Earlier this month, a federal court entered a temporary restraining order against a Utah-based business, which the Federal Trade Commission (“FTC”) and the Utah Division of Consumer Protection (“DCP”) alleged used deceptive promises of big profits to lure consumers into real estate seminars costing thousands of dollars.
According to the complaint filed by the FTC and DCP, the company used endorsements from fix-and-flip and home renovation TV stars to lure consumers to attend free real estate seminars where it claimed it would teach them how to make large profits by flipping houses “using other people’s money.” In reality, the free events were used to sell the company’s three day workshop, which cost around $2,000. Presenters at the workshop often described it as merely a “beginner” course while upselling additional products and services to consumers that cost more than $41,000.
The complaint further alleged that the company instructed consumers at the three day workshop to contact their credit card issuers to obtain new credit cards or increase their credit limits to fund real estate deals. The company allegedly instructed attendees to give card issuers income information that was significantly higher than the attendees’ current income. When dissatisfied consumers sought refunds, the company allegedly required consumers to sign an agreement barring them from writing negative reviews or speaking to regulators – in violation of the Consumer Review Fairness Act.
The order prohibits the company from making such unsupported marketing claims as misrepresenting that the company’s products will allow consumers to make thousands of dollars in profit through real estate investing with little time and effort, as well as prohibiting the company from interfering with consumers’ ability to review the company and its products. Furthermore, the court has appointed a temporary monitor over the company and instructed the company to preserve its records and assets.
Takeaway: The FTC continues to target companies preying upon consumers looking to make additional income with their get-rich-quick schemes. Furthermore, advertisers should beware that they cannot make a prohibition on negative reviews a condition of chargebacks or a condition of customer service complaint resolution.