Business ProfileforStrategic Consulting

March 4, 2024, United States District Court, Western District of New York, Plaintiffs, which include the Federal Consumer Financial Protection Bureau and various state attorneys general offices, claim that defendants, a telemarketing business and related entities providing debt-relief services, are violating the Federal Trade Commission's Telemarking Sales Rules by collecting advance fees from consumers. Defendants contend that they are exempt from the prohibition against advance fees pursuant to a "face-to-face" exception which allows advance fees if the seller provides a face-to-face sales presentation to the consumer before collecting any payment for their services. The Court finds that plaintiffs have made a preliminary showing that the face-to-face exception likely does not apply here.

The face-to-face presentations are conducted by notaries, who are independent contractors and not sellers of defendants' debt-relief services. The evidence introduced over the course of a two-day hearing demonstrated that these notaries (1) have no substantive knowledge of the debt-relief program; (2) cannot and will not answer any substantive questions by consumers about the program; and (3) have as their primary purpose the signing of the contract for debt-relief services. The contracts signed in the presence of the notaries require consumers to execute several waivers of important rights, such as agreeing to arbitration and waiving the right to participate in any class action lawsuits. The presentation lists multiple potential negative consequences of the debt-relief program, such as the likelihood that the consumer's credit score will be negatively impacted and that they will experience an increase in collection activity from debt-collectors. This essential information is presented to individuals drowning in debt and desperate for any lifeline, without the ability to have their questions answered in person, by an individual with substantive knowledge who is actually affiliated with the program. Instead, if there are questions, the consumers are given a phone number to call, which goes back to the telemarketing company. Thus, the face-to-face presentations do
not result in consumers being more informed about the program and do not limit the potential problems the TSR was designed to remedy.

Accordingly, plaintiffs' motion for a preliminary injunction is granted, defendants are preliminarily enjoined from charging and/or collecting advance fees, and the Court will enter plaintiffs' proposed preliminary injunction order.