Articles Posted in Consumer Protection Laws

In a unanimous ruling, the Supreme Court recently came down hard on the Federal Trade Commission by eliminating its ability to seek monetary relief in court under Section 13(b) of the Federal Trade Commission Act (FTC Act). The ruling comes as quite a blow to the FTC which has been recovering monetary penalties from defendants under Section 13(b) of the FTC Act for nearly half a century. The full impact of this ruling remains to be seen and may not become clear for several years.

Section 13(b) monetary relief is among the FTC’s primary tools for obtaining recovery in the cases it pursues, particularly in consumer protection matters. For instance, in fiscal year 2019 alone, the FTC filed 49 complaints in federal court and obtained 81 permanent injunctions and orders, resulting in more than $723 million in consumer redress or disgorgement. The ruling is also likely to affect antitrust enforcement in the pharmaceutical industry where the FTC has pursued disgorgement amounts as high as $1.2 billion. Going forward, the FTC will be limited to injunctive relief in the vast majority of matters unless it pursues other avenues of recovery available under different sections of the FTC Act.

The case, AMG Capital Management, LLC v. Federal Trade Commission, began when the FTC filed a lawsuit in federal court against payday lender AMG Capital Management, its owner, Scott Tucker, and several other entities under Section 5(a) of the FTC Act for allegedly misleading consumers with certain terms of payday loans. A payday loan is a high-interest, short-term loan, typically marketed to low-income consumers in need of quick cash. They generally come with exorbitantly high interest rates and short repayment schedules and have been called predatory by a number of consumer rights advocacy groups, such as the National Association of Consumer Advocates.

In its complaint, the FTC alleged that AMG Capital Management and other related entities engaged in numerous deceptive acts and practices in connection with how it collected loan payments from borrowers, often resulting in consumers paying hundreds or thousands of dollars more than the cost of the loan disclosed in the loan application documents.

The FTC could have initiated the case by using administrative proceedings available to it under Sections 5 and 19 of the FTC Act. Instead, though the FTC skipped these administrative proceedings and initiated the case directly in federal court seeking a permanent injunction and equitable monetary relief in the form of restitution and disgorgement under Section 13(b) of the FTC Act. The district court directed the defendants to pay $1.27 billion in restitution and disgorgement. On appeal from the judgment, the Ninth Circuit affirmed, citing circuit precedent interpreting the statutory text of Section 13(b) broadly to include the authority to award restitution and other forms of monetary relief as “necessary to accomplish complete justice.” Continue reading ›

Many states have passed laws in the past few years taking aim at automatic renewals in contracts such as subscription-based services. As people have found themselves home more and more during the COVID pandemic, the number of subscription services with automatic renewals have exploded. New York recently passed a law more strictly regulating these automatic subscription renewals. The new law is set to take effect on February 11, 2021.

New York’s new law is meant to replace an existing law concerning automatic renewals which was narrow in scope and applied only to contracts “for service, maintenance, or repair to or for any real or personal property” with a renewal period longer than one month. The scope of the new law is much broader, covering any company offering goods or services to consumers through any kind of subscription plan that automatically renews—which includes free trials, free gifts, and reduced-price trial periods that convert to paid subscriptions automatically charged to consumers’ credit cards. As the press release accompanying the passage of the law explained, the new law is meant to better protect consumers who may not understand how to cancel such subscriptions and to avoid “convoluted renewals [that] have created a public health hazard for New Yorkers during the pandemic, including some who were told they had to visit their gyms in person to cancel memberships.”

New York’s new statute prohibits automatically renewing a contract without a consumer’s “affirmative consent” for the renewal. Absent this affirmative consent, some goods the provider may have sent the consumer can be deemed “unconditional gifts.” Absent from the new law, however, are guidelines for how providers are to obtain this consent.

The new law also requires clear and conspicuous disclosures before enrollment. Specifically, it requires that “automatic renewal terms,” such as the cancellation policy, recurring charges, and length of the renewal term, among other things be presented in a “clear and conspicuous” way and in “visual proximity” to the request for a consumer’s consent. Consumers must also receive an acknowledgment in “a manner that is capable of being retained by the consumer” that includes the automatic renewal terms and information regarding how to cancel the agreement. Providers must also provide a web-based option for cancellation. And if a provider makes any material changes to its renewal terms, those new terms must be provided to consumers in a “clear and conspicuous” notice. Continue reading ›

Many people have become wary of online forms asking for personal information since many of them prove to be opportunities for dishonest people and institutions to use and share that information for their own purposes. But there are institutions most of us assume to be trustworthy, and for most people, that would include the College Board, the same institution that develops and administers the SAT and ACT exams. According to a new lawsuit, the College Board allegedly collected and sold students’ personal information, including their names, addresses, gender, ethnicity, grades, and citizenship status.

According to a new lawsuit, which has been filed on behalf of the parent of a student of Chicago Public Schools, the College Board allegedly collected this information using a Student Search Survey. The College Board denies having done anything wrong, saying that the survey was optional and free for students to fill out. Legislators say the College Board did ask for students’ consent to distribute their information to colleges, universities, and scholarship providers, but did not mention that the information would be sold to those third parties – that the College Board was profiting off students’ personal information.

The lawsuit alleges that the College Board collected between 42¢ and 47¢ for each student name they sold to other organizations.

The lawsuit further alleges that, after obtaining students’ personal information, the College Board offered the students’ identifying information (including their names and addresses) for sale to third parties in order to promote Student Search Service, the survey they used to collect students’ information. Continue reading ›

Depending on the state in which they live, consumers sometimes have a hard time recovering the money they may have been deceived into giving to scammers who take their money and disappear, or to buy products that turn out to be harmful. Sometimes they can’t sue because they signed away their right to sue a company in their purchase agreement, or the amount spent is too small to justify the costs of an individual lawsuit. Other times they simply aren’t aware that the company has done something wrong. Regardless of the reason, it can be disheartening to see the number of consumers who are unable to recover funds lost as a result of scams or a company’s bad practices, but there is hope for those consumers.

One of the jobs of a state attorney general is to protect consumers against companies using predatory practices. Earlier this year Mark Brnovich, Arizona’s state attorney general, reported that his office had succeeded in recovering more than $38 million in restitution for consumers in 2019 alone.

Brnovich said the money has been recovered using a combination of out-of-court settlements, lawsuits filed (or backed) by the state, civil penalties, as well as costs associated with matters of consumer protection.

But the office of the state attorney general can’t protect consumers without the help of those same consumers. The state attorney general’s office relies on consumers, not only to notify them of potential scams and/or misconduct perpetrated by companies but also to provide evidence and testimony to help them pursue legal action, especially against large corporations. The Arizona state attorney general’s office reported having processed more than 14,000 written complaints, as well as 40,000 phone calls from consumers.

It’s a lot of information to go through, but it helped the Arizona state attorney general’s office bring legal action against large corporations, including e-cigarette manufacturers and pharmaceutical companies. Continue reading ›

Having a bad credit score can negatively impact your life in a big way. It can prevent you from getting loans for things you need – everything from buying a car to getting repairs done on your home can become difficult, if not impossible when you have a low credit score. When you are able to obtain a loan, a low credit score can mean you have to pay a much higher interest rate than you would get if you had a higher credit score. People struggling to pay back debt often have low credit scores, but having a low credit score imposes another financial burden on them, making it even more difficult for them to dig themselves out of debt. When you take all that into consideration, it’s no wonder people are desperate to have their credit scores improved by any means necessary. Unfortunately, this makes them vulnerable to predators claiming to be credit repair companies.

While there are legitimate companies that can help you improve your credit score by removing debt and “hard” credit checks from your credit score, there are also companies out there that claim they can do these things, charge a hefty fee, and then never deliver.

The Federal Trade Commission (FTC) and the office of the Illinois attorney general have each filed lawsuits against companies offering credit repair services while allegedly engaging in deceptive business practices and defrauding consumers. Continue reading ›

IMG_6355_3-300x189The FTC and the State of Ohio sued a third party payment processor that engaged in processing payments for third party merchants engaged in deceptive practices and consumer fraud, as well as telemarketers in violation of the FTC Act, the TSR, and the Ohio CSPA.

The Federal Trade Commission and the State of Ohio filed a complaint seeking a permanent injunction and other equitable relief against Madera Merchant Services and B&P Enterprises. The United States District Court for the Western District of Texas issued a temporary restraining order, asset freeze, and other equitable relief, as well as an order to show cause why a permanent injunction should not be issued.

Madera Merchant Services and B&P Enterprises operate a third-party processing scheme that uses remotely created payment orders or remotely created checks to withdraw money from consumers’ accounts on behalf of third-party merchants. Madera and B&P routinely withdrew funds from consumers for merchants that were engaged in fraud or deceptive marketing. The district court stated that the defendants also routinely provided payment processing services to telemarketers in violation of the TSR, which expressly prohibits collecting payments in connection with telemarketing sales. Continue reading ›

Although e-cigarettes were first marketed as a way for smokers to quit smoking, not only has it been proven that they are not an effective way to quit smoking, but e-cigarette companies, like Juul, have actually gotten young people addicted to nicotine by targeting teens and young adults who had not previously been smokers.

Despite the fact that vaping has been marketed as a safe alternative to smoking, the reality is that it has contributed to thousands of cases of lung cancer. In addition to nicotine, many e-cigarettes also contain THC, which is a psychoactive ingredient.

Dr. Ngozi Ezik, the Director of the Illinois Department of Public Health, has reported that 201 cases of lung illnesses in Illinois alone have been confirmed as vaping-related illnesses. The youngest patient was just 13 years old. Five deaths in Illinois have been linked to vaping.

Juul is the most popular e-cigarette company by far, and it is now facing a consumer fraud lawsuit by the state of Illinois for having targeted teens. Among other things, the lawsuit alleges Juul has been instrumental in undoing decades of work by both government agencies and anti-tobacco activists towards reducing smoking rates among teens. Despite the initial success of those efforts, which saw teen use of nicotine drop from 36% in 1997 to 5% in 2017, new data shows that the use of e-cigarettes among both teens and middle school students is currently on the rise. Continue reading ›

Alison Victoria, a Chicago native and one of the stars of HGTV’s “Windy City Rehab” has said that she wants to take over Chicago and put her stamp on every neighborhood. Whether fellow Chicagoans want that is another matter, and one that is currently being handled (at least in part) in the courts since Victoria and her partner, Donovan Eckhardt, is being sued by the buyers of one of their home renovations.

The house at 2308 W. Giddings Street sold for $1.36 million after Victoria and Eckhardt gave it a makeover. The end of the episode featuring the house showed it looking fixed up with fresh paint and chic furniture, but according to the current residents’ allegations (which are denied), the rehab was only skin deep, while severe structural damage continues to cause problems. Continue reading ›

A recent decision by the Eleventh Circuit federal court of appeals adds another arrow to class action defendants’ quiver by making it more difficult for plaintiffs to establish standing to sue under the Telephone Consumer Protection Act (“TCPA”). The appellate court ruled that a single text message did not cause sufficient harm to sue in federal court.

In Salcedo v. Hanna, 936 F.3d 1162 (11th Cir. 2019), the plaintiff, John Salcedo, received a single form text message from his former attorney offering a discount on the attorney’s services. After receiving the message, Salcedo filed suit in the district court alleging that the text message violated the TCPA, 47 U.S.C. § 227(b)(1)(A)(iii). Salcedo sought to prosecute the suit on behalf of a putative class of the attorney’s former clients who also received unsolicited text messages from the attorney in the past four years. He alleged that the text message caused him to “waste his time answering or otherwise addressing the message” and infringed upon his “right to enjoy the full utility of his cellular device” and sought statutory penalties of $500 to $1,500 for each text message as damages.

After the defendant unsuccessfully moved to have the case dismissed for lack of standing and failure to state a claim, the district court permitted the defendant to file an interlocutory appeal recognizing that the question of standing “involves a controlling question of law as to which there is a substantial ground for difference of opinion.” The three-judge panel of the Eleventh Circuit did not buy the plaintiff’s standing arguments.

In a detailed opinion, the panel examined its own precedent, the legislative history of the TCPA, and the history of Article III’s standing requirement. Any discussion of standing would not be complete without an examination of the Supreme Court’s 2016 decision in Spokeo v. Robins. At the conclusion of this examination, the appellate court concluded that the plaintiff’s allegations about a single text message failed to state a “concrete injury-in-fact” necessary for federal jurisdiction.

Continue reading ›

Real product reviews are a great tool for helping consumers make better, informed decisions. Many of these reviews come from real customers who really used the product. Other reviews, however—particularly those on websites, in blogs, and on social media—are not from legitimate customers but come from companies that use fake reviews to paint a pretty picture of their products and boost their bottom line.

Earlier this year, the Federal Trade Commission (“FTC”) set its sights on a cosmetic company accused of posting fake consumer reviews of its own products online. According to a leaked internal email, the CEO of the company allegedly pressured employees to post positive reviews of new products that the company had recently released and even provided detailed instructions regarding what the employees should write about the product in reviews as well as how to avoid having the reviews traced back to the company’s IP address by using a VPN. Continue reading ›

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