The Federal Trade Commission’s May 2022 open meeting, Alvaro Bedoya’s first since being sworn in as the agency’s fifth commissioner on May 16, considered a request for public comment on proposed amendments to its Guides Concerning the Use of Endorsements and Testimonials in Advertising. After a staff presentation on commissioners’ proposed updates and statements, the agency unanimously approved the request for public comment.

The Endorsement Guides, first issued in 1980 and last amended in 2009, reflect the commission’s interpretation of how the FTC Act applies to endorsements and testimonials in advertising. Proposed updates to the guides include the following:

Continue Reading FTC Approves Request for Public Comment on Updates to Endorsements and Testimonials Guides

Yesterday, the Federal Trade Commission (FTC) moved to dismiss its long-running enforcement action against Electronic Payment Solutions (EPS) pending in the District of Arizona after the Commission voted 4-0 to approve a final settlement with EPS and certain of its owners. The case against EPS, a third-party payment processor, is just the most recent example of the FTC’s heightened focus on holding financial intermediaries responsible for failing to police the actions of their merchant customers

The FTC initially filed the federal action in 2017, requesting equitable monetary relief and injunctive relief under Section 13(b). After the Supreme Court issued its decision in AMG, the district court denied the FTC’s request for a permanent injunction and equitable monetary relief. The FTC then proceeded to file an administrative complaint against EPS, alleging unfair credit card laundering under Section 5 of the FTC Act and Assisting and Facilitating Telemarketing Sales Rule (TSR) violations.

The FTC and EPS entered into the proposed consent agreement on March 15, 2022, which the FTC finally approved last week. Though the consent agreement does not include any monetary relief in light of AMG, the conduct terms are quite rigorous and include (1) restrictions on the types of merchants for which EPS can process, (2) enhanced screening requirements for certain merchants, (3) additional monitoring requirements for certain merchants, and (4) monitoring and mandatory termination of independent sales agents.

Tomorrow, May 19, at 2:00 PM ET, we will be discussing the EPS settlement, as well as other recent government enforcement actions against payment processors and compliance tips during our webinar, “Payment Processors in the Regulatory Crosshairs: Updates on Regulatory Scrutiny and Best Practices for Compliance.” We hope you will join us to learn more about this topic. You can register to attend the webinar here.

“Free” must mean free?

Last week, the attorneys general for all 50 states and the District of Columbia announced a settlement with Intuit, Inc., the owner of TurboTax, which will require the company to hand over $141 million to consumers as restitution for allegedly tricking consumers into paying for tax-filing services when they qualified for free tax-filing services.

Recently, we wrote about the Federal Trade Commission’s legal action against Intuit for its advertisements regarding “free” tax-filing services. In that action, the FTC sought to definitively resolve that very question. As part of last week’s settlement agreement, Intuit will cease its advertising campaign promoting its “free, free, free” services in addition to paying the hefty restitution sum. The state settlement essentially ended the FTC action as well.

While the states’ investigation overlapped with the FTC’s action concerning Intuit’s alleged bait-and-switch advertising (i.e., representing the service is “free” but later requiring an upgrade to a paid version), their investigation also had another focus: “dark patterns,” which refers to a digital design feature that is intended to subtly influence a consumer’s online decisions.

Continue Reading Intuit Will Pay $141 Million in State Attorneys General Settlement Over Deceptive TurboTax Advertising

Venable hosted another jam-packed session on the regulatory and litigation risks facing the lead generation industry today, and strategies for mitigating them. In the webinar, Daniel Blynn, Alexandra Megaris, and Jonathan Pompan covered federal and state law enforcement priorities; TCPA, legislative, licensing, and regulatory developments; and more.

Key takeaways:

  • Dive into federal and state regulatory consumer protection priorities and what’s on the horizon
  • Understand the latest TCPA developments and what they mean for lead generation
  • Discover ways to avoid regulatory scrutiny and enhance compliance

View a recording of the presentation or download the slides.

The FTC held its most recent open meeting on Thursday, and two major topics were front and center: potential changes to the Telemarketing Sales Rule (TSR) and a congressional fix to Section 13(b) after the one-year anniversary of AMG Capital Management LLC v. FTC.

In its first order of business, the Commission unanimously voted to publish a Notice of Proposed Rulemaking (NPR) and an Advance Notice of Proposed Rulemaking (ANPR), which address several proposed updates to the TSR. The NPR is further along in the rulemaking process, where it seeks comment on the published proposed rule.

Continue Reading FTC’s Spring Open Meeting Brings Potential Rule Changes and Plea to Congress

As the world moves toward the rollout of fifth-generation, or 5G, wireless technology, the numbers of devices operating in many locations have grown exponentially. The Federal Communications Commission manages the commercial use of the radiofrequency spectrum – those invisible airways on which consumer and commercial wireless devices and networks operate. More wireless devices demand more use of the radio spectrum, leading the FCC to consider how to manage the spectrum more efficiently.

To that end, for the first time in two decades the agency may consider whether and how it may regulate receivers, which is the part of a wireless system that takes in transmissions of communications (e.g., voice, data). Poorly performing receivers make for inefficient spectrum use, limiting the FCC’s ability to cram more users into existing spectrum bands (a finite resource).

Late last year, the design of receivers made national news as the airline industry publicized concerns with possible interference to aircraft altimeters. An FCC decision to auction spectrum on an adjacent band to cellular carriers created concern that some altimeters could suffer performance degradation because these devices “listened” in to the adjacent band. The issue prompted the involvement of various parts of the Biden administration to step in and work out a short-term solution (for now) to modify the rollout of 5G services near airports.

Continue Reading Managing Wireless Technologies from Both Ends: FCC Considers Receiver Regulation

Last week, the Federal Trade Commission filed a complaint in the Northern District of Illinois against the Saint James School of Medicine (SJSM), an Illinois-based for-profit medical school, claiming its Caribbean medical programs deceived consumers with fake student success rates and offers to finance students’ attendance with illegal lending contracts.

Over the last several years, the FTC has focused on for-profit higher education institutions and allegedly deceptive money-making claims, which the FTC challenges as flawed and costly get-rich-quick schemes. Its move last week suggests that the agency remains highly focused on alleged deception of any type involving paying money to make money, regardless of the format.

The FTC’s complaint alleges that SJSM advertises its Caribbean medical programs as an affordable alternative to American medical schools. However, SJSM also allegedly draws students into the program by advertising that more than 96% of its students pass the USMLE Step 1 exam—a critical standardized medical school test—the first time they take it. In fact, the FTC alleges that the passage rate for SJSM students since 2017 is 35%, and that is only for students who are allowed to take the exam after meeting prerequisites set by the school. The FTC claims that the true passage rates are disclosed to students only in hard-to-find areas of SJSM’s website and are buried in a student handbook that students receive only after SJSM has collected their reservation fees.

Continue Reading The FTC Moves Its Attention to A For-Profit Medical School

A lawsuit filed by the CFPB last week against a national credit reporting agency provides some insight into the types of website features and designs that regulators like the Consumer Financial Protection Bureau and Federal Trade Commission will target. As we covered previously, digital dark patterns—or website design, features, and interfaces used to allegedly deceive, steer, and manipulate users—are a priority for both rulemaking and enforcement actions by the FTC. Although the focus has been on website features that “trick or trap” consumers into subscriptions, the potential for broad and arbitrary application of this concept is worrisome. What is the line between a website that is acceptably optimized for conversion and one that is illegally steering users to make purchases?

In the highly detailed complaint, the CFPB alleged, among other things, that the net impression of various advertising messages, combined with the design of the webpage where users landed when clicking on the ads, obscured the nature of the offer (a month-to-month subscription of a credit-monitoring service and credit score), the status of a user’s enrollment in the service, and the purpose of collecting a user’s payment information.

More specifically, the complaint described how call-to-action buttons, email subject lines, font color and size, text placement, and website flow were employed to confuse consumers who were seeking information about or copies of their annual free credit report and steer them instead into unwittingly purchasing a subscription for credit monitoring.

Continue Reading Latest CFPB Lawsuit Sheds Light on Digital Dark Patterns

At the peak of tax-filing season, when millions of consumers are still considering their method of filing, the Federal Trade Commission has set its sights on Intuit, Inc., one of the largest online tax-filing services.

On March 28, 2022, the FTC filed an administrative complaint against Intuit, alleging that the company’s marketing of TurboTax as a free tax-filing service misleads consumers because the free service applies only to some, while many end up getting hit with charges at the time of filing.

In a press release, Samuel Levine, director of the Bureau of Consumer Protection at the FTC, stated that Intuit’s advertising is a “bait-and-switch” tactic that a court should immediately halt to protect tax-paying consumers. The FTC simultaneously filed a complaint for a temporary restraining order and preliminary injunction against Intuit in federal court in the Northern District of California, seeking to immediately enjoin it from advertising its tax-filing product and service, TurboTax, as free.

Continue Reading “Free” Must Mean Free? FTC Seeks to Enjoin Intuit from Advertising TurboTax as a “Free” Service

A few weeks ago, we wrote an article discussing two enforcement actions by the Federal Trade Commission in the Central and Southern Districts of California that highlighted the risks to payment processors and financial institutions for their relationships with companies engaged in allegedly unlawful “negative option” marketing.

In both FTC v. Triangle Media Corporation et al. (the “Triangle Action”) and FTC v. Apex Capital Group, LLC (the “Apex Action”), the FTC accused the defendants of engaging in an alleged scheme to offer fake “free trials” of personal care products and dietary supplements to obtain consumers’ credit and debit card information.

Also, in both cases, the court granted the FTC’s request and recommendation that a Receiver be assigned to oversee, manage, and preserve the assets of both sets of defendants. That Receiver then sued Wells Fargo—the bank used by the defendants in both the Triangle and Apex Actions—alleging that Wells Fargo engaged in illicit activity, including, but not limited to, aiding and abetting fraud, conspiracy to commit fraud, breach of fiduciary duty, negligent supervision, and violating the California Unfair Competition Law (UCL). Last week the court denied most of Wells Fargo’s motion to dismiss, allowing the claims against the bank to proceed.

Continue Reading Update: Judge Allows Most of Receiver’s Claims Against Wells Fargo for Involvement with Negative Option Marketers to Proceed