Personal Credit

In a comment submitted to the U.S. Copyright Office, the Federal Trade Commission identifies several issues raised by the development and deployment of Artificial Intelligence (AI) that implicate competition and consumer protection policy, noting the Commission’s role in monitoring the impact of generative AI and vigorously enforcing the law as appropriate to protect competition and consumers.

“The manner in which companies are developing and releasing generative AI tools and other AI products . . . raises concerns about potential harm to consumers, workers, and small businesses,” according to the comment. “The FTC has been exploring the risks associated with AI use, including violations of consumers’ privacy, automation of discrimination and bias, and turbocharging of deceptive practices, imposters schemes and other types of scams.”

The comment explains that the FTC has an interest in copyright-related issues beyond questions about the scope of rights and the extent of liability under the copyright laws. For instance, not only may creators’ ability to compete be unfairly harmed, but consumers may be deceived when authorship does not align with consumer expectations. A consumer may think a work has been created by a particular musician or other artist when it is an AI-created product.

“Conduct that may violate the copyright laws . . . may also constitute an unfair method of competition or an unfair or deceptive practice, especially when the copyright violation deceives consumers, exploits a creator’s reputation or diminishes the value of her existing or future works, reveals private information, or otherwise causes substantial injury to consumers,” the comment continues. In addition, certain large technology firms have vast financial resources that enable them to protect the users of their generative AI tools or exclusive licenses to copyrighted proprietary data, potentially further entrenching the market power of these dominant firms.

Accordingly, the FTC has been using its existing legal authorities to take action against illegal practices involving AI, citing consumer protection examples including allegations that Amazon and Ring used highly private data they collected to train their algorithms while violating consumer privacy.

“AI, in particular generative AI, is still evolving rapidly, but it already has the potential to transform many industries and business practices. Notably, there is no AI exemption from the laws on the books. Accordingly, the FTC will vigorously use the full range of its authorities to protect Americans from deceptive and unfair conduct and maintain open, fair, and competitive markets,” the comment concludes.

The FTC submitted the comment in response to a notice of inquiry and request for comments on the copyright and policy issues raised by AI systems. It provides an overview of the FTC’s expertise in promoting competition and protecting consumers in an economy in which AI is being rapidly deployed, highlights the interconnection between AI-related copyright issues and FTC-focused competition and consumer protection concerns, and shares themes found in comments made at last month’s FTC roundtable on AI’s effects on the work of creative professionals.

As a result of a law enforcement action by the Federal Trade Commission and the State of Florida, Chargebacks911 and its owners have agreed to a settlement that will prohibit them from working with certain high-risk clients and using deceptive tactics to stop consumers trying to dispute credit card charges through the chargeback process.

In a complaint filed in April 2023, the FTC and Florida charged that, since at least 2016, the “chargeback mitigation” company and its owners, Gary Cardone and Monica Eaton, have used multiple unfair techniques to prevent consumers from winning chargeback disputes.

“The settlement order will provide important protections for consumers who shop online,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “It sends a clear message that chargeback mitigation companies must not undermine consumers’ ability to exercise their rights.”

The chargeback process is a key protection for consumers who wish to contest unwanted, fraudulent, or incorrect credit card charges. When a consumer sees a charge they did not authorize, or for which the promised goods or services didn’t arrive, they can dispute the charge with their credit card company. The consumer’s credit card company then contacts the merchant’s credit card company for information and determines whether to reverse the charge.

The FTC and Florida charged that Chargebacks911 sent materials that it knew or should have known were misleading or inaccurate to credit card companies on behalf of their clients, including screenshots of websites that were different than the ones visited by consumers. The complaint also alleged that Chargebacks911 used its “Value-Added Promotions” service to game the systems that credit card companies use to detect fraud on their payment networks.

The proposed court order, which was agreed to by the defendants and must be approved by a federal judge before it can go into effect, would prohibit them from providing chargeback mitigation services to high-risk clients who use affiliate marketing and negative option plans to sell certain product types that are often fraudulently marketed.  The order would also prohibit them from knowingly using deceptive or misleading information on behalf of their clients and would prevent them from using techniques like their Value-Added Promotions service to help clients evade fraud-monitoring programs.

The order will also require the defendants to pay $100,000 in civil penalties and $50,000 in legal costs to the State of Florida.

The Commission vote approving the stipulated final order was 3-0. The FTC filed the proposed order in the U.S. District Court for the Middle District of Florida.

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

The FTC staff attorneys on this matter are Evan Rose, Bobbi Tonelli, and Denise Oki of the FTC’s Western Region San Francisco.

The Federal Trade Commission is providing full refunds to consumers who lost money to the NTS IT Care tech support scheme, which tricked consumers into buying expensive and unnecessary tech support services and often claimed to be affiliated with Microsoft, Apple, and other tech companies. According to a complaint, they often targeted older Americans and those unfamiliar with computer security.

The refunds stem from a 2020 settlement the FTC reached with NTS IT Care, Inc., and its CEO, Jagmeet Singh Virk. The FTC’s case against Virk and NTS had been under seal until earlier this year pending the outcome of a criminal case involving Virk and NTS brought by the Department of Justice.

“As a recent report to Congress makes clear, the FTC is committed to taking action to protect older consumers from scams like these that have a disproportionate impact on them,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “And, what’s more, the FTC will keep working with DOJ to ensure criminal prosecutions follow criminal conduct.”

In its complaint, the FTC said that NTS lured consumers through alarming and deceptive pop-up warnings that appeared when consumers browsed the Internet and often disabled their browsers. The pop-ups looked like a security alert from the computer’s operating system and falsely claimed that a consumer’s computer had been compromised by malicious software, such as a virus or spyware. The pop-up further stated that the computer had been “blocked,” and that the consumer’s personal information was being stolen. The pop-ups sometimes falsely claimed to be from Microsoft, Apple, or another legitimate tech company and instructed consumers to immediately call a toll-free number for help.

When consumers called the number, the company’s sales representatives ran bogus diagnostic scans to convince consumers that their computers needed immediate repair and used high-pressure and deceptive sales tactics to push consumers to buy multi-year technical support service packages that cost as much as $499. NTS and Virk made millions of dollars from the scheme.

Now, the FTC is using money obtained as part of the settlement to provide payments totaling more than $255,000 to 272 consumers who provided victim statements in the case against Virk and NTS. The average refund amount is $937. Most consumers will receive their payment by check and will have 90 days to cash their checks. Consumers who have questions about the refunds should contact the refund administrator by phone at 866-441-9746 or by email at NTSITCare@refundadministrator.com.

The settlement imposed a $4.9 million judgment against NTS and Virk, which was partially suspended due to their inability to pay the full amount. In addition, NTS and Virk are permanently prohibited from selling or marketing any tech support service and from benefitting from any personal data they collected from consumers. They are also permanently banned from engaging in misleading telemarketing practices and from trying to collect payments from customers for technical support services they previously sold.

The Commission vote authorizing staff to file the complaint and stipulated final order was 5-0. The Commission voted on the matter prior to the departure from the FTC of former Chairman Joe Simons as well as former Commissioners Rohit Chopra, Noah Joshua Phillips, and Christine S. Wilson. The FTC filed the complaint and final order in the U.S. District Court for Northern California. The court approved the stipulated final order in December 2020.

The lead FTC staffers on this matter were Ronnie Solomon and Sarah Schroeder from the FTC’s Western Region San Francisco.

 The FTC would like to thank the Department of Justice, FBI, Santa Clara County District Attorney’s Office, the Regional Enforcement Allied Computer Team (REACT Task Force), and the Better Business Bureau of Los Angeles & Silicon Valley for their assistance with this matter.

The Commission’s interactive dashboards for refund data provide a state-by-state breakdown of refunds in FTC cases. In 2022, Commission actions led to more than $392 million in refunds to consumers across the country.

The Federal Trade Commission is sending nearly $7 million in refunds to consumers who paid for health insurance but instead got medical discount plans pitched by Consumer Health Benefits Association (CHBA).

According to the FTC’s complaint against CHBA, related entities, and their owners, the company targeted consumers who searched online for information about affordable health insurance plans. CHBA telemarketers allegedly pitched consumers with a long list of false claims about the benefits of the discount plans, including that the plans were as widely accepted and would provide the same cost savings as legitimate health insurance companies, and also misled consumers about the company’s refund policies.

The FTC recovered almost $7 million pursuant to the terms of six final orders with defendants Guarantee Trust Life Insurance, Vantage America Solutions, Inc., Century Senior Services, Richard Holson, III, Barbara Taube, and Jeffrey Burman; Ronald and Rita Werner; John Schwartz; Louis Leo; Wendi Tow; and Consumer Health Benefits Association, National Benefits Consultants LLC, National Benefits Solutions LLC, and National Association for Americans.

The FTC is sending payments to 47,166 consumers. Recipients should cash their checks within 90 days, as indicated on the check. Consumers who have questions about their payment should contact the refund administrator, Epiq, at 888-350-1458, or visit the FTC website to view frequently asked questions about the refund process. The Commission never requires people to pay money or provide account information to get a refund.

The Commission’s interactive dashboards for refund data provide a state-by-state breakdown of refunds in FTC cases. In 2022, Commission actions led to more than $392 million in refunds to consumers across the country.  

Today, the Federal Trade Commission released the National Do Not Call Registry Data Book for Fiscal Year 2023, which shows that consumer complaints about robocalls and unwanted live telemarketing calls have decreased to a five-year low.

Now in its fifteenth year of publication, the data book also provides the most recent fiscal year information available on robocall complaints, the types of calls consumers reported to the FTC, and a complete state-by-state analysis. According to the data book, complaints about imposter calls again topped the list, with more than 175,000 received during the fiscal year ending on September 30, 2023, 117,000 of which were robocalls. In such calls, imposters falsely pose as representatives of government, such as the Social Security Administration or the IRS, legitimate business entities or as people affiliated with them.

FY 2023 Registration and Complaint Data

The FTC’s National Do Not Call (DNC) Registry lets consumers add their phone number and choose not to receive most legal telemarketing calls. In the last fiscal year, more than 2.6 million people signed up with the DNC Registry, bringing the total to more than 249 million actively registered phone numbers, up from 246.8 million at the end of FY 2022.

The overall number of complaints continued its decline in FY 2023, down more than 900,000 from FY 2022. The number of consumer complaints decreased for most topics, including warranties and protection plans, the second largest topic the past several years, which saw a decrease of more than 84 percent from FY 2022.

In FY 2023, the Commission received 1.2 million complaints about robocalls, down from 1.8 million in FY 2022. This is the second year in a row the number of robocalls reported has decreased. For every month in the fiscal year, robocalls—defined under FTC regulations as calls delivering a prerecorded message—made up the majority of consumer complaints about DNC violations.

Calls about medical and prescription issues comprised the second-most commonly reported topic, with consumers filing more than 142,000 complaints. Complaints about supposed debt-reduction made up the third-most commonly reported topic, followed by complaints about energy, solar, and utilities and warranties and protection plans.

Registration and Complaint Data by State

The FTC also provides a state-by-state breakdown of its data. New Hampshire continues to top the nation in active DNC registrations per capita. The top five states reporting the most DNC complaints per 100,000 people in FY 2023 were Delaware, Ohio, Virginia, Nevada and Illinois.

Operation Stop Scam Calls

In July 2023, the FTC and more than 100 federal and state law enforcement partners nationwide, including the attorneys general from all 50 states and the District of Columbia, announced “Operation Stop Scam Calls,” the largest crackdown on illegal telemarketing calls in U.S. history.

The initiative involved more than 180 actions targeting operations responsible for billions of calls to U.S. consumers, and it not only targeted telemarketers and the companies that hire them, but also lead generators who deceptively collect and provide consumers’ telephone numbers to robocallers and others, falsely representing that these consumers have consented to receive calls. The effort also targeted Voice over Internet Protocol (VoIP) service providers who facilitate illegal robocalls every year, which often originate overseas.

Underlying Data Availability

The underlying data in the report is publicly available on the FTC’s website.

Information for consumers about the DNC Registry, company-specific DNC requests, and telemarketer caller ID requirements can be found on the FTC’s website, and consumers can sign up for the DNC Registry for free. Other information about robocalls and what consumers can do about them is also available. To report unwanted telemarketing calls, consumers can file a complaint at www.donotcall.gov or call 1-888-382-1222.

The primary staffer on the report is Paul Witt in the FTC’s Bureau of Consumer Protection.

The Federal Trade Commission is taking action against personal finance app provider Brigit, alleging that its promises of “instant” cash advances of up to $250 for people living paycheck-to-paycheck were deceptive and that the company locked consumers into a $9.99 monthly membership they couldn’t cancel.

Brigit, also known as Bridge It, Inc., has agreed to settle the FTC’s charges, resulting in a proposed court order that would require the company to pay $18 million in consumer refunds, stop its deceptive marketing promises, and end tactics that prevented customers from cancelling.

“Brigit trapped those consumers least able to afford it into monthly membership plans they struggled to escape from,” said Sam Levine, Director of the FTC’s Bureau of Consumer Protection.  “Companies that offer cash advances and other alternative financial products have to play by the same rules as other businesses or face potential action by the FTC.”

According to the FTC’s complaint, Brigit advertised its cash advance service online, through social media and through broadcast ads with claims that customers who subscribed to the company’s service would have access to “instant” cash advances of up to $250 “whenever you need it,” and could cancel anytime. Consumers could only access the cash advance features when they signed up for the $9.99 per month “Plus” subscription.

The FTC’s complaint, however, charges that consumers were rarely able to get an advance for the promised $250, and in many cases consumers were not able to receive a cash advance at all. Despite Brigit’s promises that advances would be available with “free instant transfers,” the complaint notes that the company began charging consumers a 99 cent fee for an instant transfer. Consumers who did not pay the fee had to wait up to three business days for their advances.

In addition, the complaint charges that while Brigit claimed to offer “non-recourse” advances with no fees or interest, the company prevented consumers who had an open advance from cancelling their subscription and continued to withdraw $9.99 monthly from their bank account until the advance was paid off. Such monthly charges created significant additional hardship for  consumers already struggling to pay off a cash advance.

Even when consumers without an open cash advance attempted to cancel the paid subscription, the complaint charges that the company employed dark patterns—manipulative design tricks—to create a confusing and misleading cancellation process that prevented consumers from cancelling their subscriptions, instead of offering a simple mechanism to cancel, as required by the Restore Online Shoppers’ Confidence Act (ROSCA).

The proposed settlement order, which must be approved by a federal judge before it can go into effect, would require Brigit to pay $18 million to the FTC to be used to provide refunds to consumers. In addition, the order would prohibit Brigit from misleading consumers about how much money is available through their advances, how fast the money would be available, any fees associated with delivery, and consumers’ ability to cancel their service. The order would also require the company to make clear disclosures about its subscription products and provide a simple mechanism for consumers to cancel.

The Commission vote authorizing the staff to file the complaint and stipulated final order was 3-0. The FTC filed the complaint and final order in the U.S. District Court for the Southern District of New York.

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

The staff attorneys on this matter were Patrick Roy, Mark Glassman and James Doty of the FTC’s Bureau of Consumer Protection.

As a result of a Federal Trade Commission lawsuit, Jonathan Braun, who controlled small-business funding company RCG Advances, will face a permanent ban from the merchant cash advance and debt collection industries. A federal court issued summary judgment in favor of the FTC in the case along with a permanent injunction against Braun.

“Mr. Braun and his company targeted small business consumers with an egregious array of tactics, from predatory contract terms to violent threats, and the court’s opinion is a significant win on their behalf,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “This case makes clear that the FTC will fight back against those who prey on small businesses.”

The FTC sued Braun in June 2020, along with four other defendants, for his role with RCG Advances, which formerly did business as Richmond Capital Group, charging that he deceived small businesses and other organizations by misrepresenting the terms of merchant cash advances the business provided, and then used unfair collection practices, including sometimes threatening physical violence, to compel consumers to pay.

The suit also alleged that Braun and the other defendants made unauthorized withdrawals from consumers’ accounts and required businesses and their owners to sign confessions of judgment as part of their contracts, which allowed the defendants to go immediately to court and obtain an uncontested judgment in case of an alleged default. The complaint alleges that the defendants unlawfully and unfairly used these confessions of judgment to seize consumers’ personal and business assets in circumstances not expected by consumers or permitted by the defendants’ financing contracts.

The court’s opinion granting summary judgment in favor of the FTC found that Braun engaged in “extensive misconduct” that violated both the FTC Act and the Gramm-Leach-Bliley (GLB) Act, and that Braun was liable for the damages caused by his and the company’s unlawful conduct.

The permanent injunction includes a number of key provisions:

• Ban on merchant cash advance: Braun is permanently banned from any involvement with the merchant cash advance industry, including assisting anyone else in offering those services.
• Ban on debt collection: Braun is permanently banned from the debt collection industry.
• Remove negative credit information: Braun is required to contact credit reporting agencies within 30 days to remove any negative information that was filed on consumer or business credit reports as a result of his actions.
• Prohibition on deceiving consumers and unauthorized charges: Braun is prohibited from deceiving consumers about any product or service, and is also prohibited from charging consumers without their authorization.

The court has scheduled a trial for January 2024 to determine the amount of monetary relief that should be imposed for Braun’s law violations.

The other defendants in the FTC’s case previously settled the FTC’s charges against them, resulting in industry bans and monetary relief totaling more than $2 million.

The number of cigarettes that the largest cigarette companies in the United States sold to wholesalers and retailers nationwide decreased from 190.2 billion in 2021 to 173.5 billion in 2022, according to the Federal Trade Commission’s most recent Cigarette Report. The report also states that in 2022, menthol flavored cigarettes comprised 36 percent of the market among major manufacturers.

The amount spent on cigarette advertising and promotion decreased from $8.06 billion in 2021 to $8.01 billion in 2022. Price discounts paid to cigarette retailers ($5.74 billion) and wholesalers ($1.14 billion) were the two largest expenditure categories in 2022. Combined spending on price discounts accounted for 85.9 percent of industry spending.

According to the Smokeless Tobacco Report, smokeless tobacco sales decreased from 122 million pounds in 2021 to 113.3 million pounds in 2022. The revenue from those sales rose from $4.96 billion in 2021 to $4.98 billion in 2022. Menthol flavored smokeless tobacco products comprised more than half of all sales and fruit flavored smokeless tobacco products comprised 2.6 percent of pounds sold.

Spending on advertising and promotion by the major manufacturers of smokeless tobacco products in the U.S. decreased from $575.5 million in 2021 to $572.7 million in 2022. The two largest spending categories in 2022 were price discounts paid to retailers, which were $360.5 million, and promotional allowances paid to wholesalers, which were $44.7 million.

Smokeless tobacco manufacturers also reported selling $1.06 billion of nicotine lozenges, pucks and pouches not containing tobacco in 2022, more than double the $452.8 million sold in 2020.

The Commission has issued the Cigarette Report periodically since 1967 and the Smokeless Tobacco Report periodically since 1987. The Commission vote to issue both reports was 3-0.

The primary staffer on the reports is Michael Ostheimer in the FTC’s Bureau of Consumer Protection.

The Federal Trade Commission is sending nearly $100 million in refunds to consumers who lost money as a result of internet phone service provider Vonage imposing junk fees and creating obstacles to those who try to cancel their service. 

According to the FTC’s November 2022 complaint, Vonage used dark patterns to make it difficult for consumers to cancel their service and often continued to illegally charge them even after they spoke to an agent directly and requested cancellation. The company agreed to a settlement with the FTC that required it to pay refunds to consumers harmed by the company’s actions, make its cancellation process simple and transparent, and stop charging consumers without their consent.

The FTC is sending payments to 389,106 consumers. Most consumers will get a check in the mail. Recipients should cash their checks within 90 days, as indicated on the check. Eligible consumers who did not have an address on file will receive a PayPal payment, which should be redeemed within 30 days. Consumers who have questions about their payment should contact the refund administrator, Epiq, at 1-877-525-4728 or visit the FTC website to view frequently asked questions about the refund process. The Commission never requires people to pay money or provide account information to get a refund.

The Commission’s interactive dashboards for refund data provide a state-by-state breakdown of refunds in FTC cases. In 2022, Commission actions led to more than $392 million in refunds to consumers across the country.

The Federal Trade Commission has approved an amendment to the Safeguards Rule that would require non-banking institutions to report certain data breaches and other security events to the agency.

The FTC’s Safeguards Rule requires non-banking financial institutions, such as mortgage brokers, motor vehicle dealers, and payday lenders, to develop, implement, and maintain a comprehensive security program to keep their customers’ information safe. In October 2021, the FTC announced it had finalized changes to the Safeguards Rule to strengthen the data security safeguards that financial institutions are required to put in place to protect their customers’ financial information. The FTC also sought comment on a proposed supplemental amendment to the Safeguards Rule that would require financial institutions to report certain data breaches and other security events to the Commission.

“Companies that are trusted with sensitive financial information need to be transparent if that information has been compromised,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “The addition of this disclosure requirement to the Safeguards Rule should provide companies with additional incentive to safeguard consumers’ data.”   

The amendment announced today requires financial institutions to notify the FTC as soon as possible, and no later than 30 days after discovery, of a security breach involving the information of at least 500 consumers. Such an event requires notification if unencrypted customer information has been acquired without the authorization of the individual to which the information pertains. The notice to the FTC must include certain information about the event, such as the number of consumers affected or potentially affected.

The breach notification requirement becomes effective 180 days after publication of the rule in the Federal Register.

The Commission voted 3-0 to publish the notice amending the Safeguards Rule in the Federal Register.

The lead staffers on this matter are David Lincicum and Mark Eichorn in the FTC’s Bureau of Consumer Protection.