Tag: ftc

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Payday Loan Marketers Charged by FTC

At the request of the Federal Trade Commission, a federal court has halted an online operation that allegedly debited consumers’ bank accounts without their consent when consumers visited the defendants’ websites seeking payday loans. The court also froze the defendants’ assets, pending further court proceedings.

According to the Commission’s complaint, the defendants’ websites, such as mypaydayangel.com and juniperloans.com, asked for consumers’ personal and financial information, such as social security, driver license, and bank account numbers. Near the end of the application form, the defendants offered unrelated “Direct Benefits” and “Voice Net” programs for food, travel and merchandise discounts, or for long distance calling and Internet access. Many consumers who clicked to “submit” a payday loan application were enrolled, unknowingly, into the programs, which initially charged their bank accounts up to $59.90 per month, and later charged up to $99.90 per year. Consumers often did not notice the program offers, and some people who declined the offers were allegedly charged for the programs anyway.

As alleged in the complaint filed in the U.S. District Court for the Middle District of Florida, the defendants sent consumers’ bank account information to Landmark Clearing Inc. and other payment processors to electronically generate remotely created payment orders that debited consumers’ bank accounts. Consumers typically discovered the problem when an unexpected debit appeared on their bank statement, or when their bank told them their account was overdrawn. They learned that Direct Benefits or Voice Net received the payments only after they contacted their bank or saw an online copy of the payment order. Consumers called the defendants for a refund but more often than not, received the run-around. Many consumers had to dispute the transaction or close their bank accounts to get a refund or stop the defendants from debiting their accounts.

The defendants are charged with violating the FTC Act by obtaining consumers’ bank account information and debiting their accounts without their consent, and failing to adequately disclose that, in addition to using consumers’ financial information for a payday loan application, they would use it to charge consumers for enrollment in unrelated programs and services. The FTC complaint names Direct Benefits Group LLC, also doing business as Direct Benefits Online and Unified Savings; Voice Net Global LLC, also doing business as Thrifty Dial; Solid Core Solutions Inc.; WKMS Inc.; Kyle Wood; and Mark Berry.

If you are currently engaged in the online marketing of payday loan services, or contemplate doing so, be sure to consult with your Internet attorney in order to minimize legal and regulatory risks.

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Clickback Changes Guidelines Under FTC Pressure

This week ClickBank announced new guidelines that would significantly change the way that many affiliate marketers and “JV Partner” programs would be allowed to be promoted. While the new guidelines did not specifically address JV Programs that targeted affiliates, it had been known that there was a growing amount of consumer complaints and charge backs from the “make money” programs. According to an FTC insider, Clickbank had received some initial inquiries regarding specific products from the consumer protection agency.

The guidelines mainly specifically deal with Testimonials and Endorsements and could put a huge cramp in the marketing efforts of many of the “JV Partner” programs that are promoted over Clickbank, WarriorForum, Digital Point and many affiliate marketing websites.

The requirements that will have the biggest effect are:
– All videos must be preapproved before being put up on a website (script approval by Clickbank)
– All “limited amount”, “offer almost done” and “will be closing” type opportunity messages will be banned.
– Cannot promote that products were at a higher price, unless verified by Clickbank
– Upsells will be limited on initial orders and must include a way to immediately optout (and not have to watch more promotions)
– Will not allow products to be promoted as being easy to use, “one-button”
– As Seen on TV will be banned, unless there is documentation specifically to that product that it was seen on TV.

While most in the industry feel that these are positive requirements, many people point that they will delay launches of products significantly and not allow many JV Marketers to change their landing pages as necessary or provide new content and videos to customers frequently.

What do you think of the changes?

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$4.8 Million FTC Action against Swish Marketing

At the request of the Federal Trade Commission, the U.S. District Court for the Northern District of California has ordered Swish Marketing, Inc. to pay more than $4.8 million for misleading hundreds of thousands of payday loan applicants into paying for an unrelated debit card. For some time, the Commission has been closely monitoring payday lending and other financial services in order to protect financially distressed consumers.

According to the FTC’s complaint, Swish Marketing and three individuals operated websites advertising short-term, or “payday,” loan services that allegedly matched loan applicants with lenders. The websites included an online loan application form that tricked online loan applicants into unknowingly ordering a debit card.

On many sites, clicking the button for submitting loan applications led to four product offers unrelated to the loan, each with minuscule “Yes” and “No” buttons. “No” was pre-checked for three of them, while “Yes” was pre-checked for a debit card, with inconspicuous disclosures asserting consumers’ consent to have their bank account debited. Consumers who clicked a prominent “Finish matching me with a payday loan provider!” button were subsequently charged for the debit card. Additional websites represented that the card was a “bonus” and disclosed the fee only in inconspicuous fine print below the submit button. Consumers were each improperly charged up to $54.95.

The Commission charged Swish Marketing, VirtualWorks LLC (the seller of the debit card), and principals of the operation with deceptive business practices in 2009. The FTC filed an amended complaint against the Swish Marketing defendants in 2010, including allegations that they sold consumers’ bank account information to VirtualWorks without consumer consent, and that the principals were aware of consumer complaints about the unauthorized debits.

Three principals, as well as the VirtualWorks defendants, settled the charges against them.

The court order announced last week requires Swish Marketing to pay more than $4.8 million and bans it from marketing any product with a “negative-option” program, in which a consumer’s silence or failure to reject a product is treated as an agreement to make a purchase. The order also requires the company to obtain consumers’ informed consent before it can use their personal information collected for a particular purpose for any other purpose or by a different entity, and bars the company from: (1) misrepresenting material facts about any product or service, such as the cost or the method for charging consumers; (2) misrepresenting that a product or service is free or a “bonus”, without disclosing all material terms and conditions; (3) charging consumers without first disclosing what billing information will be used, the amount to be paid, how and on whose account the payment will be assessed, and all material terms and conditions; and (4) failing to monitor their marketing affiliates to ensure that they are in compliance with the order.

Richard B. Newman is the premier Internet Attorney and FTC Compliance and Litigation Defense Lawyer at Hinch Newman LLP. He has made a name for himself in the interactive advertising and affiliate marketing industries and can be contacted at rnewman@hinchnewman.com

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The FTC Targets Scam Flogs But Ignores Media Companies That Promote Them

Technorati – The Federal Trade Commission has gone to war against all the fake news sites. If you’ve visited almost any real news site recently, you’ve most likely seen these advertisements that advertise a “special report” from some news station you never heard of, has discovered the cure to belly fat or a special new secret to working from home. First these fake news sites completely ticked-off the public, who filed complaints against the owners with everyone from the FBI to the FTC. The FTC took the complaints seriously and earlier this year filed several lawsuits against those involved in these practices.

However, while this is progress, the FTC has completely ignored the actions of the large companies that allow these types of advertisements.

The issue here is simple: while the advertisers, and affiliate networks are being targeted by the FTC for compliance actions for creating these deceptive websites, the large advertising networks, including Pulse360 and AOL’s own network continues to run these ads, knowing that they are deceptive and causing harm to consumers. Worse, the companies that run these ads are major news organizations, where the ads seem like real news stories embedded in the content.

When I was talking to the writer for this AdAge article, I pointed out that the VP of Sales at MSNBC, Kyoo Kim has recognized this as a problem and said almost 18 months ago that they would no longer allow these advertisements. As the reporter of the AdAge story pointed out, the original story, also run by MSNBC was still actually flanked by these advertisements. They knew that these ads were a problem, admitted it, but then went back on their promise and continued to make money from it.

Simiarly, as ADOTAS editor, and my friend, Gavin Dunaway, points outin his article, that Washington Post was running a story on this, and “that WaPo is guilty of running the ads as well — he asks his own publication why it ran the ads and a representative says they are investigating the situation.” Whatever that means, it shows that the publishers are well aware of what is going on.According to Richard B. Newman, an Internet attorney at Hinch Newman LLP in New York City, if regulators genuinely want to pursue those ultimately responsible for health-related deceptive advertising on the Internet, the perceived scope of responsibility must be broadened. Also an attorney for the Executive Council of Performance Marketing, Newman states that “neither the media companies, nor the digital media buyers should be automatically exempted from the regulatory scrutiny of unfair and deceptive trade practices when there is some degree of willful blindness, which often exists.”This means simply that these companies, from MSNBC, Washington Post to the networks that run these ads need to be proactive and look at their policies. More importantly, since they are all aware of what is going on, their current defense that they are “just a publisher” doesn’t fly, and their ignoring of how they are making money is at least questionable and unethical. As news sites, they need to really stand up and be “better” than the rest of the industry, not defend themselves with legalize and excuses

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FTC Announces Accelerated Review of Six Rules & Guides

On July 7, 2011, the Federal Trade Commission (“FTC”) announced an updated regulatory review schedule of numerous rules and guides in order to keep pace with the current technological landscape and rapidly evolving marketplace, while at the same time promoting greater efficiency and transparency.  For the first time, the FTC is seeking public comments on how the regulatory review process can be enhanced to better serve consumers and businesses, including how often it should review rules and guides and how it can modify its regulatory review program to make it more responsive to the needs of consumers and businesses.

The updated regulatory rules and guides review schedule for the next decade was published concurrently with a hearing on potential rulemaking reforms called by Rep. Cliff Stearns (R-Fla.), who chairs the House Energy and Commerce Committee’s Oversight and Investigations Subcommittee.  The initiatives are intended to ensure its regulations are current and not overly burdensome, including launching a new regulatory review web page. The FTC’s healthy regulatory review docket includes thirteen (13) rules and guides currently under review, as well as ten (10) additional rule reviews scheduled to commence sometime in 2011.  In sum, more than one-third of the FTC’s sixty-six (66) rules and guides will be under review, or will have just been reviewed, by the end of 2011.

The FTC is currently in the process of assessing its Children’s Online Privacy Protection Rule.  Particularly relevant to eCommerce business, the FTC plans on reviewing several of its guides in 2012, including the interpretation of just how Section 5 of the FTC Act applies to specific trade practices, its Guides Against Deceptive Pricing, Guides Against Bait Advertising, and Guides Concerning Use of the Word “Free” and Similar Representations.  It is anticipated that the FTC will revisit its Telemarketing Sales Rule in 2013.

The FTC’s agenda in 2014 is expected to include a review of its Standards for Safeguarding Customer Information, followed by its review of the CAN-SPAM Act in 2015.  The FTC will review its identity theft Red Flag rules in 2018.  In 2020, regulators plan to revisit the Use of Endorsements and Testimonials in Advertising Guidelines, Privacy of Consumer Financial Information Rule, Health Breach Notification Rule, and Affiliate Marketing.

Richard B. Newman is an highly-respected Internet Lawyer and FTC Defense Lawyer at Hinch Newman LLP. He has made a name for himself in the industry having been the lead attorney on several well known cases. He can be contacted at rnewman@hinchnewman.com

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PeerFly has few Peers.

Recently PeerFly was awarded the #2 Network in our Annual Survey of Networks. Their CEO Chad French was pretty damn happy about that, considering he only opened the doors in 2008. We decided that it was about time we sat down with him again and see what he is doing with himself, and what we can expect from his network.

We spoke to you a few months ago; you seemed really excited about the future. How does it feel that half a year later your network has blown up and you’re one of the top CPA networks in the world? It’s been an awesome experience.  When I started building the platform for PeerFly in 2008, I had no idea we’d be one of the top networks in less than 3 years time. I attribute our phenomenal growth to my team and the long hours we put in every day to make sure we’re the best we can be.  We’re never content with where we are at any given moment so we continue to push ourselves to the next level. If there isn’t a next level, we create one. We’ve done so much in 3 years… watch what we do within the next 3!

What do you think that you are offering that other CPA Networks can’t provide? I believe the advantages we have over other CPA networks are two things: creativity, and in-house development. We have a list a mile long of ideas that we want to implement into PeerFly and future assets that are not found elsewhere. We are extremely inventive and think outside of the boxes box! Myself, and two others on my team, have web-based programming backgrounds with varying levels of skill. So, when we come together and conjure up something super creative, we’re able to easily implement those ideas within our system. We’ve never relied on a 3rd party to provide value to our affiliates/clients.

Other things we provide that others don’t are several payment schedules based on revenue, several payment methods, daily payments (over a year now), over 1,300 offers in many different verticals, live chat support, a rewards program, and a lifetime 5% referral program.

As you know, fraud is a serious issue. What is PeerFly doing to combat fraud? What types of fraud are you seeing personally? We have been described as one of the most strict and rigorous in terms of fraud and compliance. To begin, our compliance department is composed of two different segments: approvals and traffic. Among other things, all applicants have to verify their phone number using our pin verification system as well as upload a government issued photo ID. If verification passes, they still have to pass another additional 20+ internal points of assessment.  If an applicant is approved and becomes an affiliate, our dedicated traffic manager audits their traffic closely and works proactively with our clients to ensure quality is where it needs to be.

We don’t really see “fraud” like we used to when we first started. Rather, we see non-compliant traffic. IE; traffic that may be legitimate but is not an accepted method or type as described on the offer page. Some affiliates just don’t know how to follow directions. However, most of the time we’re able to catch it before it becomes an issue and steer that publisher in the right direction.

We’ve talked about those networks that don’t pay their bills. What is your philosophy about this? Paying our affiliates on time is something else that sets us apart as well. It shouldn’t even be an advantage because that’s CPA network predicate 101! But, unfortunately for this industry, it is. For the first two years we were in business, we had an extremely low overhead that allowed us to save, save, save. It wasn’t until the beginning of this year that we actually got an office. Even with the office, only a couple of us work there – one being part time. We have had no investors and we’ve bootstrapped everything. Our savings has allowed us to continue to pay everyone on time even when our clients are several weeks or months late on their payment. We’ve been fortunate enough to float money without issues and I attribute that to our non-flashy, low budget, saving mentality style.

For networks that have trouble keeping up with payments and are starting to build a reputation of bad payment issues, you need to step back and reassess what you are doing in this business. The #1 priority we’ve had since day one is paying people what they earned, on time. We will make sure our affiliates are paid on time before our own pockets are paid on time. With the power of the Internet, it’s super easy for a handful of affiliates to take your business down because of your bad financial decisions. I’ve seen it time and time again. Always make sure your output is never more than your input or else you will see failure.

What do you think the biggest mistakes most affiliates are making right now? Giving up. Unfortunately, a lot of people equate this industry with a “get-rich-quick” scheme. They get into it looking to make an easy dollar and then give up when they discover it’s a lot harder than they perceived. I believe there is nothing “hard” about this business. You just have to know what you are doing so you can formulate a strategy. The only thing that separates new affiliates from super affiliates is information. That’s it. You don’t need to have any money, special talent, skills, or degrees. We have affiliates who make $20k a day and it’s not because of their good looks! They understand how to take an offer, formulate an action plan and know whom to target.

Are you offering training for affiliates? Why or why not? What specifically? We’re currently developing a whole new interface and website layout. With the launch of the new design we will also be introducing a “Training & Resource Center” which will focus on providing the information our affiliates need to succeed.  We want to start doing live Q&A sessions, video walkthroughs, a dynamic FAQ system, message board and more. We don’t think our affiliates should be paying hundreds or even thousands of dollars on coaching programs when we can provide all of it plus more for free.

Where do you think affiliates need to go to learn how to be super-affiliates? I believe our upcoming resource center will prove to be a valuable asset and will be able to take our affiliates from “newbie” to “super” in a short time. Other places to frequent for free guidance in this business are forums like: WarriorForum (http://warriorforum.com), DigitalPoint (http://forums.digitalpoint.com) and reading all the latest industry related blog posts at AffDaily (http://affdaily.com) where lots of industry bloggers provide valuable insights and information.

Do you recommend that affiliates try many networks, or stick with a few proven networks? Why or why not? Stick with the proven networks. There should be no need for you to go out looking for or working with new networks that don’t have any history. If anything, let them prove themselves first. If they seem attractive because of payout claims on a certain offer or the types of offers they have, simply ask the current proven network you’re with if they can get those offers or match those payouts. Nine times out of 10, not only will they be able to get that offer but also beat the payout on it as well. The proven networks have a lot more clout and can negotiate better payouts with advertisers. Not to mention – if you work with an unproven or unheard of network, they are more than likely brokering the offer from a bigger, proven network anyway.

What is your opinion of all the FTC lawsuits? How are you guys protecting yourselves from legal actions by the government, and what do you recommend for affiliates? Our industry obviously needs regulation. I want to help build an industry of value, integrity, and sustainability. Not scams, lies, and falsehoods. Advertising powers the Internet so we really have a bright future ahead of us just as long as we can stay accepted and compliant! I applaud the efforts of groups like the Performance Marketing Association, the Executive Council of Performance Marketing and even the Federal Trade Commission for creating standards and keeping both sides straight.

As for us, we work with our attorney to ensure our practices stay within FTC guidelines. We have absolutely no intentions of going outside the realm of veracity and standards this industry relies upon to grow.

Check out Peerfly here