June 2022

The Federal Trade Commission is sending 7,731 checks totaling more than $9.7 million to small businesses who were harmed by Yellowstone Capital, a merchant cash advance company that withdrew money from their bank accounts without permission.

Eligible businesses are getting 51% of their money back, averaging more than $1,200 for each check. Recipients should cash their checks within 90 days, as indicated on the check. Businesses who have questions about their refund should call the refund administrator, Epiq, at 855-604-1861. The Commission never requires people to pay money or provide account information to get a refund.

The FTC sued Yellowstone and its owners in 2020, alleging that they unlawfully withdrew millions of dollars in excess payments from their customers’ accounts. The complaint alleged that Yellowstone continued to withdraw hundreds or thousands of dollars from businesses after they had repaid the full amounts owed in their contracts. In some cases, Yellowstone would only refund this money when businesses complained, and even then the refunds could take weeks or months, leaving small businesses without needed cash on hand.

In 2021, Yellowstone agreed to a court order that required them to surrender funds to the FTC, which the FTC is using to provide refunds. The order also prohibits the defendants from misleading consumers or withdrawing money without authorization and requires them to monitor companies working on their behalf.

The Commission’s interactive dashboards for refund data provide a state-by-state breakdown of Commission refunds. In 2020, Commission actions led to more than $483 million in refunds to consumers across the country, but the U.S. Supreme Court ruled in 2021 that the Commission lacks authority under Section 13(b) to seek monetary relief in federal court going forward. The Commission has urged Congress to restore the Commission’s ability to get money back for consumers.

Today the Federal Trade Commission issued a report to Congress warning about using artificial intelligence (AI) to combat online problems and urging policymakers to exercise “great caution” about relying on it as a policy solution. The use of AI, particularly by big tech platforms and other companies, comes with limitations and problems of its own. The report outlines significant concerns that AI tools can be inaccurate, biased, and discriminatory by design and incentivize relying on increasingly invasive forms of commercial surveillance.

“Our report emphasizes that nobody should treat AI as the solution to the spread of harmful online content,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Combatting online harm requires a broad societal effort, not an overly optimistic belief that new technology—which can be both helpful and dangerous—will take these problems off our hands.”

In legislation enacted in 2021, Congress directed the Commission to examine ways that AI “may be used to identify, remove, or take any other appropriate action necessary to address” several specified “online harms.” The harms that are of particular concern to Congress include online fraud, impersonation scams, fake reviews and accounts, bots, media manipulation, illegal drug sales and other illegal activities, sexual exploitation, hate crimes, online harassment and cyberstalking, and misinformation campaigns aimed at influencing elections.

The report warns against using AI as a policy solution for these online problems and notes that its adoption could also introduce a range of additional harms. Indeed, the report outlines several problems related to the use of AI tools, including:

• Inherent design flaws and inaccuracy: AI detection tools are blunt instruments with built in imprecision and inaccuracy. Their detection capabilities regarding online harms are significantly limited by inherent flaws in their design such as unrepresentative datasets, faulty classifications, failure to identify new phenomena, and lack of context and meaning.

• Bias and discrimination: In addition to inherent design flaws, AI tools can reflect biases of its developers that lead to faulty and potentially illegal outcomes. The report provides analysis as to why AI tools produce unfair or biased results. It also includes examples of instances in which AI tools resulted in discrimination against protected classes of people or overblocked content in ways that can serve to reduce freedom of expression.

• Commercial surveillance incentives: AI tools can incentivize and enable invasive commercial surveillance and data extraction practices because these technologies require vast amounts of data to be developed, trained, and used. Moreover, improving AI tools accuracy and performance can lead to more invasive forms of surveillance.

Congress instructed the Commission to recommend laws that could advance the use of AI to address online harms. The report, however, finds that, given that major tech platforms and others are already using AI tools to address online harms, lawmakers should consider focusing on developing legal frameworks that would ensure that AI tools do not cause additional harm.

The Commission voted 4-1 at an open meeting to send the report to Congress. Statements will be posted shortly.

The Federal Trade Commission is seeking public comment on a petition by Gilbarco, Inc a fuel dispenser pump manufacturer. The company is requesting a partial exemption from the FTC’s Fuel Rating Rule, which, among other things, requires retailers of automotive fuel to post the automotive fuel rating of all automotive fuel sold to consumers.

The partial exemption would allow Gilbarco to make small reductions in the type and size of fuel labels to allow room for an additional fuel grade button on its pumps. The FTC has published a Federal Register notice seeking public comment. Information about how to submit a comment can be found in the notice.

The FTC implemented the Fuel Rating Rule under the Petroleum Marketing Practices Act in 1979. The law establishes uniform automotive fuel ratings and labeling standards, including octane content information, which provide consumers with the information they need to make informed choices at the gas pump. The rule also defines how ethanol content should be displayed on fuel rating labels.

Gilbarco is one of the largest manufacturers of fuel dispensers in the United States, and three times since 1988, the FTC has approved similar petitions by the company related to proposed fuel label changes. In its current petition, the company is requesting permission to make small reductions to:

• The type of “XX% Ethanol” and “Flex-Fuel Vehicles” ethanol labels;

• The type and letter spacing for the words “Minimum Octane Rating” on octane labels; and

• The width of labels for gasoline and five other types of fuels.

The Commission vote approving publication of the Federal Register notice was 5-0 with Commissioner Christine S. Wilson issuing a separate statement. The FTC will consider all public comments submitted by the deadline in the notice before voting on whether to approve Gilbarco’s petition.

The Federal Trade Commission is sending 26,698 checks totaling more than $970,000 to consumers who were harmed by a deceptive payday lending scheme that operated under the names Harvest Moon Financial, Gentle Breeze Online, and Green Stream Lending.

Consumers who receive checks should cash them within 90 days, as indicated on the check. Recipients who have questions about their refund should call the refund administrator, Epiq, at 855-662-0075. The Commission never requires people to pay money or provide account information to get a refund.

The FTC sued the payday loan enterprise and its owners in 2020, alleging that the defendants deceptively marketed their payday loans when they told borrowers that the loans would be repaid after a fixed number of payments. Yet, according to the FTC, long after the promised number of payments had been made, borrowers learned that the payments had been applied to finance charges only and that the defendants were continuing to make regular withdrawals from their checking accounts.

In 2021, the defendants in the case agreed to a court order that permanently banned them from the debt collection industry and required them to deem nearly all outstanding debts owed by consumers as being paid in full.

The Commission’s interactive dashboards for refund data provide a state-by-state breakdown of Commission refunds. In 2020, Commission actions led to more than $483 million in refunds to consumers across the country, but the U.S. Supreme Court ruled in 2021 that the Commission lacks authority under Section 13(b) to seek monetary relief in federal court going forward. The Commission has urged Congress to restore the Commission’s ability to get money back for consumers.

The Federal Trade Commission is cracking down on the Warrior Trading day trading investment scheme for making misleading and unrealistic claims of big investment gains to consumers. The FTC alleges that Warrior Trading and its CEO, Ross Cameron, used those claims to convince consumers to pay hundreds or thousands of dollars for a trading system that ultimately failed to pay off for most customers.

As a result of the FTC’s case, Warrior Trading will be required to pay $3 million to refund consumers and will be prohibited from making baseless claims about the potential for consumers to earn money using their trading strategies.

“Warrior Trading is paying a heavy price for misleading consumers with bogus money-making claims,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “The FTC will continue its crackdown on false earnings claims and phony opportunities.”

Warrior Trading, based in Great Barrington, Mass., promotes day-trading investments online, claiming to sell a trading strategy that will show consumers “how to make a profit in the markets.” From 2018 to 2021, the company made tens of millions of dollars selling its programs online. Day trading is a form of investing where consumers buy and sell stocks over very short intervals throughout the day, hoping to make profit during the very short times in which they may own shares in a particular firm.

The FTC’s complaint alleges that Warrior Trading’s advertising showcased the trading results of its CEO and founder, Ross Cameron, claiming that his strategies were both “profitable” and “scalable.” Warrior Trading deployed deceptive earnings claims throughout its sales pitch in violation of the FTC Act, and the Telemarketing Sales Rule (TSR).

According to the complaint, the vast majority of customer accounts actually lost money, with numerous consumers losing thousands of dollars trading on top of the thousands they paid Warrior Trading.

In its online advertisements, Warrior Trading exhorted consumers:

• “Learn to Trade With Certainty Towards The Financial Freedom You’ve Always Wanted” 
• “Learn How I Made over $101,280.47 in Verified Profits Day Trading Part Time in Under 45 Days Using 3 Simple Strategies that You Can Use Immediately to Increase profits and Reduce Losses NOW!”
• “Start trading over my shoulder side-by-side with me because I guarantee you that next week, the week after, the week after that, I’ll be trading the one or two stocks each day that move up 20 to 30 percent.”

Enforcement Action:

Under the FTC Act, and the TSR, the FTC has the authority to take action against companies violating consumer protection laws, including engaging in unfair or deceptive acts or practices. Under the court order agreed to by the FTC and Warrior Trading, the defendants must:

• Pay consumer redress. Warrior Trading must pay $3 million to consumers harmed by its false earnings claims and phony opportunities
• Shut down bogus earnings claims. The order prohibits the company from making unsubstantiated earnings claims and misrepresenting that purchasers of their products can be successful in trade regardless of their educational background, the amount of capital they have to invest, or the amount of time they spend trading; and
• Prohibit TSR violations. The company is prohibited from further violations of the TSR, including making any misrepresentations through telemarketing about investment opportunities, including the earnings potential or amount of risk a consumer might face.

The Commission vote approving the stipulated final order was 4-0. The FTC filed the proposed order in the U.S. District Court for the Western District of Massachusetts. The Commission thanks the U.S. Securities and Exchange Commission, Division of Economic and Risk Analysis, Office of Litigation Economics for its invaluable assistance and analysis of the relevant trading data in connection with the Warrior Trading matter.

NOTE: Stipulated final orders have the force of law when approved and signed by the District Court judge.

Today, Federal Trade Commission Chair Lina M. Khan announced that an open meeting of the Commission will be held virtually on Thursday, April 28, 2022. The open meeting will commence at 1pm ET and will begin with time for members of the public to address the Commission.

The following items will be on the tentative agenda for the April 28 Commission meeting:

Business Before the Commission

• Notice of Proposed Rulemaking and an Advance Notice of Proposed Rulemaking regarding the Telemarketing Sales Rule: FTC staff will provide a presentation and the Commission will vote on the Notice and the Advanced Notice. The proposed changes to the Rule reflect input from the public. They would allow the rule to better address fraudulent business-to-business telemarketing and would introduce requirements for easy cancellation methods for telemarketing sales, among other improvements.

• Presentation on Section 13(b) of the Federal Trade Commission Act: Ahead of the one-year anniversary of the U.S. Supreme Court’s AMG Capital Management v. FTC decision, which overturned the longstanding 13(b) authority to collect monetary redress for consumers, staff will provide a presentation on the decision’s impact on the agency’s enforcement work.

At the start of the meeting, Chair Khan will offer brief remarks and will then invite members of the public to share feedback on the Commission’s work generally and bring relevant matters to the Commission’s attention. Members of the public must sign up for an opportunity to address the Commission virtually at the April 28 event.

Each commenter will be given two minutes to share their comments. Those who cannot participate during the event may submit written comments or a link to a prerecorded video through a webform. Speaker registration and comment submission will be available through Tuesday, April 26, 2022 at 8 pm ET.

The FTC’s public meeting agendas will be posted on the Commission’s website at least seven days prior to the Commission’s next monthly meeting. A link to the event will be available in advance of the meeting via FTC.gov. The event will be recorded, and the webcast and any related comments will be available on the Commission’s website after the meeting. The Commission retains discretion to make public comments available following the event on ftc.gov. Due to challenges related to the ongoing COVID-19 public health crisis, open meetings will be held virtually until further notice.

The Federal Trade Commission today took action against Voice over Internet Protocol (VoIP) service provider VoIP Terminator, Inc., a related company, and the firms’ owner for assisting and facilitating the transmission of millions of illegal prerecorded telemarketing robocalls, including those they knew or should have known were scams, to consumers nationwide. Many of the calls originated overseas, and related to the COVID-19 pandemic, with the defendants allegedly failing to act as a gatekeeper to stop them from entering the country.

Acting on the Commission’s behalf, the U.S. Department of Justice filed the complaint announced in federal district court, along with an order permanently stopping the defendants from such illegal conduct. The order also includes a suspended civil penalty of more than $3 million.

“These defendants helped scammers blast millions of illegal robocalls into our homes,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “This is our third case in the last two years against VoIP service providers, who should take note of what happens when they ignore the law.”

The FTC’s complaint alleges Florida-based defendant VoIP Terminator, Inc., Virginia-based defendant BLMarketing, Inc., and the companies’ owner Muhammad Usman Kahn facilitated violation of the FTC’s Telemarketing Sales Rule (TSR) during their operation as a VoIP service provider.

Specifically, according to the complaint, the defendants continued to provide VoIP services to customers despite knowing or consciously avoiding knowing the customers were: 1) using the services to place calls to numbers on the FTC’s Do Not Call (DNC) Registry; 2) delivering prerecorded messages; and 3) displaying spoofed caller ID services to callers involved in scams related to credit card interest rate reduction, tech support, and the COVID-19 pandemic.

Enforcement Action

The FTC’s proposed order settling the complaint requires VoIP Terminator to:

• Stop robocalling consumers. The order bans the company from assisting and facilitating abusive telemarketing practices. This provision includes the use of VoIP services.

• Halt TSR violations. The company is prohibited from further violations of the TSR or assisting others in doing so.

• Create new procedures to block suspected robocalls. The order bans VoIP Terminator from providing services or assigning telephone numbers without having ongoing automated procedures in place to block calls that display unassigned, invalid, or unauthenticated numbers.

• Require VoIP Terminator to screen customers. For current and prospective customers, the company must ensure it does not provide VoIP services to suspected telemarketers. The order further requires the defendants to immediately terminate, or avoid entering, business relationships with customers found to be violating the TSR.

While the order imposes a $3,256,190 judgment against the defendants, it has been suspended based on the company’s inability to pay.

The Commission vote to authorize the staff to refer the complaint to the DOJ and to approve the proposed consent decree was 4-0. The DOJ filed the complaint and proposed consent decree on behalf of the Commission in U.S. District Court for the Middle District of Florida.

The Federal Trade Commission today proposed extending protections against telemarketing tricks and traps to small businesses and strengthening safeguards against other pernicious telemarketing tactics plaguing consumers. The agency is seeking comments on updates to the Telemarketing Sales Rule that would protect small businesses against business-to-business telemarketing schemes, address tech-support scams that target seniors, and extend click-to-cancel requirements to telemarketing. 

“Today we are taking aggressive action to protect small businesses and consumers from telemarketing tricks and traps,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “We look forward to hearing from the public about how we can further strengthen this rule to hold telemarketing scammers accountable.”

Both the notice of proposed rulemaking and advance notice of proposed rulemaking announced today stem from the Commission’s regulatory review of the Telemarketing Sales Rule and address public comments the FTC has received as part of that review.

The current regulatory review of the Telemarketing Sales Rule began with the publication of a 2014 Federal Register notice seeking comments on general issues such as whether to retain, eliminate, or modify the rule. It also sought comment on specific issues, such as whether the rule should provide additional protections to consumers from telemarketing calls involving use of previously acquired account information and negative option offers, as well as recordkeeping requirements for sellers and telemarketers.

The Telemarketing Sales Rule

The FTC’s Telemarketing Sales Rule became law in 1995 and applies to virtually all “telemarketing” activities, both in the United States and international sales calls to consumers in the U.S. With several notable exceptions, the rule generally applies only to outbound calls made by telemarketers to consumers and protects consumers in a range of ways. For example, the rule requires telemarketers to make certain disclosures and prohibits misrepresentations during sales calls.

The Telemarketing Sales Rule ensures that telemarketers obtain a consumer’s authorization before billing or collecting payment, and prohibits telemarketers from requesting advance payments for services, such as credit repair, “guaranteed” loans, and debt settlement programs. The rule also prohibits credit card laundering by or on behalf of telemarketers and generally prohibits them from calling phone numbers on the Do Not Call Registry or plaguing consumers with robocalls, among other things.

Proposal to Protect Small Businesses and Strengthen Enforceability

The notice of proposed rulemaking announced today proposes amending the recordkeeping requirements of the Telemarketing Sales Rule and prohibiting deception in business-to-business telemarketing calls. Specifically, the notice seeks public comment on:

• Business-to-business schemes: Whether the FTC should amend the Telemarketing Sales Rule to prohibit misrepresentations in business-to-business calls, as the Commission’s experience has shown that small businesses continue to be harmed by deceptive telemarketing, and

• Recordkeeping requirements: Whether the FTC should amend the rule’s recordkeeping provisions to require telemarketers to retain information in seven new categories, such as keeping recordings of robocalls.

Addressing Other Telemarketing Tactics and Scams

The advance notice of proposed rulemaking announced today seeks information on a range of issues, some of which were identified during the previous comment period. Specifically, the agency seeks public comment on:

• Tech-support scams: Whether the Telemarketing Sales Rule should add additional provisions to address the rise in tech-support scams. These are scams where telemarketers trick consumers into purchasing unnecessary computer technology services to fix phantom problems. Generally, telemarketers who induce consumers to call them by placing deceptive internet ads are currently exempt from Telemarketing Sales Rule requirements. The advance notice of proposed rulemaking seeks comment on whether those calls should be covered by the rule.

• Click-to-cancel requirements: Whether the rule should require telemarketers to provide consumers with a simple notice and cancelation, such as click-to-cancel, when they sign up for subscription plans; and

• Robocalls and other telemarketing to small businesses: Whether the Telemarketing Sales Rule broadly should stop treating telemarketing calls made to businesses differently from those made to consumers. Generally, such calls currently are exempt from certain provisions of the rule.

The Commission vote approving publication of the notice of proposed rulemaking and advance notice of proposed rulemaking in the Federal Register was 4-0.

The Federal Trade Commission is returning more than $149 million to AdvoCare distributors who lost money as a result of the AdvoCare pyramid scheme. The FTC sued AdvoCare in 2019, alleging that the multi-level marketing company operated an illegal pyramid scheme that deceived consumers into believing they could earn significant income as “distributors” of its health and wellness products.

In its complaint against Texas-based AdvoCare, its former CEO, and its top promoters, the FTC alleged that the defendants falsely claimed to offer a life-changing financial solution that would allow any ordinary person to earn unlimited income, attain financial freedom, and quit their regular job. In reality, the FTC alleged, the vast majority of AdvoCare distributors either earned no money or lost money.

AdvoCare, the complaint alleged, operated an illegal pyramid scheme that pushed distributors to focus on recruiting new distributors rather than selling products to customers. The compensation structure also incentivized distributors to purchase large quantities of AdvoCare products—even when they couldn’t sell the products—and to recruit a downline of other participants with the same incentives.

To recruit people, the FTC alleged, AdvoCare and the other defendants told distributors to make exaggerated claims about how much money average people could make—as much as hundreds of thousands or millions of dollars a year. The FTC alleged that distributors were told to create emotional narratives about how they gained financial success through AdvoCare and to instill fear in potential recruits that they would suffer from regrets later if they declined to invest in AdvoCare.

The Commission is sending payments to more than 224,000 consumers who lost money to the AdvoCare pyramid scheme. The payments are being distributed via check and PayPal. Consumers who receive PayPal payments should redeem their payments within 30 days, and consumers who receive checks should cash them within 90 days, as indicated on the check.

Recipients who have questions about their refund should call the refund administrator, Analytics, at 855-744-1802. The Commission never requires people to pay money or provide account information to get a refund.

The U.S. Supreme Court ruled in 2021 that the Commission lacks authority under Section 13(b) to seek monetary relief in federal court going forward. The money being returned to consumers today comes from settlements that were entered before the Supreme Court’s decision. The Commission has urged Congress to restore the Commission’s ability to get money back for consumers.

The Commission’s interactive dashboards for refund data provide a state-by-state breakdown of Commission refunds. In 2020, Commission actions led to more than $483 million in refunds to consumers across the country.

The Federal Trade Commission has moved to stop internet service provider Frontier Communications from lying to consumers and charging them for high-speed internet speeds it fails to deliver. Under a proposed order with the FTC and two California law enforcement agencies, Frontier will be prohibited from tricking consumers about its slow internet service and required to support its speed claims. Frontier must also provide current customers with free and easy cancellations when it fails to deliver the promised speeds.

“Frontier lied about its speeds and ripped off customers by charging high-speed prices for slow service,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Today’s proposed order requires Frontier to back up its high-speed claims. It also arms customers lured in by Frontier’s lies with free, easy options for dropping their slow service.”

“My office will not stand by while businesses take advantage of consumers by failing to provide them with the services they have purchased,” said Los Angeles County District Attorney George Gascón. “We will continue to work together with our law enforcement partners to make sure that companies fulfill their promises to consumers and that they refrain from making false statements in their advertisements.”

Connecticut-based Frontier advertises and sells digital subscriber line (DSL) internet service in several plans, or tiers, based on download speed. In a complaint first filed in May 2021, the FTC alleged that Frontier advertised that it could provide various speeds of DSL internet service based on the type of plan consumers purchased. Many of the subscribers to Frontier’s DSL service are in rural areas where they may only have one choice, or very limited choices, for internet service.

The FTC alleged, however, that Frontier failed to provide many consumers with the maximum speeds they were promised and the speeds they actually received often fell far short of what was touted in the plans they purchased. Some customers complained that it was difficult to engage in typical online activities that should have been possible under the plan they purchased.

In addition to prohibiting the conduct outlined in the complaint, other provisions of the proposed order: 

• require Frontier to substantiate its internet speed claims at a customer-by-customer level for new and complaining customers and notify customers when it is unable to do so;
• require Frontier to ensure it can provide the internet service speeds it advertises before signing up, upgrading, or billing new customers;
• prohibit Frontier from signing up new customers for its DSL internet service in areas where the high number of users sharing the same networking equipment causes congestion resulting in slower internet service; and
• require the company to notify existing customers who are receiving DSL internet service at speeds lower than was advertised and allow those customers to change or cancel their service at no charge.

Frontier also will be required to pay $8.5 million in civil penalties and costs to the Los Angeles County and Riverside County District Attorneys’ offices on behalf of California consumers as well as $250,000 that will be distributed to Frontier’s California customers harmed by the company’s practices. In addition, the company must discount the bills of California customers who have not been notified that they are receiving DSL service that is much slower than the highest advertised speed. Frontier is required to deploy fiber-optic internet service, which is generally much faster than DSL, to 60,000 residential locations in California over four years—at an estimated cost of $50 million to $60 million.

The Commission vote approving the stipulated final order was 4-0. Commissioner Noah Joshua Phillips issued a concurring statement. The FTC filed the proposed order in the U.S. District Court for the Central District of California.

NOTE: Stipulated final orders have the force of law when approved and signed by the District Court judge.