In testimony before the House Subcommittee on Financial Services and General Government, Federal Trade Commission Chair Lina M. Khan highlighted the agency’s broad consumer protection and competition mandate and pointed to the need for increased funding and staffing to meet growing law enforcement needs in today’s modern markets.

“The FTC is at the front lines of many of the most pressing issues Americans face today— from corporate mergers that can enable firms to hike prices and slash wages, to massive data breaches that can expose Americans’ most sensitive and personal information,” said Chair Lina M. Khan. “I continue to be impressed by the tenacity and creativity of our staff in the face of an ever-increasing workload, opposing parties with endless resources, and legal challenges to our authority. We are keen to fully deliver on our mission—but without the additional funding, it will continue to be a challenge.”

Khan’s testimony noted that the agency is responsible for enforcing 82 different statutes across the full breadth of American commerce. While recent budget increases have been helpful, she noted, the agency’s staffing level is still one-third smaller than it was four decades ago.

In her testimony, the Chair also detailed how the FTC has worked tirelessly to meet the enormous demand of enforcing the laws against unlawful mergers amid a historic surge. While the agency has moved aggressively to maximize the impact of its budget, the testimony noted that it remains extremely challenging to fully resource the FTC’s competition mission.

The volume of merger filings —filings the FTC is required to review under the Clayton Act— has significantly outpaced and overwhelmed the agency’s ability to investigate them. For example, the number of merger filings has increased to more than 3,500 in 2021 alone. Khan noted that the agency does not have sufficient resources to meet its obligations to conduct its investigations of those mergers in a timely manner, especially as transactions have grown in complexity over the decades.

Khan pointed to numerous enforcement actions in both the competition and consumer protection space that have yielded important benefits for consumers and the market. She noted that additional resources would ensure that the agency will continue to enforce laws that protect consumers from unfairness and deception across the economy, from keeping a close eye on oil and gas markets to protecting consumers’ privacy online to fighting ongoing fraud related to the COVID-19 pandemic.

The Federal Trade Commission, through its refund administrator, is mailing 690,000 checks totaling more than $152 million to consumers who lost money to a massive payday lending fraud scheme operated by AMG Services, Inc. and the company’s owner, Scott Tucker. This is the second distribution of refunds in this matter, bringing the total amount returned to consumers to more than $535 million. 

The refunds are the result of a criminal case that the Department of Justice filed and from settlements with other defendants that were entered before the Supreme Court overturned the monetary judgment the FTC had obtained in its civil case against Tucker in April 2021.

Consumers who receive checks should cash them by August 17, 2022. Checks can be verified online at www.ftc.gov/AMG. Recipients who have questions about their refund should contact the refund administrator, Rust Consulting, at 866-730-8147 or by email at admin@AMGServicesRefund.com. The Commission never requires people to pay money or provide account information to get a refund.

The FTC sued AMG Services in 2012, alleging that the company and its operators falsely claimed they would charge borrowers the loan amount plus a one-time finance fee. Instead, the defendants made multiple withdrawals from consumers’ bank accounts and assessed a new finance fee with each withdrawal. As a result, consumers paid far more for the loans than they had originally agreed to pay.

In 2017, the United States Attorney’s Office for the Southern District of New York obtained criminal convictions against Tucker and his attorney, Timothy Muir. In 2018, they obtained a sentence of more than 16 years in prison for Tucker, and a penalty of $528 million against U.S. Bancorp for violations of the Bank Secrecy Act, including failing to timely report suspicious banking activities of Tucker.

The FTC and U.S. Attorney’s Office also obtained settlements in January 2015, November 2015, February 2016, and June 2018 with three Native American tribes involved in Tucker’s operation.

In vacating the Commission’s judgment against Tucker, the Supreme Court ruled that the Commission lacks authority under Section 13(b) to seek monetary relief in federal court. The Commission has urged Congress to restore the Commission’s ability to get money back for consumers under Section 13(b).

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

The Federal Trade Commission is considering changes to tighten its guidelines for advertisers against posting fake positive reviews or manipulating reviews by suppressing bad ones—and warns social media platforms about inadequate disclosure tools. The FTC is seeking public comment on the proposed updates to its Endorsement Guides, which reflect the new ways that advertisers now reach consumers to promote products and services, including through social media.

“We’re updating the guides to crack down on fake reviews and other forms of misleading marketing, and we’re warning marketers on stealth advertising that targets kids.” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Whether it’s fake reviews or influencers who hide that they were paid to post, this kind of deception results in people paying more money for bad products and services, and it hurts honest competitors.”

The Endorsement Guides, first enacted in 1980 and amended in 2009, provide guidance to businesses and others to ensure that advertising using endorsements or testimonials is truthful. Advertisers who lie to consumers via endorsements or testimonials may violate the FTC Act. The guides, among other things, state that advertisers need to be upfront with consumers and clearly disclose unexpected material connections between endorsers and a seller of an advertised product. In February 2020, the FTC sought comment on whether changes should be made to the guides. The proposed changes reflect the extent to which advertisers have turned increasingly to the use of social media and product reviews to market their products.

In a notice, along with the proposed revisions to the guides, the FTC has:

• Warned social media platforms that some of their tools for endorsers are inadequate and may open them up to liability;
• Clarified that fake reviews are covered under the guides and added a new principle that in procuring, suppressing, boosting, organizing, or editing consumer reviews, advertisers should not distort or misrepresent what consumers think of their products. This would cover review suppression like in the FTC’s recent Fashion Nova case;
• Clarified that tags in social media posts are covered under the guides and modified the definition of “endorsers” to bring virtual influencers—that is, computer-generated fictional characters—under the guides; and
• Added an example addressing the microtargeting of a discrete group of consumers.

In addition, the FTC also has proposed adding a new section highlighting that child-directed advertising is of special concern and that children may react differently than adults to endorsements in advertising or related disclosures. In order to provide further guidance, the FTC plans to hold a public event on October 19, 2022, focusing specifically on children’s capacity at different ages and developmental stages to recognize and understand advertising content and distinguish it from other content and the need for and effectiveness of disclosures to children.

The Commission voted 5-0 at an open meeting to submit the notice detailing the proposed changes to the guides to the Federal Register. Instructions for filing comments appear in the notice. Comments must be received within 60 days of publication and will be posted on Regulations.gov. Chair Lina M. Khan as well as Commissioners Rebecca Kelly Slaughter, Christine S. Wilson and Alvaro Bedoya issued separate statements.

The Federal Trade Commission announced today that it will crack down on education technology companies if they illegally surveil children when they go online to learn. In a new policy statement adopted today, the Commission made it clear that it is against the law for companies to force parents and schools to surrender their children’s privacy rights in order to do schoolwork online or attend class remotely. Under the Children’s Online Privacy Protection Act, companies cannot deny children access to educational technologies when their parents or school refuse to sign up for commercial surveillance.  

“Students must be able to do their schoolwork without surveillance by companies looking to harvest their data to pad their bottom line,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Parents should not have to choose between their children’s privacy and their participation in the digital classroom. The FTC will be closely monitoring this market to ensure that parents are not being forced to surrender to surveillance for their kids’ technology to turn on.”

The policy statement underscores that, even as companies across the economy become more aggressive in harvesting and monetizing individuals’ data, ed tech providers cannot do the same:  Ed tech providers must comply fully with all provisions of the COPPA Rule. Today’s policy statement makes clear that the Commission will vigilantly enforce the law to ensure that companies covered under COPPA are complying with all of the rule’s provisions, including:

• Prohibitions Against Mandatory Collection: Companies cannot require children to provide more information than is reasonably needed for participation in an activity.

• Use Prohibitions: Ed tech providers that collect personal information from a child with the school’s authorization are prohibited from using the information for any other commercial purpose including marketing or advertising.  

• Retention Limitations: Ed tech providers are prohibited from retaining children’s personal information for longer than is necessary to fulfill the purpose for which it was collected and therefore cannot keep such data just because they might want to use it in the future.

• Security Requirements: Ed tech providers must have procedures to maintain the confidentiality, security, and integrity of children’s personal information.

The policy statement notes that companies that fail to follow the COPPA Rule could face potential civil penalties and new requirements and limitations on their business practices aimed at stopping unlawful conduct.

The Commission voted 5-0 at an open meeting to adopt the policy statement. Chair Lina M. Khan as well as Commissioners Rebecca Kelly Slaughter, Christine Wilson and Alvaro Bedoya issued statements on the matter.

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 digitalads2kids@ftc.gov 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.