June 2022

The Federal Trade Commission will host a virtual event on October 19, 2022, to examine how best to protect children from a growing array of manipulative marketing practices that make it difficult or impossible for children to distinguish ads from entertainment in digital media. The event will examine practices such as the rapidly growing “kid influencer” marketplace in which the line between paid promotions and unsponsored influencer videos is often blurred. 

The FTC will bring together researchers, child development and legal experts, consumer advocates, and industry professionals to examine the techniques being used to advertise to children online and what measures should be implemented to protect children from manipulative advertising. Some of the topics the event will examine include:

• Children’s capacity at different ages and developmental stages to recognize and understand advertising content and distinguish it from other content;
• The harms to children resulting from the inability of children to recognize advertising;
• What measures should be taken to protect children from blurred content in digital marketing; and
• The need for and efficacy of disclosures as a solution for children of different ages, including the format, timing, placement, wording, and frequency of disclosures.

The FTC is seeking research papers and written comments on the topics and questions listed above. Papers and comments should be submitted via email to [email protected] by July 18, 2022.

The workshop will be held virtually and webcast on the FTC’s website at FTC.gov. Additional information, including a list of speakers and the agenda will be posted to the event page in advance of the event.

The Federal Trade Commission today called for research presentations on a wide range of privacy and data security topics such as commercial surveillance and automated decision making for its annual PrivacyCon event, which will take place virtually on November 1, 2022.

PrivacyCon 2022 will bring together a diverse group of stakeholders to discuss the latest research and trends related to consumer privacy and data security. As part of this event, the FTC is seeking empirical research and demonstrations, including rigorous economic analyses, on such topics as:

• Algorithmic bias and ensuring fairness in the use of algorithms;
• Commercial surveillance including workplace monitoring, surveillance advertising, and biometric surveillance;
• Potential new remedies and approaches to improve privacy and security practices such as the deletion of algorithms or other products developed using data illegally collected from consumers; and
• Children’s and teen’s privacy risks, harms, and vulnerabilities, particularly those presented by emerging technologies.

More details on other topics and information on how to submit presentations can be found in the Call for Presentations. The deadline for submitting a presentation for PrivacyCon is July 29, 2022.

The event is free, open to the public, and will be webcast on the FTC’s website at www.ftc.gov. The agenda will be posted to the event page prior to the event.

The Federal Trade Commission has finalized an order against Electronic Payment Systems for allegedly opening credit card processing merchant accounts for fictitious companies on behalf of Money Now Funding, a business opportunity scam that the FTC previously sued. By ignoring warning signs that the merchants were fake, Electronic Payment Systems assisted Money Now Funding in laundering millions of dollars of consumers’ credit card payments to the scammers from 2012 to 2013.

In an administrative complaint filed in March 2022, the FTC alleged that Electronic Payment Systems facilitated the Money Now Founding scam by creating 43 different merchant accounts for fictitious companies on behalf of Money Now Funding, allowing the scammers to run more than $4.6 million in consumer credit card charges through those accounts. The practice of processing credit card transactions through another company’s merchant accounts is known as credit card laundering.

The complaint also outlined ways in which Electronic Payment Systems employees turned a blind eye to the credit card laundering, and even gave advice to Money Now Funding on how to spread charges among different accounts to evade detection.

Enforcement Action

The FTC is ordering Electronic Payment Systems, and its owners John Dorsey and Thomas McCann, to make a number of substantial changes to their processes that will ensure they do not further harm consumers moving forward. The FTC is not able to obtain a monetary judgment in this case because of the Supreme Court’s decision in AMG Capital Management v. FTC.

Under the terms of the settlement order, Electronic Payment Systems, Dorsey, and McCann would be:

• Prohibited from credit card laundering: The defendants would be prohibited from credit card laundering and any other actions to evade fraud and risk monitoring programs.
• Prohibited from working with certain merchants: The defendants would be prohibited from providing payment processing services to any merchant that is, or is likely to be, engaged in deceptive or misleading conduct, and any merchant that credit card industry monitoring programs have flagged as high-risk for certain reasons.
• Required to screen potential merchants: The defendants would be required to conduct detailed screening of potential merchants who conduct outgoing telemarketing or are engaged in certain activities that could harm consumers.

The Federal Trade Commission is taking action against Twitter, Inc. for deceptively using account security data for targeted advertising. Twitter asked users to give their phone numbers and email addresses to protect their accounts. The firm then profited by allowing advertisers to use this data to target specific users. Twitter’s deception violates a 2011 FTC order that explicitly prohibited the company from misrepresenting its privacy and security practices. Under the proposed order, Twitter must pay a $150 million penalty and is banned from profiting from its deceptively collected data.

“As the complaint notes, Twitter obtained data from users on the pretext of harnessing it for security purposes but then ended up also using the data to target users with ads,” said FTC Chair Lina M. Khan. “This practice affected more than 140 million Twitter users, while boosting Twitter’s primary source of revenue.”

“The Department of Justice is committed to protecting the privacy of consumers’ sensitive data,” said Associate Attorney General Vanita Gupta. “The $150 million penalty reflects the seriousness of the allegations against Twitter, and the substantial new compliance measures to be imposed as a result of today’s proposed settlement will help prevent further misleading tactics that threaten users’ privacy.” 

“Consumers who share their private information have a right to know if that information is being used to help advertisers target customers,” said U.S. Attorney Stephanie M. Hinds for the Northern District of California. “Social media companies that are not honest with consumers about how their personal information is being used will be held accountable.”

California-based Twitter generates most of its revenue from advertising on its platform, which allows users ranging from consumers to celebrities to corporations to post 280-character messages, or tweets.

According to a complaint filed by the Department of Justice on behalf of the FTC, Twitter in 2013 began asking users to provide either a phone number or email address to improve account security. For example, the information was used to help reset user passwords and unlock accounts the company might have blocked due to suspicious activity, as well as for enabling two-factor authentication. Two-factor authentication provides an extra layer of security by sending a code to either a phone number or email address to help users log into Twitter along with a username and password.

From 2014 to 2019, more than 140 million Twitter users provided their phone numbers or email addresses after the company told them this information would help secure their accounts, according to the complaint. Twitter, however, failed to mention that it also would be used for targeted advertising, the FTC alleged. Twitter used the phone numbers and email addresses to allow advertisers to target specific ads to specific consumers by matching the information with data they already had or obtained from data brokers, according to the FTC complaint.

Twitter’s deceptive use of users’ phone numbers and email addresses for targeted advertising also violated the EU-U.S. Privacy Shield and Swiss-U.S. Privacy Shield agreements, which required participating companies to follow certain privacy principles in order to legally transfer data from EU countries and Switzerland.

The Commission alleged that Twitter’s deceptive use of user email addresses and phone numbers violated the FTC Act and the 2011 Commission order, which stemmed from FTC allegations that the company deceived consumers and put their privacy at risk by failing to safeguard their personal information, resulting in two data breaches. The previous order prohibited Twitter from misrepresenting the extent to which the company maintains and protects the security, privacy, confidentiality, or integrity of any nonpublic consumer information.

In addition to the $150 million penalty, other provisions of the proposed order would:

• prohibit Twitter from profiting from deceptively collected data;
• allow users to use other multi-factor authentication methods such as mobile authentication apps or security keys that do not require users to provide their telephone numbers;
• notify users that it misused phone numbers and email addresses collected for account security to also target ads to them and provide information about Twitter’s privacy and security controls;
• implement and maintain a comprehensive privacy and information security program that requires the company, among other things, to examine and address the potential privacy and security risks of new products;
• limit employee access to users’ personal data; and
• notify the FTC if the company experiences a data breach.

The Commission vote to refer the complaint and stipulated final order to the Department of Justice for filing was 4-0. DOJ filed the complaint and stipulated final order in the District Court of Northern California, San Francisco Division. Chair Lina M. Khan and Commissioner Rebecca Kelly Slaughter issued a joint statement. Commissioners Noah Joshua Phillips and Christine S. Wilson issued a separate joint statement.

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

The Federal Trade Commission today resolved an action against the purveyor of a subscription scam called Publishers Business Services and its officers, Brenda Dantuma Schang, Dries Dantuma, Dirk Dantuma, and Jeffrey Dantuma, obtaining a court order that holds them accountable for the deceptive telemarketing scheme they used to fleece consumers and harass them over the phone. The order also imposes a suspended $14.47 million penalty.

“The FTC shut down this subscription scam years ago, and today we’re obtaining a permanent order holding its ringleaders accountable,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “We won’t back down from challenging firms that use tricks, traps, or threats when selling subscriptions or anything else.”

As alleged in the Commission’s 2008 complaint, which was filed as part of an enforcement sweep, The defendants called consumers pretending to conduct a survey. At the end of the survey, they allegedly offered “free” or low-cost magazine subscriptions. Weeks later they sent consumers a bill falsely stating they agreed to pay several hundred dollars for the magazine subscriptions. The defendants made cancelling very difficult and harassed consumers who refused to pay the exorbitant bills, including by threatening to initiate collection actions or threatening to submit derogatory information about them to the major credit bureaus.

Enforcement Action

The proposed order announced today follows a permanent injunction entered against the Publishers Business Services in 2010 that shuttered their operations. That order remains in place today and prohibits them from committing similar wrongdoing in the future. Provisions of the new order include:

• Monetary judgment. The order imposes a suspended judgment of $14.47 million against the defendants and requires them to give up all claims to money already paid to the Commission in this case; and

• Potential contempt remedies for any future violations. The defendants are required to monitor their compliance with the proposed order and may face significant contempt remedies if they violate its terms.

The Commission’s original monetary relief in this action was vacated following the Supreme Court’s decision in AMG Capital Management LLC v. FTC, which would have resulted in a monetary windfall to the alleged scammers behind Publishers Business Services. The FTC’s settlement of this matter for a suspended judgment of $14.47 million, after originally having been awarded $24 million at trial, demonstrates the challenges since the Supreme Court’s AMG decision.

The Commission vote approving the stipulated final order was 4-0-1, with Commissioner Alvaro M. Bedoya not participating. The FTC filed the proposed order in the U.S. District Court for the District of Nevada.

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

The Federal Trade Commission works to promote competition and protect and educate consumers. Learn more about consumer topics at consumer.ftc.gov, or report fraud, scams, and bad business practices at ReportFraud.ftc.gov. Follow the FTC on social media, read consumer alerts and the business blog, and sign up to get the latest FTC news and alerts.

The Federal Trade Commission has taken action against Financial Education Services and its owners, Parimal Naik, Michael Toloff, Christopher Toloff and Gerald Thompson, as well as a number of related companies, for scamming consumers out of more than $213 million.

In response to a complaint filed by the FTC, a federal court has temporarily shut down the sprawling bogus credit repair scheme. The FTC’s complaint alleges that the company preys on consumers with low credit scores by luring them in with the false promise of an easy fix and then recruiting them to join a pyramid scheme selling the same worthless credit repair services to others. 

“These defendants collected millions in junk fees as part of a pyramid scheme that peddled phony credit repair products,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “We are pleased that the court shut down this operation and froze its assets, and we will continue to pursue firms that prey on families’ economic pain.”

According to the FTC’s complaint, Michigan-based Financial Education Services, also doing business as United Wealth Services, has operated its scheme since at least 2015. The company claims to offer consumers the ability to remove negative information from credit reports and increase credit scores by hundreds of points, charging as much as $89 per month for their services. Their techniques, according to the complaint, are rarely effective and in many instances harm consumer’s credit scores.

The FTC’s investigation found that the company’s scheme combines charging consumers for these worthless credit repair services with a hard sell to join a pyramid scheme that consists of selling the worthless services to more consumers. The complaint alleges that the company’s practices violate the FTC Act, the Credit Repair Organizations Act, and the Telemarketing Sales Rule. Specifically, the agency alleges that the defendants:

• Deceived consumers about credit repair: Financial Education Services uses social media, telemarketing, bogus “testimonials, and a network of sales agents across the country to deceive consumers, falsely promising in English and Spanish that they can remove negative information from credit reports and increase credit scores. The complaint alleges that the company has often merely sent consumers form letters to send to credit bureaus that did not result in the promised changes.

• Sold ineffective rent payment products: The company also sells an additional product that supposedly sends rent payment information to credit bureaus, but the complaint notes that this information is not generally part of consumers’ credit scores and many credit bureaus don’t accept this kind of information directly from consumers

• Charged consumers upfront for credit repair: The company charges consumers upfront for credit repair services, which is illegal. The complaint alleges that consumers are charged $99 upfront, and then pay a recurring monthly fee as high as $89 for the ineffective services. The company also regularly fails to provide consumers important information required by law, including refund and cancellation policies.

• Operated a pyramid scheme: The company also encourages consumers to become Financial Education Services “agents” themselves, selling the company’s services to other consumers. Agents make outlandish income claims that consumers can make more than $1,000 weekly in the scheme and earn bonuses of tens of thousands of dollars. The complaint also alleges that consumers must pay hundreds of dollars to join the scheme and pay for the company’s bogus credit repair services each month, even if they don’t need them. The compensation structure for the scheme has hallmarks of a pyramid scheme, with increasing levels of compensation and titles based on the number of members recruited, and an emphasis on the importance of recruiting new members. Few, if any, consumers make the income promised, and many consumers lose money as agents.

The Commission vote authorizing the staff to file the complaint and request for temporary restraining order was 4-0. The complaint was filed in the U.S. District Court for the Eastern District of Michigan.

The FTC appreciates the assistance of the Georgia Office of the Attorney General Consumer Protection Division in bringing this case.

NOTE: The Commission files a complaint when it has “reason to believe” that the named defendants are violating or are about to violate the law and it appears to the Commission that a proceeding is in the public interest. The case will be decided by the court.

The Federal Trade Commission is sending 5,726 checks totaling more than $255,000 to consumers who were harmed by Vantage Point Services’ illegal debt collection practices.

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, JND Legal Administration, at 877-389-2224. The Commission never requires people to pay money or provide account information to get a refund.

In 2018, the FTC negotiated a settlement with Vantage Point, permanently banning Vantage Point and its executives from the debt collection business. The settlement also prohibits these defendants from misrepresenting material facts about financial-related products and services, profiting from customers’ personal information collected as part of the challenged practices, and failing to dispose of such information properly.

The FTC and the State of New York sued Vantage Point in 2015, alleging that the debt collection company used threats and abusive language, including false threats that consumers would be arrested, to collect supposed debts from thousands of consumers.

In their complaint against Vantage Point, the FTC and New York alleged that the company often falsely claimed to be a law firm, process server, or even affiliated with the government when talking to consumers. In some instances, they posed as FBI agents and district attorneys, and in other cases they falsely claimed they were working as an intermediary with the state, or that the state had placed the consumers’ account with them to give them a chance to pay the debt before criminal charges were filed.

The defendants, using these deceptions, falsely claimed that consumers had committed a crime and that an arrest warrant would be issued unless they made a payment. Often, the defendants told consumers that they would spend months in jail or would need to pay thousands of dollars in bail if they didn’t pay. In some cases, the defendants falsely told third parties, including consumers’ friends and employers, that the consumers had committed a crime and that a warrant had been issued for their arrest.

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 is sending 1,064 checks totaling more than $542,000 to consumers who were harmed by a bogus business and investment scheme known as Digital Income System.

Consumers who receive checks should cash them within 90 days, as indicated on the check. Recipients who have questions about their refund, or who didn’t receive a check and believe they may be eligible for a refund, should call the refund administrator, Rust Consulting, Inc., at 833-539-2840. The Commission never requires people to pay money or provide account information to get a refund.

The FTC sued Digital Income System in 2020 as part of the Operation Income Illusion sweep, alleging that the Florida-based scam falsely told consumers that by selling memberships in the defendants’ programs, they were likely to earn large sums of money. The defendants claimed on their website that participants would “earn between $500 and $12,500 per sale,” and “Every time one of our professionals closes a sale on your behalf, we will send you a huge commission check right to your doorstep.”  According to the FTC’s complaint, though, the vast majority of consumers who paid the defendants never earned substantial income, and in fact, many consumers earned nothing.

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 staff of the Federal Trade Commission has provided its annual report to the Consumer Financial Protection Bureau on its enforcement and related activities in 2021 regarding the Truth in Lending Act (TILA), Consumer Leasing Act (CLA), and Electronic Fund Transfer Act (EFTA).

The report highlights the FTC’s enforcement actions related to the Acts and their implementing regulations, including in the areas of automobile purchases and financing, payday lending, credit repair and debt relief, and electronic fund transfers:

• Automobile Purchase and Financing: The report notes the FTC’s settlement with Richard Berry, the owner and manager of four auto dealers, in the FTC’s action against Tate’s Auto for falsifying consumers’ information on financing applications and misrepresenting financial terms in advertisements. The settlement provides for a $450,000 payment to the FTC for consumer redress, and prohibits Berry from misrepresenting the costs or other material facts related to vehicle financing and from violating the TILA and CLA. The report also notes the Commission’s administrative opinion and order against Traffic Jam Events for sending consumers deceptive mailers about COVID-19 benefits and potential prize winnings, and violating the TILA including by quoting monthly payments for consumers to purchase vehicles that failed to provide or hid in fine print key financing terms required by law. The order bans the defendants from the auto industry, prohibits misrepresentations regarding financial assistance from the government, and requires compliance with TILA.  
• Payday Lending: The report highlights the FTC’s settlement against Harvest Moon Financial for overcharging consumers millions of dollars, deceiving them about the terms of their loans and failing to make required loan disclosures. According to the report, the owners and operators of the settling entities are banned from making loans or extending credit, nearly all debt held by the company will be deemed paid in full, and the companies involved are being liquidated, with the proceeds to be used to provide redress to consumers harmed by the company.  
• Credit Repair and Debt Relief: The report discusses the FTC’s settlement with the operators of a student loan debt relief scheme (Student Advocates Team), charged with falsely promising consumers the company could lower or eliminate student loan balances, illegally imposing upfront fees for credit repair services, and signing consumers up for high-interest loans to pay the fees without making required loan disclosures in violation of TILA. The order bans the defendants from providing debt relief services and from collecting any further payments from consumers who purchased the services, and  requires the defendants to return money to be used to refund consumers.

The report also highlights the agency’s Military Task Force, which comprises a cross-section of FTC representatives and focuses on various initiatives to assist military consumers. The report further outlines the FTC’s consumer and business education efforts on truth in lending and electronic fund transfer issues, including updates about vehicle purchases and financing and  add-on products and services that can cost consumers thousands of extra dollars, and information about how debit and prepaid cards differ from other cards and important considerations about each type of card.

The FTC also has provided a copy of the report to the Federal Reserve Board.

The staff of the Federal Trade Commission is seeking the public’s input on ways to modernize the agency’s business guidance titled “.com Disclosures: How to Make Effective Disclosures in Digital Advertising.” First published in March 2013, this resource provides guidance to businesses on digital advertising and marketing.

As digital deception grows in sophistication, some companies are wrongly citing the guides to justify practices that mislead consumers online. For example, firms have claimed that they can avoid liability under the FTC Act by burying disclosures behind hyperlinks, a practice that can expose consumers to financial fraud, intrusive surveillance, and other harms.

“We know that some companies are wrongly citing our current guides to justify dark patterns and other forms of digital deception,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “We are looking to update the guides to make clear that online tricks and traps will not be tolerated, and we look forward to hearing from the public on this initiative.”

FTC staff is seeking public input to ensure the guides are helping honest businesses treat consumers fairly, rather than being used as a shield by firms looking to deceive. In seeking public comment on possible revisions, staff is interested in the technical and legal issues that consumers, the FTC’s law enforcement partners, and others believe should be addressed. The issues on which FTC staff is seeking comment include:

• the use of sponsored and promoted advertising on social media;
• advertising embedded in games and virtual reality and microtargeted advertisements;
• the ubiquitous use of dark patterns, manipulative user interface designs used on websites and mobile apps, and in digital advertising that pose unique risks to consumers;
• whether the current guidance adequately addresses advertising on mobile devices;
• whether additional guidance is needed to reflect the multi-party selling arrangements involved in online commerce and affiliate marketing arrangements;
• how the guidance on the use of hyperlinks can be strengthened to better protect consumers; and
• the adequacy of online disclosures when consumers must navigate multiple webpages;

The FTC will seek public comment beginning today and continuing through August 2, 2022. Information on how to submit comments can be found here. 

This is one of a number of initiatives the FTC is undertaking to tackle dark patterns and digital deception, including issuing a click-to-cancel policy statement, proposing strengthened advertising guidelines against fake and manipulated reviews, arming staff with new tools to investigate dark patterns, and authorizing a Notice of Penalty Offense against deceptive reviews.