Electronic Retailer - April 2011 - (Page 16)
FTC Forum Talkin’ ’Bout Lead Gen-eration
BY LESLEY FAIR To some in the direct response industry, the name of the game is lead generation: compiling – and selling – lists of prospective customers inclined to buy a product or service. But marketers in that line of work should be mindful of the Federal Trade Commission (FTC) Act. If any aspect of your business touches on lead generation, two recent cases serve as a warning to be careful about the company you keep. According to the FTC’s settlement with Media Innovations, Hermosa Group, Financial Future Network, and their president, Jonathan Greenberg, their radio and TV ads promised easy solutions for people struggling to pay their bills: “With one simple call you can eliminate your debt in a fraction of the time and for less than you owe.” Did the defendants offer debt settlement services or enroll consumers in debt settlement programs? No. They simply sold their names and phone numbers to others that referred the information to third parties, usually debt settlement businesses or law firms.
Since the financial downturn hit, the FTC has brought dozens of actions against companies falsely claiming to help people get out of debt. Two new rules mandate advertising disclosures and make it illegal for many businesses to charge upfront fees for debt settlement or mortgage assistance relief services.
The FTC charged that the defendants deceptively claimed that they themselves provided the advertised services and that people who used the services promoted in the ads would get their debts settled, reduced or eliminated. According to the FTC, the defendants didn’t have adequate substantiation that the companies that ultimately got the leads achieved the advertised results. The stipulated order mandated $500,000 in disgorgement and an $8.5 million suspended judgment, imposed tough injunctive provisions and banned the company president for life from any involvement in the debt relief services industry. The FTC’s case against 800 Credit Card Debt, Debt.com Marketing, Media Choice, and owner Stephen Todd Cook challenged similar business practices. In national ads, the defendants promised to eliminate debt “by up to 60%.” But the FTC’s concerns extended beyond the fact that the companies simply sold leads to debt settlement providers and other lead generators or brokers who resold them. According to the complaint, the ads featured phony testimonials from people posing as satisfied customers. In addition, the FTC charged that statements like “The following is a public announcement... If you have ten thousand dollars or more in credit card debt, a new relief program is now available...” deceptively represented that the defendants’ services were part of a public, non-commercial program. The settlement in that case bans Mr. Cook for life from the debt relief business and imposes a $28.2 million judgment that will be suspended when the defendants surrender all funds in their corporate bank accounts, as well as the proceeds from real estate Mr. Cook owns in California and the Virgin Islands and his ownership interests in two overseas investment funds. Since the financial downturn hit, the FTC has brought dozens of actions against companies falsely claiming to help people get out of debt. Two new rules mandate advertising disclosures and make it illegal for many businesses to charge upfront fees for debt settlement or mortgage assistance relief services. But these cases are among the first to challenge the activities of lead generators. Whether selling debt relief leads or leads for other products or services, companies must substantiate their advertising claims. Lesley Fair is an attorney with the FTC’s Bureau of Consumer Protection.
© Maxxyustas | Dreamstime.com
electronicRETAILER | April 2011
Table of Contents for the Digital Edition of Electronic Retailer - April 2011
Electronic Retailer - April 2011
Calendar of Events
Your Association, Your Bottom Line
ERA Government Affairs Fly-In Preview
The Electronic HomeShopping Preview
IMS Retail Rankings
Jordan Whitney’s Top Categories
Lockard & Wechsler’s Clearance & Price Index
Ask the Expert
Cover Story: Staying Ahead of the Curve
Why is it Tougher to Make DRTV Pay?
Electronic Retailer - April 2011