FTC APPROVES METHOD TO GET PARENTS' CONSENT FOR CHILDREN TO ACCESS ONLINE SERVICES

FROM:  U.S. FEDERAL TRADE COMMISSION 

The Federal Trade Commission has approved a new method for companies to get parents’ consent for their children to access online services covered by the Children’s Online Privacy Protection Act (COPPA) Rule.

Based on an application submitted by Imperium, Inc., the Commission has approved the use of knowledge-based authentication as a method to verify that the person providing consent for a child to use an online service is in fact the child’s parent.

Under the COPPA Rule, online sites and services directed at children must obtain permission from a child’s parents before collecting personal information from that child. The rule lays out a number of acceptable methods for gaining parental consent, but also includes a provision allowing interested parties to submit new verifiable parental consent methods to the Commission for approval.

Knowledge-based identification is a way to verify the identity of a user by asking a series of challenge questions, typically that rely on so-called “out-of-wallet” information; that is, information that cannot be determined by looking at an individual’s wallet and are difficult for someone other than the individual to answer. This authentication method has been used by financial institutions and credit bureaus for a number of years, and has been acknowledged by the Commission and other government agencies as effective for that purpose.

The Commission’s letter to Imperium approves knowledge-based authentication as an acceptable method of obtaining verifiable parental consent, as long as the specific process uses dynamic, multiple-choice questions with enough options to ensure that the chances of a child guessing the correct answers is low and the questions used are of sufficient difficulty that it would be difficult for a child in the household to figure out the answers.

The Commission vote to issue the letter and accept knowledge-based authentication as an acceptable verifiable parental consent method was 4-0.      

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

FTC LEADS CAMPAIGN AGAINST SEVING MINORS ALCHOHOL

FROM:  U.S. FEDERAL TRADE COMMISSION 
For a Safe Holiday Season Remember to Say, "We Don't Serve Teens"

FTC-led Campaign: Providing Alcohol to Teens is Unsafe, Illegal, Irresponsible.
“We Don’t Serve Teens,” the national campaign to reduce underage drinking developed by the Federal Trade Commission, is reminding parents and other concerned adults that underage alcohol use creates negative health, social, and economic consequences for adolescents, their families, and their communities.

In 2008, almost 40,000 people between the ages of 15 and 20 were hospitalized with alcohol problems.  One quarter of them also had been assaulted, or injured in a traffic accident or fight.  The average length of stay was 5 days, at a cost of over $19,000 per stay.  Preventing underage alcohol use is a year-round priority – and it warrants special attention during the holiday season, when increased free time and celebrations increase the risk of teen drinking.    

“What many do not realize is that most teens who drink get the alcohol from older friends and family, or by taking it from a home without permission,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection.  “So, reducing easy teen access to alcohol from social sources is critical.”  

The DontServeTeens.gov website has been updated in time for the holiday season.  It provides information in English and Spanish on the rates and risks of teen drinking, what to say to friends and neighbors about serving alcohol to teens, links to state laws, and tips on enlisting the support of organizations, the media, and others to fight underage alcohol use.  It features free downloadable materials, including posters and transit art, radio PSAs, and web banners and buttons.

The “We Don’t Serve Teens” program has recognized by the National Prevention Council Commission and the U.S. House and Senate.  The FTC encourages national, state, and local organizations, both public and private, to take advantage of these materials and play a part in reducing teen alcohol use.

FTC SAYS FEDERAL JUDGE HALTED 'YELLOW PAGES' FRAUD

FROM:  FEDERAL TRACE COMMISSION 
FTC Stops Online 'Yellow Pages' Scam; Canada-Based Operation Targeted Small Businesses and Churches in United States

At the Federal Trade Commission’s request, a federal judge has temporarily halted, and frozen the assets of, a Montreal operation that bilked more than $14 million from small businesses and churches in the United States for unwanted listings in online business directories.  The FTC seeks to permanently stop the illegal practices and make the defendants return victims’ money – the scheme has generated more than 13,000 complaints from consumers.

“Hiding behind borders to scam churches and small businesses is a tactic that we’ve seen before,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection.  “Scammers need to know that we have great relationships with our law enforcement partners in Canada and, as this case shows, we can and will work together to protect our consumers.”

According to court papers filed by the FTC, the defendants operated from Montreal, using corporate shells and mail drops in the U.S. to hide their actual location.  Typically, they made phone calls pretending they were verifying contact information to update or confirm existing directory listings.  In some cases, the defendants said they were calling in response to a cancellation request, and asked to verify the organization’s contact information to confirm the cancellation.  In fact, the defendants had no prior relationship with the consumers.

The bills sent by the defendants averaged $499.99 or more and had a “walking fingers” image often associated with a local yellow pages directory.  Some consumers paid, thinking someone in their organization had ordered these listings.  Other consumers paid after the defendants used partially recorded phone conversations with consumers who had verified their contact information to convince them that they had a binding oral contract with the defendants, according to the FTC’s complaint.

Consumers who ignored the bills or refused to pay received collection calls and dunning notices, often with added interest charges, late fees, and legal fees, as well as threats of collection agency referral, credit rating damage, and legal action, the FTC alleged.  To make consumers believe third-party debt collectors were involved, the defendants created two debt collection companies, CC Recovery and M&A Recovery, which also made threats.  The defendants’ threats convinced many consumers to pay the bills, the FTC alleged.

The FTC’s complaint alleges that the defendants violated the FTC Act by misrepresenting that they had a preexisting business relationship with consumers, that consumers had agreed to buy directory listings, and that consumers owed them money.

The defendants are Mohamad Khaled Kaddoura, Derek Cessford, and Aaron Kirby, and 15 companies they ran:  Modern Technology Inc., also doing business as Online Local Yellow Pages; Strategic Advertisement Ltd., also d/b/a Local Business Yellow Pages; Dynamic Ad Corp., also d/b/a Yellow National Directory and Yellowpages Local Directory; Wisetak Inc., also d/b/a Online Public Yellow Pages and US Public Yellow Pages; Wisetak, Inc., also d/b/a Online Public Yellow Pages and US Public Yellow Pages; Internet Solutions LLC, also d/b/a Public Yellow Pages; Yellow Pages Express Inc., also d/b/a Yellow Pages Express; Yellow Pages Online Inc., also d/b/a Yellow Pages Online; CessTech Inc., also d/b/a Yellow US Pages; SEO Online Inc., also d/b/a Yellow Local Directory; SEO Online LLC; SEOOnline, also d/b/a Public Yellow Pages; SEM Pundits Inc., also d/b/a Yellow Pages Online; CC Recovery Corporation, also d/b/a CC Recovery; and M&A Recovery Inc., also d/b/a MA Recovery.

The FTC would like to thank the Canadian Anti-Fraud Centre; the Attorneys General of Illinois, Florida, New York, Nevada and Vermont; the Wisconsin Department of Agriculture, Trade and Consumer Protection; the Better Business Bureaus of Arkansas and of Chicago and Northern Illinois; and the Kahnawake Mohawk Peacekeepers for their valuable assistance with this matter.

The FTC also would like to acknowledge the Royal Canadian Mounted Police (RCMP news release in English and French) and the Centre of Operations Linked to Telemarketing Fraud (Project COLT) for their valuable assistance.  Launched in 1998, Project COLT combats telemarketing-related crime, and includes members of the Royal Canadian Mounted Police, Sureté du Québec, Service de Police de la Ville de Montréal, Canada Border Services Agency, Competition Bureau of Canada, Canada Post, U.S. Department of Homeland Security (U.S. Immigration and Customs Enforcement and the U.S. Secret Service), the U.S. Postal Inspection Service, the Federal Trade Commission, and the Federal Bureau of Investigation.  Since its inception, Project COLT has recovered $22 million for victims of telemarketing fraud.

DELAWARE RECEIVES ADVICE FROM FTC ON PRICING IN RETAIL ELECTRICITY MARKETS

FROM:  FEDERAL TRADE COMMISSION 
FTC Staff Advises Delaware Public Service Commission on Dynamic Pricing in Retail Electricity Markets

Federal Trade Commission staff submitted a response to a request from the Public Service Commission of the State of Delaware for comments on a proposal to revise its rules for certifying and regulating electricity suppliers.

The FTC staff comment encourages the Public Service Commission to consider the potential costs associated with a proposal to require electricity suppliers to give customers at least five days’ advance notice of price changes.  The comment identifies alternatives to a five-day notice period that would provide consumers with the benefits of dynamic pricing via devices such as “smart meters” while assuring they have accurate and timely electricity price information.

The potential benefits of dynamic pricing include more accurate prices, more opportunities for customers to save on electric bills, and an increased ability for power system operators to maintain the reliability of electric service both locally and regionally.

Although price information is critical to the efficient functioning of markets, a five-day notice requirement would preclude some of the most beneficial variable price offers, from the perspectives of both retail electricity customers and power system operators.  The comment states that “[o]ne alternative would be to include an exemption to give customers the option to use a device or service that displays the price on an ongoing basis, or issues alerts when the price is outside a range designated by the customer.  Another alternative would be simply to replace the five-calendar-day advance notice with a requirement of one day’s notice, which would be a significant improvement over five days’ notice by allowing variable retail pricing based on the PJM Interconnection’s day-ahead market prices.  If the PSC chooses to implement either of these alternatives to the five-day notice, it could also require special prominence for disclosures pertaining to price variability and early termination charges in residential retail electricity sales contracts involving variable rates.

The Commission vote approving the comment was 4-0. (FTC File No. V130011; the staff contact is John H. Seesel, Associate General Counsel for Energy, Office of the General Counsel.

AGENDA AVAILABE FOR VITON G. CERF'S KEYNOTE FTC ADDRESS

FROM:  U.S. FEDERAL TRADE COMMISSION
Internet Innovator Vinton G. Cerf to Keynote FTC's Internet of Things Workshop Nov. 19
Tentative Event Agenda Now Available

Vinton G. Cerf, co-creator of the Internet’s key networking technology, will give the keynote address at the Federal Trade Commission’s Internet of Things workshop on Nov. 19 in Washington, D.C. FTC Chairwoman Edith Ramirez and Commissioner Maureen K. Ohlhausen will give remarks during the event.

The tentative agenda for the workshop includes speeches and panel discussions on topics surrounding the opportunities and challenges for consumers related to the growing number of Internet-connected devices that touch their lives. From household goods to automobiles, the ability of devices to connect with each other and the world provides countless benefits to consumers, but also raises important questions about how to protect consumer privacy and security.

Cerf, who is vice president and chief internet evangelist for Google, Inc., is the co-creator of TCP/IP, the communication protocol that powers nearly all communication on the Internet. Over his career, he has helped shape the technology that led to the revolutionary impact of the Internet on the lives of billions. In his current position, he is responsible for identifying new enabling technologies to support the development of advanced, Internet-based products and services. Cerf is a recipient of the Presidential Medal of Freedom and the National Medal of Technology.

The workshop will be held at the FTC Conference Center, 601 New Jersey Avenue NW in Washington, and is free and open to the public. Detailed information about the Internet of Things workshop can be found on the FTC website.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them.  To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357).  The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad.  The FTC’s website provides free information on a variety of consumer topics.  Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

COMMENT SOUGHT ON KIDSAFE'S PROPOSED SAFE HARBOR PROGRAM

FROM:  FEDERAL TRADE COMMISSION 

FTC Seeks Public Comment on kidSAFE's Proposed Safe Harbor Program Under the Children's Online Privacy Protection Rule

The Federal Trade Commission is seeking public comment on a proposed safe harbor program that the kidSAFE Seal Program has submitted for Commission approval under the agency’s Children’s Online Privacy Protection Rule.

The Rule includes a “safe harbor” provision designed to encourage increased industry self-regulation in this area. Under this provision, industry groups and others may ask the Commission to approve self-regulatory guidelines that implement the protections of the Rule. Companies that comply with the FTC-approved guidelines receive safe harbor from agency enforcement action under the Rule.

The FTC’s COPPA Rule requires that operators of commercial websites and online services directed to children under the age of 13, or general audience websites and online services that knowingly collect personal information from children under 13, must post comprehensive privacy policies on their sites, notify parents about their information practices, and obtain parental consent before collecting, using, or disclosing any personal information from children under the age of 13. Since the Rule took effect on April 21, 2000, five groups – Aristotle, Inc., the Children’s Advertising Review Unit of the Council of Better Business Bureaus, the Entertainment Software Rating Board, TrustE, and PRIVO – have received Commission approval for their safe harbor programs.

In a Federal Register notice to be published shortly, the FTC is seeking public comment about the proposed kidSAFE program; whether the proposed program provides “the same or greater protections for children” as those contained in the Children’s Online Privacy Protection Rule; whether the mechanisms used to assess operators’ compliance are effective; whether incentives for operators’ compliance with the guidelines are effective; and whether the program provides adequate means for resolving consumer complaints. The comment period will last for 30 days, until Oct. 18, 2013.

NOTE: Publication of this Federal Register notice does not indicate Commission approval of the safe harbor application. The Commission has 180 days to review proposed self-regulatory guidelines and must set forth its conclusions in writing.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them.  To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357).  The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad.  The FTC’s website provides free information on a variety of consumer topics.  Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

CONSUMERS LOOSE OVER $5 MILLION IN AN ALLEGED PAYDAY LOAN BROKER SCAM

FROM:  FEDERAL TRADE COMMISSION 
At the FTC's Request, Court Halts Alleged Phony Payday Loan Broker

Consumer Losses Estimated at More Than $5 Million; Defendants Promised to Help People Find Loans, But Instead Just Debited Their Bank Accounts, FTC Alleges
At the request of the Federal Trade Commission, a U.S. district court has halted a Tampa, Florida-based operation that promised to help consumers get payday loans.  Instead of loans, the defendants used consumers’ personal financial information to debit their bank accounts in increments of $30 without their authorization, the FTC alleged.

Claiming to be affiliated with a network of 120 potential payday lenders, the defendants misrepresented that 80 percent of applicants got loans in as soon as one hour, according to the FTC.  The court order freezes the defendants’ assets to preserve the possibility of providing redress to consumers.

“Repeatedly, we’ve seen situations where consumers provide sensitive financial information when inquiring about a payday loan online, and that information falls into the wrong hands,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection.  “The FTC is committed to shutting down these fraudulent operations.”

The FTC alleged that defendants Sean C. Mulrooney and Odafe Stephen Ogaga and five companies they controlled used websites with the names Vantage Funding, Ideal Advance, Loan Assistance Company, Palm Loan Advances, Loan Tree Advances, Pacific Advances, and Your Loan Funding to collect consumers’ names, Social Security numbers, bank routing numbers, and bank account numbers, which allowed them to access consumers’ checking accounts.

The defendants obtained other consumers’ financial information by paying more than $500,000 to third parties, and debited those consumers’ accounts without authorization as well, according to documents filed with the court.  In all, the defendants victimized tens of thousands of consumers, taking more than $5 million from their bank accounts.  Many of the victims were in difficult financial straits to begin with, and as an added insult, often began receiving harassing telemarketing and debt collection calls shortly after the defendants made their unauthorized withdrawals, according to the FTC.  Consumers who complained to Defendants’ Philippines-based customer service agents were frequently offered refunds and $100 gasoline vouchers that never materialized, according to the FTC.

Mulrooney and Ogaga apparently used proceeds from their allegedly illegal scheme to finance a lavish lifestyle.  Mulrooney is the registered owner of a 2012 Maserati GranTurismo, while Ogaga owns a 2011 Rolls Royce Ghost and a 2006 Ferrari 430, according to documents filed with the court.

This is the FTC’s third recent case involving allegedly fraudulent online payday-loan-related operations, and the first one in which the defendants claimed to broker payday loans.  In two previous cases, American Credit Crunchers, LLC and Broadway Global Master Inc., the defendants allegedly attempted to collect on payday loan debts that either did not exist or weren’t owed to them.

The complaint charges the defendants with violating the Federal Trade Commission Act by using unfair billing practices, and by misrepresenting that they will help consumers find a payday loan and use their personal and financial information to get the loan.  The complaint also alleges that the defendants untruthfully claim four of five consumers who applied were approved for a payday loan.  

For more consumer information on this topic, see, Online Payday Loans.

In addition to Mulrooney and Ogaga, the Vantage Funding complaint names Caprice Marketing LLC; Nuvue Partners LLC; Capital Advance LLC; Loan Assistance Company LLC; and Ilife Funding, LLC, formerly known as Guaranteed Funding Partners LLC.

The Commission vote authorizing the staff to file the Vantage complaint was 4-0.  The complaint and request for a temporary restraining order were filed in the U.S. District Court for the Northern District of Illinois.  On August 29, 2013, the court granted the FTC’s request.

NOTE:  The Commission a files complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest.  The case will be decided by the court.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them.  To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistantor call 1-877-FTC-HELP (1-877-382-4357).  The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad.  The FTC’s website provides free information on a variety of consumer topics.  Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

FTC SETTLES WITH WORK-AT-HOME OPPORTUNITIES MARKETER

FROM:  U.S. FEDERAL TRADE COMMISSION 

FTC Settlement Bans Marketer from Selling Work-At-Home Opportunities
Christopher Andrew Sterling, a work-at-home opportunity marketer, has been banned from selling work-at-home and business opportunities under a federal court settlement. The FTC sued Sterling in November 2012 as part of “Operation Lost Opportunity,” a federal-state crackdown on scams that falsely promised jobs and opportunities to “be your own boss” to people who are unemployed or underemployed.

The agency charged Sterling with violating the FTC Act and the FTC’s Business Opportunity Rule, which requires business opportunity sellers to provide specific information to help consumers evaluate a business opportunity.  The FTC alleged in its complaint that Sterling’s websites (sterlingvisa.com, rebatedataprocessor.com, and creditcardworker.com) falsely promised that consumers could earn up to $1,000 per day from data-entry work processing rebate and credit card applications online, but the claimed earnings and the promised business were not delivered.

In addition to banning Sterling from selling any work-at-home opportunity, and any business opportunity covered by the Business Opportunity Rule, the proposed settlement permanently prohibits him from misrepresenting material facts about any products and services, selling or otherwise benefitting from consumers’ personal information, and failing to properly dispose of customer information.  The order imposes a $69,289 judgment that will be suspended based on Sterling’s inability to pay.  The full judgment will become due immediately if he is found to have misrepresented his financial condition.

The Commission vote to approve the proposed consent judgment was 4-0.  The Department of Justice filed the proposed consent judgment on behalf of the Commission in the U.S. District Court for the Southern District of California.  It is subject to court approval.

NOTE:  Consent judgments have the force of law when approved and signed by the District Court judge.

POSTAL JOBS SCHEME OPERATORS BANNED FROM SELLING EMPLOYMENT SERVICES UNDER SETTLEMENT

FROM:  FEDERAL TRADE COMMISSION 

Operators of Postal Jobs Scheme Banned from Selling Employment Services
Under settlement orders with the Federal Trade Commission announced today, the operators of an alleged federal jobs scam have been banned from selling employment products or services.  Last year, as part of Operation Lost Opportunity, the FTC charged Career Exams, Inc., O’Brien Marketing, Inc., Jeryn B. Lee, and Derek Jackson with running deceptive ads for nonexistent U.S. Postal Service jobs.  The FTC alleged that the defendants lured consumers into paying $120 by representing that Postal Service jobs were available in the consumer’s geographic area.  Instead of jobs, consumers simply received a booklet containing general information about the hiring process for the federal civil service and Postal Service.

In addition to banning the defendants from selling employment products or services, the settlement orders prohibit the defendants from misrepresenting material facts about any products and services that they market or sell in the future.  Under the orders, the defendants will surrender cash and investments totaling approximately $45,000.  The orders also impose a $4.8 million judgment that will be partially suspended based on the defendants’ inability to pay the full judgment.  The full judgment will become due immediately if the defendants are found to have misrepresented their financial condition.

The Commission vote authorizing the staff to file the proposed consent judgments settling this action was 4-0.  The consent judgments were entered by U.S. District Court for the Western District of Kentucky on June 28 and July 10, 2013.

NOTE:  Consent judgments have the force of law when approved and signed by the District Court judge.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them.

FTC STAFF RECOMMENDS EXPANSION OF RETAIL ELECTRIC COMPETITION IN ARIZONA

FROM:  FEDERAL TRADE COMMISSION 
FTC Staff Makes Recommendations to Arizona Corporation Commission On Expanding Retail Electric Competition

Federal Trade Commission staff submitted a comment in response to a request from the Arizona Corporation Commission (ACC) for comments on retail electric competition in Arizona.

The FTC staff comment agrees with the ACC that it is timely for Arizona to consider retail competition that would enable consumers to select from specialized power suppliers using metering innovations now widely available in the state.  Retail choice can help consumers match their preferences for bill savings, increased reliability, renewable power, and energy management services.  For example, consumers can lower their bills by shifting power use away from periods when the power system depends on more costly generation resources or faces challenges to its reliability, and they can choose how much power to consume from renewable generation sources.

The FTC staff comment recommends that the ACC “evaluate the promising prospect that retail customer choice will help customers expand and fine-tune their choice of electricity service and contribute to balancing power supply and demand.”

The Commission vote approving the comment was 4-0.