The Federal Trade Commission joined the Consumer Financial Protection Bureau (CFPB) in filing an amicus brief with the U.S. Court of Appeals for the Third District in the case of Ingram v. Experian. The brief asks the appeals court to overturn a lower court’s decision that could create an exception to the Fair Credit Reporting Act (FCRA) allowing furnishers of credit information to decline to investigate when consumers dispute inaccurate information in certain circumstances. The brief argues that the holding could undercut a key protection provided by the FCRA that allows consumers to dispute and correct inaccurate information in their credit reports.

“The law gives consumers a right to dispute inaccurate information and have their claim investigated,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “The FTC-CFPB brief rejects the argument that there are circumstances when furnishers do not have to follow the law.”

The FCRA provides consumers with two avenues for disputing the accuracy of their credit information that furnishers provide to credit reporting agencies. Consumers can file a dispute directly with furnishers or file a dispute indirectly with the credit reporting agencies, which may refer the dispute to the furnishers.

The FTC and CFPB amicus brief relates to a case involving a request made by a consumer to a furnisher, Comcast Communications, to remove an account from his credit report that was listed as delinquent. The consumer reported to Comcast that he was the victim of identity theft and did not open the account. Comcast rejected this claim after it said the consumer failed to submit proof of his identity theft and later referred the matter to a debt collector. The consumer later made what is considered an indirect dispute by disputing the delinquent account with the credit reporting agency Experian, which sent the dispute to the debt collector, as the furnisher of the inaccurate information.

In response to litigation from the consumer, the lower court ruled in favor of the debt collector, saying that the furnisher is only obligated to investigate “bona fide” indirect disputes and may therefore decline to investigate any dispute it deems frivolous. The FTC and CFPB, however, say that the lower court erred, arguing in their brief that:

• Furnishers are Required to Investigate: The brief argues that there is nothing in the text of the FCRA that suggests that a furnisher can choose not to investigate indirect disputes if it deems them to be not “bona fide.” The statutory text is unambiguous: furnishers must investigate all indirect disputes, according to the brief.

• Consumers Would Be Left in the Dark: Under the FCRA, consumers are entitled to be notified about the outcome of their disputes and must be given an opportunity to address any problems with their dispute claims. The district court’s ruling would circumvent those requirements, leaving consumers in the dark and undercutting a central remedy under the FCRA that ensures consumers are able to dispute and correct inaccurate information on their credit reports.

• Exception is Unnecessary: The exception created by the lower court’s decision is unnecessary because furnishers are already protected in other ways from having to investigate a frivolous dispute. For example, the FCRA requires credit reporting agencies to determine if a dispute is frivolous before forwarding a dispute to the furnisher.

The Commission voted 5-0 to file the amicus brief with the CFPB.

Representatives from 13 federal and state government agencies, along with representatives from industry and consumer advocates, will join the Federal Trade Commission on Sept. 29 for the first meeting of the newly formed Scams Against Older Adults Advisory Group.

The advisory group, which was created as part of the Stop Senior Scams Act passed in March of this year, is led by the FTC and will tackle four topics: 1) expanding consumer education efforts; 2) improving industry training on scam prevention; 3) identifying innovative or high-tech methods to detect and stop scams; and 4) developing research on consumer or employee engagement to reduce fraud. The advisory group also will help identify and invite key stakeholders to contribute to the committees’ work.

Agencies and organizations participating in the meeting in addition to the FTC include:

• AARP
• AmeriCorps
• Chamber of Digital Commerce
• Commodity Futures Trading Commission
• Consumer Financial Protection Bureau
• Federal Deposit Insurance Corporation
• Federal Reserve Board
• Federal Trade Commission
• Financial Crimes Enforcement Network
• Financial Industry Regulatory Authority
• Innovative Payments Association
• National Retail Federation
• Office of the Attorney General for the State of Vermont
• Retail Gift Card Association
• Securities and Exchange Commission
• The Money Services Round Table
• U.S. Department of Health and Human Services
• U.S. Department of Justice
• U.S. Department of Treasury
• U.S. Postal Inspection Service
• USTelecom.

The meeting will take place on Sept. 29 at 2:30 p.m. ET and will be livestreamed at ftc.gov.

The Federal Trade Commission has referred a complaint to the Department of Justice alleging Adam J. Harmon and two companies he controls falsely told consumers that personal protective equipment they marketed during the pandemic, as well as light fixtures they sold, were made in the United States. The FTC charged Harmon and his two companies, Axis LED Group, LLC and ALG-Health LLC, with violating the COVID-19 Consumer Protection Act, the Made in USA Labeling Rule and the FTC Act. The agency’s proposed order would stop them from making deceptive claims that products were Made in USA – or, that because they were Made in USA, they provided superior protection from COVID-19. The order also would require them to pay a civil penalty for their past deceptive claims. The claims resolved by the settlement are allegations only, and there has been no determination of liability. Defendants neither admit nor deny any of the allegations in the Complaint, except as specifically stated in the Order.

“ALG and its CEO slapped the Made in USA label on masks that were made overseas, and now they’re paying the price,” said Sam Levine, Director of the FTC’s Bureau of Consumer Protection. “As Americans struggle to obtain safe, authentic personal protective equipment, the Commission will use every tool we have to root out false claims and phony labels.”

With the onset of the COVID-19 pandemic in early 2020, Harmon began operating under the name ALG-Health LLC, and selling personal protective equipment such as masks, gowns, and gloves. According to the complaint, Harmon and ALG made numerous false and misleading claims that their PPE products were all or virtually all made in the United States, even though the products were wholly imported, or incorporated significant imported materials or subcomponents. These claims and other false statements – including that the defendants’ products were U.S.-origin respirators, certified by the National Institute for Occupational Safety (NIOSH) – violated the COVID-19 Consumer Protection Act, the complaint alleges. Specifically, the defendants harmed consumers by:

• Deceiving consumers about the country of origin of their products. Through social media posts, marketing materials, and labels, the defendants claimed that their lighting and COVID-19 personal protective products were manufactured in the United States. In fact, the defendants’ products were almost entirely imported. The defendants’ conduct violated the FTC Act, the Covid-19 Consumer Protection Act, and the Made in the USA Labeling Rule.

• Deceiving consumers about the efficacy of their COVID-19 PPE products. The defendants claimed to consumers that their PPE products were superior due their country of origin. These false claims deceived consumers and undermined honest competitors.

Enforcement Action

The proposed order settling the FTC’s complaint against Harmon, Axis LED Group, LLC, and ALG-Health LLC prohibits the conduct alleged in the complaint. Harmon and his companies must:

• Stop making deceptive U.S.-origin labeling and advertising claims. Harmon and his companies are prohibited from claiming that products are made in the United States unless they can (1) show that the product’s final assembly or processing – and all significant processing – takes place in the United States, and that all or virtually all ingredients or components of the product are made and sourced in the United States, or (2) clearly and prominently qualify origin claims to disclose imported content or processing.

• Provide substantiation. The defendants must substantiate all Made in USA and COVID-19-related claims, and refrain from making misleading claims for any products or services they provide.

• Pay civil penalties. The defendants must pay a $157.683.37 civil penalty, which is due immediately. The defendants are also subject to a $2.8 million redress judgment, which is suspended due to their inability to pay. Should the FTC discover that the defendants have misstated the value of any assets or failed to disclose them, the agency will seek to have the suspension lifted and the full judgment due immediately.

Protecting consumers and honest businesses from deceptive Made in USA claims is a key priority for the Federal Trade Commission. Over the last year, the agency has brought three other cases in this area, Resident Home, Lions Not Sheep, and Lithionics Battery, LLC. Last August, the Commission voted to finalize the Made in USA Labeling Rule, which enables the Commission to seek civil penalties from companies that make false claims. This is the Commission’s second action this year to enforce the rule.

The FTC’s Enforcement Policy Statement on U.S. Origin Claims provides further guidance on making non-deceptive “Made in USA” claims. 

The Commission vote to authorize the staff to refer the complaint to the DOJ and to approve the proposed consent decree was 5-0. Commissioners Noah Joshua Phillips and Christine S. Wilson issued a joint concurring statement. The DOJ filed the complaint and proposed consent decree on behalf of the Commission in U.S. District Court for the Northern District of Ohio.

NOTE: The Commission authorizes the filing of 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. Consent decrees have the force of law when approved and signed by the District Court judge.

WHAT: The Federal Trade Commission is hosting a public forum regarding its Advanced Notice of Proposed Rulemaking (ANPR) on commercial surveillance and data security practices that harm consumers and competition. WHEN: Thursday, September 8, 2022, 2 p.m. – 7:30 p.m. ET WHERE: The event will be held online. A link to view the forum will be posted to ftc.gov the day of the event and on the event page. WHO: The event will feature remarks by FTC Chair Lina M. Khan, Commissioners Rebecca Kelly Slaughter and Alvaro Bedoya, as well as a staff presentation, two panel discussions, and comments from the public. TWITTER: Follow along with the conversation on the FTC’s Twitter page (@FTC) using the hashtag #ANPRForum.

The Federal Trade Commission is sending payments totaling more than $1.9 million to 30,172 consumers nationwide who bought Hubble brand contact lenses from Vision Path, Inc. The FTC alleged that the company substituted its own brand of lenses for those prescribed by the consumers’ eye doctors in violation of the Contact Lens Rule and violated the FTC Act by deceiving consumers about whether their doctors had approved the substitution, among other things. The average refund amount is $63.

Refund checks are being mailed to affected consumers starting today. The deadline for cashing the checks is 90 days from the date they are issued. Consumers who have questions about their refund or who did not get a refund but think they may be eligible, should contact the refund administrator, Epiq, at 1-855-914-4722. The Commission never requires consumers to pay money or provide account information to get a refund.

The FTC’s January 2022 complaint against Vision Path alleged the company violated the Contact Lens Rule in several ways, including by failing to obtain prescriptions and to properly verify prescription information, and by substituting Hubble lenses for those actually prescribed to consumers. The FTC also alleged the company violated the FTC Act when it promised consumers it had properly verified their lenses with their eye doctors, and when it failed to disclose that many reviews of Hubble lenses were written by reviewers who were compensated for their reviews, and, in at least one instance, by one of its own executives.

 The Commission’s interactive dashboards for refund data provide a state-by-state breakdown of refunds in FTC cases. In 2021, Commission actions led to more than $472 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 has taken action against credit services company Credit Karma for deploying dark patterns to misrepresent that consumers were “pre-approved” for credit card offers. The FTC alleges that the company used claims that consumers were “pre-approved” and had “90% odds” to entice them to apply for offers that, in many instances, they ultimately did not qualify for. The agency’s order requires the company to pay $3 million that will be sent to consumers who wasted time applying for these credit cards and to stop making these types of deceptive claims.

“Credit Karma’s false claims of ‘pre-approval’ cost consumers time and subjected them to unnecessary credit checks,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “The FTC will continue its crackdown on digital dark patterns that harm consumers and pollute online commerce.”

Credit Karma provides tools that allow consumers to monitor their credit scores and credit reports. To use Credit Karma’s services, consumers must provide the company with a variety of personal information, allowing Credit Karma to amass over 2,500 data points on each consumer, including credit and income information. Credit Karma uses that information to send targeted advertisements and recommendations for financial products, like credit cards.

According to the FTC’s complaint, Credit Karma violated Section 5 of the Federal Trade Commission Act by falsely representing that consumers were pre-approved for credit offers or had 90% odds of approval. The complaint alleges that Credit Karma’s conduct harmed consumers by: 

• Deceiving them about whether they were approved: Despite Credit Karma’s claims that consumers were “pre-approved,” for many offers, almost a third of consumers who applied were in fact denied. Credit Karma often only revealed the possibility of denial in buried disclaimers or false claims that consumers had “90% odds” of approval. Credit Karma was aware that its consumers were misled: for example, its own customer service training materials cited “I was declined for a pre-approved credit card offer …. How is that possible?!?!?!” as a common issue representatives would encounter.

• Costing consumers time and harming their credit score: The complaint alleges that, in response to Credit Karma’s false claims, numerous consumers wasted significant time applying for credit card offers. Additionally, when consumers applied for these offers, third party financial companies made a “hard inquiry” on their credit reports, which in many instances lowered consumers’ credit scores and harmed their ability to secure other financial products in the future.

Enforcement Action

Under the FTC Act, the FTC has the authority to take action against companies for engaging in unfair and deceptive acts or practices. The FTC’s proposed order against Credit Karma requires the company to:

• Stop deceiving consumers: The FTC’s order prohibits Credit Karma from deceiving consumers about whether they are approved or pre-approved for a credit offer, as well as about the odds or likelihood that a consumer will be approved for a credit offer.

• Pay $3 million in consumer redress: The order requires Credit Karma to pay $3 million to the FTC, which will be sent to consumers who were harmed by the company’s actions.

• Preserve records: To help prevent further use of deceptive dark patterns, the order requires Credit Karma to preserve records of any market, behavioral, or psychological research, or user, customer, or usability testing, including any A/B or multivariate testing, copy testing, surveys, focus groups, interviews, clickstream analysis, eye or mouse tracking studies, heat maps, or session replays or recordings.

The Commission vote to issue the administrative complaint and to accept the consent agreement was 5-0. The FTC will publish a description of the consent agreement package in the Federal Register soon. The agreement will be subject to public comment, after which the Commission will decide whether to make the proposed consent order final. Instructions for filing comments appear in the published notice. Comments must be received 30 days after publication in the Federal Register. Once processed, comments will be posted on Regulations.gov.

NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $46,517.

The Federal Trade Commission’s second report on e-cigarette sales and advertising nationwide shows sales of flavored disposable e-cigarettes and menthol e-cigarette cartridges surging dramatically in 2020. This significant increase, which coincides with a federal ban on the flavored cartridges popular with young smokers, suggests that youth e-cigarette use shifted to substitute products rather than declined. The report also found that the distribution of free and discounted e-cigarettes – a practice linked to a rise in youth smoking – reached record highs.

“This report shows that youth are still at risk from flavored or deeply discounted e-cigarettes,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Marketers of e-cigarettes have proven skillful at evading FDA regulation and hooking youth on addictive products.”

The FTC has been reporting on tobacco sales annually since 1967 and smokeless tobacco sales since 1987. Last year, the agency expanded its studies of industry and published its first-ever report on e-cigarettes. E-cigarettes or vaping devices are battery-operated devices that people use to inhale an aerosol, which typically contains nicotine, flavorings, and other chemicals. The two main types of e-cigarettes are cartridges and disposables. Cartridges are rechargeable and designed to be used multiple times. Users generally replace the pre-filled cartridge when it is empty. Disposables are not rechargeable or refillable, and are thrown away once they run out of charge or e-liquid.

This year’s e-cigarette report covers sales and advertising data from 2019 and 2020, a period in which the Food and Drug Administration (FDA) published an enforcement policy banning the sale of flavored e-cigarette cartridges other than menthol. Overall, the report found that total e-cigarette sales, which had increased from $304.2 million in 2015 to $2.046 billion in 2018, grew to $2.703 billion in 2019, but then declined to $2.24 billion in 2020. The FTC report notes that the 2020 decline may not represent the market given major industry shifts. Key findings in the report include:

• Significant shift to flavored disposable e-cigarettes: Publicly available sources indicate that the sale of disposable e-cigarettes – which are exempt from the FDA’s 2020 policy – increased substantially, with “other” flavored disposable products making up 77.6 percent of all disposables sold in December 2020. The FTC’s data did not show an increase in disposable sales. However, FTC’s data likely does not represent an accurate picture of the market for disposable e-cigarettes. Only two of the five companies submitting data for 2019-20 continued to market disposable e-cigarettes in 2020, and those that did provided more limited offerings. In order to improve the representativeness of its industry sales data for future FTC reports, the FTC recently sent orders to four additional e-cigarette companies.

• Major increase in menthol cartridge sales: Similarly, the report found that the sale of the remaining non-FDA-banned flavored cartridge, menthol, increased significantly, to 63.5 percent of all cartridges sold in 2020.

• Record high e-cigarette discounting: The data also reveal that price discounting for e-cigarettes reached a record high of $182.3 million in 2019, and, although it decreased slightly in 2020, such discounting still represented the largest category of ad expenditures by e-cigarette manufacturers.

• Doubling of nearly free e-cigarette samples: The data collected for 2019-20 suggest that spending on the sampling and distribution of free and deeply price-discounted e-cigarettes more than doubled in just two years, making it the second-largest spending category in 2020. This occurred because, after the FDA banned tobacco product sampling in 2016 to limit youth access, some companies began offering e-cigarettes for $1 (or even less) in an apparent attempt to get around the ban.

The FTC’s report provides an important market snapshot of the impact of the FDA’s efforts to restrict harmful youth e-cigarette use and a roadmap for additional steps the FDA can take to combat youth addiction to nicotine. There is significant evidence that flavored e-cigarettes remain attractive for youth, increasing the serious potential for more American youth to become addicted to nicotine and its harmful effects on the human body. This report shows that partial bans on certain types of flavors for certain types of e-cigarettes are unlikely to be successful in achieving a reduction in youth addiction to nicotine via e-cigarette usage.

The FTC also is concerned about price discounting practices for e-cigarettes. Studies indicate that consumers clearly respond to price changes for tobacco products – with younger smokers responding more strongly than their older counterparts. Such studies led the U.S. Surgeon General to conclude that price discounting has resulted in an increase in youth tobacco use. The FTC considers similar discounting in the price of e-cigarettes also concerning. FDA efforts to restrict free e-cigarette samples seem to have engendered an effort by e-cigarette manufacturers to circumvent the ban by offering record-high discounting and nearly free e-cigarette products. 

The Commission vote approving the FTC’s E-Cigarette Report and related data tables for 2019-20 was 5-0.