Debt Elimination Group Card Consumer Credit Debt Information

							ABA CONSUMER PROTECTION UPDATE

             May 2007

      The Lustigman Firm, P.C.
         Andrew Lustigman
          Adam Solomon
          Jonathan Ezor
                                 1
Agenda
 Federal Trade Commission Update
 State Attorneys General Update
 Private Litigation Update
 National Advertising Division Update
 Privacy Update




                                         2
Deceptive Marketing of
Magazine Subscriptions
 FTC charged several Pennsylvania-based defendants with violating
  the FTC Act and the Telemarketing Sales Rule by telemarketing
  magazine subscriptions falsely claiming they were only conducting
  a survey and providing an incentive of receiving “valuable coupons”
  for groceries and other items worth over $1,000
 FTC alleged that defendants failed to tell consumers that they were
  actually selling magazine subscriptions and to get the coupons they
  had to buy magazine subscriptions
 FTC alleged that sometimes defendants claimed that the
  magazines were free or that the consumers only had to pay
  shipping and handling or otherwise misrepresented the cost of the
  subscriptions
 FTC claimed that defendants violated the TSR when they called
  consumers and failed to make clear that they were offering
  products for sale, failed to disclose the total cost of their program
  before obtaining payment information, made misrepresentations to
  induce consumers to make a purchase, and misrepresented the
  cancellation policy
                                                                      3
Human Growth Hormone Internet
Marketer Settles FTC Actions
   FTC settled actions against two groups who marketed oral sprays that were
    supposed to help users lose weight, reverse the aging process, and prevent or
    treat diseases
   Marketing for the sprays claimed that they contained HGH and referred to
    clinical studies and prestigious publications
   FTC alleged that the claims were unproven and untrue. The FTC charged that
    the sprays did not contain HGH, or cause the body to increase production of
    HGH, and did not offer anti-aging, weight loss, or disease prevention effects
   FTC alleged that representation on website as to use of SSL encryption was
    false making the credit card information submitted for payment vulnerable to
    capture while in transit
   Settlement provides for payment of $172,000 with a $2.2 million avalanche
   Orders also contain injunctions prohibiting misrepresentations in marketing food,
    drugs, devices, services, or dietary supplements, including misrepresentations
    about the product benefits, misrepresentations about studies and research, and
    representations made without possessing competent and reliable scientific
    evidence. The orders also prohibit misrepresenting the security of Web pages
   One group also is precluded from violating CAN-SPAM Act based on prior
    violations of Act in sending false sender identification, using deceptive subject
    headings, failing to provide an opt-out mechanism, and failing to provide
    physical postal address

                                                                                    4
Owners/Mangers of Debt
Elimination Program Banned
   FTC had sued Debt Solutions, Inc., a group that marketed a “debt elimination”
    program for $399 to $629
   FTC alleged that marketers falsely promised consumers substantially reduced
    interest rates and thousands of dollars in savings because a financial consultant
    with special relationships with the consumers‟ creditors would negotiate
    substantially lower interest rates, resulting in reduced monthly payments and
    elimination of debt three to five times faster than otherwise would be possible
   Promised savings was actually projected savings that would result from simply
    paying more than the monthly minimum on their credit card debts over an
    extended period of time and not from reduced interest rates on the debts
   Defendants allegedly violated the FTC‟s Telemarketing Sales Rule and
    Washington state law by misrepresenting projected savings, failing to disclose
    the limits of their money-back guarantee, calling phone numbers listed on the
    National Do Not Call Registry, failing to pay the required annual fee for access
    to DNC-listed numbers, and calling people who asked them to stop calling
   Settlement permanently prohibits the defendants from engaging in the violations
    alleged in the complaint and imposes an avalanche judgment of $23,255,420
   Individual owners and telemarketing sales managers are permanently banned
    from engaging in any debt negotiation or debt elimination business



                                                                                        5
Business Opportunities
FTC Obtains $17 Million Verdict
 FTC obtained a $17 million summary judgment order in an action for falsely
  representing that the consumers would make substantial money using the
  “Stefanchik Program” to buy and sell privately held promissory notes and
  mortgages
 Defendants telemarketed and sold a package of products and services as
  part of a program of course materials, seminars, workshops, video tapes,
  audio tapes, and personal coaches – which purported to teach consumers
  how to buy and sell privately held mortgages, commonly known as “paper”
 Court found that in the marketing and selling of the Stefanchik Program, the
  defendants falsely represented, directly or by implication, that:
       Consumers who purchased defendants‟ materials, attended defendants‟ seminars and
        workshops, or used defendants‟ personal coaches, would quickly make large amounts
        of money in their spare time by learning and using the methods taught
       Defendants‟ personal coaching service was staffed by persons substantially
        experienced in the paper business who were readily available by telephone to assist
        consumers in finding and completing paper transactions”
 Order requires John Stefanchik and Beringer to pay $17,775,369, the total
   amount of consumer loss. Bars defendants from misrepresenting: that
   consumers will make a substantial amount of money; the income, profit, or
   sales volume that consumers may or are likely to achieve or that previous
   consumers achieved; that services are provided by substantially
   experienced persons, or that such persons are readily available to assist
   consumers; or any other material fact                                                      6
FTC Settles Franchisor Action
 Netvertise, Inc. and Elliot Krasnow settled charges that they
  deceptively marketed Website design and promotion service
  franchises
 Defendants allegedly misrepresented that franchisees were
  likely to earn substantial incomes and overstated the value of
  the supplied search engine optimization software, and failed to
  provide proper franchise disclosure documents regarding prior
  consent orders and earnings claims
 Defendants are barred from marketing franchises or business
  opportunity programs. The order bars defendants from
  marketing or selling any business arrangement covered by the
  Franchise Rule or the Business Opportunity Rule and from
  otherwise misrepresenting any business ventures or investment
  opportunities
 Order requires the defendants pay $160,000, with a $500,000
  avalanche

                                                                    7
Permanent Ban Against Repeat Offender In
Telemarketing, Selling Business Programs
   Richard C. Neiswonger, William S. Reed, and their firm, Asset Protection Group,
    Inc., charged with deceptively marketing business opportunity programs in
    action brought in the Eastern District of Missouri
   Program offered sale of services relating to the forming of Nevada corporations
    and off-shore corporation
   Unsubstantiated six figure earnings claims and false claims of pre-screened
    client list
   Violation of 1997 Consent Order against Neiswonger which required posting of
    $100,000 bond
   Court found Neiswonger in contempt of prior order. Court also ruled that
    business partner and corporation were also bound by the prior order because
    they were aware of the order and acted in concert with deceptive business
    practices
   Court entered a second permanent injunction barring Neiswonger from
    advertising, marketing, promoting, offering for sale, selling, or otherwise inducing
    participation in any program and bans him from telemarketing and instructed the
    court-appointed receiver to calculate how much the defendants had gained from
    the scheme before he orders a final monetary judgment against the defendants
       Judge scheduled a hearing on June 25, 2007, for Reed and APG to defend
         why they should not be subject to a similar injunction


                                                                                       8
Debt Reduction
 Interim Order Entered In FTC v. Debt Set, Inc.
 Company advertised "debt reduction services," including "debt
    consolidation" and "debt settlement" programs
   Complaint alleged that defendants promise to stop collections
    calls, and to consolidate debts, negotiate better interest rates
    such as "between 0 and 9 percent," or lump settlements such as
    "50 cents on the dollar" or "50 to 60 percent" of the debt when
    actually consumers were required to pay 8% of the debt in
    monthly payments before defendants contact creditors, and
    sometimes do not contact them at all
   Interim Order lifts asset freeze and permits defendants to
    continue operating its business under a monitor
   Interim Order precludes misrepresentations regarding fees or
    outcome of service
   Interim Order specifies certain claims that would be permitted if
    substantiated

                                                                    9
Cross-Border Advance Fee Credit Cards
   A federal district court in Illinois has entered final orders against three people
    based in Canada who allegedly defrauded U.S. consumers out of more than $9
    million through the sale of advance-fee credit cards
   Orders bar the defendants from engaging in similar illegal conduct in the future,
    as well as from calling consumers whose phone numbers are on the National Do
    Not Call Registry for telemarketers (litigation continues against the other
    defendants)
   Defendants allegedly used outbound telemarketing to contact consumers in the
    United States, falsely offering major credit cards, such as MasterCard and Visa,
    to people who agreed to have the defendants electronically debit their bank
    accounts for an advance fee of $249
   Defendants typically claimed that the credit cards would have a $2,000 credit
    limit, zero percent interest, and no annual fees, and often targeted their offers at
    consumers with poor credit histories
   Consumers who provided their bank account information did not receive a major
    credit card, but instead were sent an application for either a “stored value card”
    or “cash card” that had no line of credit associated with it and could be used only
    if the consumer first loaded funds onto the card. The complaint also alleged that
    the defendants violated the law by calling consumers on the FTC‟s National Do
    Not Call Registry


                                                                                      10
Restaurant Gift Card Settlement
Approved
 The FTC approved the Darden Restaurant Group‟s
  Consent Order following public comment period
 As reported last month, Darden was charged with
  engaging in deceptive practices in advertising and
  selling restaurant gift cards by failing to adequately
  disclose monthly dormancy fees
 Consent order requires Darden to restore fees
  deducted from consumers' gift cards and to disclose -
  - at point of sale and on the front of any card -- fees
  and expiration dates


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Attorney Advertising
New Jersey
 FTC filed an amicus brief with the NJ SC with the Office of the General
   Counsel urging the vacating of the NJ Opinion 39
 Opinion prohibits attorneys from participating in ratings programs that result
   in “Best Lawyers” and “Superlawyers” lists
 The FTC argues that there are a growing number and wide variety of legal
   rating programs in the United States, each with its own method for rating
   and scoring attorneys based on a variety of criteria, and “these ratings
   programs serve a consumer demand, and the merit, quality and validity of
   them is best determined in the marketplace”
Indiana
 FTC filed comments with the Indiana SC regarding attorney advertising
 The proposed amendments would ban deceptive advertisements, but with
   one exception, place no prophylactic bans on specific forms of advertising
 FTC staff recommend that the Bar revise the proposed amendments to
   make clear that referral programs (such as online legal matching programs)
   are permissible as they can provide an efficient and lower-cost alternative
   for consumers to obtain legal services


                                                                              12
State AG Update: Anheuser-Busch
 Twenty-nine Attorneys General criticized Anheuser Busch
  Companies, Inc. for producing and promoting alcoholic
  energy drinks containing caffeine and other stimulants
 Citing serious health concerns, including skewing a
  person‟s sense of alertness, the Attorneys General called
  on Anheuser Busch to provide readable warning labels
  that alert consumers to the risks of alcoholic energy drinks
 One week after receiving the Attorneys General‟s letter,
  Anheuser Busch announced that it will stop the production
  of Spykes, a caffeinated energy drink with alcohol that
  appeals to youth in taste and appearance

 Thirty-Seven Attorneys General praise Beam Global (Jim
  Beam) for adopting stronger voluntary advertising
  standard to reduce youth exposure to alcohol ads
                                                             13
State AG Update: Dell
   New York Attorney General files lawsuit against Dell and DFS for False
    Advertising, Failure to Provide Services and Deceptive Business Practices
    relating to Dell‟s technical support services, promotional financing, rebate offers,
    and billing and collection activity
   Repeatedly failing to provide timely onsite repair to consumers who purchased
    service contracts promising “onsite” and expedited service
   Pressuring consumers, including those who purchased service contracts
    promising “onsite” repair, to remove the external cover of their computer and
    remove, reinstall, and manipulate hardware components
   Discouraging consumers from seeking technical support; those who called Dell‟s
    toll free number were subjected to long wait times, repeated transfers, and
    frequent disconnections
   Using defective “refurbished” parts or computers to repair or replace consumers‟
    equipment
   Luring consumers to purchase its products with advertisements that offered
    attractive “no interest” and/or “no payment” financing promotions. In practice,
    however, the vast majority of consumers, even those with very good credit
    scores, were denied these deals
   DFS incorrectly billed consumers on cancelled orders, returned merchandise, or
    accounts they did not authorize Dell to open, and then continually harassed
    these consumers with illegal billing and collection activity

                                                                                      14
State AG Update: Best Buy
 Connecticut Attorney General files lawsuit against Best Buy
  alleging the chain used in-store computer kiosks to deceive
  consumers about product prices and overcharge them
 Best Buy operates an internal site accessible only at kiosks in its
  stores. The site is virtually identical to BestBuy.com, the
  company's web site, except for listing in-store instead of online
  prices. Consumers access information at the in-store kiosk by
  clicking on a tab labeled "BestBuy.com," even though they are
  not connecting to the internet site
 Since 2005, the company's stores have pledged to match any
  lower online price, including from their own Internet site. Many
  Best Buy salespeople falsely told consumers searching for or
  seeking to confirm lower online prices that the kiosk connected
  them to BestBuy.com. When the site displayed the higher in-
  store price, salespeople allegedly suggested that consumers,
  who thought they were viewing BestBuy.com, previously
  misread the lower online price or the online price had expired

                                                                   15
State AG Update: BlueHippo
   Maryland Attorney general enters into a settlement with Baltimore-based
    BlueHippo Funding, LLC, its subsidiary, BlueHippo Capital, LLC and Joseph
    Rensin, the owner of both companies
   BlueHippo targets national advertising to consumers who have poor credit
    histories, claiming to make products affordable by financing the purchases and
    allowing consumers to pay on a weekly or biweekly basis. Consumer
    complained they did not receive purchased goods within represented time
    frames. As many as two-thirds of BlueHippo‟s Maryland customers never
    received the computers or televisions they ordered
   When consumers failed to receive the goods and requested to cancel their
    orders, BlueHippo allegedly refused to refund the consumers‟ payments
   Settlement resolves allegations that the Defendants engaged in unfair and
    deceptive trade practices by selling computers, televisions, and other goods to
    consumers for two or more times their retail price, and then placing undisclosed
    conditions on delivery of the items that prevented many consumers from ever
    receiving their purchased items
   Under the settlement agreement, Defendants will pay restitution to consumers
    who did not receive their purchased goods or who the Division alleges were
    overcharged, cease the practices that the Division alleged violated the
    Consumer Protection Act, and make a $300,000 payment


                                                                                   16
State AG Update:
Certified Game of Skill
 Ohio Attorney General unveils new protocol for
  determining whether electronic gaming machines are
  skill-based, process will provide guidance to local
  officials dealing with proliferation of machines
 Gaming Laboratories International will exam and
  evaluate each machine
 Ohio AG Order with SGN International Oil Co.
  (Match‟em UP)
 Degree of skill necessary for a machine to be a legal
  game of skill, i.e. it is wholly or largely controlled by
  skill - - 51%
                                                          17
Private Litigation Update
 Proposed Settlement in Fair Isaac Corporation and
  Equifax class action
      Related to marketing of Suze Orman‟s credit-score kit:
       Suze Orman Fico Kit and 155 other products
      Allegedly violated the Credit Repair Organizations Act
      Bar on advertising the products/services as
       “enhancing”, “boostering”, “raising”, or “improving”
       credit scores with words such as “tips” “suggestions” or
       “advice”
      Settlement includes three months of free credit-score
       tracking
      Settlement is pending court approval
                                                              18
Private Litigation Update
Splenda and Equal Settle Private Litigation Ad Charges
 The makers of Equal (Merisant) and Splenda (McNeil) reached an
   undisclosed settlement over Splenda‟s slogan "made from sugar, so it
   tastes like sugar"
 Merisant alleged that Splenda‟s claims confused consumers into believing
   that Splenda actually contained sugar, rather than with artificial sweeteners.
   McNeil argued that it had never deceived consumers or set out to deceive
   them, since the product did in fact start out with sugar
 As a result of the settlement, the verdict was not read, although reportedly
   the jury had found in favor of Equal‟s maker, Merisant, though the damages
   to be awarded were reportedly not as much as Merisant had wanted
 The parties said that the details of the settlement were confidential and that
   they would make no additional comment
 Previously, a French business court ruled in favor of a French subsidiary of
   Merisant and said that McNeil had intentionally confused consumers with
   its advertising. The court, which found that McNeil s French subsidiary had
   violated French advertising and consumer protection laws, ordered the
   subsidiary to cease its claims that Splenda is made from sugar and tastes
   like sugar

                                                                               19
NAD Update
The Proctor & Gamble Company: Crest Pro-Heath Toothpaste
 Challenge by Colgate, which argued that P&G‟s use of a dentist,
  caduceus, and dental tray in Pro-Health advertising creates an implied
  message that Crest Pro-Health is a “dentist recommended” product
 Claims at issue:
       Provides dentist recommended benefits
       Crest Pro-Health has received the ADA seal of acceptance for certain specified benefits
       Reduces plaque, Whitens teeth
       Uses a Polyflourite System consisting of antibacterial fluoride and ActivClean Crystals
       Product Research; Over 70 publications & research presentations
       Dentifrices containing stabilized stannous fluoride have been shown to provide significant
        antigingivitis protection. Stannous fluoride has bactericidal and bacteriostatic activity to both
        kill bacteria and inhibit the re-growth of new bacteria for at least twelve hours
       Provides superior cavity protection compared to a standard sodium fluoride toothpaste
 P&G argued that the caduceus, used by the ADA in its seal and by
   dentists around the world, “is simply an ancient symbol of commerce.”
   P&G also argued that a dental researcher in its ads was simply pointing
   to a list of points that dentists check and explaining that Crest Pro-
   Health protects all these areas, but that the ads weren't meant to imply
   dentists recommend the product for that purpose

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NAD Update
The Proctor & Gamble Company: Crest Pro-Heath Toothpaste (con’t)
 The NAD disagreed with P&G. “The concept of a dentist
  recommending the results or „benefits‟ themselves . . . is
  counterintuitive.” “Patients do not need dentists telling them that they
  do not want plaque-covered teeth or foul-smelling breath.” Because the
  dentist-recommended message the ads seem to convey was not
  supported by P&G the NAD recommend it to be discontinued
 The NAD also took issue with P&G‟s implication that the ADA accepted
  Crest Pro-Health for certain dental benefits and a cavity-reduction claim
  based on an early prototype
 The NAD rejected five other issues Colgate had with Crest's
  advertising, finding P&G had provided sufficient substantiation for
  claims that Pro-Health fights plaque, whitens teeth, and fights bacteria
  for 12 hours
 NAD stated that P&G had supported its claim that Pro-Health provides
  12 hours of antibacterial protection. Colgate is currently making that
  same claim for Total toothpaste


                                                                         21
NAD Update
Starbucks Corporation: Carmel Apple Cider
 BBB of Eastern Massachusetts, Maine and Vermont,
  Inc. challenged name used by Starbucks to market
  the apple beverage product called “Carmel Apple
  Cider”
      BBB‟s position: Product is made with apple juice,
       rather than apple cider
      Starbucks‟ position: No laws or regulations that
       establishes what constitutes “cider” or any distinctions
       between “apple cider and “apple juice” furthermore
       there are regional differences in the usage of the terms
 NAD recommended that Starbucks discontinue use
  of the descriptor “cider” in advertising the product
                                                              22
NAD Update
Wachovia Bank: Customer Service
 NAD reviewed commercial pursuant to its ongoing
  monitoring program
 Commercial featured Joe Carta who described how
  his Wachovia banker helped him on Christmas day to
  open the vault at 5:00am the next day to get a
  passport
 “At Wachovia we are absolutely obsessed with
  satisfying our customers” (express claim)
 The service depicted is representative of a service a
  Wachovia customer can typically expect (implied
  claim)
                                                      23
NAD Update
Wachovia Bank: Customer Service (con’t)
 NAD reviewed customer satisfaction surveys
 NAD concluded Wachovia had reasonable basis for
  express claim
 NAD recommend that Wachovia discontinue or
  modify commercial to clearly and conspicuously
  disclosure that scenario is unusual, atypical or may
  depend on certain limitations
      No Wachovia policy which requires or suggests that
       employees should disrupt their family activities during a
       major holiday in order to retrieve a passport

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NAD Update
Bayer Consumer Healthcare: One-A-Day Women’s
 NAD requested substantiation for certain claims
  made in print ads by Bayer for its One-A-Day
  Women‟s
 “One-A-Day Women‟s Multi-Vitamin is the only
  complete multi-vitamin with more calcium for strong
  bones, and now more vitamin D, which emerging
  research suggests may support breast health”
  (express claim)
 Taking One-A-Day Women‟s multi-vitamins women
  can reduce or eliminate women‟s risk of breast
  cancer (implied claim)

                                                        25
NAD Update
Bayer Consumer Healthcare: One-A-Day Women’s
  (con’t)
 NAD determined that a reasonable interpretation of
  “breast health,” with the claims at issue is that emerging
  research suggests vitamin D may reduce the risk of breast
  cancer
 NAD noted in its decision that the evidence in the record –
  several studies and journal articles on the health benefits
  of vitamin D – indicates that a higher intake of vitamin D
  may result in a lower risk of breast cancer
 NAD determined that the evidence provided a reasonable
  basis for the advertiser‟s claim that the product, which
  contains 800 International Units of vitamin D per dose, has
  “more vitamin D, which emerging research suggests may
  support breast health”

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Major Data Breaches
Continue to Make Headlines
   $400,000 worth of funds from Carson, CA attempted stolen via keylogger
    program installed on city treasurer computer
   Attack on a computer server at the University of Colorado exposes names and
    Social Security numbers of almost 45,000 students
   Northwestern University sends letter notifying students after laptop containing
    the Social Security numbers of Northwestern students and alumni stolen in late
    April from employee in the Financial Aid Office
   American Federation of Government Employees sues TSA for loss of hard drive
    containing names, social security numbers, dates of birth, and payroll and bank
    account information for some 100,000 employees
   Stony Brook University announces potential release of names and Social
    Security numbers of 89,853 current and former faculty, staff, students, alumni
    and others
   Chinese hacker broke into a University of Missouri System database, the first of
    three separate attacks that resulted in the theft of the names and Social Security
    numbers of 22,000 current and former UM employees
   Illinois Department of Financial and Professional Regulation discovers potential
    compromise of names, Social Security numbers and other personal data of an
    estimated 300,000 licensees and applicants



                                                                                    27
ChoicePoint Settles
Over Breach
 Forty-Four Attorneys General reached a settlement
  with ChoicePoint, resolving allegations that the
  company failed to adequately maintain the privacy
  and security of consumers‟ personal information
 The settlement with the states goes beyond the
  January 2006 FTC settlement and requires
  ChoicePoint to improve its credentialing process for
  clients that obtain Social Security numbers
 Among other requirements in the states‟ agreement,
  ChoicePoint must perform audits, including
  independent audits, to make sure that it is properly
  identifying those individuals or businesses requesting
  information
 $500,000 on ID theft information campaigns
                                                       28
MySpace and Sex Offenders
 State prosecutors demanded that MySpace
  turn over information on convicted sex
  offenders with profiles on MySpace
 MySpace initially refused, citing ECPA
  subpoena requirement
 Monday, 5/21, MySpace and 50 state AGs
  agreed on disclosure procedure



                                            29
Mergers Raise Privacy Concerns
 Recent proposed mergers raising potential
  privacy issues
 Questions of combined databases, matching
  anonymous and identified data
 Announced deals include:
     Google buying DoubleClick
     Yahoo! buying RightMedia
     Microsoft purchasing aQuantive
 May also impact on privacy policies of
  merged firms
                                              30
Identity Theft and Data Breach Laws
Expand on State, Federal Level
 Two bills now progressing in Congress:
    Social Security Protection Act of 2007 (HR 948)
       Makes illegal certain sales of Social Security numbers

    Securely Protect Yourself From Cyber-Trespass, or
     Spy Act (HR 964)
       Prohibits certain “spyware” technologies, creates FTC

        enforcement authority
 Massachusetts latest state to push ID theft and data
  breach notification law
      Passed MA house on May 9, 2007 in response to TJX
       case and others

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      Questions?




      Thank You
The Lustigman Firm, P.C.




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