This week, the following consumer protection actions made headlines:
Mortgage Scammer Under Water After FTC Settlement
On May 9, 2016, the FTC announced that it is returning $1.87 million to 1,630 consumers who lost money in the Expense Management America telemarketing scheme that never provided debt or mortgage relief services after absconding with homeowners’ up-front fees. The repayment to consumers is a capstone on a three and a half year joint effort with the DOJ, FBI and HUD to crack down on mortgage scammers taking advantage of distressed homeowners. Related efforts, underway since 2008, resulted in a new FTC rule providing increased protection to homeowners by prohibiting any collection of fees until the homeowner has an acceptable written offer from their lender. In prosecuting Expense Management America, the FTC worked closely with various enforcement agencies in Canada to track down and prosecute the scammers.
FTC Brings Consumer Reporting Agency Guidance to the Foreground
On May 10, 2016, the FTC issued guidance to employment background screening companies for compliance with the Fair Credit Reporting Act (“FCRA”). The agency’s primary aim is to describe when background screeners’ business models may bring them within FCRA’s definition of a “consumer reporting agency.” In those circumstances, the FTC states that FCRA requires an employment background screening company to (1) follow reasonable procedures to ensure data accuracy; (2) seek and receive employer certifications regarding the employee’s permission to submit to the background check, that the employer will comply with FCRA and that the screening report will not be used by the employer for discrimination; (3) provide employers with information about FCRA; and (4) comply with the employee’s right to access the files and reasonably investigate if an employee disputes the accuracy of the report.
FTC Furnishes Credit Protection Association With a $72,000 Civil Penalties Bill
The FTC hit the Texas-based Credit Protection Association (“CPA”) with $72,000 in civil penalties and imposed requirements that it develop new policies and procedures to be in compliance with FCRA’s Furnisher Rule. The Rule requires third party debt collectors such as CPA to implement written policies and procedures regarding the accuracy and integrity of consumer information later provided to a credit reporting agency. The FTC alleged that CPA failed to adopt policies encouraging objective investigations into consumer disputes, maintain adequate records, train staff on furnishing consumer information to reporting agencies and conduct periodic evaluations of its own FCRA-related practices. As part of a stipulated final order, CPA agreed to civil penalties and increased compliance reporting directly to the FTC for the next 20 years.
FDA Reevaluating “Healthy” Food Regulations: Sounds Grrrrrreat!
In the face of criticism that, among other foods, Tony the Tiger’s Frosted Flakes are considered “healthy,” but avocados, salmon, and almonds are not, the FDA is reevaluating regulations for nutrient content claims, particularly use of the term “healthy.” Kind LLC, the makers of fruit and nut Kind Bars, filed a petition with the FDA to encourage change in the regulations after it received a warning letter from FDA in 2015 requesting that Kind stop marketing its bars as “healthy.” The FDA has since rescinded the letter and begun the process of reevaluating its regulations as scientific evidence of the nutritional value of healthy fats has become more prevalent. FDA is not expected to update its guidance this year.
Searching for Payday Loans?
On May 11, 2016, Google added payday loans to its advertising blacklist, along with guns, drugs and other illicit activity. The search giant stated that “unaffordable payment and high default rates” underscored its goals of protecting users from “deceptive or harmful financial products.” In particular, the policy update prohibits paid advertising for loans with repayment dates within 60 days and interest rates of 36 percent or more, but will have no effect on standard financial products such as mortgages, car loans and student loans. The update will make its way into Google’s ad algorithm on July 13, 2016.
NAD Scratching Out Genomma Lab’s Athlete Foot Claims
On May 12, 2016, the National Advertising Division (“NAD”) recommended that Genomma Lab USA, Inc. modify claims made in its Spanish language advertising for the Silka athlete’s foot product to remove comparisons with over-the-counter products. Bayer Healthcare challenged Genomma’s ads claiming that Silka would alleviate symptoms within four days and cure athlete’s foot within four weeks. Genomma stated that a miscommunication in its Mexico City market department allowed the commercials to continue airing despite efforts to permanently discontinue the disputed ads. NAD’s review only required Genomma to remove language comparing Silka with OTC products treating the same condition. Genomma agreed to comply with the recommendations for future advertising campaigns.
Shark’s “2-to-1 Preference” Claims Snapped From Its Jaws by NAD
On May 9, 2016, NAD recommended that Shark stop using the unsupported preference claim that “Americans now choose Shark 2-to-1 over Dyson,” which was accompanied by the disclosure that it was based on unit sales for a 12-month period. Dyson argued that the preference claim could not be made by unit sales alone. NAD decided that sales superiority did not equate with preference of one brand over the other, but that Shark could modify the statement by stating that its sales were twice Dyson’s sales. NAD also recommended that Shark discontinue its “dust cup” head-to-head product demonstration with Dyson and modify its disclosures on other product demonstrations to clearly state that the comparisons are limited to only one specific Dyson model, not Dyson’s entire line. Shark agreed to comply and make the appropriate modifications immediately.