On November 30, 2016, the Federal Trade Commission (“FTC”) announced a settlement with Jason A. Kotzker, the purported owner and member of two separate data broker companies: Sequoia One, LLC and Gen X Marketing Group, LLC. Kotzker was the final defendant to settle an action commenced by the FTC last August. According to the FTC’s complaint, in some instances, Kotzker’s companies purchased payday loan applications from websites that offered to help consumers find payday lenders. In other instances, it was alleged, Kotzker’s companies established phony websites offering to match consumers looking for payday loans with lenders. In all instances, Kotzker’s companies obtained consumer personally identifiable information including social security numbers. Instead of connecting these consumers with payday lenders, Kotzker’s companies sold the applications to non-lender third parties. According to the FTC, those third parties fraudulently withdrew funds from consumer bank accounts for financial services products that were never purchased by the affected consumers. As a result, the FTC sued Kotzker, his companies, and other partners for violation of the FTC Act. Kotzker’s companies previously defaulted, and the other individually named defendants have settled.

What are the Terms of the FTC’s Settlement with the Data Broker?

Terms of Settlement with Data Broker

According to the terms of the settlement agreement, Kotzker is permanently enjoined from selling the personal information of consumers. Additionally, Kotzker is prohibited from making any misrepresentations concerning any financial or other product or service in the future. The FTC obtained a judgment in excess of $7 million against Kotzker. However, because of his represented inability to pay, all but $45,000 of the judgment awarded has been suspended.

Protect Yourself

FTC scrutiny of financial-related product and service companies has intensified. We recently blogged about an FTC campaign to shut down 13 separate debt relief organizations. In this regulatory climate, it is imperative that businesses offering consumers financial products and services review their marketing and information collection practices with experienced and competent counsel.