FTC Cracks Down on Illegal Telemarketing in Debt Relief Scheme and Issues Agenda for Robocall Summit


In an action filed by the Federal Trade Commission, a California district court has issued a temporary restraining order against the operators of debt relief companies that the agency says not only made false representations in telemarketing phone calls and on websites about the nature of the services they provided and their success rates, but also allegedly made phone calls to numbers listed on the federal Do Not Call List. The order requires the defendants to stop their allegedly deceptive practices and freezes their assets pending the outcome of the FTC's action against Jeremy R. Nelson and four companies he allegedly controlled. The TRO also required defendants to shut down a number of websites offering debt relief services.

The complaint in FTC v. Nelson Gamble & Associates LLP charges defendants with violating the Federal Trade Commission Act and the agency's Telemarketing Sales Rule by making false and deceptive claims; causing consumers' bank accounts to be debited without their express, informed consent; and charging advance fees for debt relief services. The FTC alleges that defendants marketed and sold debt relief services through telemarketing and websites, representing that lawyers would assist consumers in settling debts for 50 to 80 percent less than they owed, as they had for numerous clients in the past, when, in reality, defendants are not lawyers and have settled few, if any, debts for customers. Defendants also allegedly violated the Electronic Fund Transfer Act and Regulation E by debiting consumers' bank accounts on a recurring basis without their written authorization and without providing consumers with a copy of the authorization.

According to the FTC's complaint, in addition to making false and deceptive claims, defendants violated the Telemarketing Sales Rule by calling phone numbers listed on the National Do Not Call Registry, calling consumers who had told them not to call, failing to transmit caller identification to consumers' caller ID service, delivering prerecorded messages without consumers' prior written consent, repeatedly calling consumers to annoy them, and delivering prerecorded messages that failed to identify the seller, the call's purpose, and the product or service.

The Ohio Attorney General's Office, which assisted the FTC with its investigation, reportedly filed suit against the defendants, alleging that the companies entered into agreements with consumers over the telephone but did not provide consumers with written agreements; misrepresented themselves as law firms and lawyers, or as having an affiliation with lawyers; and failed to provide refunds to consumers who demanded that the defendants either deliver the agreed-upon services or refund their money. The defendants have also been the subject of recent consumer complaints, a 2010 consumer warning by the Better Business Bureau and more than one consumer lawsuit.

According to the FTC's statement, the suit is part of the agency's focus on halting scams that target consumers in financial distress and its continuing crackdown on illegal "robocalls," which has included 88 enforcement actions to date against 250 corporate and 194 individual defendants involving robocalls and Do Not Call violations, resulting in payments of more than $69 million in civil penalties and equitable monetary relief.

Also as part of its crackdown on illegal telemarketing, FTC has announced the agenda for its upcoming Robocalls Summit on October 18, 2012. After opening remarks by FTC Chairman Jon Leibowitz, the morning session will focus on "Where We Are Today" and will include panels on the current state of telephonic technology; how changes in technology have affected the telecommunications industry; and the law surrounding robocalls, including enforcement, challenges and limitations, and how this affects consumers. The afternoon sessions will focus on "Developing Solutions" and will include panels on caller ID spoofing and call authentication technology, data mining and anomaly detection, and call-blocking technology.

For more information about the content of this alert, please contact Michael Mallow or Michael Thurman (follow him on Twitter @CPD_Attorney).

Circular 230 Disclosure: To assure compliance with Treasury Department rules governing tax practice, we inform you that any advice (including in any attachment) (1) was not written and is not intended to be used, and cannot be used, for the purpose of avoiding any federal tax penalty that may be imposed on the taxpayer, and (2) may not be used in connection with promoting, marketing or recommending to another person any transaction or matter addressed herein.

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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