Debt-icated to protecting consumers

Never underestimate the creativity of marketers attempting to separate cash-strapped consumers from their last dollar.  And never underestimate the FTC’s resolve to protect people from deception in tough economic times.  Those are just two points to take from recent FTC law enforcement actions.

If there were an Effrontery Hall of Fame — and we’re glad there isn’t — San Antonio-based lead generator Christopher Mallett may have earned a nomination.  Last year the FTC charged Mr. Mallett with violating the FTC Act, the Telemarketing Sales Rule, and the Mortgage Assistance Relief Services Rule by peddling bogus debt-, mortgage- and tax-relief services.  The deceptive claims had a familiar ring, but his methods deserve special mention.  According to the lawsuit, using the official FTC seal and language copied from ftc.gov, Mr. Mallett represented himself as part of the non-existent (and redundantly named) Department of Consumer Services Protection Commission.  The complaint charged that through that promotion and a similar one involving the “U.S. Mortgage Relief Counsel” — another Mallett-created entity — he falsely claimed an official government affiliation and made deceptive representations about the nature of his service.  The settlement in the case bans him for life from the debt relief, tax relief, and mortgage assistance relief businesses and imposes a suspended $129,695 judgment.

The FTC’s case against Arizona-based Premier Nationwide Corporation and Eric C. Synstad centered on cold calls promising to consolidate people's debts or negotiate lower payments and interest rates — for a fee of between $149 and $599.  What if struggling consumers were concerned about paying that kind of money upfront?  The defendants’ telemarketing scripts anticipated that objection and gave the suggested rejoinder, “Now of course with your new Debt Management Plan you should save that much in interest in the first few months.”  So what did people who paid for debt consolidation services actually get?  A list of banks and the advice to apply for low-interest credit cards on their own.  Those looking for lower interest rates were told they’d have to pony up an additional monthly fee to a "debt management" company that would try to get their rates reduced.  In addition to challenging the underlying claims as false, the FTC says the defendants refused to honor their advertised refund policy.  The settlement imposes a lifetime ban barring Mr. Synstad from the debt relief services industry.  It also imposes a $15 million judgment, which will be suspended when Mr. Synstad turns over proceeds from the sale of two cars and when he and the company relinquish money held in two payment processor reserve accounts.

After a five-day trial in federal court in Florida, the FTC won a $2.6 million judgment against three defendants behind a scheme that charged homeowners hefty upfront fees and then didn’t deliver on promised mortgage modifications.  According to the FTC, the operation involved a marketing company that contracted with a direct mail outfit to send postcards offering help to homeowners who were at least two months behind in their mortgage payments.  The postcards included a toll-free number and the signature of a local attorney, who was paid $100 to accept a homeowner into the “program.”   When people called the toll-free number, a customer service rep collected financial documents — and a $2,000 fee.  All nine defendants behind the Crowder Law Group operation were charged with violating the FTC Act and the Telemarketing Sales Rule.  The FTC alleged they falsely claimed they could modify people’s mortgages and substantially reduce their monthly payments, exaggerated the role an attorney would play in the process, and falsely claimed to be affiliated with a government agency.

The Court found defendants Richard Bishop, Brent McDaniel, and Washington Data Resources jointly liable for $1.97 million, and another defendant, Tyna Caldwell,  liable for $665,000.  If they don’t turn over their assets voluntarily, the FTC has said it will move forward with seizing and selling them.  The Court also ordered the defendants to destroy any consumer information they've collected.  Last year the Court approved settlements with other defendants:  attorney Douglas A. Crowder, attorney Bruce Meltzer, Crowder Law Group, Kathleen Lewis, and Optimum Business Solutions.

For businesses looking to stay on the right side of the law, the FTC has plenty of compliance resources.  Check out:

• Mortgage Assistance Relief Services Rule: A Compliance Guide for Business;

• Mortgage Assistance Relief Services Rule: A Compliance Guide for Lawyers;

• Debt Relief Services & the Telemarketing Sales Rule: A Guide for Business; and

• Debt Relief Services & the Telemarketing Sales Rule:  What People Are Asking.