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FTC Actions Stop Deceptive Schemes in “Operation Tele-PHONEY” Cases

Four deceptive telemarketing operations targeted by the Federal Trade Commission have agreed to abandon the illegal tactics they allegedly used to scam consumers – such as charging for products that were never ordered, making bogus claims about their products, and harassing consumers with unwanted phone calls – under settlements with the FTC announced today.

Defendants responsible for the four telemarketing operations, which were sued by the FTC last year as part of the largest telemarketing fraud sweep ever coordinated by the agency, have signed court orders barring them from these and other illegal practices. The law enforcement sweep, “Operation Tele-PHONEY,” included 13 FTC complaints against unscrupulous telemarketers who allegedly defrauded more than 500,000 consumers, resulting in losses of more than $100 million. With the settlements announced today, all defendants in nine of the 13 “Tele-PHONEY” cases have settled the FTC’s charges, and courts have permanently prohibited the telemarketers’ illegal activity. In one other “Tele-PHONEY” complaint, the FTC said today it has added 15 new defendants, and a court has preliminarily barred the illegal conduct of 10 of them.

Combined with the actions brought by other agencies, the “Tele-PHONEY” sweep encompassed more than 180 cases, including both civil and criminal actions in the U.S. and Canada (see press release at: http://www.ftc.gov/opa/2008/05/telephoney.shtm). In many of the FTC actions, federal courts temporarily froze the defendants’ assets and suspended their operations pending trial soon after the complaints were filed.

In the complaints resulting in the settlements announced today, the FTC charged that:

Montreal-based Med Provisions operated a bogus online pharmacy that sold sham “membership packages” to elderly consumers for $389. The defendants claimed their online pharmacy could save customers 30 percent to 50 percent on prescription drug costs, and offered a 30-day money-back “guarantee.” But according to the FTC, consumers who ordered the package got either nothing, or a prescription drug card that turned out to be worthless. Consumers did not get refunds.

Steven Breitling/ICS Financial Firm used phony loan offers to bilk consumers out of $75 each. Consumers received a direct mailing from ICS Financial “guaranteeing” them a loan of between $2,000 and $5,000. Those who responded were contacted by telemarketers, who told them that to get their loan they first had to pay a $75 consulting fee and sign a contract. Consumers who paid the fee never received any loans, and many never heard from the company again, according to the complaint.

City West Advantage, Inc. d/b/a Unified Services allegedly deceived consumers into disclosing their bank account information, and then charged them about $149 without their permission. The defendants called consumers and told them they had won a $1,000 shopping spree or other “free gift,” and that the bank account information they provided would be used to charge them $1.95 for shipping and handling. Consumers who hesitated were called back repeatedly and harassed by telemarketers, even after consumers asked them to stop calling. Consumers who provided their financial information were charged approximately $149 without their consent.

Direct Connection Consulting, Inc., et al. allegedly billed consumers for products they never agreed to buy after bombarding them with a confusing sales pitch over the phone. The defendants contacted consumers with promises of free gift cards, gas cards, or free resort vacations. The telemarketers often read their pitch so fast that consumers didn’t understand or realize they were agreeing to pay for products or services. Consumers who understood the pitch were told that they would not be billed, since they did not provide their billing information. However, although consumers did not know it, the telemarketers already had their billing information and charged their credit cards or debited their bank accounts, without providing the “free” goods or the services they promised.

The four settlements announced today against 16 defendants contain judgments totaling more than $27.6 million, although large portions have been suspended by the courts due to the defendants’ inability to pay. Each of the settlements includes provisions that bar the defendants from further deceiving consumers and restrict the way they do business in the future. In the case of Direct Connection Consulting, Inc., the settlement order also bans JoAnn R. “Jody” Winter, the co-owner and officer of the corporate defendants, from telemarketing of any kind. All the other defendants in this case settled the FTC’s charges in March 2009 (see press release at http://www.ftc.gov/opa/2009/04/suretouch.shtm).

The Commission vote to approve the agreed-upon final order in each case was 4-0. The orders were filed in: 1) The U.S. District Court for the Northern District of Ohio (Med Provisions); 2) The U.S. District Court for the Western District of Oklahoma (Steven Breitling/ICS Financial Firm); 3) The U.S. District Court for the District of Nevada (Publishers Business Services, Unified Services); and 4) The U.S. District Court for the Northern District of Georgia, Atlanta Division (Direct Connection Consulting, Inc.). All orders have been entered by the respective courts.

Amended Complaint in NHS Systems, Inc.

The FTC also has added 15 new defendants to its complaint against NHS Systems, Inc., another company targeted in Operation Tele-PHONEY, and the court has preliminarily stopped the illegal practices of 10 of those defendants. The Order prohibits the 10 new defendants from telemarketing or charging a consumer’s bank account. The other five new defendants had been preliminarily ordered to stop their alleged illegal activity in 2008. The FTC has charged that this operation called consumers and misled them to believe that the defendants were affiliated with U.S. government agencies.

The defendants deceived consumers into providing bank account information, which was then used to bill them for enrollment in a “discount health care program” to which they never agreed. The FTC charged that the 15 defendants were part of the original operation or worked to continue the scheme in a new guise, even after the court ordered a halt to the operation in May and June 2008. Most of the defendants were part of the original scheme and worked to continue the new scheme.

The new defendants include: 1) PHS Enterprises, Inc.; 2) 6676529 Canada, Inc.; 3) Nicole Bertrand; 4) Barry Kirstein; 5) a person using the name “Dannie Boie;” 6) First Step Management, Inc.; 7) Gold Dot, Inc.; 8) Linke Jn Paul; 9) Tasha Jn Paul; 10) Nevada Business Solutions, Inc.; 11) Interface Management, Inc.; 12) Beginning Again, Inc.; 13) Plus Health Savings, Inc.; 14) Physicians Health Systems, Inc.; and 15) Health Management, LLC.

The Commission vote approving the amended complaint was 4-0. The amended complaint was filed in the U.S. District Court for the Eastern District of Pennsylvania on July 6, 2009, and the court entered a temporary restraining order on July 9, 2009, and a preliminary injunction on July 24, 2009.

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 a defendant has violated the law. Stipulated final orders are for settlement purposes only and do not constitute an admission by the defendant of a law violation. Stipulated final orders require approval by the court and have the force of law when signed by the judge.

Copies of the four stipulated final orders and amended complaint 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, D.C. 20580. The FTC 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.ftc.gov/ftc/complaint.shtm 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 1,700 civil and criminal law enforcement agencies in the U.S. and abroad. For free information on a variety of consumer topics, click http://ftc.gov/bcp/consumer.shtm.

(FTC File Nos.: 082-3098, 082-3101; 082-3117; 082-3064; 082-3075)
(Civ. Nos.: 1:08CV1051; 08 C 2309; 8:08-cv-00899-T-17-MAP; CV-00620-PMP-PAL; 08-2215; CV-00609-BES-GWF; 08-cv-1739-Batten)
(Tele-PHONEY 5.final.wpd)

Commission Approves Final Consent Order in Matter Concerning Aspen Technology, Inc.

Following a public comment period, the Commission has approved a final consent order in the matter of Aspen Technology, Inc. Last month, the FTC announced it would modify a 2004 order against Aspen Technology, Inc. to impose additional obligations intended to restore competition in the U.S. markets for several engineering process simulation software products. The Commission’s action came after Aspen Tech failed to divest certain assets in a timely manner, as required by the agency’s 2004 order.

The Commission vote approving the final order was 3-0-1, with Commissioner J. Thomas Rosch recused and Commissioner Pamela Jones Harbour issuing a separate concurring statement that can be found on the FTC’s Web site and as a link to this press release. (FTC Docket No. D-9310; the staff contact is Daniel P. Ducore, Bureau of Consumer Protection, 202-326-2526; see press release dated July 6, 2009, at http://www.ftc.gov/opa/2009/07/aspen.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 42.2009.wpd)

FTC Action Stops Foreclosure ‘Rescue’ Operation

The Federal Trade Commission has put a stop to a deceptive foreclosure “rescue” operation that charged homeowners $1,200 based on the false promise that it could save them from losing their homes.

The operators of the business are barred from any further deceptive practices under a settlement with the FTC. The agency charged them with violating the FTC Act by falsely claiming that they would prevent homes from being foreclosed in virtually all instances or refund most of the $1,200 fee. In most cases the defendants neither stopped foreclosure nor provided promised refunds.

The settlement prohibits the defendants from misrepresenting any fact material to a consumer’s decision to purchase a foreclosure rescue service, including that they can prevent or postpone any foreclosure; the likelihood that their foreclosure rescue will succeed; the degree of past success of any foreclosure rescue efforts; the likelihood that a consumer will get a refund if the rescue effort fails; that they can help all consumers, regardless of their individual circumstances; the number of satisfied customers or customer complaints; the terms of any refund or guarantee; any endorsement or rating by the Better Business Bureau or any other consumer association.

The order imposes a $4.1 million judgment, which will be suspended upon transfer of $21,694 in bank account funds that were frozen by the court. The full judgment will become due immediately if the defendants are found to have misrepresented their financial condition. The settlement bars them from selling or otherwise disclosing personal information about anyone whose information they obtained during their operation. The settlement also contains record-keeping and reporting provisions to monitor their compliance.

The defendants are Stephanie Dietschy, Darin Dietschy, and United Home Savers, LLC, all based in Florida. The Commission vote to authorize staff to file the stipulated final order was 4-0. The document was filed in the U.S. District Court for the Middle District of Florida, and was entered by the court on August 19, 2009.

NOTE: Stipulated final orders are for settlement purposes only and do not constitute an admission by the defendants of a law violation. A stipulated final order requires approval by the court and has 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 1,500 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. X080046)
(United Home Savers)

At FTC’s Request, Court Halts Deceptive Claims for Free Government Grants

A U.S. district court has shut down several Web sites that scammers have been using to falsely claim that they can help consumers get free government grant money, the Federal Trade Commission announced today.

At the request of the FTC, the court issued an order closing the Web sites of several related companies that falsely promised consumers that their “Easy to Use Program,” Grant Connect, could help people “instantly find the grant that’s right for [them],” while using pictures of President Obama, Vice President Biden, and the American flag to give the false impression that they were connected to the government. The FTC also charged the companies with using bogus testimonials, failing to disclose the actual cost of their product, bundling multiple other products together for sale without adequate disclosures, and debiting consumers’ bank accounts on a recurring basis without permission.

On July 28, 2009, the court entered an order that temporarily halts these companies’ illegal activities. Subsequently, five of the 12 defendants in the case agreed to a preliminary injunction halting these practices until the matter is decided at trial. The court has set a preliminary injunction hearing for the remaining defendants for September 11, 2009. The FTC is seeking to permanently stop these practices and force the companies to return their ill-gotten gains so the funds can be used to reimburse consumers who were defrauded.

According to the FTC, the operators sell many products online, including Grant Connect, which they describe as “a unique, consumer-friendly US government grant program that delivers all of the tools for the consumer to search multiple databases, write grant proposals, and deliver polished plans…” While the companies claim that consumers will be charged only a few dollars at most, they instead bundle other products and services, such as identity theft protection services, credit offers, and purported health benefits plans with their offer, ultimately charging consumers as much as $70 per month.

Using an affiliated network of Web sites, including www.grantconnectoffer.com and others, they make claims such as: “Grant Connect – $15 Billion of Free Money Available;” “Over $10 Billion Issued in 2009 Already;” and “EASY TO USE PROGRAM: Instantly find the Grant that’s right for you!” They also claim that Grant Connect “makes the process FAST and EASY, so all you have to worry about is where to spend your money!” In addition, the Grant Connect site features “testimonials,” including photos of people who supposedly got grants from the company, including one that states, “It’s so easy! I got my first grant for $300,000. All I have to do is search and click.”

To further persuade consumers into purchasing their product, the Grant Connect site has used images of the President and Vice President in an effort to suggest an affiliation with the U.S. government. For a time, the site featured a photo of President Obama and Vice President Biden standing in front of an American flag, next to the Grant Connect logo and a caption that read, “CHANGE Is Here! $15 BILLION in FREE Government MONEY for you!”

Unfortunately for consumers, according to the FTC, Grant Connect provides little more than outdated, useless information and worthless grant writing “tools.” Few, if any, grants are available to consumers who sign up for the program, and those that are require applicants to meet strict eligibility requirements before they are even considered for the grant.

In addition, while the Web sites tell consumers they can get the Grant Connect service for a one-time fee of as little as 99 cents to $2.78, they do not adequately disclose that buyers will be automatically signed up for other products and services costing up to $70 a month. While the Web site contains some disclosure language in small, densely packed type, few consumers realize they will be charged monthly for services such as “SmartHealth Gold medical and lifestyle benefits” and “VComm International and Long Distance Calling Service” unless they cancel these memberships.

The FTC charged the Grant Connect defendants with violating federal law by: 1) making deceptive representations regarding Grant Connect, 2) failing to adequately disclose the material terms and conditions of their offers, and 3) violating the Electronic Funds Transfer Act by debiting consumers’ bank accounts on a recurring basis without their authorization.

The Commission vote authorizing the complaint was 4-0. It was filed in the U.S. District Court for the District of Nevada on July 27, 2009. The complaint names Grant Connect, LLC; Global Gold, Inc.; Horizon Holdings, LLC; O’Connell Gray, LLC; Pink LP, Vantex Group, LLC; Vertek Group, LLC; Rachel A. Cook, manager of Vantex, and Vertek; James J. Gray, managing member of Grant Connect, Horizon Holdings, and O’Connell Gray; Steven R. Henriksen, president and owner of Global Gold; Juliette M. Kimoto, owner of Vertek and General Partner of Pink; and Randy D. O’Connell, managing member of Horizon Holdings and O’Connell Gray.

The five defendants who agreed to the preliminary injunction entered by the court on August 18, 2009, are: Grant Connect, LLC; Horizon Holdings, LLC; O’Connell Gray, LLC; James J. Gray; and Randy D. O’Connell.

The FTC appreciates the assistance of United States Attorney’s Office for the District of Nevada, the Better Business Bureau of Northern Nevada, the Better Business Bureau of Southern Nevada, the Las Vegas Metropolitan Police Department, and Reno Police Department (Financial Crimes/Computer Crimes Department) in this matter.

The FTC has announced several other grant fraud cases as part of the “Operation Short Change” law enforcement sweep targeting economic stimulus frauds, as well as a complaint against a company that promised consumers “guaranteed” $25,000 government grants. Information about these cases can be found on the Commission’s Web site at: http://www.ftc.gov/opa/2009/07/shortchange.shtm and http://www.ftc.gov/opa/2009/07/gwi.shtm.

Copies of the Commission’s complaint can be found on the FTC’s Web site and as a link to this press release. 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 1,500 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. 092-3126; Civ. No. 2:09-CV-01349)
(Grant Connect.final)

FTC Settlement Bars Deceptive Online Marketing Tactics; Payday Loan Applicants Were Charged for Unwanted Debit Cards

A debit card company that charged consumers a fee for a debit card they had ordered unknowingly while applying for a payday loan online, has agreed to settle Federal Trade Commission charges that the company and its principals violated federal law. The settlement bars future violations and requires the company’s owner to pay $52,000. The FTC also filed suit in federal court, charging the company’s marketing affiliate and its principals with deceptive marketing practices and seeking to bar the deception and obtain redress for consumers.

The FTC alleged that thousands of consumers who applied for a payday loan online were charged up to $54.95 for a prepaid debit card with a zero balance. According to the FTC, the debit card company sold Visa- and MasterCard-brand debit cards through a payday loan marketer whose Web site homepages contained a loan application form and a button for submitting it. On numerous Web sites, consumers who clicked the submit button were taken to another page offering four products unrelated to the loan, each with tiny “Yes” and “No” buttons. “No” was pre-clicked for three of the products; “Yes” was pre-clicked for a debit card, with fine-print disclosures asserting the consumers’ consent for their bank account to be debited. Consumers who failed to change the debit card offer to “No” and simply clicked the prominent button labeled “Finish matching me with a payday loan provider!” incurred the fee for the debit card. On other Web sites, the homepage touted the debit card as a “bonus” and disclosed the enrollment fee only in the fine print below the submit button.

According to the FTC’s complaint, the debit card company and the payday loan marketer worked together to design the offer. The card company paid its affiliate up to $15 for each transaction. Thousands of consumers were charged the enrollment fee of up to $54.95, and many also were hit with fees and penalties from their banks because their accounts ended up overdrawn. Consumers complained to the companies, the Better Business Bureau, law enforcement agencies, banks, and payday lenders.

All of the defendants were charged with falsely representing that consumers who completed an online loan application and clicked the submit button were only applying for a loan, when in fact they were also buying a prepaid debit card. They were also charged with falsely representing that loan applicants would receive a prepaid debit card at no charge.

The settlement order permanently bars the debit card company and its principals from misrepresenting the cost of any product or service, the method for charging consumers, or any other material fact. They also may not misrepresent that a product or service is free or a “bonus” without disclosing all material terms and conditions. The order further bars the defendants from charging consumers without first disclosing the specific billing information to be used, the amount to be paid, the method for assessing the payment, the entity on whose behalf the payment will be assessed, and all material terms and conditions. The order also requires that consumers affirmatively authorize the transaction, and it requires the settling defendants, in marketing financial products or services, to take reasonable steps to monitor their marketing affiliates to ensure compliance with the order.

The order imposes a $5.5 million judgment against the settling defendants, which is suspended upon payment of $52,000 by the debit card company’s owner. The full judgment will become due immediately if the settling defendants are found to have misrepresented their financial condition. The order also contains record-keeping and reporting provisions to monitor compliance.

The settling defendants are VirtualWorks, LLC, also known as Virtual Works and formerly known as Private Date Finder, also doing business as EverPrivate Card and Secret Cash Card; Jerome “Jerry” Klein; and the company’s owner, Joshua Finer. The Commission vote to authorize staff to file the stipulated final order and complaint as to the settling defendants was 3-0-1, with Commissioner J. Thomas Rosch abstaining. The complaint and order was filed in the U.S. District Court for the Northern District of California, San Jose Division.

The marketing affiliate defendants are Swish Marketing Inc., Mark Benning, Matthew Patterson, and Jason Strober. The Commission vote to authorize staff to file the complaint as to the marketing affiliate defendants was 4-0. The complaint was also filed in the U.S. District Court for the Northern District of California, San Jose Division.

NOTE: The Commission issues 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 final orders are for settlement purposes only and do not constitute an admission by the defendants of a law violation. A stipulated final order requires approval by the court and has the force of law when signed by the judge

(FTC File No. 0723241)
(Ever Private Card)

FTC Announces Public Forum on Proposed Debt Relief Amendments to the Telemarketing Sales Rule

The Federal Trade Commission is inviting interested persons to participate in a public forum on November 4, 2009, to discuss proposed debt relief amendments to the Commission’s Telemarketing Sales Rule. The recently proposed rules seek to combat deceptive and abusive telemarketing of debt relief services that purportedly can reduce consumer credit card debt and other unsecured debt. The debt relief forum, which is free and open to the public, will be held at 600 Pennsylvania Avenue, NW, Washington, DC 20850. Seating is limited and will be provided on a first come, first served basis. The Commission will publish an agenda on its Web site prior to the event.

Parties interested in participating as panelists must submit two things: a request to participate and a comment in response to the Notice of Proposed Rulemaking (NPRM) issued by the FTC on July 30, 2009. The NPRM, which was published in the Federal Register yesterday, is available on the FTC’s Web site at http://www.ftc.gov/os/fedreg/2009/august/090819telemarketingsalesrule.pdf.

Requests to participate as panelists in the public forum must be filed separately from public comments, either on paper or via e-mail to: [email protected]. The e-mail should refer to “Telemarketing Sales Rule – Debt Relief Rulemaking Forum – Request to Participate, R411001.” Full instructions for submitting comments are in the supplementary information section of the NPRM. The forum is open to the public; however, seating is limited and will be provided on a first come, first served basis.

Reasonable accommodations for people with disabilities are available upon request. Requests should be submitted via e-mail to [email protected] or by calling 202-326-3224. Requests should include a detailed description of the accommodations needed and a way to contact you if we need more information. Please provide advance notice. (FTC File No. R411001, the staff contact is Allison Brown, Bureau of Consumer Protection, 202-326-3224.)

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.

(TSR Forum FYI.wpd)

Court Halts Job Placement Scam at FTC’s Request

A U.S. district court has halted a phony job placement operation that allegedly stole money from job seekers by promising them full-time work, with benefits, that never materialized, the Federal Trade Commission announced today.

The court shut down the job placement operation until a hearing on a preliminary injunction can be held, and froze its assets. According to a complaint filed by the FTC, the scam took out ads in local newspapers around the United States. The ads urged job seekers to call an 800 number, where they got a pitch from telemarketers urging them to provide information about their work histories and to pay a placement fee that ranged from $89 to $195.

The FTC complaint charges that the defendants misled consumers by guaranteeing that they would land jobs making at least $25,000 a year if they paid the placement fee and provided the work history information. Consumers who did this did not get the promised jobs, however. Their repeated efforts to follow up with the defendants or ask for a refund were fruitless.

The Florida-based defendants charged in the case are Career Hotline, Inc., and its principal, Susan Bright, who also does business as Unique Flowers.

The Commission vote authorizing the complaint against the defendants was 4-0. The complaint was filed with the request for a temporary restraining order and entered by the U.S. District Court for the Middle District of Florida Tampa Division on August 4, 2009. The court unsealed the complaint and temporary restraining order on August 10, 2009.

The FTC appreciates the assistance of the Pinellas County Office of Justice and Consumer Services, the Pinellas County Sheriff’s Office, and the Office of the Attorney General of Ohio.

(FTC File No. 092-3161)
(Career Hotline NR.wpd)

Commission Announces New Fees for Telemarketers Accessing the National Do Not Call Registry

The FTC has announced new fees starting on October 1, 2009, for telemarketers accessing phone numbers on the National Do Not Call Registry. All telemarketers making calls to consumers in the United States are required to download the numbers on the Do Not Call list to ensure they do not call consumers who have registered their phone numbers. The first five area codes are free, and organizations that are exempt from the Do Not Call rules, such as some charitable organizations, may obtain the entire list for free. Telemarketers must subscribe each year for access to the Registry numbers.

The access fees for fiscal year 2010 (from October 1, 2009 to September 30, 2010) are based on the Do-Not-Call Registry Fee Extension Act of 2007. Under the Act’s provisions, in fiscal year 2010, telemarketers will pay $55 for access to Registry phone numbers in a single area code, up to a maximum charge of $15,058 for all area codes nationwide. Telemarketers will pay $27 per area code for numbers they subscribe to receive during the second half of the 12-month subscription period.

The Commission vote authorizing publication of the Federal Register notice announcing the new fees was 4-0. It can be found at http://www.ftc.gov//os/2009/08/P034305frnotice.pdf on the FTC’s Web site and as a link to this press release. (FTC File No. P034305; the staff contact is Kelly A. Horne, Bureau of Consumer Protection, 202-326-3031; see related press release dated April 10 2008, at http://www2.ftc.gov/opa/2008/04/dncfyi.shtm.)

(FYI 41.2009.wpd)

Mortgage Lender Agrees to Settle FTC Charges; Prescreened Loan Offers Lacked Proper Opt-Out Notice

A home mortgage lender that sent prescreened offers of credit to consumers without properly informing them of their right to opt out of receiving such offers in the future has agreed to settle Federal Trade Commission charges that it violated federal law. The settlement requires the company to pay a $20,000 civil penalty and bars future violations.

Prescreened offers of credit or insurance typically are mailings sent to selected consumers based on information in their credit report indicating that they meet the offering company’s criteria. The Fair Credit Reporting Act (FCRA) permits lenders or insurers to make prescreened offers if the offer clearly and conspicuously discloses that, among other things, the consumer’s credit report was used to make the offer and that the consumer can opt out of receiving such offers in the future. The FTC’s Prescreen Opt-Out Notice Rule (Prescreen Rule) requires that each written solicitation contain a short and a long notice, and it specifies the format, type size, and content in order to make the notices simple and easy for consumers to see and understand.

According to the FTC’s complaint, the company violated the FCRA and the FTC’s Prescreen Rule by not providing opt-out notices that comply with the Rule. In some instances, for example, the notices did not contain a short notice on the front page of the solicitation as required by the Rule, or the notices did not comply with the Rule’s format requirements.

The settlement requires Metropolitan Home Mortgage, Inc., doing business as Wholesale Home Lenders, to pay a $20,000 civil penalty and bars the company from failing to comply with the Prescreen Rule. The settlement also contains record-keeping and reporting provisions to allow the FTC to monitor compliance with the order.

The Commission vote to authorize staff to refer the complaint and stipulated final order to the U.S. Department of Justice for filing on the FTC’s behalf was 4-0. The documents were filed in the U.S. District Court for the Central District of California, Southern 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 defendant of a law violation. Stipulated orders are subject to court approval and have the force of law when signed by the judge.

(FTC File No. 0823104)
(Wholesale Home Lenders)

FTC Issues Final Breach Notification Rule for Electronic Health Information

The Federal Trade Commission has issued a final rule requiring certain Web-based businesses to notify consumers when the security of their electronic health information is breached.

Congress directed the FTC to issue the rule as part of the American Recovery and Reinvestment Act of 2009. The rule applies to both vendors of personal health records – which provide online repositories that people can use to keep track of their health information – and entities that offer third-party applications for personal health records. These applications could include, for example, devices such as blood pressure cuffs or pedometers whose readings consumers can upload into their personal health records. Consumers may benefit by using these innovations, but only if they are confident that their health information is secure and confidential.

Many entities offering these types of services are not subject to the privacy and security requirements of the Health Insurance Portability and Accountability Act (HIPAA), which applies to health care service providers such as doctors’ offices, hospitals, and insurance companies. The Recovery Act requires the Department of Health and Human Services to conduct a study and report by February 2010, in consultation with the FTC, on potential privacy, security, and breach-notification requirements for vendors of personal health records and related entities that are not subject to HIPAA. In the meantime, the Act requires the Commission to issue a rule requiring these entities to notify consumers if the security of their health information is breached. The Commission announced a proposed rule in April 2009, collected public comments until June 1, and is issuing the Final Rule today.

The Final Rule requires vendors of personal health records and related entities to notify consumers following a breach involving unsecured information. In addition, if a service provider to one of these entities has a breach, it must notify the entity, which in turn must notify consumers. The Final Rule also specifies the timing, method, and content of notification, and in the case of certain breaches involving 500 or more people, requires notice to the media. Entities covered by the rule must notify the FTC, and they may use a standard form, which can be found along with additional information about the rule at www.ftc.gov/healthbreach.

The Commission vote approving the Final Rule was 4-0. The notice will be published in the Federal Register shortly, and is available now on the FTC’s Web site and as a link to this press release.

(FTC File No. R911002)
(health info.wpd)

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