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FTC Enforcement

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July 29, 2022

First American Payment Systems—a merchant payment processing provider—and two sales affiliates have been ordered to return $4.9 million to businesses harmed by FAPS’ hidden terms, surprise exit fees, and zombie charges. FAPS’ preyed mostly on merchants with limited English proficiency, promising low costs and an easy exit, but hit them with surprise fees and illegal charges when the customers tried to get out. In addition to the monetary penalty, FAPS is required to stop misleading customers about fees and pricing, stop unauthorized bank withdrawals, make service cancellation easier, and stop charging early termination fees. FTC

May 17, 2022

R360 LLC and its owner, Steven Doumar, were hit with a $3.8 million civil penalty judgment under the Opioid Addiction Recovery Fraud Prevention Act of 2018, for deceiving people seeking addiction treatment. The case, a first for the FTC under the Act, alleges that R360 made misrepresentations in its television ads for its “R360 Network,” comprised of supposed addiction treatment and recovery specialists. R360 and Doumar touted a rigorous evaluation process for its service providers, to meet the customers’ individualized needs. In fact, Doumar was the one responsible for assessing and selecting the treatment centers, even though he had no expertise or education in the field. The FTC also secured an order prohibiting Doumar from making similar misrepresentations going forward. FTC

April 15, 2022

Caribbean Saint James School of Medicine a/k/a Human Resource Development Services, Inc., and its operator Kaushik Guha will pay $1.2 million in refunds to students who were lured by exaggerated promises of future success. For a period spanning at least 4 years, the defendants misrepresented their students’ medical license exam pass rate and misrepresented their residency match rate, stating that theirs was equal American schools’ match rate. Defendants violated the FTC’s Holder Rule, which requires specific notice to credit-holding consumers informing them of their right to assert claims, and also failed to provide a CPR disclosure in their credit agreements. FTC

March 8, 2022

The operators of online stock trading site RagingBull.com, which used bogus earnings claims to lure customers into expensive and hard to cancel subscriptions, have been ordered to pay $2.4 million.  The proposed settlement order also prohibits the defendants from making similar claims in the future, requires them to obtain informed consent from consumers before signing them up to subscriptions, and requires them to provide consumers with easy methods of cancellation.  FTC

May 3, 2021

Vivint Smart Home Inc., which sells “smart” home security and monitoring systems through a door-to-door sales force, has agreed to settle for $20 million in the largest civil penalty ever paid to resolve violations of the Fair Credit Reporting Act (FCRA).  According to the DOJ, Vivint’s lack of an Identity Theft Prevention Program allowed its sales force to fraudulently obtain credit reports of unsuspecting consumers in order to complete sales to potential Vivint customers who failed required credit checks.  Vivint then allegedly sold debt from Vivint customers who defaulted to debt collectors who attempted to collect from the unsuspecting victims.  Vivint recently paid $3.2 million to settle charges involving a different scheme.  DOJ; FTC

December 10, 2020

Complete Merchant Solutions, LLC (CMS), a payment processor, and its former CEO, Jack Wilson, have agreed to pay $1.5 million in refunds to harmed consumers in order to settle FTC charges of illegally processing millions of dollars in credit card payments that they knew or should have known were fraudulent.  According to the FTC, CMS and Wilson ignored clear red flags while processing payments, including high rates of consumer chargebacks, the use of multiple merchant accounts to avoid chargeback rates, and the submission of sham chargeback reduction plans.  As part of the order, CMS and Wilson are required to conduct enhanced screening and monitoring of certain merchants, and are prohibited from acting as a payment processor for certain companies.  FTC

December 7, 2020

DISH Network LLC has agreed to pay a record-breaking $126 million in civil penalties for violating the FTC’s Telemarking Sales Rule, as well as a combined $84 million to the States of California, Illinois, North Carolina, and Ohio for violating the Telephone Consumer Protection Act.  In 2017, a federal district court found DISH liable for more than 66 million unlawful telemarketing calls made directly by the company or by retailers marketing their products and services.  The total settlement amount, $210 million, represents the largest civil penalty ever obtained for do-not-call violations.  DOJ; CA AG; NC AG

July 24, 2020

Several divisions of pharmaceutical company Indivior, which marketed of the opioid-addiction drug Suboxone, pleaded guilty to felony healthcare fraud, entered into a five-year Corporate Integrity Agreement, and will pay a total of $600 million in criminal fines, restitution, civil damages, and penalties.  In six separate cases brought by whistleblowers, Indivior was also alleged to have caused false claims to be submitted to government healthcare programs including by promoting the sale of Suboxone to physicians who were prescribing it outside of medically accepted indication, misrepresenting the likelihood of Suboxone being diverted, and taking steps to delay generic competition for Suboxone. Indivior admitted making false statements about the safety of the film version of Suboxone in order to promote its sale.  In addition, the FTC claimed that violated antitrust laws through a deceptive scheme to thwart lower priced generic competition with Suboxone.  The total settlement consists of criminal restitution of $289 million; a civil settlement of $300 million, with $209.3 million paid to resolve claims by the federal government and $90.7 million to participating states; and, $10 million in penalties to the Federal Trade Commission.  The settlement also requires Indivior to take steps including the dissolution of its Suboxone sales force. Indivior was until 2014 a subsidiary of Reckitt Benckiser Group PLC, which previously paid $1.4 billion to resolve claims related to Suboxone marketing.  DOJ; USAO NJ; FTC

May 19, 2020

Payment processing company First Data Merchant Services, LLC will pay $40.2 million to resolve FTC charges that it laundered, or assisted laundering of, credit card transactions for scams facilitated by Chi “Vincent” Ko and his company First Pay Solutions LLC, which operated as an independent sales agent for First Data.  Ko allegedly opened hundreds of merchant accounts to process payments for scams that targeted hundreds of thousands of consumers, and First Data knowingly processed payments for those scams.  FTC

April 20, 2020

A company that markets rent-to-own payment plans in retail stores nationwide has agreed to pay $175 million to settle FTC charges of intentionally misleading customers.  By hiding payment terms, Progressive Leasing allegedly led customers to believe the payment plans had no interest when in fact, the company did charge an interest rate that resulted in customers paying as much as double the true price of products.  The settlement proceeds will go toward refunds for affected customers, and under the terms of the proposed settlement, Progressive Leasing will be prohibited from engaging in similar conduct and required to disclose full payment costs to its customers.  FTC
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