FTC Bans Companies from Future Telemarketing

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March 4, 2015

telemarketingThe Federal Trade Commission (“FTC”) has settled a complaint that it filed in June 2014 against several companies that, through unscrupulous telemarketing practices, allegedly swindled Spanish-speaking consumers across the country by sending unordered or defective products, including phony weight-loss belts, and subsequently making it difficult, impossible or extremely costly for the consumers to obtain refunds.

The FTC had charged the defendants with refusing to provide refunds for, or imposing substantial fees to exchange, unwanted or unusable products; misrepresenting that consumers could return products, even after use, for refunds at no additional cost; and making false, unsubstantiated claims about the subject weight-loss products, in violation of the FTC Act.  Specifically, the FTC alleged that: [READ MORE]

  • When customers called to complain, they were placed on hold for long periods of time, were disconnected or ignored, and even insulted by defendants’ representatives;
  • If consumers persisted, sales representatives said that they could not return or exchange defective products or products that the consumers allegedly never ordered;
  • Consumers were required to pay additional fees, ranging from $20 to $299, to return or exchange defective products; and
  • The most persistent consumers received promises of refunds or exchanges that never materialized.

Under the terms of the settlement, the settling defendants admitted to the allegations and agreed:

  • To be banned from engaging in both future telemarketing and the sale of weight-loss products;
  • In any future business, they must provide refunds or exchanges, free of charge for:
    • incorrect or non-working products;
    • any product that differs from what was advertised;
    • unreceived gifts, promised as an inducement for a purchase.
    • Not to make material misrepresentations about goods or services;
    • To disclose any restriction or condition on a refund, cancellation, repurchase or exchange, before making a sale; and
    • To the entry of a $50 million judgment that will be suspended upon the surrender of all of the defendants’ significant assets, including houses, cars, bank accounts and life insurance policies.

Telemarketing Best Practices to Avoid FTC Investigation

This case, and the settlement entered into by the defendants, underscores the importance of complying with all state and federal laws when conducting telemarketing campaigns.  We have previously written about the dangers that await companies that do not strictly adhere to telemarketing regulations.  Prior to embarking on any telemarketing campaign, it is imperative for businesses to have their practices and procedures examined by experienced counsel to ensure compliance with applicable state and federal telemarketing laws.

If you are interested in learning more about this topic or need to review your telemarketing practices and procedures, please email us at info@kleinmoynihan.com, or call us at (212) 246-0900.

The material contained herein is provided for information purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney.  Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.

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