)

Media Advisory

March 16, 2010

 

WHAT:	The Federal Trade Commission will host the latest in a series of three roundtable discussions to explore the privacy challenges posed by the vast array of 21st century technology and business practices that collect and use consumer data.
WHEN:	Wednesday, March 17, 2010 at 8:30 a.m.
WHERE:	FTC Conference Center 601 New Jersey Avenue, NW Washington, DC 20001 The event is free and open to the public (government issued identification is required). The roundtable will be webcast for persons unable to attend. More information about the roundtable can be found at, http://ftc.gov/bcp/workshops/privacyroundtables/index.shtml.

MEDIA CONTACT:

Contact Information

Office of Public Affairs
202-326-2180

The Federal Trade Commission is seeking public comments on two additional applications filed this week by the Divestiture Trustee to divest assets under the Commission’s March 5, 2009 order, which was designed to help restore the competition lost by Whole Foods Market Inc.’s 2007 acquisition of Wild Oats Market, Inc. The Trustee’s applications propose to sell the Wild Oats brand name, as well as other intellectual property.

Under that 2009 order, the Commission appointed The Food Partners as the Divestiture Trustee to divest certain Wild Oats stores and the intellectual property associated with the Wild Oats brand, including the use of the Wild Oats name. The Divestiture Trustee is now requesting FTC approval to sell Wild Oats’ intellectual property to Topco Associates LLC or Luberski, Inc., and to sell Alfalfa’s Markets’ intellectual property to Topco. Alfalfa’s is a chain that Wild Oats previously bought but did not re-brand as Wild Oats.

The Divestiture Trustee recently requested FTC approval to sell the former Wild Oats stores in Kansas City, Missouri; Boulder, Colorado; and Portland, Maine. (see press releases at: http://www.ftc.gov/opa/2010/03/wholefoods.shtm and http://www.ftc.gov/opa/2010/03/wholefoods2.shtm).

The Commission is accepting public comments on the Divestiture Trustee’s petitions for 30 days, until April 12, 2010. Written comments should be sent to: FTC Office of the Secretary, 600 Pennsylvania Ave., N.W., Washington, DC 20580. Copies of the petitions can be found on the FTC’s Web site and as a link to this press release. Comments can be submitted at the following link: https://public.commentworks.com/ftc/wholefoodspet3/. (FTC Docket No. 9324; the staff contact is Daniel P. Ducore, Bureau of Competition, 202-326-2526; see press release dated March 6, 2009, at: http://www.ftc.gov/opa/2009/03/wholefoods.shtm.)

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.

(FYI 11.2010.wpd)

For Release

March 10, 2010

I hereby announce my resignation as a Commissioner of the Federal Trade Commission, effective April 6, 2010.

The happiest individuals, it is said, are those who are contributing to society. I could not agree more. My tenure as a Commissioner has rewarded me with true contentment and satisfaction, far beyond any other prior professional venture.

During my six and one-half years on the Commission, I have had the privilege of serving with eight tremendously talented Commissioners. I thank all of them for their fellowship and friendship, and for always keeping me “on my game.” I also owe a debt of gratitude to the senior managers and career staff, not just for their vast substantive expertise (and their generosity in sharing it), but for their devotion to our agency’s competition and consumer protection missions. These individuals are the real driving force behind the Commission’s tradition of excellence, and I will always be proud of all we have accomplished together.

My experiences as a Commissioner have confirmed my belief that there is no greater calling than government service. Thank you for the opportunity to serve this country and the American consumer.

Contact Information

MEDIA CONTACT:

Office of Public Affairs
202-326-2180

FTC Chairman Jon Leibowitz and Illinois Attorney General Lisa Madigan will host a press conference at 10:30 CST (11:30 EST) on Tuesday, March 9, to discuss a major identity theft law enforcement initiative.

WHAT:	Press Conference
WHEN:	Tuesday, March 9, 2010 10:30 AM CST (11:30 EST)
WHERE:	FTC Midwest Regional Office Suite 1825 55 West Monroe Street Chicago, Illinois 60603 The press conference will be Webcast and will be available at: http://htc-01.media.globix.net/COMP008760MOD1/ftc_web/FTCindex.html#Mar_09a_10 Reporters who wish to participate, but who cannot attend may call: 866-363-9013 Conference ID: 59828346.

MEDIA CONTACT:

LifeLock, Inc. has agreed to pay $11 million to the Federal Trade Commission and $1 million to a group of 35 state attorneys general to settle charges that the company used false claims to promote its identity theft protection services, which it widely advertised by displaying the CEO’s Social Security number on the side of a truck.

In one of the largest FTC-state coordinated settlements on record, LifeLock and its principals will be barred from making deceptive claims and required to take more stringent measures to safeguard the personal information they collect from customers.

“While LifeLock promised consumers complete protection against all types of identity theft, in truth, the protection it actually provided left enough holes that you could drive a truck through it,” said FTC Chairman Jon Leibowitz.

“This agreement effectively prevents LifeLock from misrepresenting that its services offer absolute prevention against identity theft because there is unfortunately no foolproof way to avoid ID theft,” Illinois Attorney General Lisa Madigan said. “Consumers can take definitive steps to minimize the chances of having their personal information stolen, and this settlement will help them make more informed decisions about whether to enroll in ID theft protection services.”

Since 2006, LifeLock’s ads have claimed that it could prevent identity theft for consumers willing to sign up for its $10-a-month service.

According to the FTC’s complaint, LifeLock has claimed:

• “By now you’ve heard about individuals whose identities have been stolen by identity thieves . . . LifeLock protects against this ever happening to you. Guaranteed.”
• “Please know that we are the first company to prevent identity theft from occurring.”
• “Do you ever worry about identity theft? If so, it’s time you got to know LifeLock. We work to stop identity theft before it happens.”

The FTC’s complaint charged that the fraud alerts that LifeLock placed on customers’ credit files protected only against certain forms of identity theft and gave them no protection against the misuse of existing accounts, the most common type of identity theft. It also allegedly provided no protection against medical identity theft or employment identity theft, in which thieves use personal information to get medical care or apply for jobs. And even for types of identity theft for which fraud alerts are most effective, they do not provide absolute protection. They alert creditors opening new accounts to take reasonable measures to verify that the individual applying for credit actually is who he or she claims to be, but in some instances, identity thieves can thwart even reasonable precautions.

New account fraud, the type of identity theft for which fraud alerts are most effective, comprised only 17 percent of identity theft incidents, according to an FTC survey released in 2007.

The FTC’s complaint further alleged that LifeLock also claimed that it would prevent unauthorized changes to customers’ address information, that it constantly monitored activity on customer credit reports, and that it would ensure that a customer always would receive a telephone call from a potential creditor before a new account was opened. The FTC charged that those claims were false.

In addition to its deceptive identity theft protection claims, LifeLock allegedly made claims about its own data security that were not true. According to the FTC, LifeLock routinely collected sensitive information from its customers, including their social security numbers and credit card numbers. The company claimed:

• “Only authorized employees of LifeLock will have access to the data that you provide to us, and that access is granted only on a ‘need to know’ basis.”
• “All stored personal data is electronically encrypted.”
• “LifeLock uses highly secure physical, electronic, and managerial procedures to safeguard the confidentiality and security of the data you provide to us.”

The FTC charged that LifeLock’s data was not encrypted, and sensitive consumer information was not shared only on a “need to know” basis. In fact, the agency charged, the company’s data system was vulnerable and could have been exploited by those seeking access to customer information.

The FTC and state settlements with LifeLock bar deceptive claims, and prohibit the company from misrepresenting the “means, methods, procedures, effects, effectiveness, coverage, or scope of any identity theft protection service.” They also bar misrepresentations about the risk of identity theft, and the manner and extent to which LifeLock protects consumers’ personal information. In addition, the settlements require LifeLock to establish a comprehensive data security program and obtain biennial independent third-party assessments of that program for twenty years.

The Attorneys General of Alaska, Arizona, California, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Maine, Maryland, Massachusetts, Michigan, Missouri, Mississippi, Montana, Nebraska, Nevada, New Mexico, New York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Vermont, Virginia, Washington, and West Virginia participated in this settlement.

In addition to LifeLock, the FTC complaint named co-founders Richard Todd Davis and Robert J. Maynard, Jr., who will be barred from the same misrepresentations as LifeLock.

The Commission vote to authorize staff to file the complaint and the settlement with LifeLock and Richard Todd Davis was 4-0. The Commission vote to authorize staff to file the settlement with Robert J. Maynard, Jr. was 3-1, with Commissioner J. Thomas Rosch dissenting. The documents were filed in the U.S. District Court for the District of Arizona.

The FTC will use the $11 million it receives from the settlements to provide refunds to consumers. It will be sending letters to the current and former customers of LifeLock who may be eligible for refunds under the settlement, along with instructions for applying. Customers do not have to contact the FTC to be eligible for refunds. Up-to-date information about the redress program can be found at 202-326-3757 and at www.ftc.gov/lifelock.

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. Stipulated judgements are for settlement purposes only and do not constitute an admission by the defendant of a law violation. Consent judgments have the force of law when signed by the judge.

In addition to announcing the LifeLock case, the FTC’s Northeast Regional Office sponsored an event to kick off National Consumer Protection week. The goal was to alert consumers to the top complaint categories in the Northeast Region and to arm consumers with the tools to recognize and protect themselves against all types of fraud. Also participating were the Better Business Bureau serving Metropolitan New York, the New York Attorney General’s Office, the New York City Department of Consumer Affairs, and AARP.

The Federal Trade Commission works for the consumer 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, click http://www.ftccomplaintassistant.gov or call 1-877-382-4357. The FTC enters Internet, telemarketing, identity theft, and other fraud-related 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. For free information on a variety of consumer topics, click http://www.ftc.gov/bcp/consumer.shtm.

(FTC File No. 072-3069)