April/May 2012

In this issue:

  • The FTC has obtained a temporary restraining order freezing the assets of a company that allegedly placed more than 2.7 million telephone calls in the United States attempting to fraudulently collect payday loan debts from consumers who didn’t owe them money.
  • The Department of Health and Human Services has reached a settlement with Blue Cross & Blue Shield of Tennessee based on the theft of 57 unencrypted hard drives from Blue Cross facilities. The drives included protected health information of approximately one million persons. The settlement involved the payment of $1.5 million.
  • A Virginia court dismissed a claim under Virginia’s “do-not-call” list act against Dish Network based on calls by Dish Network affiliates. Zhu v. Dish Network, LLC. The court ruled that Dish was not responsible for the actions of its marketers under state law.

Federal Trade Commission
The FTC has settled charges against several companies and individuals which alleged that the defendants deceived consumers who were trying to sell timeshare properties.  The defendants obtained upfront fees from consumers after representing that they could sell the consumers’ timeshares.  Federal Trade Commission v. Vacation Property Services, Inc., et al.  The companies surrendered almost all of their assets to the FTC and are prohibited from misrepresenting material facts about any good or service offered in the future.  The FTC also charged that the calls violated the national “do-not-call” list.

Comment: View the attorney’s comments on this posting.

The FTC has obtained a temporary restraining order freezing the assets of a company that allegedly placed more than 2.7 million telephone calls in the United States attempting to fraudulently collect payday loan debts from consumers who didn’t owe them money.  Federal Trade Commission v. Broadway Global Master, Inc., et al.  In the calls from India, the caller allegedly pretended to be an American Law Enforcement Agency.

Comment:  If the allegations are true, this obviously is fraud and abuse at its worse.  A temporary restraining order is unusual and is a strong remedy under such circumstances.

The FTC has obtained a default judgment against an individual and three of his companies after it alleged that Samuel Bain made false promises to consumers to reduce mortgage payments, interest rates, or loan balances.  Federal Trade Commission v. Samuel Paul Bain, et al.  Bain filed an answer to the complaint in 2011, but the court ordered a default as a sanction for failure to comply with discovery rules or appear in court in response to an order to show cause.

Comment:  This case, again, shows penalties which can be applied in worst case scenarios.

The FTC has obtained a settlement against an individual, his wife, and their companies, permanently banning them from telemarketing or engaging in timeshare resale services.  Federal Trade Commission v. Timeshare Mega Media, et al.  The defendants allegedly represented an ability to locate purchasers for consumers’ timeshares.  Defendant Pasquale Pappalardo will be required to render the proceeds of the sale of the condominium to the FTC pursuant to the settlement.

Medicare Calling
The Center for Medicaid and Medicare Services (CMS) has issued a final rule revising its standards for marketing medical equipment to Medicare recipients via telephone.  77 Fed. Reg. 14989 (March 14, 2012).  The regulations ban direct telephone contact by suppliers of covered devices to Medicare beneficiaries without express consent or the past receipt of an item within 15 months of the date of the call.

Comment: View the attorney’s comments on this posting.

Federal Data Breach Privacy Settlement
The Department of Health and Human Services has reached a settlement with Blue Cross & Blue Shield of Tennessee based on the theft of 57 unencrypted hard drives from Blue Cross facilities.  The drives included protected health information of approximately one million persons.  The settlement involved the payment of $1.5 million.

Colorado
A federal court in Colorado has granted the Direct Marketing Association’s motion for summary judgment permanently barring enforcement of a new state law regarding use tax.  Colorado imposed a notice requirement on all merchants selling products to customers in Colorado, even if out of state, in an effort to impose use tax on interstate transactions.  The court ruled the law unconstitutional because it discriminated against out of state retailers and imposed an undue burden on remote sellers with no physical presence in the state.

Massachusetts
Massachusetts’ Attorney General has entered into a settlement with a company (Maloney Properties, Inc.) alleging that it failed to adequately protect personal information of Massachusetts residents.  An employee stored unencrypted information on a laptop which was then stolen.

Nebraska
The Nebraska Public Service Commission held an informational workshop on the use of automatic dialer in Nebraska on Thursday, April 5, 2012.  The Public Service Commission specifically invited political campaigns to attend an informative session and this may signal an increase in enforcement of Nebraska statute which requires a permit prior to use of what the statute refers to as an automatic dialing-announcing device.

Comment: Nebraska’s statute is not unique as approximately 10 other states require some form of notice either to the State Public Utilities Commission or local telephone company prior to use of prerecorded dialer.  Statutes have been seldom enforced.  However, the registrations required are generally easy and inexpensive.

Virginia
A Virginia court dismissed a claim under Virginia’s “do-not-call” list act against Dish Network based on calls by Dish Network affiliates.  Zhu v. Dish Network, LLC.  The court ruled that Dish was not responsible for the actions of its marketers under state law.

Comment: The court in this case found Virginia law did not impose “strict liability” on Dish Network, but this is contrary to most interpretations of the federal “do-not-call” list law holding a seller responsible for the actions of its agents.

Wisconsin
The Wisconsin Department of Consumer Protection has indicated that it intends to apply the Wisconsin “do-not-call” list to instances of upsells or cross sales delivered on inbound or outbound telephone calls.

Comment:  The FTC specifically has ruled that “do-not-call” lists do not apply to upsells or cross-sells made during a telephone call.  If Wisconsin actually attempted to enforce the above interpretation, it would conflict with the FTC’s ruling.

Commentary

Sales Calls’ Limitations Can Be Contingent on the Product Being Sold

Sales Calls and the Applicability of the National Do-No-Call List