THE FTC AND STUDENT LOANDEBT RELIEFAFSLR ConferenceOctober 9, 2014 Michelle Grajales Federal Trade Commission Division of Financial Practices
What Does The FTC Do? • Dual mission to protect consumers and promote competition. • Goal of advancing consumer interests while encouraging innovation and competition in our dynamic economy. • Policy development through hearings, workshops, and conferences. • Collaboration with law enforcement partners across the country and around the world. • Cooperation with international agencies and organizations to protect consumers in the global marketplace.
What Does The Bureau of Consumer Protection Do? • Protect consumers by stopping unfair, deceptive or fraudulent practices in the marketplace. • Conduct investigations, sue companies and people that violate the law. • Develop rules to ensure a vibrant marketplace. • Educate consumers and businesses about their rights and responsibilities. • Collect complaints about hundreds of issues and make them available to law enforcement agencies worldwide for follow-up.
Where Does Student Loan Debt Relief Fit In? • Part of our debt relief program area • Policy work • Enforcement work • Traditional “three” business models in debt relief • Emerging business model • Support business models
What Statutes Does The FTC Enforce In This Area? • Telemarketing Sales Rule. 16 C.F.R. Part 310 • Main Entities/Primary Activities Covered • Companies that provide substantial assistance to them knowing or consciously avoiding knowing of their conduct • Outbound and inbound telemarketing calls covered under debt relief amendments • Unsecured debts • Negotiation or alteration of existing debts • Primary Restrictions • Advance fee ban and other fee restrictions • Prohibition on false or unsubstantiated material claims • Pre-sale disclosures
The FTC Act, 15 U.S.C § 45(a) • The Federal Trade Commission Act: • Prohibits unfair or deceptive business practices in commerce. • FTC can file administrative actions or law suits in federal district court to stop law violations. • Referrals to DOJ for civil penalties. • Covers lead generators as well as service providers.
How Are These Laws Applied? • The FTC has filed two debt relief cases since the AFSLR conference last year. • FTC v. DebtPro 123 LLC, et al., SACV 14-00693 JLS (Anx)(C.D. Cal. May 2, 2014) • debt resolution program would completely resolve consumers' credit card, medical, and student loan debts between 30% to 70% of the amount owed within 18, 24, or 36 months. • Attorney assistance claims, refund claims, credit repair claims. • Upfront and monthly fee. • Complaint includes FTC Act deception counts, TSR, and CROA.
FTC v. One Or More Unknown Parties d/b/a American Bill Pay Organization, Case 1:14-cv-01414-RBW (D. D.C., Aug. 19, 2014) • Phony government assistance program. • Promised to improve consumers’ credit scores in 30 days. • Promised to get consumers grants of up to $75,000 towards their debts. • Ads included a recording of President Obama saying “I approve this message.” • Upfront “service charge” of $900-$1100 • Complaint charged FTC Act violations for savings claims and credit repair claims, as well as government affiliation.; CROA counts for advanced fee and misleading representations.
What Can I Take Away From These Case Examples? • FTC actions continue to include debt relief programs, including student loan debt relief. • The advance collection of fees • “service fee,” “donation,” “contribution” • Credit repair claims • Lawyer claims • Consumer perspective • Providing “means and instrumentalities” • Clarity and accuracy in all consumer interactions.