Advertising Law - June 2014

In This Issue:

  • Auto Lender Pays $5.5M Over FDCPA, FCRA, and FTC Act Charges
  • “Right To Be Forgotten” Gets Paperwork
  • Geolocation Data Focus of Legislation, Congressional Meeting
  • No Love Lost: Jennifer Love Hewitt Sues Over Publicity Rights Violation
  • Noted and Quoted . . . Prominent Business and Trade Publications Turn to Goldstein and Wasserman on Impact of Supreme Court’s POM Decision

Auto Lender Pays $5.5M Over FDCPA, FCRA, and FTC Act Charges

More than $5.5 million was required to settle the Federal Trade Commission’s charges against Consumer Portfolio Services, a California-based auto lender the agency said used illegal tactics and harassed consumers.

According to the FTC, CPS violated multiple federal statutes including the Fair Debt Collection Practices Act, the Fair Credit Reporting Act’s Furnisher Rule, and Section 5 of the Federal Trade Commission Act. The company misrepresented fees owed by customers and unilaterally modified contracts, failed to disclose the effects of a loan extension to borrowers, and made false statements that CPS audits verified the balances of consumer accounts. In addition, the company disclosed the existence of debts to third parties, it deceptively manipulated Caller IDs when contacting borrowers, it called borrowers at work when not permitted, and it repeatedly called with the intent to harass.

To settle the FTC Act violations, CPS agreed to refund or adjust more than $3.5 million to 128,000 consumer accounts and forebear collections on another 35,000 accounts. It paid an additional $2 million in civil penalties for violations of the FDCPA and FCRA’s Furnisher Rule.

The company also promised to update its practices and procedures to comply with the federal statutes and to establish and maintain a comprehensive data integrity program that will “ensure the accuracy, integrity and completeness of CPS’ loan servicing processes, and the data and other information that CPS services, collects or sells.”

To read the complaint and stipulated order in United States v. Consumer Portfolio Services, click here

Why it matters: The FTC once again made it clear that loan servicers can’t charge consumers more than they owe without risking substantial penalties.

“Right To Be Forgotten” Gets Paperwork

Wasting no time, Google has already created a request form for residents of the European Union in light of the recent decision upholding the “right to be forgotten.”

In May, the EU’s highest court ruled that the search engine was required to delete links to 1998 legal notices about a Spanish attorney that appeared in a Spanish newspaper and announced the auction of his property to recover debts. Mario Costeja Gonzalez requested their removal, but Google declined. The lawyer sued, arguing that the proceedings had been resolved and were now irrelevant.

The European Court of Justice agreed and ruled that the data was “inadequate, irrelevant or no longer relevant, or excessive,” particularly as Gonzalez played no role in public life. Within days, the search engine was already fielding removal requests from other EU citizens.

In response, the company created a form found on the EU’s legal page. The form requires a requester (who must attach documentation for identity verification) to supply the URL that the individual wants removed, along with details about the search terms used to find it and an explanation of why the search result is “irrelevant, outdated, or otherwise inappropriate.”

Google also announced that it intends to form a committee of privacy experts – composed of non-company employees like the head of Wikipedia and former data regulators from European countries – to help it handle the changes. “We’re trying now to be more European and think about it maybe more from a European context,” CEO Larry Page told the Financial Times. “A very significant amount of time is going to be spent in Europe talking.”

The company indicated it may add an alert at the bottom of search results pages where links have been removed upon request.

To read the ECJ’s decision, click here

To see Google’s new form, click here

Why it matters: The EU decision suggests that it may favor the privacy rights of the individual over the public’s need to know. Further decisions may provide a clarification.

Geolocation Data Focus of Legislation, Congressional Meeting

Just days after Sen. Al Franken (D-Minn.) reintroduced his geolocation privacy bill, Jessica Rich of the Federal Trade Commission testified before a subcommittee of the Senate Judiciary Committee about the agency’s efforts to protect the privacy of consumers’ geolocation data.

Rich, Director of the agency’s Bureau of Consumer Protection, discussed some of the geolocation related enforcement actions with members of the Senate Judiciary Subcommittee on Privacy, Technology and the Law. Most recently, the FTC reached a settlement agreement with Snapchat, a mobile messaging app that was charged with making various misrepresentations to consumers, including how their geolocation information would be shared.

Flashlight app and a rent-to-own retailer that installed spyware on computers were also challenged by the agency.

Rich also threw her support behind Sen. Franken’s Location Privacy Protection Act – albeit with a caveat. Originally presented to the Senate in 2011, the proposed law would require that companies obtain permission before collecting location data about individuals from their phones, tablets, or vehicle navigation devices. If a company gathers geolocation data from 1,000 or more devices, the bill would mandate that the companies publicly disclose the details about the collection, whether or not the data is shared, and how individuals can opt out from collection or sharing.

“The commission very much supports the goals of the bill, which chiefly seeks to improve the transparency of geolocation services and give consumers greater control over the collection of their geolocation information,” she said. “The bill really represents an important step forward in protecting consumers’ sensitive geolocation information, notably by requiring clear and accurate disclosures and opt-in consent before geolocation data can be collected.”

While Rich praised the intent behind the legislation, she recommended that the FTC be given civil enforcement authority and that the Department of Justice prosecute criminal violation. As currently drafted, the bill gives the DOJ sole rulemaking and enforcement authority in consultation with the FTC, although a private right of action is also included.

Other speakers were less supportive of the legislation. “New laws or rules could impede future developments or discourage companies from continuing to compete over privacy features,” Lou Mastria, executive director of the Digital Advertising Alliance, told lawmakers at the hearing. He advocated for continued reliance upon industry self-regulation.

Dr. Robert Atkinson, president and founder of the Information Technology and Innovation Foundation, agreed. “While notification and consent to use geolocation data is appropriate for mobile apps today, it may not be so for other types of platforms in the future,” he testified. “For example, the use of geolocation information may be so integral to the purpose and functioning of a particular device that mandatory disclosures and consent requirements would be superfluous.”

To read the Location Privacy Protection Act, click here

To read Rich’s prepared testimony, click here

Why it matters: Could the geolocation bill fare better the second time around? Possibly, particularly as Sen. Franken has emphasized that his concern is focused on criminal actors and the use of so-called “stalking apps.” “I want to make one thing clear,” he said at the hearing. “Location-based services are terrific. I use them all the time.” With general support for outlawing these apps, other companies collecting geolocation data could be swept up in the law.

No Love Lost: Jennifer Love Hewitt Sues Over Publicity Rights Violation

Jennifer Love Hewitt alleges she did not give permission to use her name and image in advertisements and spam e-mails for a weight loss product in a new suit filed in California state court.

According to the complaint, The Marz Group violated the right of publicity of the self-described “internationally acclaimed actress, producer, author, television director and singer-songwriter” when it included Hewitt’s photograph as part of a marketing campaign for Slim Spray, an oral vitamin spray the company touts as a weight loss supplement, energy booster, and sleep aid.

Hewitt alleged the defendant makes a concerted effort to exploit celebrities as part of its advertising, with “an entire section of defendant’s website…littered with photos of celebrities who were undoubtedly pushed to hold the product at red carpet events,” according to the complaint.

The inclusion of Hewitt in such marketing “degrades her invaluable ‘brand’ and public image, which causes devastating effects on her ability to enter into future deals to promote quality, upscale products,” she alleged. After learning about the photo, lawyers for Hewitt sent Marz a cease and desist letter.

Although the company responded that it would stop using Hewitt’s image, it featured her in a promotional e-mail just a few weeks later. The e-mail displayed “a prominent, front-and-center photo of Hewitt and included the caption: ‘AS SEEN WITH JENNIFER LOVE HEWITT.’”

The complaint noted that the defendant appeared on a June 2013 episode of the ABC show “Shark Tank” on which it sought to find investors for its business. Comments from the hosts and potential investors referred to the spray as “a scam” and “a hustle.” Hewitt also cited a blogger who referenced her photos when reviewing the TV episode. “The blogger implies that these celebrity ‘endorsements’ add credibility to the effectiveness of defendant’s product, despite it being labeled a scam on national television by a highly successful and well-known investor,” the complaint argued.

The suit seeks injunctive relief and trebled damages for violations of Hewitt’s common law and statutory rights of publicity.

To read the complaint in Hewitt v. The Marz Group, click here.

Why it matters: Hewitt’s suit indicates that advertisers run the risk of challenge when they use the names and/or likeness of celebrities without their permission. Hewitt’s case is but a recent example.

Noted and Quoted . . . Prominent Business and Trade Publications Turn to Goldstein and Wasserman on Impact of Supreme Court’s POM Decision

In the past week, a host of top business and industry publications, including BusinessWeek, FDA Week, Advertising Age, Food Product Design, Law360 and The National Law Journal, sought commentary from Linda Goldstein, Manatt’s Advertising, Marketing & Media Division Chair, and Ivan Wasserman, a partner in the advertising practice, on the significance of the U.S. Supreme Court’s decision in the POM Wonderful v. Coca-Cola case. The court ruled that the Federal Food, Drug and Cosmetic Act does not preclude a private party from bringing an action under the Lanham Act for deceptive labeling, a decision that allows POM’s suit against Coca-Cola to move forward.

Speaking to Food Product Design on June 13, Ivan said, “Clearly the Supreme Court has spoken unanimously that compliance with FDA regulations does not provide a defense to a lawsuit by a competitor under the Lanham Act.”

In a BusinessWeek article published on June 12, Linda said, “The decision will now make claims on packaging and labeling additional fodder for competitive challenges, which will likely lead to an increase in brand wars.”

To read the related media coverage, click here.

Topics:  Advertising, Automotive Loans, Compliance, FCRA, FDCPA, FTC, Harassment, UDAAP

Published In: Communications & Media Updates, Finance & Banking Updates, Privacy Updates, Science, Computers & Technology Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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