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Operator of Online Tax Preparation Service Agrees to Settle FTC Charges That it Violated Financial Privacy and Security Rules

The operator of a Georgia-based online tax preparation service has agreed to settle Federal Trade Commission allegations that it violated federal rules on financial privacy and security.

In its complaint against TaxSlayer, LLC, the FTC alleged that malicious hackers were able to gain full access to nearly 9,000 TaxSlayer accounts between October 2015 and December 2015. The hackers used the information they accessed to engage in tax identity theft, which allowed them to obtain tax refunds by filing fraudulent tax returns, according to the complaint.

The FTC charged that TaxSlayer violated the Gramm-Leach-Bliley Act’s Safeguards Rule, which requires financial institutions to implement safeguards to protect the security, confidentiality and integrity of customer information, and the Privacy Rule, which requires financial institutions to deliver privacy notices to customers.

“Tax preparation services are responsible for very sensitive information, so it’s critical they implement appropriate safeguards to protect that information,” said Tom Pahl, Acting Director of the FTC’s Bureau of Consumer Protection. “TaxSlayer didn’t have an adequate risk assessment plan, and hackers took over user accounts and committed identity theft.”

The FTC alleged that TaxSlayer violated the Safeguards Rule by failing to develop a written comprehensive security program until November 2015; to conduct a risk assessment to identify reasonably foreseeable internal and external risks to security; and to implement information security safeguards that would help prevent a cyberattack.

For example, TaxSlayer failed to implement adequate risk-based authentication measures that would have helped reduce the chances of an attack from hackers who had used stolen credentials to try to gain access to TaxSlayer customer accounts, according to the complaint. The FTC also alleged that the company did not require consumers to choose strong passwords, exposing customers to the risk that attackers could guess commonly used passwords to access their TaxSlayer accounts.

The FTC also alleged that the company violated the Privacy Rule by failing to provide its customers with a clear and conspicuous initial privacy notice and to deliver it in a way that ensured that customers received it.

“This case also demonstrates the importance of password protection,” said Pahl. “Hackers took advantage of people who re-used passwords from other sites, and the attack ended when TaxSlayer eventually required people to use multi-factor authentication.”

As part of the settlement with the FTC, the company is prohibited from violating the Privacy Rule and the Safeguards Rule of the Gramm-Leach-Bliley Act for 20 years. Consistent with several past cases involving violations of Gramm-Leach-Bliley Act Rules, the company is required for 10 years to obtain biennial third-party assessments of its compliance with these rules.

The Commission vote to issue the administrative complaint and to accept the consent agreement was 2-0. The FTC will publish a description of the consent agreement package in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through September 29, 2017, after which the Commission will decide whether to make the proposed consent order final. Interested parties can submit comments electronically by following the instructions in the “Invitation To Comment” part of the “Supplementary Information” section.

NOTE: The Commission issues an administrative 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. 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 up to $40,654.

The Federal Trade Commission works to promote competition, and protect and educate consumers. You can learn more about consumer topics and file a consumer complaint online or by calling 1-877-FTC-HELP (382-4357). Like the FTC on Facebook, follow us on Twitter, read our blogs and subscribe to press releases for the latest FTC news and resources.

Court Holds Terrason Spinks and Jet Processing Inc. Liable for $280 Million in Consumer Harm Caused by the IWorks Scheme

Following a trial, a federal court has found Terrason Spinks and his company, Jet Processing Inc., liable for more than $280 million in consumer harm caused by the IWorks scheme.

IWorks’ online marketing campaigns falsely claimed that federal grants for personal needs were generally available to consumers, and that people who used its money-making product were likely to earn substantial income. The company unlawfully enrolled consumers in membership programs without disclosing, or without disclosing clearly, that it would charge their accounts on a recurring basis until they canceled.

The court found that Spinks participated in creating IWorks’ money-making product, and that he and Jet Processing obtained merchant accounts that allowed IWorks to continue bilking consumers when payment processors were closing IWorks accounts because of high chargeback rates – reversals of charges to consumers’ credit cards.

The court’s final order bans Spinks and Jet Processing from selling grant and money-making products, and imposes a $280,911,870 judgment against them.

All of the other defendants in this matter – nine individuals and dozens of corporations – have settled with the FTC. Scott Leavitt and his company, Employee Plus, and Duane Fielding and his companies, Network Agenda and Anthon Holdings, settled with the Commission shortly before the trial. Other individual defendants settled with the FTC in October 2013, April 2014, February 2016, and August 2016.

FTC Announces Refund Process for Victims of Deceptive Tech Support Operation

The Federal Trade Commission is sending email notices to people who are eligible for partial refunds from a tech support scheme. The operators agreed to pay $10 million to settle allegations that they deceived hundreds of thousands of people.

Eligible consumers bought tech support products and services between April 2012 and November 2014 from Advanced Tech Support, which also used the name Inbound Call Experts. Consumers will have until October 27, 2017 to submit a request for a refund.

According to the FTC’s complaint, the defendants used high-pressure sales pitches to market tech support products and services by falsely claiming that people’s computers were infected with viruses and malware.

The defendants in the case paid $10 million as part of a settlement with the FTC. The settlement also prohibits the defendants from misrepresenting that they have identified performance or security issues on people’s computers and from making any other misrepresentations while selling a product or service.

FTC Advice for Helping Hurricane Harvey Victims

The Federal Trade Commission has information for people who want to help Hurricane Harvey victims, and for those who are dealing with and recovering from, its long-term effects. In addition to the important tips and advice below, they can find more at www.FTC.gov/weatheremergencies.

Wise giving after the storm

If you’re looking for a way to give, be cautious of charity scams. Do some research to ensure that your donation will go to a reputable organization that will use the money as promised:

Donate to charities you know and trust with a proven track record with dealing with disasters.
Be alert for charities that seem to have sprung up overnight in connection with current events. Check out the charity with the Better Business Bureau’s (BBB) Wise Giving Alliance, Charity Navigator, Charity Watch, or GuideStar.
Designate the disaster so you can ensure your funds are going to disaster relief, rather than a general fund.
Never click on links or open attachments in e-mails unless you know who sent it. You could unknowingly install malware on your computer.
Don’t assume that charity messages posted on social media are legitimate. Research the organization yourself.
When texting to donate, confirm the number with the source before you donate. The charge will show up on your mobile phone bill, but donations are not immediate.
Find out if the charity or fundraiser must be registered in your state by contacting the National Association of State Charity Officials. If they should be registered, but they’re not, consider donating through another charity.

Picking up the pieces

The storm has devastated much of Southeastern Texas. Once the rain and floodwaters recede, it will be time to take stock and develop a recovery plan. Here are some tips and links to resources to help make the task less burdensome:

Contact your insurance company. Ask what the next steps are in assessing any damage to your home or business.
Your home and its contents may look beyond hope, but it’s possible many of your belongings can be restored. With luck and hard work, your flooded home could be cleaned up, dried out, rebuilt, and reoccupied.
Be skeptical of people promising immediate clean-up and debris removal. Some may demand payment up-front for work they never do, quote outrageous prices, or simply lack the skills, licenses, and insurance to legally do the work.
If you’re looking for a place to rent during recovery, be cautious of rental listing scams. Scammers often advertise rentals that don’t exist to trick people into sending money before they find out the truth.
Many people will be asking for your personal information. Make sure you know who you are dealing with. Ask for identification before you share your Social Security or account numbers. Scammers sometimes pose as government officials, and ask for your financial information or money to apply for aid that you can request on your own for free. Government officials will never ask you for money in exchange for information or the promise of a check.
You might have had to leave your home without IDs, checks, credit and debit cards, and other documents. You also might be without access to a bank account or paycheck for some time. If you need to get money, understand your options for paying bills and replacing important documents. This list of contacts may help you regain your financial footing.
Call your creditors and ask for help. If you’re a homeowner, even if your home is uninhabitable, you still have a mortgage. Contact your lender to discuss your options.

FTC Presents Criminal Liaison Unit’s Consumer Shield Award to U.S. Postal Inspection Service

The Federal Trade Commission is honoring Inspector Clayton E. Gerber of the U.S. Postal Inspection Service with its Consumer Shield award. The Criminal Liaison Unit presents the award to recognize extraordinary work by a criminal law enforcement group in fighting consumer fraud.

The U.S. Postal Inspection Service is tasked with investigating crimes that adversely affect or fraudulently use the U.S. mail, the postal system or postal employees.

“I am extremely grateful for everything Inspector Gerber has done in recent years to protect American consumers from fraud,” said Maureen K. Ohlhausen, Acting Chairman of the Federal Trade Commission. “His work has run the gamut from providing joint training for Postal Inspectors and FTC investigators and attorneys, to investigating mass mailing fraud schemes, to supporting FTC civil cases against individuals involved in phony debt repair, unauthorized billing and sweepstakes scams.”

The FTC often coordinates with criminal law enforcement to ensure the successful prosecution of fraudsters who prey on American consumers. Since its inception11 years ago, the FTC’s CLU has contributed to the successful criminal prosecution of hundreds of fraudulent telemarketers, phantom debt and mortgage relief scammers, immigration fraudsters, and others who seek to harm American consumers.

FTC Obtains Court Order Halting World Patent Marketing Invention Promotion Scheme

At the Federal Trade Commission’s request, a federal court has found that the FTC is likely to prevail in its case against World Patent Marketing, an invention-promotion scheme that allegedly deceived consumers through misrepresentations about its success and the services it provided, and suppressed complaints about the company by threatening dissatisfied customers.

“The record supports a preliminary finding that [the] defendants devised a fraudulent scheme to use consumer funds to enrich themselves,” U.S. District Court Judge Darrin P. Gayles wrote in an order issuing a preliminary injunction that will apply during litigation in which the FTC seeks to permanently stop the defendants’ practices and return money to consumers.

The court temporarily halted the scheme in March, when the FTC filed a complaint alleging that the defendants charged consumers thousands of dollars to patent and market their inventions based on bogus “success stories,” and never delivered what they promised. Instead, many customers ended up in debt or lost their life savings.

Under the preliminary injunction issued on August 16, 2017, the defendants are prohibited from making misrepresentations to induce people to purchase products or services, and from threatening anyone who complains about them, including asking people to withdraw negative comments. The judge continued the existing asset freeze indefinitely, and converted the court-appointed receiver from temporary to permanent.

Three Dietary Supplement Marketers Settle FTC, Maine AG Charges

The final three of nine defendants sued for deceptively marketing dietary supplements will settle charges the FTC and the State of Maine filed in February 2017. The agencies charged the defendants with using deceptively formatted radio infomercials and print ads with fictitious endorsers to pitch products they claimed would improve memory and reduce back and joint pain.

The proposed orders announced today bar Synergixx, LLC, an ad agency, its principal, Charlie R. Fusco, and Ronald Jahner from engaging in a wide range of marketing practices that have caused financial injury to consumers. The settlement orders announced today are similar to the orders against the other defendants, which the FTC announced earlier this year.

The FTC and State of Maine charged all nine defendants with making false and misleading claims about the supplements CogniPrin and FlexiPrin. The claims include that CogniPrin: 1) reverses mental decline by 12 years; 2) improves memory by 44 percent; and 3) improves memory in as little as three weeks and is clinically proven to improve memory; and that FlexiPrin: 1) reduces joint and back pain, inflammation, and stiffness in as little as two hours; 2) rebuilds damaged joints and cartilage; and 3) has been clinically proven to reduce the need for medication in 80 percent of users and to reduce morning joint stiffness in all users.

According to the complaint, Synergixx LLC and Fusco promoted CogniPrin and FlexiPrin through 30-minute radio ads that were deceptively formatted to sound like educational talk shows. The complaint also alleges that Synergixx and Fusco created inbound call scripts that deceptively claimed that consumers could try the supplements “risk-free” with an unconditional 90-day money-back guarantee, without disclosing burdensome requirements for obtaining refunds and making product returns.

The complaint also alleges that the defendants failed to disclose that consumers would have to enroll in an auto-ship continuity plan to qualify for the “risk-free” trial offer, and would have 14 days or less to try the products. It also charges Synergixx and Fusco with failing to make important disclosures when they “up-sold” consumers negative option buying clubs and discount medical programs with ongoing fees, charging many consumers for poorly disclosed auto-ship continuity plans they did not want.

In addition, Jahner, whom defendants presented as an objective medical expert, was charged with providing endorsements without examining the products or exercising his represented expertise. The defendants also allegedly failed to disclose that he was paid a percentage of FlexiPrin and CogniPrin sales revenues.

The two orders announced today settle the charges against Synergixx, Fusco and Jahner, and bar them from making the false or unsubstantiated health claims challenged in the complaint, require them to have competent and reliable scientific evidence when making health-related claims, and require them to clearly disclose their material connections between product sellers and product endorsers.

The defendants are also barred from misrepresenting the existence or outcome of tests and studies when they promote health products. Additionally, defendants Synergixx and Fusco are barred from employing deceptive marketing practices relating to cancellations, negative-option payment plans, upsold merchandise, and deceptive pricing practices.

The order against Synergixx and Fusco also requires that when they sell products through continuity programs, they must obtain customers’ express informed consent prior to enrolling consumers into such plans, including free-trial offers that convert to continuity programs at the end of the trial period. Finally, the order against Synergixx and Fusco imposes a $6.5 million monetary judgment that is suspended based on their inability to pay.

The Commission vote approving the proposed stipulated orders was 2-0. The FTC filed the proposed orders in the U.S. District Court for the District of Maine. The FTC appreciates the assistance provided by the Maine Office of the Attorney General in bringing and resolving this case.

NOTE: Stipulated final orders have the force of law when approved and signed by a District Court judge.

Statement of Federal Trade Commission’s Acting Director of the Bureau of Competition on the Agency’s Review of Amazon.com, Inc.’s Acquisition of Whole Foods Market Inc.

Bruce Hoffman, the Acting Director of the Federal Trade Commission’s Bureau of Competition, issued this statement on the Commission’s decision not to further pursue an investigation of Amazon.com, Inc.’s acquisition of Whole Foods Market Inc.:

“The FTC conducted an investigation of this proposed acquisition to determine whether it substantially lessened competition under Section 7 of the Clayton Act, or constituted an unfair method of competition under Section 5 of the FTC Act. Based on our investigation we have decided not to pursue this matter further. Of course, the FTC always has the ability to investigate anticompetitive conduct should such action be warranted.”

The Federal Trade Commission works to promote competition, and protect and educate consumers. You can learn more about how competition benefits consumers or file an antitrust complaint. Like the FTC on Facebook, follow us on Twitter, read our blogs and subscribe to press releases for the latest FTC news and resources

HMDA Examiner Transaction Testing Guidelines

FIL-36-2017
August 23, 2017

HMDA Examiner Transaction Testing Guidelines

Printable Format:

FIL-36-2017 – PDF (PDF Help)

Summary:

The Federal Financial Institutions Examination Council (FFIEC) is issuing guidelines for examiners to use in assessing the accuracy of the Home Mortgage Disclosure Act (HMDA) data institutions record and report. The HMDA Examiner Transaction Testing Guidelines (Guidelines) describe FFIEC procedures for sampling and validating HMDA data. The Guidelines should assist financial institutions seeking to better understand the approach the FDIC will use to assess HMDA data as part of the examination process.

Statement of Applicability to Institutions with Total Assets under $1 Billion: This Financial Institution Letter applies to all FDIC-supervised institutions subject to HMDA and Regulation C. A HMDA exemption applies to institutions with assets at or below a threshold specified in Regulation C.

Highlights:

The Guidelines will apply to HMDA data collected by financial institutions in or after 2018.
The Guidelines describe a data sampling process that involves prioritizing designated data fields for review or reviewing all data fields within a sample. The FDIC’s examination approach will include reviewing designated data fields to be announced prior to January 1, 2018.
Examination staff will determine whether errors in each data field reviewed exceed a specified threshold described in the Guidelines. File or line error rates generally will not be considered.
The size of the sample identified for review will be driven by a financial institution’s mortgage lending activities. Specifically, the number of files sampled and the error threshold for resubmission will vary based on the number of applications listed on an institution’s Loan Application Register.
The Guidelines establish tolerances for minor errors in certain data fields involving dates or dollar amounts. Data that fall within these tolerances do not count towards error thresholds.
An effective compliance management system, commensurate with a financial institution’s size, complexity, and risk profile, plays an important role in ensuring compliance with applicable law and in preventing recurring HMDA data errors.

FTC Announces Agenda for Joint Conference on Protecting Military Consumers

The Federal Trade Commission has announced the agenda for the upcoming Protecting Military Consumers: A Common Ground Conference, which will take place from 9:00 am to 1 pm on Sept. 7, 2017, at the Los Angeles Police Department Headquarters, 100 W. 1st Street, in Los Angeles.

The conference will bring together and train military attorneys and financial advisors, law enforcement, prosecution agencies, and consumer protection officials to identify, prevent, and respond to consumer fraud and other issues affecting service members and their families.

Co-sponsored by the FTC and state and local law enforcement, the conference will first address current and emerging issues affecting servicemembers and their families, such as higher education, identity theft, imposter scams, debt collection, mortgage disputes and real estate fraud.

Next, participants will learn about federal, state and local consumer protection laws such as the Servicemembers Civil Relief Act, the Military Lending Act, the FTC Act, the Consumer Financial Protection Bureau’s rules and regulations, California’s Unfair Competition Law, and California’s False Adversing Law. Finally, the conference will provide practical tips on counseling, one-on-one dispute resolution, reporting fraud, and available legal representation that can help service members and military attorneys prevent, detect and defend against consumer fraud.

The FTC’s Acting Director of the Bureau of Consumer Protection, Tom Pahl, will provide the keynote address. Several other Federal Trade Commission staff will participate in panel discussions. Other organizations providing speakers include the U.S. Attorney’s Office, Consumer Financial Protection Bureau, California Military Department’s JAG Corps, California Attorney General’s Office, San Diego District Attorney’s Office, Los Angeles District Attorney’s Office, Los Angeles Police Department, and Los Angeles County Department of Consumer and Business Affairs.

The conference will be streamed live online. An RSVP is suggested, as space is limited. To RSVP, please email only your name and affiliation (if any) to [email protected].

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HMDA Examiner Transaction Testing Guidelines

Printable Format:

Summary:

Highlights:

Related posts:

Related posts: