Providers of Locations for Business Opportunities Ordered to Stop Misrepresentations

Four members of a South Carolina family have settled Federal Trade Commission charges that they operated “location services” companies that falsely promised to find locations for their customers’ vending machines and display racks and made false earnings claims.

The defendants promised customers they would secure “profitable locations,” charging from $150 to as much as $6,000, depending on the number and types of locations they were paid to find. According to a complaint filed by the FTC, they often did little or nothing for their customers, and often failed to find any locations, or not as many as they had been hired to find. They also were charged with falsely claiming that customers were likely to achieve significant sales and earn substantial income by using locations the company could secure. Customers rarely, if ever, made the kind of sales promised in the pitches or ever achieved a full return of their investment.

The defendants are Cornerstone Marketing LLC; Sidney Putnam, individually and d/b/a Prime Time Marketing, Prestige Marketing, Metropolitan Placement Services, and Best Locations; his wife, Carol Putnam, individually and d/b/a Prestige Marketing and Best Locations; their son, Christopher Putnam, individually and as a member, organizer, or manager of Cornerstone Marketing LLC; and his wife, Melanie Putnam, individually and d/b/a Prestige Marketing and Best Locations.

Under the settlement, the defendants are permanently prohibited from failing to secure locations for consumers within 90 days after the consumers pay, and they must refund payments for any location not secured within 90 days. They also are permanently prohibited from making misrepresentations about the availability or profitability of locations in a purchaser’s geographic area; the income, profits, or sales volume a purchaser is likely to achieve or that have been achieved by others; how long it is likely to take to recoup an investment; that the defendants already have obtained or identified specific locations; that they have a locator operating in a purchaser’s geographic area; the amount of competition within, or a purchaser’s territorial rights to any geographic territory; the terms and conditions of any refund, relocation, cancellation, exchange, repurchase, or guarantee policy; or that the defendants will provide the goods or services they claim.

The settlement contains a suspended monetary judgment of $3 million. Based on the defendants’ financial condition, the order requires them to pay $55,000, plus the net proceeds of the sale of a house that Christopher and Melanie Putnam are required to sell. The full judgment will be imposed if the defendants are found to have misrepresented their financial condition.

The Commission vote to authorize staff to file the proposed stipulated permanent injunction and final order was 5-0. The order was filed in the U.S. District Court for the District of South Carolina, Beaufort Division.

Copies of the proposed stipulated final orders are available from the FTC’s Web site at http://www.ftc.gov and also 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 1,600 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.

Alleged Swindlers Agree to Settle FTC Charges of Deceptive Business Opportunity Sales

Two persons who operated a business opportunity scam have agreed to settle Federal Trade Commission charges that they tricked more than 1,300 consumers into paying between $5,000 and $25,000 for a bogus business opportunity.

The settlement is a result of last year’s Project Fal$e Hope$, an FTC-led effort that targeted bogus business opportunities and work-at-home scams, producing more than 100 law enforcement actions by the FTC, the Department of Justice, the U.S. Postal Inspection Service, and law enforcement agencies in 11 states.

In November 2006, the FTC charged Business Card Experts, Inc. d/b/a BCE Media, BCE, Inc., Scott R. Boardman, and Stewart P. Grandpre with using false and deceptive earnings claims and phony references to lure consumers into buying dealerships to sell business cards and other materials produced by BCE. Using Internet and classified advertisements, telemarketers, and income projection spreadsheets, BCE claimed that consumers could earn $150,000 in their first year and recoup their initial investments within three to five months. In May 2007, the FTC named Boardman’s wife, Kelley P. Boardman, as a relief defendant to ensure the recovery of assets stemming from the business that were held individually by her or jointly with her husband.

Under the proposed settlement orders, judgments of more than $16 million against the original defendants, and an order of disgorgement of more than $3.5 million against the relief defendant, will be suspended once they have relinquished assets subject to an asset freeze, including Scott Boardman’s accounts in financial institutions totaling approximately $5 million, the Boardmans’ condominium in Florida, and the balance of Grandpre’s accounts in financial institutions totaling more than $35,000, as well as Grandpre’s two snowmobiles, a snowmobile trailer, and a motorcycle trailer.

Under the proposed settlements, Scott Boardman and Stewart Grandpre are permanently prohibited from making material misrepresentations to any potential purchaser of any goods or services. Boardman is permanently banned from engaging in or benefitting from any aspect of commerce involving business ventures or investment opportunities, and from telemarketing or assisting others engaged in telemarketing. In connection with the sale of business ventures or investment opportunities, Grandpre is permanently prohibited from making misrepresentations, including the potential earnings, the number of investors, the fact that anyone has invested or can report about their investment experience, or failing to disclose any personal relationship with an investor or consideration he has promised or paid them. Grandpre also is prohibited from violating the Telemarketing Sales Rule, and, in any telemarketing business he controls or has a majority interest in, from failing to take steps to ensure that all telemarketing personnel comply with the order. Both Boardman and Granpdre also are permanently prohibited from using the name, address, account numbers, or other identifying information of any consumer who purchased business ventures or investment opportunities from them.

The Commission vote to authorize staff to file the stipulated final orders was 5-0. The documents were filed in the U.S. District Court for the District of Minnesota.

NOTE: These stipulated final orders are for settlement purposes only and do not constitute admissions 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.

Copies of the proposed stipulated final orders are available from the FTC’s Web site at http://www.ftc.gov and also 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 1,600 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.

Alleged Swindlers Agree to Settle FTC Charges of Deceptive Business Opportunity Sales

Two persons who operated a business opportunity scam have agreed to settle Federal Trade Commission charges that they tricked more than 1,300 consumers into paying between $5,000 and $25,000 for a bogus business opportunity.

The settlement is a result of last year’s Project Fal$e Hope$, an FTC-led effort that targeted bogus business opportunities and work-at-home scams, producing more than 100 law enforcement actions by the FTC, the Department of Justice, the U.S. Postal Inspection Service, and law enforcement agencies in 11 states.

In November 2006, the FTC charged Business Card Experts, Inc. d/b/a BCE Media, BCE, Inc., Scott R. Boardman, and Stewart P. Grandpre with using false and deceptive earnings claims and phony references to lure consumers into buying dealerships to sell business cards and other materials produced by BCE. Using Internet and classified advertisements, telemarketers, and income projection spreadsheets, BCE claimed that consumers could earn $150,000 in their first year and recoup their initial investments within three to five months. In May 2007, the FTC named Boardman’s wife, Kelley P. Boardman, as a relief defendant to ensure the recovery of assets stemming from the business that were held individually by her or jointly with her husband.

Under the proposed settlement orders, judgments of more than $16 million against the original defendants, and an order of disgorgement of more than $3.5 million against the relief defendant, will be suspended once they have relinquished assets subject to an asset freeze, including Scott Boardman’s accounts in financial institutions totaling approximately $5 million, the Boardmans’ condominium in Florida, and the balance of Grandpre’s accounts in financial institutions totaling more than $35,000, as well as Grandpre’s two snowmobiles, a snowmobile trailer, and a motorcycle trailer.

Under the proposed settlements, Scott Boardman and Stewart Grandpre are permanently prohibited from making material misrepresentations to any potential purchaser of any goods or services. Boardman is permanently banned from engaging in or benefitting from any aspect of commerce involving business ventures or investment opportunities, and from telemarketing or assisting others engaged in telemarketing. In connection with the sale of business ventures or investment opportunities, Grandpre is permanently prohibited from making misrepresentations, including the potential earnings, the number of investors, the fact that anyone has invested or can report about their investment experience, or failing to disclose any personal relationship with an investor or consideration he has promised or paid them. Grandpre also is prohibited from violating the Telemarketing Sales Rule, and, in any telemarketing business he controls or has a majority interest in, from failing to take steps to ensure that all telemarketing personnel comply with the order. Both Boardman and Granpdre also are permanently prohibited from using the name, address, account numbers, or other identifying information of any consumer who purchased business ventures or investment opportunities from them.

The Commission vote to authorize staff to file the stipulated final orders was 5-0. The documents were filed in the U.S. District Court for the District of Minnesota.

NOTE: These stipulated final orders are for settlement purposes only and do not constitute admissions 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.

Copies of the proposed stipulated final orders are available from the FTC’s Web site at http://www.ftc.gov and also 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 1,600 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.

Remarks by FTC Chairman to Open Debt Collection Workshop October 10-11

Federal Trade Commission Chairman Deborah Platt Majoras will provide opening remarks to begin the FTC’s two-day public workshop to explore changes in the debt collection industry and examine their impact on consumers and businesses. Consumer advocates, industry representatives, state and federal regulators, and others with relevant expertise will provide information on a range of issues, including the effects of technological, economic, and legal changes on the industry and whether the Fair Debt Collection Practices Act and other laws have kept pace with developments. There is no charge and no pre-registration. All attendees must show a valid form of photo identification, such as a driver’s license.

WHEN: October 10 – 9 a.m. to 5:15 p.m.
October 11 – 9 a.m. to 4 p.m.
WHERE: FTC’s Satellite Building Conference Center
601 New Jersey Avenue, N.W., Washington, D.C.

Webcast Information

Reporters and others interested in this event can see the agenda and view the conference via Webcast by accessing the following link: www.ftc.gov/debtcollectionworkshop.

Remarks by FTC Chairman to Open Debt Collection Workshop October 10-11

Federal Trade Commission Chairman Deborah Platt Majoras will provide opening remarks to begin the FTC’s two-day public workshop to explore changes in the debt collection industry and examine their impact on consumers and businesses. Consumer advocates, industry representatives, state and federal regulators, and others with relevant expertise will provide information on a range of issues, including the effects of technological, economic, and legal changes on the industry and whether the Fair Debt Collection Practices Act and other laws have kept pace with developments. There is no charge and no pre-registration. All attendees must show a valid form of photo identification, such as a driver’s license.

WHEN: October 10 – 9 a.m. to 5:15 p.m.
October 11 – 9 a.m. to 4 p.m.
WHERE: FTC’s Satellite Building Conference Center
601 New Jersey Avenue, N.W., Washington, D.C.

Webcast Information

Reporters and others interested in this event can see the agenda and view the conference via Webcast by accessing the following link: www.ftc.gov/debtcollectionworkshop.

FTC Challenges Kyphons Acquisition of Disc-O-Tech

The Federal Trade Commission today announced a complaint challenging Kyphon, Inc.’s (Kyphon) proposed acquisition of the spinal assets of Disc-O-Tech Medical Technologies, Ltd. and Discotech Orthopedic Technologies, Inc. (collectively Disc-O-Tech) as anticompetitive in the U.S. market for minimally invasive vertebral compression fracture (MIVCF) treatment products. Under the terms of a consent order allowing the transaction to proceed, the parties are required to divest Disc-O-Tech’s Confidence product lines – a brand of MIVCF treatment product – to an FTC-approved buyer within 60 days.

“Without the Commission’s action today, the acquisition by Kyphon of Disc-O-Tech’s Confidence product would have deprived Americans suffering from vertebral compression fractures, including the elderly, of the benefits of competition for these vital products,” said Jeffrey Schmidt, Director of the FTC’s Bureau of Competition. “The Commission’s order contains strong relief that will preserve competition, ensuring that these products will be provided at lower prices and higher quality.”

The Transaction and Relevant Product Market

In October 2006, Kyphon agreed to acquire certain spinal assets from Disc-O-Tech, including the intellectual property and assets related to the latter’s B-Twin, SKy Bone Expander, and Confidence product lines for approximately $220 million. According to the FTC, the competitive overlap between the two companies is in the U.S. market for MIVCF treatment products. These products are used to treat vertebral compression fractures (VCFs), which can cause extreme debilitating pain for some patients. VCFs can occur when one or more vertebrae collapse and are commonly caused by osteoporosis.

In the past, doctors typically treated VCFs with vertebroplasty, the first MIVCF treatment to be introduced. While it effectively relieves pain, many doctors have safety concerns about the liquid bone cement used in the procedure. In 1999, Kyphon introduced kyphoplasty, which is similar to vertebroplasty but uses a technology that reduces the chance of bone cement leakage. Because of its safety advantages and other factors, kyphoplasty is now the most widely used MIVCF treatment product in the United States. Disc-O-Tech’s Confidence system competes directly with Kyphon’s higher-priced kyphoplasty product and uses a highly viscous cement that makes it a safer alternative to vertebroplasty. Accordingly, it has become a closer substitute for Kyphon’s product than other vertebroplasty products. While other companies are attempting to enter the MIVCF product treatment market, none of their products has the Confidence system’s immediate prospects of success or ability to compete effectively with kyphoplasty.

The Commission’s Complaint

According to the Commission’s complaint, Kyphon’s acquisition of Disc-O-Tech as proposed would violate Section 5 of the FTC Act and Section 7 of the Clayton Act, as amended, by causing significant competitive harm in the market for MIVCF treatment products. The complaint alleges that Confidence is Kyphon’s main competitive threat and, absent the acquisition, would make significant inroads into Kyphon’s near-monopoly position in this market. Kyphon’s acquisition of Confidence appears to have been motivated, in part, by its desire to keep those assets out of the hands of other major medical equipment companies that had the sales and marketing know-how to capitalize on those assets. Kyphon’s acquisition of Confidence would have allowed it to avoid the competition that another acquirer would have brought to the MIVCF treatment product market.

The FTC contends that entry by another competitor is unlikely to be either timely or sufficient to offset the alleged anticompetitive effects of the proposed acquisition. Entry is limited by the need for U.S. Food and Drug Administration clearances and approvals, the substantial intellectual property positions of Kyphon, Disc-O-Tech and other market participants, and the difficulty of establishing a U.S. sales and marketing force for any new MIVCF treatment product.

Terms of the Consent Order

The FTC’s consent order is designed to remedy the competitive harm that otherwise would result from Kyphon’s acquisition of Disc-O-Tech’s Confidence assets. Under the terms of the order, the parties have agreed to divest these assets no later than 60 days after the consent agreement is accepted for public comment, thereby remedying the anticompetitive effects in the MIVCF treatment product market. Specifically, the order requires the parties to divest all assets related to the Confidence system, including tangible and intellectual property, as well as any permits and licences needed to make, distribute, and sell the Confidence system. The parties also must divest rights to certain of Disc-O-Tech’s development efforts related to the system. If the acquirer requires additional assets not included in the divestiture package, the order would require Kyphon to provide a license to any other assets acquired from Disc-O-Tech to enable the acquirer to immediately enter the MIVCF treatment product market as a viable competitor.

In addition, the order contains several provisions designed to ensure that the divestiture is successful. First, the FTC will evaluate possible buyers to ensure that they are able to restore competition that would have been lost through the acquisition. If the parties do not divest the assets within the time required, the Commission can appoint a divestiture trustee to oversee their sale. Next, Disc-O-Tech is required to provide transitional services to the buyer approved by the FTC to ensure a smooth transition to the buyer and to ensure continued uninterrupted service to customers during the transition. To ensure that Kyphon does not interfere with the acquirer’s freedom to compete in the MIVCF treatment product market, the order would bar Kyphon from suing the buyer for infringing on any intellectual property rights acquired from Disc-O-Tech.

Finally, the consent order contains an order that requires Disc-O-Tech to maintain the viability of the assets to be divested until they have been transferred to a Commission-approved buyer. The Order to Hold Separate and Maintain Assets also prohibits Kyphon from offering jobs to Disc-O-Tech employees involved in the Confidence system before the assets are divested.

The Commission vote approving the issuance of the complaint and consent order was 3-0-2, with Commissioners Pamela Jones Harbour and William Kovacic recused. The order will be subject to public comment for 30 days, until November 8, 2007, after which the Commission will decide whether to make it final. Comments should be sent to: FTC, Office of the Secretary, 600 Pennsylvania Ave., N.W., Washington, DC 20580..

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. 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 $11,000.

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, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580. To learn more about the Bureau of Competition, read “Competition Counts” at http://www.ftc.gov/competitioncounts.

FTC Challenges Kyphons Acquisition of Disc-O-Tech

The Federal Trade Commission today announced a complaint challenging Kyphon, Inc.’s (Kyphon) proposed acquisition of the spinal assets of Disc-O-Tech Medical Technologies, Ltd. and Discotech Orthopedic Technologies, Inc. (collectively Disc-O-Tech) as anticompetitive in the U.S. market for minimally invasive vertebral compression fracture (MIVCF) treatment products. Under the terms of a consent order allowing the transaction to proceed, the parties are required to divest Disc-O-Tech’s Confidence product lines – a brand of MIVCF treatment product – to an FTC-approved buyer within 60 days.

“Without the Commission’s action today, the acquisition by Kyphon of Disc-O-Tech’s Confidence product would have deprived Americans suffering from vertebral compression fractures, including the elderly, of the benefits of competition for these vital products,” said Jeffrey Schmidt, Director of the FTC’s Bureau of Competition. “The Commission’s order contains strong relief that will preserve competition, ensuring that these products will be provided at lower prices and higher quality.”

The Transaction and Relevant Product Market

In October 2006, Kyphon agreed to acquire certain spinal assets from Disc-O-Tech, including the intellectual property and assets related to the latter’s B-Twin, SKy Bone Expander, and Confidence product lines for approximately $220 million. According to the FTC, the competitive overlap between the two companies is in the U.S. market for MIVCF treatment products. These products are used to treat vertebral compression fractures (VCFs), which can cause extreme debilitating pain for some patients. VCFs can occur when one or more vertebrae collapse and are commonly caused by osteoporosis.

In the past, doctors typically treated VCFs with vertebroplasty, the first MIVCF treatment to be introduced. While it effectively relieves pain, many doctors have safety concerns about the liquid bone cement used in the procedure. In 1999, Kyphon introduced kyphoplasty, which is similar to vertebroplasty but uses a technology that reduces the chance of bone cement leakage. Because of its safety advantages and other factors, kyphoplasty is now the most widely used MIVCF treatment product in the United States. Disc-O-Tech’s Confidence system competes directly with Kyphon’s higher-priced kyphoplasty product and uses a highly viscous cement that makes it a safer alternative to vertebroplasty. Accordingly, it has become a closer substitute for Kyphon’s product than other vertebroplasty products. While other companies are attempting to enter the MIVCF product treatment market, none of their products has the Confidence system’s immediate prospects of success or ability to compete effectively with kyphoplasty.

The Commission’s Complaint

According to the Commission’s complaint, Kyphon’s acquisition of Disc-O-Tech as proposed would violate Section 5 of the FTC Act and Section 7 of the Clayton Act, as amended, by causing significant competitive harm in the market for MIVCF treatment products. The complaint alleges that Confidence is Kyphon’s main competitive threat and, absent the acquisition, would make significant inroads into Kyphon’s near-monopoly position in this market. Kyphon’s acquisition of Confidence appears to have been motivated, in part, by its desire to keep those assets out of the hands of other major medical equipment companies that had the sales and marketing know-how to capitalize on those assets. Kyphon’s acquisition of Confidence would have allowed it to avoid the competition that another acquirer would have brought to the MIVCF treatment product market.

The FTC contends that entry by another competitor is unlikely to be either timely or sufficient to offset the alleged anticompetitive effects of the proposed acquisition. Entry is limited by the need for U.S. Food and Drug Administration clearances and approvals, the substantial intellectual property positions of Kyphon, Disc-O-Tech and other market participants, and the difficulty of establishing a U.S. sales and marketing force for any new MIVCF treatment product.

Terms of the Consent Order

The FTC’s consent order is designed to remedy the competitive harm that otherwise would result from Kyphon’s acquisition of Disc-O-Tech’s Confidence assets. Under the terms of the order, the parties have agreed to divest these assets no later than 60 days after the consent agreement is accepted for public comment, thereby remedying the anticompetitive effects in the MIVCF treatment product market. Specifically, the order requires the parties to divest all assets related to the Confidence system, including tangible and intellectual property, as well as any permits and licences needed to make, distribute, and sell the Confidence system. The parties also must divest rights to certain of Disc-O-Tech’s development efforts related to the system. If the acquirer requires additional assets not included in the divestiture package, the order would require Kyphon to provide a license to any other assets acquired from Disc-O-Tech to enable the acquirer to immediately enter the MIVCF treatment product market as a viable competitor.

In addition, the order contains several provisions designed to ensure that the divestiture is successful. First, the FTC will evaluate possible buyers to ensure that they are able to restore competition that would have been lost through the acquisition. If the parties do not divest the assets within the time required, the Commission can appoint a divestiture trustee to oversee their sale. Next, Disc-O-Tech is required to provide transitional services to the buyer approved by the FTC to ensure a smooth transition to the buyer and to ensure continued uninterrupted service to customers during the transition. To ensure that Kyphon does not interfere with the acquirer’s freedom to compete in the MIVCF treatment product market, the order would bar Kyphon from suing the buyer for infringing on any intellectual property rights acquired from Disc-O-Tech.

Finally, the consent order contains an order that requires Disc-O-Tech to maintain the viability of the assets to be divested until they have been transferred to a Commission-approved buyer. The Order to Hold Separate and Maintain Assets also prohibits Kyphon from offering jobs to Disc-O-Tech employees involved in the Confidence system before the assets are divested.

The Commission vote approving the issuance of the complaint and consent order was 3-0-2, with Commissioners Pamela Jones Harbour and William Kovacic recused. The order will be subject to public comment for 30 days, until November 8, 2007, after which the Commission will decide whether to make it final. Comments should be sent to: FTC, Office of the Secretary, 600 Pennsylvania Ave., N.W., Washington, DC 20580..

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. 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 $11,000.

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, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580. To learn more about the Bureau of Competition, read “Competition Counts” at http://www.ftc.gov/competitioncounts.

FTC Advisory Opinion: Debt Collectors May Inform Consumers That Collection Efforts Have Ceased

The Federal Trade Commission has issued an advisory opinion clarifying when the Fair Debt Collection Practices Act allows a debt collector to notify a consumer that it has ceased trying to collect a debt. The FDCPA provides that if a debt collector contacts a consumer to collect a debt, and the consumer disputes the debt in writing, the collector must stop collection efforts until it has sent the consumer written verification of the debt. ACA International, a debt collection trade association, asked the Commission to address whether, if a consumer disputes a debt in writing and the debt collector determines to cease its collection efforts, it would violate the FDCPA for the collector to notify the consumer that it has ceased its collection efforts. The FTC’s advisory opinion concluded that a debt collector informing a consumer that its collection efforts have ceased would not violate the FDCPA and would benefit the consumer, in that the consumer would no longer have to worry about further contacts from that collector.

The Commission vote approving issuance of the advisory opinion was 5-0. (File No. P06-4803) The staff contact is Thomas E. Kane, Bureau of Consumer Protection, 202-326-3224.

Copies of the opinion are available from the FTC’s Web site, 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.

Federal Enforcers Target List Brokers

The Federal Trade Commission has joined forces with the U.S. Postal Inspection Service and the U.S. Attorney for the Southern District of Illinois to halt an illegal operation that sold lists of consumers to Canadian telemarketers who planned to use them unlawfully. The lists included consumers’ credit card and bank account information, exposing thousands of consumers to possible identity theft, and violating federal law.

The USPIS set up an undercover sting – using postal inspectors who posed as Canadian telemarketers – and sought to buy lists that contained consumers’ credit card account numbers and security codes, and bank account numbers and routing codes, so they could offer credit cards to U.S. consumers for a one-time, up-front fee. It’s a violation of federal law to sell such lists, but Practical Marketing, Inc., sold them to the undercover inspectors. Randy G. Massey, the U.S. Attorney for the Southern District of Illinois, brought federal criminal charges, and Practical Marketing pled guilty to identity theft and was sentenced to a criminal fine of $10,000, and ordered to make payment of $100,000 to the Postal Inspection Service Fraud Fund to assist the Service in investigating and prosecuting fraud cases.

In a separate civil action, the FTC charged Practical Marketing and its principals with assisting telemarketers who were purchasing lists in order to solicit U.S. consumers to pay advance fees to get “guaranteed” credit cards with substantial credit limits. Selling lists with unencrypted credit card and bank account information – so called “full data leads”– violates the FTC’s Telemarketing Sales Rule. In addition, the TSR bars telemarketers from charging fees in advance to obtain credit cards. The FTC charged that the telemarketers violated the Rule by offering advance-fee credit cards, and the list brokers knowingly assisted the telemarketers in that unlawful conduct.

The settlement in the FTC’s action bars the list brokers from “collecting, selling or disclosing” consumers’ account numbers to unaffiliated third parties in the future. It requires that

the defendants turn over any lists of account numbers to the FTC and destroy any copies. The settlement also requires the defendants to take steps to monitor the activities of their clients. It requires them to evaluate the products and services their clients are offering and the truthfulness of their marketing claims; investigate any complaints they receive about their clients; terminate services to clients who are breaking the law; and report any terminated clients to the FTC. The order also bars the defendants from providing assistance or support to marketers who are violating the TSR by requiring that the defendants obtain telemarketers’ scripts prior to selling them lists. The settlement contains standard reporting and recordkeeping provisions to allow the FTC to monitor compliance.

This case was filed in conjunction with, and with the invaluable assistance of, the U.S. Postal Inspection Service and Assistant U.S. Attorney Bruce Reppert in the office of the U.S. Attorney for the Southern District of Illinois.

The defendants named in the FTC complaint are Practical Marketing, Inc., and its principals, Robert and Valerie DeSalvo. They are based in Boca Raton, Florida.

The Commission vote to authorize staff to file the complaint and stipulated final order was 5-0. The complaint and stipulated final order were filed in the U.S. District Court for the Southern District of Illinois.

NOTE: This stipulated final order is for settlement purposes only and does not constitute an admission by the defendant 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 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 1,600 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.

Federal Enforcers Target List Brokers

The Federal Trade Commission has joined forces with the U.S. Postal Inspection Service and the U.S. Attorney for the Southern District of Illinois to halt an illegal operation that sold lists of consumers to Canadian telemarketers who planned to use them unlawfully. The lists included consumers’ credit card and bank account information, exposing thousands of consumers to possible identity theft, and violating federal law.

The USPIS set up an undercover sting – using postal inspectors who posed as Canadian telemarketers – and sought to buy lists that contained consumers’ credit card account numbers and security codes, and bank account numbers and routing codes, so they could offer credit cards to U.S. consumers for a one-time, up-front fee. It’s a violation of federal law to sell such lists, but Practical Marketing, Inc., sold them to the undercover inspectors. Randy G. Massey, the U.S. Attorney for the Southern District of Illinois, brought federal criminal charges, and Practical Marketing pled guilty to identity theft and was sentenced to a criminal fine of $10,000, and ordered to make payment of $100,000 to the Postal Inspection Service Fraud Fund to assist the Service in investigating and prosecuting fraud cases.

In a separate civil action, the FTC charged Practical Marketing and its principals with assisting telemarketers who were purchasing lists in order to solicit U.S. consumers to pay advance fees to get “guaranteed” credit cards with substantial credit limits. Selling lists with unencrypted credit card and bank account information – so called “full data leads”– violates the FTC’s Telemarketing Sales Rule. In addition, the TSR bars telemarketers from charging fees in advance to obtain credit cards. The FTC charged that the telemarketers violated the Rule by offering advance-fee credit cards, and the list brokers knowingly assisted the telemarketers in that unlawful conduct.

The settlement in the FTC’s action bars the list brokers from “collecting, selling or disclosing” consumers’ account numbers to unaffiliated third parties in the future. It requires that

the defendants turn over any lists of account numbers to the FTC and destroy any copies. The settlement also requires the defendants to take steps to monitor the activities of their clients. It requires them to evaluate the products and services their clients are offering and the truthfulness of their marketing claims; investigate any complaints they receive about their clients; terminate services to clients who are breaking the law; and report any terminated clients to the FTC. The order also bars the defendants from providing assistance or support to marketers who are violating the TSR by requiring that the defendants obtain telemarketers’ scripts prior to selling them lists. The settlement contains standard reporting and recordkeeping provisions to allow the FTC to monitor compliance.

This case was filed in conjunction with, and with the invaluable assistance of, the U.S. Postal Inspection Service and Assistant U.S. Attorney Bruce Reppert in the office of the U.S. Attorney for the Southern District of Illinois.

The defendants named in the FTC complaint are Practical Marketing, Inc., and its principals, Robert and Valerie DeSalvo. They are based in Boca Raton, Florida.

The Commission vote to authorize staff to file the complaint and stipulated final order was 5-0. The complaint and stipulated final order were filed in the U.S. District Court for the Southern District of Illinois.

NOTE: This stipulated final order is for settlement purposes only and does not constitute an admission by the defendant 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 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 1,600 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.