FTC Announces Return of Money to Victims of Debt Collection Scheme

Last week, the Federal Trade Commission announced that it is mailing hundreds of checks totaling approximately $200,000 to U.S. consumers that were allegedly duped into paying bogus debts.

FTC defense lawyer Richard B. Newman states that in October 2015, the Federal Trade Commission and the State of New York alleged that a group of defendants collected on fake debts. The complaint alleges that the defendants should have known that the debts were bogus, did not identify themselves as debt collectors, misrepresented themselves to be attorney or process servers and threatened arrest if the purported debts were not paid. In 2016, the defendants stipulated to a permanent injunction that banned them from the debt collection industry.

The matter – “Operation Collection Protection” – was part of a coordinated federal, state and local law enforcement crackdown against abusive debt collectors. This nationwide crackdown included numerous law enforcement actions against collectors that use illegal tactics.

According to the Federal Trade Commission, the average refund amount is a few hundred dollars.

In other news, the FTC recently revised its Jewelry Guides. Many in the diamond industry are none-too-pleased with the revised definition of “diamond,” which does not necessarily include only natural stones. The new FTC guide does, however, require conspicuous disclosure of lab-grown diamonds and colored stones.

Industry guides are not “stand-alone statutes,” however, they provide a window into the FTC’s interpretation of how Section 5 of the FTC Act applies to certain practices in a particular industry. Highlights include new provisions about composite gemstone products, man-made gemstones, varietals, “cultured” diamonds, treatments to pearls, the surface application of precious metals, below-threshold precious metal alloys and products containing more than one metal.

As a result of marketplace changes and in addition to the elimination of the word “natural” from the definition of diamond, the Federal Trade Commission deleted provisions that discussed the use of the word “gem” and removed a section on misleading illustrations.

In general, the revised Jewelry Guides indicate a broader regulatory trend. The Federal Trade Commission regularly reviews at existing rules and guides in order to ensure that they do not impose unnecessary burdens and that they accurately reflect marketplace changes.

Richard B. Newman is a New York City (NYC) Department of Consumer Affairs (DCA) defense lawyer at Hinch Newman LLP focusing on advertising and digital media matters.

Informational purposes only. Not legal advice. Previous results do not guarantee similar future result. Hinch Newman LLP | 40 Wall St., 35th Floor, New York, NY 10005 | (212) 756-8777.

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