Sixth Circuit Upholds Court Order Against Telemarketers’ Deceptive Debt Relief Programs

The United States Court of Appeals for the Sixth Circuit has issued a decision upholding a district court ruling that several defendants based in the U.S. and Canada deceived consumers through a telemarketing scheme designed to sell them phony mortgage assistance and debt relief programs, according to the Federal Trade Commission.

The Court’s decision “affirms that marketers can’t get away with using misleading sales pitches and then burying ‘disclaimers’ in lengthy documents given to consumers later,” according to Jessica Rich, director of the FTC’s Bureau of Consumer Protection.

The decision by the Sixth Circuit Court of Appeals stems from an FTC complaint filed against E.M.A. Nationwide and several other defendants, alleging that since at least mid-2010 they operated a call center in Montreal that cold-called thousands of U.S. consumers, including those whose numbers were registered on the Do Not Call Registry, pitching programs that supposedly would help them pay, reduce, or restructure their mortgage and other debts. The FTC charged that these actions violated the FTC Act, the Telemarketing Sales Rule, and the Mortgage Assistance Relief Services Rule.

The lower court granted the FTC’s motion for summary judgment and ordered defendants to pay restitution of $5.7 million to consumers injured by the defendants’ practices. Additionally, the court permanently enjoined defendants from working in “the debt relief and mortgage assistance industries.”

The Court of Appeals agreed with the district court’s conclusions that “[d]efendants’ messages actually deceived consumers, leading them to sign contracts for services promised,” in violation of the FTC Act and the Telemarketing Sales Rule. Further, the Court of Appeals concluded that the evidence clearly showed that defendants violated the Mortgage Assistance Relief Services Rule by not disclosing to consumers that they were not approved by the government, and by telling consumers not to speak with their mortgage lenders.

The court rejected the defendants’ argument that the district court needed to conduct additional fact-finding proceedings before determining that those misrepresentations were not offset or “cured” by fine-print disclaimers and clarifications in the contracts and other written materials that consumers received only after agreeing to enroll in the defendants’ programs. The Court held that “[a] court need not look past the first contact with a consumer to determine the net impression from that contact, and a court may consider individual advertisements or messages to determine the net impression.” Furthermore, “Defendants cannot make considerable material misrepresentations to consumers and then bury corrections and disclaimers in subsequent communications. … Therefore, the district court did not err in granting summary judgment.”

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