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FTC Submits Fiscal Year 2016 Budget Request, Performance Plan, and Fiscal Year 2014 Performance Report to Congress

The Federal Trade Commission has submitted to Congress its Fiscal Year 2016 budget request, which includes the FY 2016 Budget Overview Statement, Performance Plan for FY 2015 and FY 2016, and Performance Report for FY 2014, as required under the Government Performance and Results and Modernization Act of 2010. The FTC’s formal budget request was submitted to Congress on February 2, 2015, in support of the President’s FY 2016 budget for the federal government.

The Commission vote to submit the budget request, performance plan, and performance report to Congress was 5-0. (FTC File No P859900; the staff contact is Kimberly Mayo, Financial Management Office, 202-326-2899.)

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.

Guidance on Private Student Loans with Graduated Repayment Terms at Loan Origination

FIL-6-2015
February 2, 2015

Guidance on Private Student Loans with Graduated Repayment Terms at Loan Origination

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Summary:

The agencies¹, in conjunction with the State Liaison Committee (SLC), have issued Guidance on Private Student Loans with Graduated Repayment Terms at Loan Origination (Student Loan Guidance). The Student Loan Guidance recognizes that students leaving a higher education program may prefer more flexibility with their payments as they transition into the labor market. Financial institutions that originate private student loans with graduated repayment terms should prudently underwrite the loans and provide disclosures that clearly communicate the timing and the amount of payments to facilitate a borrower’s understanding of the loan’s terms and features.

Statement of Applicability to Institutions Under $1 Billion in Total Assets: This Financial Institution Letter applies to FDIC-supervised institutions that originate private student loans.

Highlights:

Financial institutions that originate private student loans may offer graduated repayment terms in addition to fixed amortizing terms to borrowers at the time of loan origination.
Graduated repayment terms provide lower initial monthly payments early in the repayment period and phase in the amortization of the principal balance.
The Student Loan Guidance provides principles that financial institutions should consider in their policies and procedures for originating private student loans with graduated repayment terms.
Graduated repayment terms may align a borrower’s income level with loan repayment requirements, provide flexibility to repay the debt sooner if a borrower’s income increases more quickly than projected, and may help long-term probability of full repayment.
Financial institutions should provide disclosures that clearly communicate the timing and the amount of payments to facilitate a borrower’s understanding of the loan’s terms and features.

FTC Puts Conditions on Sun Pharmaceutical’s Proposed Acquisition of Ranbaxy

Pharmaceutical companies Sun Pharmaceutical Industries Ltd. and Ranbaxy Laboratories Ltd. have agreed to divest Ranbaxy’s interests in generic minocycline tablets in order to settle Federal Trade Commission charges that Sun’s $4 billion proposed acquisition of Ranbaxy would likely be anticompetitive. Torrent Pharmaceuticals Ltd., a global drug company based in India that markets generic drugs in the United States, will acquire the divested assets.

Generic minocycline tablets are used to treat a wide array of bacterial infections, including pneumonia, acne, and urinary tract infections. According to the FTC’s complaint, the proposed merger would likely harm future competition by reducing the number of suppliers in the U.S. markets for three dosage strengths (50 mg, 75 mg, and 100 mg) of generic minocycline tablets. Ranbaxy is currently one of three suppliers of the products, while Sun is one of only a limited number of firms likely to sell generic minocycline tablets in the United States in the near future. Sun’s entry likely would have resulted in significantly lower prices for these drugs.

Under the proposed settlement, Sun and Ranbaxy must also sell Ranbaxy’s generic minocycline capsule assets to Torrent, to enable Torrent to achieve regulatory approval for a change in ingredient suppliers for its minocycline tablets as quickly as Ranbaxy would have been able to do in the absence of the deal. In addition, Sun and Ranbaxy must supply generic minocycline tablets and capsules to Torrent until the company establishes its own manufacturing infrastructure. The FTC has appointed an interim monitor to ensure that Torrent receives the support it needs from Sun and Ranbaxy during the divestiture process.

More information about this proposed merger and the FTC’s consent agreement can be found in the analysis to aid public comment.

The Commission vote to issue the complaint and accept the proposed consent order for public comment was 5-0.

The FTC will publish 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 March 3, 2015, after which the Commission will decide whether to make the proposed consent order final. Comments can be filed electronically or in paper form by following the instructions in the “Supplementary Information” section of the Federal Register notice.

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 $16,000 per day.

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.

Funeral Home Settles FTC Charges It Violated the Funeral Rule

An Ohio funeral home operator has agreed to pay a civil penalty to settle Federal Trade Commission charges for violating the agency’s Funeral Rule, which requires funeral providers to provide information consumers need to compare prices and buy only the funeral services and goods they want.

At the FTC’s request, the U.S. Attorney for the Southern District of Ohio filed allegations against Larry S. Glickler, doing business as Bradford-Connelly & Glickler Funeral Home, for failing to provide consumers, in a timely manner, with an itemized general price list at the beginning of an in-person discussion about funeral arrangements; a casket price list at the beginning of any discussion about caskets; and an outer burial container price list at the beginning of any discussion about outer burial containers, as required by the Funeral Rule.

The FTC conducts undercover inspections every year to ensure that funeral homes are complying with the Funeral Rule, which gives consumers important rights when making funeral arrangements. The Rule, issued in 1984, requires funeral homes to provide consumers with itemized price lists at the start of any in-person discussions of funeral arrangements, caskets, and/or outer burial containers. It also requires funeral homes to provide price information by telephone on request, and it prohibits funeral homes from requiring consumers to buy any item, such as a casket, as a condition of obtaining any other funeral good or service.

The consent decree requires Glickler to pay a $6,500 civil penalty, and permanently prohibits him from violating the Funeral Rule.

For more information about the Funeral Rule, read Shopping for Funeral Services and Complying with the Funeral Rule.

The Commission vote to authorize the filing of the civil penalty complaint and approve the proposed consent decree was 5-0. The United States Attorney for the Southern District of Ohio filed the complaint and proposed consent decree on behalf of the Commission in the U.S. District Court for the Southern District of Ohio.

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. Consent decrees have the force of law when approved and signed by the District Court judge.

In First FTC Cases Against Car Title Lenders, Companies Settle Charges They Deceptively Advertised the Cost of Their Loans

The Federal Trade Commission has taken action for the first time against two car title lenders, reaching settlements that will require them to stop their use of deceptive advertising to market title loans.

A car title loan is typically a high cost, short-term loan, secured with the consumer’s car title. In administrative complaints issued against two title lenders, First American Title Lending of Georgia, LLC, and Finance Select, Inc., the FTC charged that the companies advertised, both online and in print, zero percent interest rates for a 30-day car title loan without disclosing important loan conditions or the increased finance charge imposed after the introductory period ended.

“This type of loan is risky for consumers because if they fail to pay, they could lose their car – an asset many of them can’t live without,” said Jessica Rich, director, FTC’s Bureau of Consumer Protection. “Without proper disclosures, consumers can’t know what they’re getting, so when we see deceptive marketing of these loans we’re going to take action to stop it.”

While advertised as short-term loans, title loans can become longer-term, high cost installment loans with payments due over several months. The annual percentage rate of a car title loan can be over 300 percent. If a consumer does not repay the loan within 30 days, high finance charges can add up quickly, with a consumer paying hundreds or thousands of dollars in fees or forfeiting the vehicle.

The FTC charged that First American Title Lending, which operates over 30 locations in Georgia, advertised a zero percent offer (in English and Spanish) and failed to disclose that the borrower had to meet specific conditions to receive that rate. The borrower had to be a new customer, repay the loan within 30 days, and pay with a money order or certified funds, not cash or a personal check. If a borrower failed to meet those conditions, the offer did not apply, and he or she would be required to pay a finance charge from the start of the loan. The company’s advertisements also failed to disclose the amount of the finance charge after the introductory period ended.

The FTC alleged Finance Select, doing business as Fast Cash Title Pawn, failed to disclose that unless a loan was paid in full in 30 days, the zero percent offer did not apply, and that a borrower would have to pay a finance charge for the initial 30 days of the loan in addition to any finance charges incurred going forward. Fast Cash, which has five locations across Georgia and two in Alabama, also failed to disclose how much the finance charge would cost a borrower after the 30-day introductory period was over.

As part of the proposed settlements with First American Title Lending and Fast Cash Title Pawn, the respondents are prohibited from:

failing to disclose all the qualifying terms associated with obtaining a loan at its advertised rate;
failing to disclose what the finance charge would be after an introductory period ends; and
misrepresenting any material terms of any loan agreements.

In addition, First American Title Lending is also prohibited from stating the amount of any down payment, number of payments or periods of repayment, or the amount of any payment or finance charge without clearly and conspicuously stating all the terms required by the Truth in Lending Act and Regulation Z.

These cases are part of the FTC’s ongoing effort to protect consumers in the short-term lending and auto marketplaces. The agency’s guidance, Caution: Car Title Loans Can Leave You Stranded, encourages consumers to shop around for their loan, and to look to their bank or other lenders for options that may be more affordable than a car title loan.

The Commission vote to issue the administrative complaints and accept the proposed consent orders for public comment was 5-0. The agreements will be subject to public comment for 30 days, beginning today and continuing through March 3, 2015, after which the Commission will decide whether to make the proposed consent orders final. Submit comments for Fast Cash Title Pawn and First American Title Lending online.

Statement by FTC Chairwoman Edith Ramirez on Appellate Ruling in the POM Wonderful Matter

Federal Trade Commission Chairwoman Edith Ramirez issued the following statement in response to a ruling today by the U.S. Court of Appeals for the District of Columbia Circuit regarding the FTC’s deceptive advertising case against POM Wonderful, its parent company, and its principals.

“Today’s decision by the D.C. Circuit is a victory for consumers. It is in keeping with established law that advertisers who market products for serious health conditions must have rigorous science to back up those claims. The court specifically recognized that this applies to food and dietary supplement marketers such as POM. It also held that requiring a randomized, well-controlled human clinical study for future disease benefit claims is an appropriate remedy based on POM’s conduct.”

The D.C. Circuit affirmed a January 2013 FTC decision that the marketers of POM Wonderful 100% Pomegranate Juice and POMx supplements deceptively advertised that the products could treat, prevent, or reduce the risk of heart disease, prostate cancer, and erectile dysfunction, and were clinically proven to have such benefits. The court did not uphold the FTC order requirement for two randomized well controlled human clinical trials by POM. However, the court did affirm the FTC’s order requiring POM to have at least one such study before making disease prevention or treatment claims and held out the possibility that two might be warranted in other cases.

POM Wonderful filed an appeal with the court in March 2013, challenging the Commission’s January 2013 decision and order, which found that the POM marketers had made deceptive claims in 36 advertisements and promotional materials for the pomegranate juice and supplements. The Commission issued a final order requiring POM’s future disease treatment and prevention claims to be supported by at least two randomized well-controlled human clinical trials, and other health benefit claims to be supported by competent and reliable scientific evidence.

FTC Shuts Down Diploma Mill Operators

The principal owners of two Florida-based online diploma mills are permanently banned from marketing and selling academic degrees under settlements with the Federal Trade Commission.

Alexander Wolfram and IDM Services, LLC, and Maria Garcia have settled charges that they deceived consumers into enrolling in their programs by claiming they could obtain “official” and accredited high school diplomas and use them to enroll in college, apply for jobs, and “receive the recognition [they] aspire for in life.” The defendants also fabricated an accrediting organization to give legitimacy to their diploma mill operation, according to the FTC’s complaint.

Doing business as “Jefferson High School Online” and “Enterprise High School Online,” defendants led consumers to believe that those who passed their online multiple-choice exam and paid between $200 and $300 could obtain legitimate high school diplomas. The defendants claimed that their online test was styled like the GED test. On Sept. 16, 2014, a U.S. district court judge signed a temporary restraining order to halt the deceptive practices and freeze the assets of the defendants.

In addition to permanently shutting down their operation, the settlements also prohibit the defendants from making misrepresentations in connection with the marketing or sale of any other product or service.

The orders also impose a judgment of more than $11.1 million against the defendants and the corporate relief defendants, which will be partially suspended based on their inability to pay. Relief defendants Tiffany Chambers and Sylvia Gads also agreed to monetary judgments for the amounts they received from the scheme, which also are suspended because of their inability to pay.

If the defendants or relief defendants are found to have misrepresented their financial condition, their entire judgment would become immediately due in full.

The FTC is also seeking separate default judgments with similar prohibitions against two additional businesses operated by the defendants: Diversified Educational Resources (DER) LLC and Motivational Management & Development Services (MMDS), Ltd.

The Commission vote approving the orders was 5-0. The order against Wolfram and IDM was filed in the U.S. Court for the Southern District of Florida on Jan. 12, 2015, and the order against Garcia was filed on Jan. 13, 2015. Both have been entered by the judge. In addition, the motion for default judgments against DER and MMDS was filed on Jan. 20, 2015.

Students interested in pursuing a degree online should review the FTC’s guidance on Diploma Mills.

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

Website Operator Banned from the ‘Revenge Porn’ Business After FTC Charges He Unfairly Posted Nude Photos

The operator of an alleged “revenge porn” website is banned from publicly sharing any more nude videos or photographs of people without their affirmative express consent, under a settlement with the Federal Trade Commission. In addition, he will have to destroy the intimate images and personal contact information he collected while operating the site.

The FTC’s complaint against Craig Brittain alleges that he used deception to acquire and post intimate images of women, then referred them to another website he controlled, where they were told they could have the pictures removed if they paid hundreds of dollars.

“This behavior is not only illegal but reprehensible,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “I am pleased that as a result of this settlement, the illegally collected images and information will be deleted, and this individual can never return to the so-called ‘revenge porn’ business.”

According to the FTC’s complaint, Brittain acquired the images in a number of ways, such as by posing as a woman on the advertising site Craigslist, and offering nude photos purportedly of himself in exchange for photos provided by women. When women provided him with the photos, Brittain posted them on his site without their knowledge or permission.

In addition to collecting and posting the images himself, Brittain solicited viewers of his site to anonymously submit nude photos of people to his site, according to the complaint. He required submissions to include sensitive personal information about the people in the photos, including their full name, town and state, phone number and Facebook profile.

The complaint also alleged that Brittain offered a “bounty system” on his site, wherein users could offer a reward of at least $100 in exchange for other users finding pictures and information about a specific person. Overall, Brittain’s site included photos of more than 1,000 individuals, according to the complaint.

Women whose photographs and information were posted on the site contacted Brittain to have the information removed, citing the potential harms to their careers and reputations. In addition, women cited unwelcome contact from strangers who had discovered their information on Brittain’s site. The complaint notes that in many cases Brittain did not respond to the women’s requests to remove the information.

In fact, the complaint alleges that Brittain’s site advertised content removal services under the name “Takedown Hammer” and “Takedown Lawyer” that could delete consumers’ images and content from the site in exchange for a payment of $200 to $500. Despite presenting these as third-party services, the complaint alleges that the sites for these services were owned and operated by Brittain.

Under the terms of the settlement, Brittain is required to permanently delete all of the images and other personal information he received during the time he operated the site. He will also be prohibited from publicly sharing intimate videos or photographs of people without their affirmative express consent, as well as being prohibited from misrepresenting how he will use any personal information he collects online.

The Commission vote to accept the the proposed consent order for public comment was 5-0. 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 March 2, 2015, 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.

FTC Concludes Review of AgeCheq’s Second Proposed COPPA Verifiable Parental Consent Method

Following a public comment period and review of AgeCheq, Inc.’s second proposed Children’s Online Privacy Protection (COPPA) Rule verifiable parental consent method, the Federal Trade Commission has denied the company’s application.

In its application, AgeCheq proposed a device-signed parental consent form as a method to obtain verifiable parental consent, consisting of a multi-step method requiring entry of a code sent by text message to a mobile device. In a letter to AgeCheq, the FTC stated that the company’s proposed mechanism was not compliant with COPPA’s requirements regarding the type of parental information that can be collected as a means to verify a parent’s identity.

The Commission also said in its letter that AgeCheq’s method did not meet the rule’s requirements that it be reasonably calculated to ensure that the person providing consent is the child’s parent or guardian. The letter notes that the person providing consent under the proposed method could easily be the child using the very device on which an app seeking consent was downloaded.

Under the COPPA Rule, online sites and services directed at children under 13, and general audience sites or services that knowingly collect, use, or disclose personal information from children under 13, must obtain permission from a child’s parents before collecting personal information from that child. The rule lays out a number of acceptable methods for gaining parental consent, but also includes a provision allowing interested parties to submit new verifiable parental consent methods to the Commission for approval. Approved methods may be used by any company, not just the particular applicant requesting approval of the method.

The Commission vote to deny AgeCheq’s application and issue the letter was 5-0.

Prepaid Mobile Provider TracFone to Pay $40 Million to Settle FTC Charges It Deceived Consumers About ‘Unlimited’ Data Plans

Note: A conference call for media with FTC Consumer Protection Director Jessica Rich will occur as follows:

Date: January 28, 2015
Time: 1:30 p.m. ET

Call-in lines, which are for media only, will open 15 minutes prior to the start of the call. Director Rich and FTC staff will be available to take questions from the media about the case.

TracFone, the largest prepaid mobile provider in the U.S., has agreed to pay $40 million to the Federal Trade Commission to settle charges that it deceived millions of consumers with hollow promises of “unlimited” data service.

The FTC’s complaint against TracFone alleges that since 2009, TracFone has advertised prepaid monthly mobile plans for about $45 per month with “unlimited” data under various brands, including Straight Talk, Net10, Simple Mobile, and Telcel America. But despite emphasizing unlimited data in its advertisements, TracFone drastically slowed or cut off consumers’ mobile data after they used more than certain fixed limits in a 30-day period.

“The issue here is simple: when you promise consumers ‘unlimited,’ that means unlimited,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “This settlement means that Straight Talk, Net10, Simple Mobile, and Telcel America customers will be able to get money back from the company for services the company promised but didn’t deliver.”

Beginning today, consumers who had a Straight Talk, Net10, Simple Mobile, or Telcel America unlimited plan before January 2015 can visit www.ftc.gov/prepaidphones to file a claim for a refund. Refunds will be paid to consumers whose data service was slowed or cut off. Consumers who had an unlimited plan but are unsure if their data service was slowed or cut off should still file a claim to find out if they are eligible for a refund.

According to the FTC’s complaint, TracFone marketed “unlimited” plans under its name brands through television and radio commercials, print advertisements, in-store displays and other media. Some of these brands’ advertisements were aimed at specific populations. For example, Telcel America marketed to Spanish-speaking consumers.

Counter to the marketing promises, the FTC alleges that TracFone regularly either slowed down consumers’ data speeds – known as throttling – or cut off their data entirely when they used more than certain fixed amounts of data in a 30-day period. TracFone even terminated all the services (talk, text, and data) of some consumers. As described in the FTC’s complaint, throttled customers often experienced slow-downs of at least 60% and sometimes even 90%, significantly impairing their ability to engage in online activities like streaming video. One TracFone employee who tested the effects of throttling said that “Customer experience is affected because [i]t is very slow… ‘Regular’ users like me may get upset.”

The FTC alleges that TracFone varied its data limits, but generally slowed data service when a customer used one to three gigabytes, and suspended data service at four to five gigabytes. When consumers approached TracFone’s limits, they would often receive a call that warned them for the first time about their “excessive data usage” but did not disclose TracFone’s data limits, according to the agency’s complaint.

The complaint states that there was no technical reason for TracFone to limit data, such as to reduce network congestion; rather, internal documents showed that the company’s data policies were created to “reduce the high costs associated” with providing the unlimited data that it had promised.

Beginning in September 2013, TracFone began to make some disclosure of its throttling practices for its “unlimited” programs, but those disclosures were often not clear and conspicuous, according to the FTC’s complaint. In many cases, the disclosures were in very small print or on the back of packages or cards where consumers were likely to miss them.

In addition to the $40 million in consumer refunds that it must pay under its settlement with the FTC, TracFone is prohibited from making further deceptive advertising claims about its mobile data plans, and must clearly and conspicuously disclose any limits on the speed or quantity of its data service.

This is the second case brought by the FTC against a mobile provider for failing to live up to its promises of unlimited data: the Commission’s case against AT&T is currently in litigation.

The Commission vote authorizing staff to file the complaint and approving the proposed stipulated order was 5-0. The FTC filed the complaint and proposed stipulated order in the U.S. District Court for the Northern District of California.

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

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Guidance on Private Student Loans with Graduated Repayment Terms at Loan Origination

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