ERSP Recommends Certificate Program Claims Be Modified, Discontinued

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Manatt, Phelps & Phillips, LLP

Claims made in online and print advertising for a real estate and tax lien certificate investing program should be modified or discontinued, the Electronic Retailing Self-Regulation Program (ERSP) recently recommended.

An anonymous competitor directed the ERSP to advertising for the United States Tax Lien Association (USTLA) that included information about earnings, performance, selectivity and pricing claims.

For example, the marketing stated that participants could “[s]afely secure a consistent predictable monthly cash flow of up to an extra $1,200 to $7,800 per month, or even more!” by attending a program taught by “Tony Martinez and Saen Higgins[, who] have over 27 years of expert experience.” The marketing also stated that consumers needed to act fast because the “[e]xclusive program is limited to the first 30 registrants” and advised that “P.S. – We’ve set aside your invaluable Bonus Gifts ($230 Value) and will have them waiting for you when you attend the event.”

ERSP expressed concern that consumers could reasonably interpret the earnings claims to mean that they could make the stated amounts of income ($1,200 to $7,800) solely through investing in tax lien certificates. The self-regulatory body recommended that the advertiser clarify which income statements occurred as a result of tax lien redemption.

USTLA submitted information about the amount of income generated by five participants, but ERSP said the data was not a sufficiently representative sample to substantiate the claims. Lacking adequate substantiation, the advertiser should discontinue claims that imply consumers will earn significant amounts of money, the ERSP said.

Performance claims also raised questions for the ERSP, particularly those referencing certain instructors by name. Consumers could reasonably interpret the claims to mean that the named instructors would personally teach those classes. If they were not present at the courses, those claims should be discontinued, according to the decision.

While USTLA took advantage of the “common marketing strategy” to direct customer attention to limited-time deals, the advertiser admitted to ERSP that it sometimes allowed more than 30 registrants to attend its courses. USTLA voluntarily modified claims regarding “the first 30 registrants” as well as those touting the price of “free” gifts because the advertiser did not provide any internal sales information about the value of those products.

To read the ERSP’s press release about the decision, click here.

Why it matters: The self-regulatory body acknowledged that it appreciated USTLA’s participation in the process, including its willingness to make voluntary revisions to its advertising. The ERSP also recommended several changes to the advertiser’s marketing with regard to earnings and performance claims.

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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