Federal Trade Commission (FTC)

The Federal Trade Commission announced in mid-July that it conducted the first compliance sweep of car dealerships since the effective date of its revised Used Car Rule requiring use of a new Buyers Guide sticker.  The sweep took place between April and June 2018 in 20 cities nationwide.  The FTC coordinated its efforts with 12 partner agencies in seven states to ensure that dealers are displaying a revised version of the Buyers Guide, which contains warranty and other information for consumers. 

In the sweep, inspectors found that approximately 70 percent of vehicles displayed Buyers Guides and roughly half of those displayed the revised Buyers Guide.  Inspectors reviewed 94 different dealerships and reported that 33 dealerships posted the revised Buyers Guide on more than half of their vehicles, but only 14 dealerships had revised Buyers Guides on all of their used vehicles for sale.  The FTC Act provides for penalties of up to $41,484 per violation for those dealerships that do not properly comply with the Used Car Rule. 

As we reported here, the FTC issued additional guidance on the Used Car Rule in September 2017 in response to a number of questions raised by dealers regarding compliance.  The guidance was in the form of frequently asked questions (FAQs) and addressed topics such as: whether and what type of changes can be made to the language; the format and font of the Buyers Guide; disclosure requirements regarding manufacturer and third-party warranties; and guidance for completing the “systems covered” portion of the revised Buyers Guide.  The amendments to the Rule included a grace period that permitted dealers to use their remaining stock of Buyers Guides for up to one year after the January 28, 2017 effective date, making January 28, 2018 the deadline for compliance. 

The FTC and its partners inspected dealerships in California, Florida, Illinois, New York, Ohio, Texas, and Washington.  The FTC reports that those dealerships that were not compliant can expect follow-up inspections to ensure compliance.


The Federal Trade Commission recently reached a settlement agreement with a Los Angeles-based company purporting to offer student loan debt relief services for alleged violations of the FTC Act and the Telemarketing Sales Rule.

The FTC filed a complaint against defendants Salar Tahour and his companies, M&T Financial Group and American Counseling Center Corp., as part of an initiative known as “Operation Game of Loans”, a coordinated effort between the FTC and numerous state attorneys general intended to crack down on deceptive student loan debt relief scams. The defendants, who operated as Student Debt Relief Group, SDRG, Student Loan Relief Counselors, SLRC, StuDebt, and Capital Advocates Group, marketed themselves as student loan debt relief servicers. However, according to the FTC the companies engaged in a scheme that defrauded consumers out of $7.3 million.

In its complaint, the FTC alleged that the defendants operated an unlawful student loan debt relief service and engaged in illegal and deceptive practices. These included violating the Telemarketing Sales Rule by contacting consumers on the National Do Not Call Registry and charging advanced fees for their debt relief services.  They were also charged with violating the FTC Act by misrepresenting to consumers that they were affiliated with the U.S. Department of Education. The FTC also alleged that the companies told consumers they were operating under the Federal Student Loan Forgiveness Act of 2012 – an act that was proposed during former President Obama’s administration but was never signed into law.

Per the terms of the settlement order, the defendants are permanently banned from offering any type of debt relief product or service and must pay a monetary judgement of over $12 million –  $11,694,347.49 of the judgment representing the estimated amount of injury caused to consumers by the defendants’ actions.

In May 2017, the Federal Trade Commission, along with federal, state, and international law enforcement partners, announced “Operation Tech Trap,” a nationwide and international crackdown on tech support scams that trick consumers into believing their computers have a virus and then charge those consumers money for unnecessary repairs.

As part of Operation Tech Trap, the FTC and the State of Ohio filed a complaint in federal court in Ohio against defendants Repair All PC LLC, Pro PC Repair LLC, I Fix PC LLC, WebTech World LLC, Online Assist LLC, Datadeck LLC, and I Fix PC d/b/a Techers247, as well as individual defendants Jessica Marie Serrano, Dishant Khanna, Mohit Malik, Romil Bhatia, Lalit Chadha, and Roopkala Chadha.

According to the FTC and the State of Ohio, the defendants contacted consumers through online advertisements that appeared to be pop-up security alerts from well-known companies such as Microsoft or Apple. The complaint alleged that the ads falsely warned consumers that their computers were infected with a virus or had been hacked, and urged consumers to call a toll-free number. Once consumers called the number, telemarketers, who claimed to be affiliated with tech companies, gained access to the consumer’s computer and ran “diagnostic tests” that appeared to show that the consumer’s computer had major problems. The telemarketers then sold the consumer a one-time “fix” or a long-term service plan, costing hundreds of dollars.

The defendants entered into a settlement agreement with the FTC and Ohio, which was approved by the district court on January 26, 2018. The settlement imposes a $12.4 million judgment that will be suspended upon payment of $122,376.39. The Ohio defendants entered into a separate settlement that imposes a $12.4 million judgment that will be suspended upon payment of $27,000.

As part of the settlement agreement, all of the defendants are barred from: (1) offering tech support products and services; (2) engaging in deceptive telemarketing practices; (3) misrepresenting their affiliation with another company; and (4) collecting or attempting to collect payment for tech support products or services.

The FTC’s news release on the action is available here.

The deadline for motor vehicle dealer compliance with the Federal Trade Commission’s revised Used Car Rule is rapidly approaching.  The January 28, 2018 compliance date imposed by the FTC requires dealers, as of that date, to use the agency’s revised window sticker, known as the “Buyers Guide,” on all used vehicles offered for public sale. 

In November 2016, the FTC announced its final amendments to the Used Car Rule, and specifically revised the federally-required form of the Buyers Guide that must be displayed on a used motor vehicle offered for sale to the public. 

As we covered here, the FTC issued additional guidance on the Used Car Rule in September 2017, in response to a number of questions raised by dealers regarding compliance.  The guidance was in the form of frequently asked questions (FAQs) and addressed topics such as:  whether and what type of changes can be made to the language; the format and font of the Buyers Guide; disclosure requirements regarding manufacturer and third-party warranties; and guidance for completing the “systems covered” portion of the revised Buyers Guide.   

The amendments to the Rule included a grace period that permitted dealers to use their remaining stock of Buyers Guides for up to one year after the January 28, 2017 effective date.  Time is running short, however, and all used vehicles must display the new Buyers Guide by January 28, 2018.

On January 10, the FTC issued a report summarizing the themes and key takeaways from a recent workshop it jointly hosted with the National Highway Traffic Safety Administration (NHTSA) on privacy and security issues related to connected and autonomous cars.

The report – styled a “Staff Perspective” – noted several important themes that emerged from the joint workshop:

  • Companies “throughout the connected car ecosystem” will collect data from vehicles, including car manufacturers, component manufacturers, third-party component manufacturers, and auto insurance companies.
  • The data collected from vehicles will include not only aggregate and non-sensitive data but also “sensitive personal data” about the occupants of vehicles, including “fingerprint and iris pattern” data used for authentication purposes.
  • Given the variety of companies that will collect data and the types of data that will be collected, “consumers may be concerned about secondary, unexpected uses” of the data.
  • Connected and autonomous vehicles will present cybersecurity risks that can potentially be exploited.

Consistent with those themes, the report stressed that “addressing consumer privacy concerns is critical to consumer acceptance and adoption of the emerging technologies behind connected cars.”

It also stressed that the industry should voluntarily adopt “best practices” for mitigating cybersecurity risks, including industry-wide information sharing regarding cyber vulnerabilities, segregated network design, ongoing risk assessment and mitigation efforts, and implementation of government and standard-setting agency guidelines.

The FTC’s report is available here.

2017 was a transformative year for the consumer financial services world. As we navigate an unprecedented volume of industry regulation and forthcoming changes from the Trump Administration, Troutman Sanders is uniquely positioned to help its clients find successful resolutions and stay ahead of the compliance curve.

In this report, we share developments on consumer class actions, background screening, bankruptcy, credit reporting and consumer reporting, debt collection, payment processing and cards, mortgage, auto finance, the consumer finance regulatory landscape, cybersecurity and privacy, and the Telephone Consumer Protection Act (“TCPA”).

We hope you find this helpful as you navigate the evolving consumer financial services landscape.


In its Office of Claims and Refunds Annual Report, the Federal Trade Commission reports that its law enforcement efforts between July 1, 2016, and June 30, 2017, returned $6.4 billion in refunds to consumers, including $391 million sent directly by the FTC to 6.28 million consumers.  This is the first such report on money returned to consumers and businesses.  The report describes how the FTC’s Bureau of Consumer Protection obtained 168 court orders for more than $12.72 billion during this oneyear period (not including judgments that were suspended by courts due to defendants inability to pay). 

The FTC also reports that 72% of individuals who received FTC checks cashed them, and the FTC paid an average of 4.85% in administrative costs, which are higher if the agency has to conduct a claims process to disburse refunds.

The report also details how the FTC identifies who is eligible for a refund.  Typically, a court order requires the company to provide a list of customers, their contact information, and how much each customer paid.  If the list is reliable, the FTC will send the refund directly to the customer.  Otherwise, customers must apply for a refund through a claims process, which involves either a media campaign to contact potentially eligible individuals or the use of available data to inform consumers about the refund process.  If neither of those options are feasible, the agency’s Consumer Sentinel Database may be used to find eligible recipients.

In addition to identifying eligible consumers, the report outlines the process for mailing refund checks, finding current contact information for potential recipients, and deciding whether additional check mailings are feasible.  There is typically a $10 minimum for checks mailed by the FTC.

The FTC’s report also provides links to web pages outlining details of some of its most successful cases and refund programs.

On December 22, the Federal Trade Commission issued its biennial report to Congress on the use of the National Do Not Call Registry, which is the database maintained by the federal government listing the telephone numbers of individuals who have requested that telemarketers not call them.

According to the report, 3.8 million phone numbers were added to the Registry in fiscal year 2017, and the Registry now has more than 229 million active registrations.  In addition, in fiscal year 2017, over 18,000 sellers, telemarketers, and exempt organizations subscribed to access the Registry, with 2,259 of those entities paying fees totaling more than $12.6 million for access to the database.

The report also notes that advances in technology have increased the number of illegal telemarketing calls made to telephone numbers on the Registry.  For instance, telemarketers are now able to use Voice over Internet Protocol (“VoIP”) technology to make calls inexpensively from anywhere in the world.  They also now are able to easily fake the caller ID information that accompanies their calls, thus concealing their identity from consumers and law enforcement.  According to the report, the “net effect of these technological developments is that individuals and companies who do not care about complying with the Registry or other telemarketing laws are able to make more illegal telemarketing calls cheaply and in a manner that makes it difficult for the FTC and other law enforcement agencies to find them.”

Consistent with that finding, between 2009 and 2017, the number of consumer complaints about illegal telemarketing calls has more than quadrupled – from 63,000 complaints per month in fiscal year 2009 to nearly 185,00 complaints per month in fiscal year 2017.

The report also discussed the impact of the established business relationship exemption, which allows a telemarketer to call an individual who has recently made a purchase or payment, and to return a call to an individual who has recently made an inquiry, even if the individual’s telephone number is listed on the Registry.

According to the FTC, many consumers think that telemarketing calls that fall within the established business relationship exemption are improper because they do not realize that they have an established business relationship with the telemarketer.  That perception is especially likely when the relationship between the consumer and the telemarketer arises from a brief, one-time transaction, or when the business identified in the telemarketing call and the business with whom the consumer has a relationship are technically part of the same legal entity but seem to be separate entities because they use different names or market different products.

The report reiterated the FTC’s position that “whether calls by or on behalf of sellers who are affiliates and subsidiaries of an entity with which a consumer has an established business relationship fall with the [established business relationship] exception depends on consumer expectations.”  In other words, the FTC will ask whether consumers are likely to be surprised by the call and find it inconsistent with placing their names on the Registry.

In addition, the report noted that telephone calls from telemarketers to phone numbers provided by lead generators generally do not fall within the established business relationship exemption because, while the consumer may have an established business relationship with the lead generator, they generally do not have an established business relationship with the entity that purchased the leads.  According to the FTC, unless the consumer inquired into the services of a specific business, or the lead generator made disclosures that would alert the consumer that he or she should expect telemarketing calls from the business as a result of his or her communication with the lead generator, the business cannot claim that it has an established business relationship with the consumer such that it can ignore the consumer’s registration on the Do Not Call Registry.

The FTC’s biennial report is available here.

On December 13, the U.S. Court of Appeals for the Eleventh Circuit affirmed the imposition of joint and several liability on a payment processor that had provided “substantial assistance” to another entity that violated a federal ban on improper telemarketing practices. The decision leaves the payment processor responsible for paying the $1.7 million judgment with its co-defendants.


In 2011 and 2012, a group of individuals known as Treasure Your Success (“TYS”) allegedly operated a fraudulent scheme under which TYS promised to reduce consumer credit card interest rates in exchange for the consumer authorizing a charge to his or her credit card. TYS, however, never had the ability to honor its promises to lower interest rates. Using this approach, TYS amassed more than $2.5 million from the victims of its scheme.

To carry out this scheme, TYS relied on Universal Processing Services of Wisconsin, LLC, a payment processing company, to charge customers’ credit cards. After receiving an internal referral, Derek DePuydt, Universal’s president, personally reviewed TYS’s merchant application and, despite several red flags indicating TYS might constitute a fraud risk, approved two accounts for TYS.

The FTC Complaint and First District Court Decision

In October 2012, the FTC filed a complaint in the U.S. District Court for the Middle District of Florida, naming members of the TYS scheme as defendants and alleging violations of the Federal Trade Commission Act (“FTCA”), 15 U.S.C. § 41 et seq., the Telemarketing and Consumer Fraud and Abuse Prevention Act, 15 U.S.C. § 6101 et seq., and the Telemarketing Sales Rule (“TSR”), 16 C.F.R. § 310.1 et seq. The FTC later added other defendants, including Universal and DePuydt, and brought an additional count that alleged Universal and DePuydt provided substantial assistance to TYS and “knew, or consciously avoided knowing,” that TYS was violating the TSR.

After various settlements, only Universal and two other defendants remained. The FTC moved for summary judgment against the three defendants. The district court granted the motion and found Universal substantially assisted TYS in perpetrating the scheme by establishing the merchant accounts and knew, or consciously avoided knowing, about TYS’s fraud. The court ordered disgorgement in the amount of $1,734,972 and held that the three defendants were jointly and severally liable for the entire amount of restitution.

First Appeal and District Court Clarification

Universal appealed, and the Eleventh Circuit directed the district court to further explain why it subjected Universal to joint and several liability. In a new opinion, the district court reasoned that although Universal did not participate in the scheme, the language of the TSR, in conjunction with how such situations are treated in tort and securities law, allowed for joint and several liability where an entity provides substantial assistance to another that it knows, or consciously avoids knowing, is violating the TSR.

The Second Appeal and Affirmation of District Court’s Decision on Joint and Several Liability

The decision was appealed again and the Eleventh Circuit affirmed. In so doing, the Eleventh Circuit first rejected Universal’s claim that joint and several liability cannot exist absent a common enterprise, explaining no authority supported that conclusion.

Next, the court looked to the history behind the TSR’s adoption and noted that the FTC expressly relied on tort and securities concepts when it formulated the rule. Specifically, the FTC invoked § 876(b) of the Restatement (Second) of Torts, which contemplates imposing liability on a person who gives substantial assistance to another person whose conduct breaches a duty, resulting in harm to a third party, where the offeror of the assistance knows the other party’s conduct is a breach. According to the court, § 876(b) shares three elements with the TSR—a primary violation, substantial assistance and knowledge. As a result, the court found borrowing from tort law appropriate. The court also found noteworthy that the Second Restatement expressly allows for imposing joint and several liability on an aider-abettor.

The Eleventh Circuit additionally focused on the FTC’s reference to securities law in its explanation of the final TSR. Securities law also provides for joint and several liability in the same situation as tort law, but it expands the requisite mental culpability from “knowing” to reckless. Recklessness, the court believed, even more closely tracked the “consciously avoid[ing] knowing” language adopted by the FTC in the TSR.

Finally, the court rejected Universal’s various arguments that the unjust gains could be fairly apportioned between the three remaining defendants, which Universal argued precluded joint and several liability. The court’s decision left Universal (with its potentially deeper pockets) on the hook for the $1.7 million judgment.

The case is Federal Trade Commission v. WV Universal Management, LLC, et al., No. 16-17727 (11th Cir. Dec. 13, 2017), and the opinion can be located here.

Troutman Sanders will monitor whether other federal courts follow the Eleventh Circuit and adopt this expansion of liability. Updates will be provided as they become available.

The Board of Governors of the Federal Reserve System recently issued a Consent Order against Peoples Bank, based in Lawrence, Kansas, to settle claims of deceptive residential mortgage origination practices that arose from the bank’s charging of fees in mortgage originations.  The Federal Reserve alleged that Peoples told mortgage borrowers that certain additional fees that the borrowers paid as discount points would lower the borrowers’ interest rates.  The Federal Reserve’s investigation determined that many borrowers did not, in fact, receive a reduced interest rate.  The Federal Reserve alleged this practice violated Section 5 of the Federal Trade Commission Act (“FTC Act”).

The Consent Order requires Peoples to pay approximately $2.8 million into an account to be used to provide restitution to the borrowers.  Additionally, Peoples must develop a plan that provides for restitution to each borrower who, in the course of obtaining a mortgage loan from Peoples, paid discount points that did not reduce the borrowers’ interest rate.  The Consent Order also requires Peoples to avoid any future violation of Section 5 of the FTC Act.