Markets Wired

A federal court has held three Internet pagejackers in contempt and ordered them to return more than $555,,000 in ill-gotten gains for flouting a previous court order that barred them from deceptive business practices.

At the request of the Federal Trade Commission, the U.S. District Court for the District of New Hampshire has ordered defendants Sanford Wallace, Walter Rines, and Online Turbo Merchant, Inc. to return money that they made by violating a previous court order and collecting personal information about Internet users without their consent. According to the FTC, the operation targeted users of MySpace.com, diverting them to different Web sites and then bombarding them with ads to earn advertising commissions. The agency charged that the defendants subjected MySpace users to “phishing,” “pagejacking,” and “mousetrapping” scams.

The FTC’s complaint charged that the defendants obtained personal information about MySpace users without their consent by sending deceptive “phishing” messages that appeared to be from MySpace or other MySpace users; redirected users to Web sites other than those they chose to visit by “pagejacking” them to Web sites displaying advertisements; and modified and disabled users’ Web-browser navigation controls, a practice known as “mousetrapping”that allows scammers to take charge of which sites consumers visit.

The previous court order was part of a settlement reached with the FTC in October 2006 that prohibited Rines and others acting in concert with him from collecting personal information from Internet users without their advance consent. In the action announced today, the court ruled that Rines, Wallace, and Rines’s firm, Online Turbo Merchant, violated that provision. The court granted the FTC’s request to hold Rines’s business partner Wallace in contempt because, although Wallace was not part of the 2006 settlement, he had notice of the order and helped Rines collect personal information online without users’ prior consent, in violation of the order. The court held that Rines also violated a separate provision in the order that required him to post a $500,000 performance bond before downloading or installing computer code or other content that causes the display of ads or collects personal information.

In its original complaint, filed in October 2005, the FTC charged Odysseus Marketing, and its principal, Rines, with luring consumers to their Web site by offering free software,
including a program that supposedly allowed them to engage in anonymous peer-to-peer file sharing. According to the FTC, the bogus software was bundled with spyware that intercepted and replaced search results and barraged consumers’ computers with pop-up ads. The FTC alleged that the defendants’ software captured consumers’ personal information and transmitted the information to the defendants’ servers. Consumers were unable to locate or uninstall the spyware through reasonable means, the agency charged.

The FTC filed its motion asking the court to hold Rines, Wallace, and Online Turbo Merchant in contempt for targeting users of MySpace.com with another “phishing” scheme in January 2008.

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.X050069; Civil Action No. 05-CV-330-SM)
(Odysseus.wpd)

In an ongoing effort to better protect financially distressed consumers, the Federal Trade Commission is seeking public comment on proposed rules to combat deceptive and abusive telemarketing of debt relief services – services that purportedly can reduce consumers’ credit card and other unsecured debt.

In the Noticed of Proposed Rulemaking (NPRM) announced today, the Commission proposes amendments to the Telemarketing Sales Rule (TSR) that would:

• Prohibit companies from charging fees until they have provided the debt relief services;
• Require disclosures about the debt relief services being offered, including how long it will take to obtain promised debt relief and how much it will cost;
• Prohibit specific misrepresentations about material aspects of debt relief services, including success rates and whether a debt relief company is nonprofit;
• Extend the TSR to cover calls consumers make to debt relief services in response to their advertisements; and
• Define the term “debt relief service” to cover any service to renegotiate, settle, or in any way alter the payment terms or other terms of the debt between a consumer and one or more unsecured creditors or debt collectors, including a reduction in the balance, interest rate, or fees owed.

The NPRM provides an overview of the debt relief services industry, including three major categories of debt relief – credit counseling, debt settlement, and debt negotiation – and
the abuses observed in each area. It also describes FTC and state law enforcement efforts to combat deceptive and abusive practices in this industry. Additionally, the NPRM summarizes
the Commission’s September 2008 public workshop, “Consumer Protection and the Debt Settlement Industry.”

The FTC adopted the TSR on August 16, 1995. It requires certain disclosures and prohibits misrepresentations during telemarketing calls. It also bars abusive practices, including
charging up-front fees for certain services such as credit repair, recovery services, and offers of a loan or other extension of credit when granting it is “guaranteed” or is represented as having a
high likelihood of success. The TSR was amended in 2003 to create the National Do Not Call Registry and again in 2008 to curtail telemarketing calls that deliver prerecorded messages.

Comments should include the reference “Telemarketing Sales Rule – Debt Relief Amendments – R411001.” Full instructions for submitting comments are found in the Addresses section of the Notice. The NPRM has a 60-day public comment period, which ends on October 9, 2009. Additionally, the NPRM announces that the Commission will hold a public forum on this rulemaking, and it provides instructions for individuals wishing to participate. The date of the public forum will be announced separately.

The Commission vote approving the NPRM was 4-0. It can be found now on the FTC’s Web site at http://www.ftc.gov/os/2009/07/R411001tsrnprm.pdf 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. R411001)
(TSR 09.final.wpd)

A financial services telemarketer who allegedly violated several requirements of the Federal Trade Commission’s Do Not Call Rule – from calling hundreds of thousands of consumers on the National Do Not Call Registry to failing to transmit accurate caller ID information – has settled the government’s charges and is banned from telemarketing to consumers for five years.

In November 2007, as part of a multi-case crackdown on Do Not Call violators, the government charged Global Mortgage Funding, Inc. (Global Mortgage) and its owner, Damian Robert Kutzner, with unlawfully calling consumers on the Do Not Call Registry in an attempt to sell financial products, including mortgages and related financing services. The complaint also charged the defendants with violating the FTC’s Do Not Call Rule by failing to transmit accurate caller ID information, failing to pay fees required to access the Registry, and abandoning calls by not connecting consumers to a representative within two seconds after they answered the phone. Following a lengthy investigation by the FTC, the lawsuit was filed and litigated by the Department of Justice on the Commission’s behalf.

The agreed-upon court order announced today bans Kutzner and anyone working with him from participating in telemarketing to consumers, and from helping others involved in telemarketing to consumers, for five years. It also permanently bars Kutzner from violating the Telemarketing Sales Rule, as well as its Do Not Call provisions, which include calling consumers on the National Do Not Call Registry, failing to provide accurate caller ID information, calling consumers who have said they do not want to be called, and abandoning calls.

The order imposes a $6 million civil penalty against Kutzner and Global Mortgage, which has been suspended due to their inability to pay. Both defendants have filed for bankruptcy. The order also imposes reporting and record-keeping provisions to help monitor Kutzner’s compliance. Finally, the order ensures that Global Mortgage will not resume its operation or benefit from its past conduct.

Both Global Mortgage and Kutzner had a previous run-in with the FTC, which sued them in 2002 for allegedly sending “spoofed” e-mails that offered mortgages and purported to be from legitimate banks. Global and Kutzner signed a consent decree in 2003 in which they agreed to pay over $60,000 to resolve that litigation and accepted a court order prohibiting them from future “spoofing” and other misrepresentations.

The Commission vote authorizing the filing of the stipulated order was 4-0. The order was filed in the U.S. District Court for the Central District of California, and it was signed by the judge and entered by the court on July 17, 2009. The order settles the United States’ charges against Global Mortgage Funding, Inc., doing business as Global Realty, Inforte Financial, and U.S. Escrow; and Damian Robert Kutzner, individually and as an officer or director of Global Mortgage Funding, Inc.

NOTE: This stipulated final order is for settlement purposes only and does not constitute an admission by the defendants of a law violation. A stipulated final has the force of law when approved by the judge and entered by the court.

Copies of the Commission complaint and stipulated final order 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 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. X080009; Civ. No. SACV07-1275 Doc (PJWx)
(Global Mortgage.final)

The FTC is seeking public comments on its Private Vocational and Distance Education Schools Guides, commonly known as the Vocational Schools Guides, as part of its systematic review of agency guides and regulations. As detailed in the Federal Register notice announcing the review, the FTC issued the Guides in 1972 to advise businesses offering vocational training courses – either on the school’s premises or through distance education, such as correspondence courses or the Internet – how to avoid unfair and deceptive practices in the advertising, marketing, or sale of their courses. The Guides were amended in 1998 to address misrepresentations related to post-graduation employment and make other minor changes.

Specifically, the FTC is seeking comments on the Guides’ benefits and potential burdens. The notice also solicits comments on whether changes to the Guides are needed to increase their benefits, reduce their costs, or address changes in relevant technology, economic conditions, or applicable laws. Public comments are being accepted through October 16, 2009, and the notice provides information on how and where they may be submitted. All comments submitted will be publicly available on the FTC’s Web site at: www.ftc.gov/os/publiccomments.shtm.

The Commission vote approving the Federal Register notice was 4-0. It can be found on the FTC’s Web site and as a link to this press release at www.ftc.gov/os/2009/07/P097701vocationalschool.pdf. (FTC File No. P097701; the staff contact is Julie A. Lady, FTC East Central Region, Cleveland, 216-263-3409.)

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 36.2009.wpd)

The Federal Trade Commission today told the U.S. House Subcommittee on Commerce, Trade, and Consumer Protection of the Committee on Energy and Commerce that the FTC will work with the Subcommittee and others to explore ways to deploy the FTC’s experience and resources in connection with the recent grievous events at the historic Burr Oak Cemetery in Alsip, Illinois, and in addressing consumer protection concerns regarding cemeteries.

The testimony, presented by Charles Harwood, Deputy Director of the FTC’s Bureau of Consumer Protection, commended Subcommittee Chairman Bobby L. Rush for holding the field hearing in Chicago, Illinois, on oversight of cemeteries and other funeral services. The FTC also lauded Illinois authorities’ thorough and rapid response to the desecrations at Burr Oak Cemetery, and stated that the agency is prepared to cooperate and coordinate with these authorities and take further action if warranted. The Commission vote authorizing the testimony 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 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.

(Funeral Testimony)
(FTC File No. R611001)

On July 15, 2009, the Federal Trade Commission sent refund checks to consumers who allegedly had been defrauded in the case of FTC v. Integrity Financial Enterprises, LLC. Consumers who filed a claim with the FTC received checks averaging more than $200, which covered more than 85 percent of their losses. The refund checks must be cashed by September 13, 2009, or they become void.

In 2008, the FTC sued Integrity Financial Enterprises, LLC (which did business as Infinite Financial and National Benefits Exchange), National Benefits Exchange, Inc., and the companies’ owner, alleging that they promised consumers a “credit card” that could be used like a Visa or MasterCard for an up-front fee of $200 to $300, but which actually could be used only to buy products from the defendants’ Web site or catalog. The resulting court order and settlement in this case required the defendants to forfeit their financial assets to the FTC, which distributed the money to consumers who were harmed by the defendants’ conduct.

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 35.5.2009.wpd)