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FTC Issues Agency Financial Report for Fiscal Year 2015

The Federal Trade Commission’s Fiscal Year 2015 Agency Financial Report provides an overview of fiscal and key performance results that show how the agency has managed its resources. The report includes highlights from FTC programs, accomplishments in its missions of protecting consumers and promoting competition, and plans for addressing future challenges. The report also demonstrates the FTC’s sound financial management and stewardship of public funds.

Prepared in accordance with OMB Circular A-136, this report includes annual audited financial statements, as well as the Office of the Inspector General’s summary of identified management and performance challenges. The FTC’s FY 2015 independent financial audit resulted in the 19th consecutive unmodified opinion, the highest audit opinion available.

The report will be submitted to the Director of the Office of Management and Budget and to Congress, as required under the Chief Financial Officers Act of 1990 (amended by the Reports Consolidation Act of 2000), the Government Management Reform Act of 1994, the Accountability of Tax Dollars Act of 2002, and the Annual Management Reports under the Government Corporations Control Act.

The Commission vote to release the Performance and Agency Mission Challenges sections of the report was 4–0. (FTC File No. P859900, the staff contact is Joseph O’Leska, Office of the Executive Director, 202-326-2716.)

The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

FTC and FCC Sign Memorandum of Understanding For Continued Cooperation on Consumer Protection Issues

The Federal Trade Commission and the Federal Communications Commission have signed a Memorandum of Understanding to further the agencies’ ongoing cooperation on consumer protection matters.

The memorandum is designed to formalize the existing cooperation between the agencies, outlining how the FTC and FCC will coordinate consumer protection efforts. The memorandum outlines methods by which the agencies will coordinate and share information and recognizes the agencies’ expertise in their respective jurisdictions. In addition, the memorandum recognizes the two agencies’ complementary authorities with regard to practices by common carriers.

The agencies have followed a similar memorandum of understanding related to telemarketing enforcement issues since 2003.

FDIC Clarifying its Approach to Banks Offering Products and Services, such as Deposit Accounts and Extensions of Credit, to Non-Bank Payday Lenders

FIL-52-2015
November 16, 2015

FDIC Clarifying its Approach to Banks Offering Products and Services, such as Deposit Accounts and Extensions of Credit, to Non-Bank Payday Lenders

Printable Format:

FIL-52-2015 – PDF (PDF Help)

Summary:

The FDIC is reissuing FIL-14-2005, “Payday Lending Programs: Revised Examination Guidance,” and its attachment, “Revised Guidelines for Payday Lending,” (collectively, the 2005 Payday Lending Guidance) to ensure that bankers and others are aware that it does not apply to banks offering products and services, such as deposit accounts and extensions of credit, to non-bank payday lenders. Financial institutions that can properly manage customer relationships and effectively mitigate risks are neither prohibited nor discouraged from providing services to any category of business customers or individual customers operating in compliance with applicable state and federal laws.

Statement of Applicability to Institutions with Total Assets Under $1 Billion: FIL-14-2005 applies to all FDIC-supervised financial institutions that make payday loans.

Highlights:

The 2005 Payday Lending Guidance establishes the FDIC’s expectations for prudent risk-management practices, both safety and soundness and consumer protection, for banks making payday loans directly or through third parties.
The 2005 Payday Lending Guidance has been updated to ensure that bankers and others are aware that it does not apply to banks offering products and services, such as deposit accounts and extensions of credit, to non-bank payday lenders.
The clarification is reflected in in the General Examination Procedures section of the 2005 guidance, which may be accessed here, and new footnote 4, which may be accessed here.
The revised FIL-14-2005 may be accessed in its entirety here.

FTC, Pennsylvania and Connecticut Sue Tech Support Scammers That Took More Than $17 Million From Consumers

A federal court has granted a request by the Federal Trade Commission to shut down a tech support scam that allegedly bilked consumers out of more than $17 million by pretending to represent Microsoft, Apple and other major tech companies.

“We’re pleased the court shut down these scammers, who defrauded consumers out of millions of dollars by preying on their lack of technical expertise,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “Our goal is now to get money back for the victims in this case, and keep the defendants out of the scam tech support business.”

According to a complaint filed by the FTC, the Commonwealth of Pennsylvania Office of Attorney General and State of Connecticut Office of Attorney General, the defendants in the case used internet advertisements and popups that appeared to be from well-known technology companies to lure consumers into calling them. When consumers called the defendants’ phone numbers, they were further misled into thinking their computers were riddled with viruses, malware, or security breaches, and were given a high-pressure sales pitch for unnecessary tech support services.

As alleged in the complaint, consumers who responded to the phony ads were routed to a call center operated by the defendants, where telemarketers would frequently misrepresent that they were “a Microsoft agent,” “Google support,” or “work with AT&T,” among other affiliation claims. The telemarketers would then convince consumers to give them remote access to their computers, navigate to harmless portions of the computer, such as the Windows Event Viewer, and mislead consumers into thinking their computer was infected with viruses and malware.

At that point, defendants would pressure consumers to sign up for technical support plans and repair services often costing hundreds and sometimes thousands of dollars. In some cases, the alleged technical support consisted of deleting harmless files, but in other cases, defendants “technicians” would make changes that could potentially harm the performance of the computer, according to the complaint.

Under the terms of the preliminary injunction order issued by the court, the defendants must stop their deceptive and unfair practices and are subject to an asset freeze while the case against them progresses. The defendants in the case are Click4Support, LLC; iSourceUSA LLC, also doing business as Click4Support and UBERTECHSUPPORT; Innovazion, Inc., also doing business as Click4Support Tech Services; Spanning Source LLC, also doing business as Click4Support; Bruce Bartolotta, also known as Bruce Bart; George Saab; Chetan Bhikhubhai Patel; and Niraj Patel.

The complaint in the case alleges that the defendants violated the FTC Act, the Telemarketing Sales Rule, the Connecticut Unfair Trade Practices Act, and the Pennsylvania Unfair Trade Practices and Consumer Protection Law.

The FTC thanks the Better Business Bureaus serving Connecticut and Eastern Pennsylvania for their assistance in this investigation.

The Commission vote authorizing the staff to file the complaint was 4-0. The complaint was filed in the U.S. District Court for the Eastern District of Pennsylvania.

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 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

FTC Action: Medical ‘Discount’ Card Scammers Banned from Selling Healthcare-Related Products

A mother-son marketing team who allegedly tricked Spanish-speaking and other consumers into buying phony medical discount cards will be banned from selling any healthcare-related products under a settlement with the Federal Trade Commission.

In August 2014, the FTC charged Constanza Gomez Vargas, Walter S. Vargas, and United Solutions Group Inc. with falsely telling consumers they were buying a qualified health insurance plan under the Affordable Care Act. They targeted consumers who needed health insurance or were paying high premiums for coverage because they had lost their jobs or had pre-existing medical conditions.

“These scammers lied about selling health insurance and tricked people into buying phony medical discount cards instead,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “We’re putting this operation out of business.”

According to the FTC’s complaint, the defendants claimed the “insurance” would pay for doctor and emergency room visits, but instead, consumers received nearly worthless “discount cards” and were left uninsured, despite paying an enrollment fee and monthly payments ranging from $99 to several hundred dollars.

The proposed settlement order also permanently prohibits the United Solutions Group defendants from misrepresenting material facts about any product or service, and selling or otherwise benefitting from customers’ personal information. It imposes a $2.1 million judgment that will be suspended upon payment of $17,616 and the transfer of two Mercedes Benz cars. The full judgment will become due immediately if the defendants are found to have misrepresented their financial condition. Litigation continues against Gary L. Kieper and Partners In Health Care Association Inc.

The Commission vote authorizing the staff to file the proposed stipulated final order was 5-0. The U.S. District Court for the Southern District of Florida entered the order on November 10, 2015.

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

To learn how to avoid these scams, read Discount Plan or Health Insurance?

FDIC Seeking Comment on Frequently Asked Questions Regarding Identifying, Accepting, and Reporting Brokered Deposits

The FDIC is seeking comment for 45 days (closing 12-28-2015) on a proposed update to a series of frequently asked questions (FAQs) and an accompanying introductory letter regarding identifying, accepting and reporting brokered deposits that were issued in January 2015 through FIL-2-2015.

Statement of Applicability to Institutions with Total Assets Under $1 Billion: This Financial Institution Letter applies to all FDIC-insured financial institutions that use brokered deposits.

Financial Institution Letters
FIL-51-2015
November 13, 2015

FDIC Seeking Comment on Frequently Asked Questions Regarding Identifying, Accepting, and Reporting Brokered Deposits

Purpose

In January 2015, the FDIC issued a Financial Institution Letter, or “FIL,” with a series of “Frequently Asked Questions,” or “FAQs” regarding identifying, accepting and reporting brokered deposits, and also with an introductory letter to the FAQs (FIL-2-2015). The FIL indicated that the FDIC would periodically update the FAQs on its website. The FDIC is now proposing to update the FAQs and the introductory letter to reflect feedback that has been received since the FIL was issued. Attached are proposed revisions and additions to certain sections of the FAQs and to the introductory letter that precedes the FAQs with revisions and additions highlighted to allow readers to readily identify changes. Clean versions of the documents are also attached.

The FDIC is seeking comment on the proposed updated FAQs and introductory letter for 45 days, ending December 28, 2015. Comments are sought on the entire FAQ document and introductory letter, with particular emphasis on areas with proposed updates or additions. Comments received will be considered before posting the final updated FAQs and introductory letter. In order to finalize the updates in a timely manner, comments received that address areas outside of the proposed FAQs may be answered under separate cover or in the next round of FAQ updates. When posted to the FDIC’s website, the updated FAQs and introductory letter will rescind and replace FIL-2-2015. Comments should be sent to [email protected] by December 28, 2015. Comments will be posted on the FDIC’s website.

Background

Section 29 of the Federal Deposit Insurance Act (FDI Act) (12 U.S.C. § 1831f) and the FDIC’s implementing regulations at 12 C.F.R. § 337.6 define the term “deposit broker” and restrict the acceptance of deposits by or through a deposit broker by insured depository institutions (IDIs) that are not well capitalized, among other provisions. The purpose of these restrictions is to prevent weaker banks from increasing their risk-taking through brokered deposits and to reduce costs to the Deposit Insurance Fund for banks that fail. Reports from the Government Accountability Office and the FDIC’s Office of Inspector General, as well as the Inspector General’s material loss reviews of failed banks, indicate that brokered deposits were a significant contributing factor in many recent bank failures.¹

The term “deposit broker” is defined as “any person engaged in the business of placing deposits, or facilitating the placement of deposits, of third parties with IDIs or the business of placing deposits with IDIs for the purpose of selling interests in those deposits to third parties.” 12 U.S.C. § 1831f(g)(1)(A). If an IDI accepts a deposit through a “deposit broker,” the deposit is a “brokered deposit.” See 12 C.F.R. § 337.6(a)(2).

In the FDIC’s experience, the question of what constitutes a brokered deposit is very fact-specific and can depend upon varying product features, delivery mechanisms, fee structures, contracts and other governing documents, and evolving technology, among other things. Therefore, over the years, based on industry feedback and requests for guidance, as well as individual brokered deposit determinations, staff at the FDIC has provided guidance on brokered deposits through various advisory opinions and interpretive letters.² Additionally, in 2011, the FDIC published its Study on Core Deposits and Brokered Deposits, which was required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, and which also addressed the categorization of certain types of brokered deposits.³

Despite the existence of Section 29, implementing regulations, staff interpretations, advisory opinions, the study, and governing principles, questions continued to arise regarding whether certain types of deposits were brokered deposits. To assist the industry by providing this information in one place, the FDIC issued FIL-2-2015, with a series of FAQs that summarized issues from key questions on the statute and regulations, as well as existing staff interpretations, opinions, letters, and the study, grouping them into common categories with the goal of explaining the questions and issues in plain language. The FDIC intended the FAQs to be a helpful way for banks to begin the process of determining whether a particular deposit should be categorized as brokered to the extent they had not previously done so.

Since the FAQs were issued, the FDIC has received written inquiries and participated in a number of calls and meetings with bankers, banking trade groups, and other interested parties. The FDIC also held an industry-wide banker call-in regarding the FAQs on April 22, 2015, during which a number of banker questions were addressed. The FAQs have been envisioned to be a living document, and the FIL pointed out that FAQs will be periodically updated on the FDIC’s website.

Purpose of the FAQs and General Information – The introductory letter to the FAQs has been revised to state more clearly that the FAQs are based on the law, regulation, study, and other existing interpretations, and accordingly, are not considered new. To that end, footnote citations to these existing sources have been provided for various FAQs, where applicable. The FAQs have also been updated to include new FAQs that are based on written or oral inquiries received since the January 2015 release of the FAQs, and those are identified with footnote citations as well.

The introductory letter also emphasizes that the FAQs are intended as a starting point for analysis, and that the FDIC takes a case-by-case approach to each determination. A statement has also been added indicating that, if an institution was unaware of brokered deposit treatment until the FAQs were released, then the FDIC would generally not seek refiling of past Consolidated Reports of Condition and Income (Call Reports). However, an institution’s accounting and financial reporting personnel might make their own refiling recommendations. The introductory letter has also been revised to state that the FDIC intends to update the FAQs annually as needed, rather than periodically, as stated in the previous version, to give the industry a better indication of when updates can be expected.

FTC Announces Panel Topics for November 18 Debt Collection Dialogue in Atlanta

1:30 – 3:00 p.m.

Panel 1: State Regulation and Enforcement of Debt Collection

Moderator: Cindy Liebes, Director, FTC Southeast Region

Panelists:
Nick Jarman, President and COO, Delta Outsource Group, Inc., and member of the ACA International Board of Directors

Carri Grube Lybarker, Administrator, South Carolina Department of Consumer Affairs

Olha N.M. Rybakoff, Senior Counsel, Tennessee Attorney General’s Office

John Sours, Director, Consumer Protection Unit, Georgia Department of Law

3:15 – 4:45 p.m.

Panel 2: Federal Regulation and Enforcement of Debt Collection

Moderator: Thomas Kane, Senior Staff Attorney, FTC Division of Financial Practices

Panelists:
Christopher Koegel, Assistant Director, FTC Division of Financial Practices

Gregory Nodler, Senior Counsel for Enforcement Policy and Strategy, Consumer Financial Protection Bureau

Kenneth Lennon, Assistant Director, Community and Consumer Law Division, Office of the Comptroller of the Currency

Harvey Moore, President, The Moore Law Group, and President, NARCA, The National Creditors Bar Association

Tim Bauer, President, insideARM, and Co-Executive Director, The Consumer Relations Consortium

Brett Soldevila, Chief Compliance Officer, Security Credit Services, LLC, and Chair, Certification Standards Committee, DBA International

FTC and Veterans Administration Sign Agreement Furthering Efforts To Protect Service Members Who Use Military Education Benefits

The Federal Trade Commission and the Veterans Administration signed a Memorandum of Agreement to further their ongoing efforts to stop fraudulent and deceptive practices targeted at U.S. service members, veterans and dependents who use military education benefits.

The agreement is designed to enhance cooperation between the FTC and the VA in investigating and taking action against institutions that target service members with unfair or deceptive advertising or enrollment practices. It outlines terms under which the VA can refer potential violations to the FTC.

The FTC advises service members to watch out for any for-profit schools that may stretch the truth to encourage enrollment, either by exerting pressure on service members to sign up for unnecessary courses or to take out loans that might be a challenge to pay off. Students interested in pursuing a higher education should check out the FTC’s updated guidance, Choosing a College: Questions to Ask.

Anyone who encounters a school that has not lived up to their promises should file a complaint with the FTC.

FTC Challenges Proposed Merger of Two West Virginia Hospitals

The Federal Trade Commission today authorized action to block Cabell Huntington Hospital’s proposed acquisition of St. Mary’s Medical Center – two hospitals located three miles apart in Huntington, West Virginia. The FTC issued an administrative complaint alleging that the combination would create a dominant firm with a near monopoly over general acute care inpatient hospital services and outpatient surgical services in the adjacent counties of Cabell, Wayne, and Lincoln, West Virginia and Lawrence County, Ohio likely leading to higher prices and lower quality of care than would be the case without the acquisition.

The Commission also authorized staff to seek a temporary restraining order and a preliminary injunction in federal court if, and when, necessary to prevent the parties from consummating the acquisition, and to maintain the status quo pending the administrative proceeding. The FTC may not immediately pursue an action in federal court because the merging hospitals are still awaiting approvals from the West Virginia Health Care Authority and the Catholic Church before they can close the transaction, which may take months.

“If this proposed acquisition goes forward, it would eliminate important competition that has yielded tremendous benefits for Huntington-area residents,” said Steve Weissman, Deputy Director of the FTC’s Bureau of Competition. “The merged hospitals would have a market share of more than 75%, and local employers and residents are likely to face higher prices and reduced quality and service at the combined hospital.”

The complaint alleges that the two hospitals are each other’s closest competitor for health plans and patients, and that the acquisition would substantially lessen competition between the hospitals for patients and for inclusion in health plan networks. The complaint also alleges that, at times, the parties have attempted to limit their intense head-to-head competition through collusive conduct, such as restrictive marketing agreements.

According to the FTC’s complaint, in an attempt to avoid a merger challenge the merging hospitals have entered into temporary agreements with the Attorney General of West Virginia and the largest health plan in the area, but those agreements fall far short of replicating the benefits of competition. Also, when these agreements expire, Huntington-area employers and residents will be subject to the full harmful effects of a virtual monopoly for hospital services in their community, according to the complaint.

The Complaint also alleges that entry is unlikely to offset the competition lost by the acquisition. Moreover, according to the complaint, potential cost savings and purported quality improvements are speculative, not merger-specific, and insufficient to outweigh the likely competitive harm resulting from the acquisition.

The Commission votes to issue the administrative complaint and to authorize staff to seek a temporary restraining order and preliminary injunction in federal court were 4-0. The administrative trial is scheduled to begin on April 5, 2016.

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 issuance of the administrative complaint marks the beginning of a proceeding in which the allegations will be tried in a formal hearing before an administrative law judge.

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 antitrust{at}ftc{dot}gov, or write to the Office of Policy and Coordination, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave., NW, Room CC-5422, Washington, DC 20580. To learn more about the Bureau of Competition, read Competition Counts. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

FTC Approves Final Order Requiring National Association of Animal Breeders to Eliminate Rules that Restrict Competition among Its Members

Following a public comment period, the Federal Trade Commission has approved a final order settling charges that the National Association of Animal Breeders restrained competition among its respective members through its code of ethics.

Under the FTC order, the NAAB must stop imposing anticompetitive restrictions on its members’ advertising, and limiting their ability to disseminate truthful, non-deceptive information about their products and the products of their competitors. The association also must remove references to the restrictions from its website and official documents; publish and distribute an announcement regarding the consent agreement and the resulting changes to the Code of Ethics; and implement an antitrust compliance program.

The Commission vote approving the final order was 4-0. (FTC File No 141 0215; the staff contacts are Armando Irizarry, Bureau of Competition, 202-326-2964; and Karen A. Mills, Bureau of Competition, 202-326-2052.)

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, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, Room CC-5422, Washington, DC 20580. To learn more about the Bureau of Competition, read Competition Counts. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

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FDIC Clarifying its Approach to Banks Offering Products and Services, such as Deposit Accounts and Extensions of Credit, to Non-Bank Payday Lenders

Printable Format:

Summary:

Highlights:

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FDIC Seeking Comment on Frequently Asked Questions Regarding Identifying, Accepting, and Reporting Brokered Deposits

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