Tag: internet attorney

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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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$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