Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: FTC action leads to halt of advance fee recovery scheme targeting victims of timeshare investment scams, (Nov 20, 2014)

By Linda O’Brien, J.D., LL.M.

The FTC announced today that telemarketer defendants in the agency’s federal court action have agreed to stop operating an advance fee recovery scheme for the duration of the ongoing litigation. The FTC seeks to permanently stop the operation, which in the past year took close to $1.3 million from consumers, many of them elderly people who had lost money to timeshare resale and precious metal investment frauds (FTC v. Consumer Collection Advocates, Inc., File No. 142-3082).

According to the FTC’s complaint, telemarketers Consumer Collection Advocates, Corp. and Michael Robert Ettus called consumers and falsely guaranteed that—for an up-front fee, typically 20 percent of the amount they lost—the defendants would recover substantial amounts of money for them – 60 percent or more—within 30 to 180 days. For consumers who had lost from several thousand to hundreds of thousands of dollars and could not afford a 20 percent up-front fee, the defendants would often accept a reduced fee of less than 10 percent of their loss. The defendants also charged a back-end fee of 20 percent for any amount recovered.

Consumers were sent a contract and power of attorney to sign and return with an up-front payment ranging from hundreds to as much as $10,000. Consumers who did not agree to buy the service received repeated calls from defendants pressuring them to sign up. Once consumers paid for the recovery service, they stopped hearing from the defendants. Those who called to ask about their recovery were told their case was being worked on, but few, if any, consumers received any money, according to the complaint.

The defendants are charged with violating the FTC Act and the FTC’s Telemarketing Sales Rule, which prohibits seeking or accepting payment from a person for recovery of money paid for previous telemarketing transactions until seven business days after that person receives the money.

In the stipulated preliminary injunction, the defendants are prohibited from misrepresenting that consumers who buy their services will recover, or are highly likely to recover, a substantial portion of money they have lost to telemarketers, typically within 30 to 180 days. They are also barred from violating the TSR, and from selling or otherwise benefitting from customers’ personal information.

The complaint was filed in the U.S. District Court for the Southern District of Florida. On November 4, 2014, the court entered a temporary restraining order halting the defendants’ deceptive scheme and freezing their assets. The defendants agreed to a preliminary injunction, which the court entered on November 17, 2014. The preliminary injunction continues the conduct prohibitions and asset freeze.

As part of a joint investigation between the FTC and the State of Florida, the Florida Attorney General’s Office filed an action against the defendants in state court on November 5, 2014, alleging the same deceptive practices.

The Commission vote authorizing the staff to file the complaint was 5-0.

Companies: Consumers Collection Advocates, Corp.

News: ConsumerProtection FederalTradeCommissionNews