Good morning! This is the eighth edition of the Compliant Connect newsletter.
The goal is simple: to keep you in the loop on what the FTC and other regulatory agencies are up to so that you can protect yourself.
These newsletters will land in your inbox twice a week – Mondays and Thursdays.
Remember: this is NOT legal advice, only information!
Here’s the rundown today…
- 🚨 BizOpp Crackdown
- 🏡 Inside The FTC’s Latest Settlement (Invitation Homes)
- 📈 How Many Complaints Does The FTC Get?
- 🏛️ FTC Chair Defends Non Compete Rule
- ☎️ The Compliant Way To Start A Sales Call
Compliance Digest: What You Should Read Today
The FTC Is Cracking Down On Companies That Launch An Manage Online Businesses On Behalf Of Customers
This article from CNBC explores recent FTC actions, including their investigations and lawsuits again companies that offer done for you “bizopp” services.
The article talks about the recent case targeting Ascend Ecom, which ran an Amazon e-commerce program.
Deceptive earnings claims are at the heart of many of these investigations.
Lina Khan Defends New Non Compete Rule [Video]
FTC chair Lina Khan did an interview with 60 Minutes, where she talked about the FTC’s priorities.
She recorded a separate video that specifically focused on the FTC’s new non-compete rules.
It’s worth watching since she hints at the FTC’s path forward after their recent legal setbacks.
Case Breakdown: Invitation Homes
Invitation Homes, one of the largest owners of single-family rental properties in the United States, agreed to pay $48 million to settle with the FTC,
The FTC accused the company of engaging in deceptive business practices, including withholding security deposits unfairly, charging hidden fees, and renting homes in poor condition.
Note: Invitation Homes admitted to no wrongdoing. Here is their press release.
You may not be a large landlord, but there is still a lot about this case that’s probably relevant to you. Below are some highlights.
Misrepresentations About The True Price Of Renting
Invitation Homes are accused of misrepresenting the full cost of renting a home, thus violating section 5 of the FTC Act.
While customers were told in the advertising about the rent they would pay, they were not told about mandatory fees such as “application fees” and “reservation fees.” These could add an additional $40-$145 per month.
According to the complaint, this was a deliberate practice, with employees being told to only display fees when absolutely critical.
In the complaint, the FTC says that since 2018, Invitation Homes has tracked customer complaints. These include “escalations” where a customer posts a negative review or submits a complaint to the Better Business Bureau.
The most common complaint? Frustration about surprise fees.
Deceptive Promises About Home Inspections
In the marketing of these homes, the FTC alleges that Invitation Homes promised that ever home passed a “quality assurance inspection” before a new tenant moved in.
According to the complaint, over a 5 year period tenants in over 33,328 properties submitted work orders within the first week of moving in. Many complained of mold, broken appliances, exposed wiring and other issues a home inspection would catch.
Deceptive Promises About Maintenance
According to the FTC, tenants were told that they would get “24/7 emergency maintenance”.
However, many residents complained that they would go weeks before CRITICAL repairs like heat in the winter or air conditioning in the summer because of delays in repairs.
Aggressive Withholding Of Security Deposits
Invitation Homes misled prospective tenants about what would cause them to withhold their security deposits.
The complaint alleges that Invitation Homes withheld security deposits from tenants for things like normal wear-and-tear, damages that existed before renters moved in, and renovations. These are all things that the tenants should not have been responsible for.
According to the complaint, one exployee said that aggressively charging residents “is how we get upset residents but also make the numbers [the Chief Financial Officer] communicated investors need [to] see.”
Settlement Terms
The FTC claims that Invitation Homes violated Section 5 of the FTC Act through misrepresentations and unfair practices.
They also accused Invitation Homes of violating the Gramm-Leach-Bliley Act – a law which prohibits individuals from fraudulently obtaining customer information from financial institutions.
Invitation Homes is required to give $48 million to the FTC for customer refunds.
They are also PROHIBITED from practices the FTC accused them of, such as improperly withholding security deposits and not notifying prospects about the full cost of renting their homes.
Here is the link to the FTC’s press release.
Here is the link to the complaint.
Did You Know…
In 2023, the FTC’s Consumer Sentinel Network received over 5.4 million consumer reports.
Quick Compliance Tip: Proper Call Introduction
As we’ve talked about many times, the FTC is emphasizing telesales in its enforcement.
The reason is that the AMG Capital case ruling by the Supreme Court has made it so the FTC is now focusing more on Section 19 and the application of the Telemarketing Sales Rule.
A common violation that Greg talks about is not properly introducing yourself at the beginning of a sales call.
It’s SIMPLE to introduce yourself in a compliant way.
Here’s how. At the very beginning of every sales call, there must be a formal introduction with…
- The name of the caller
- Who or what company they represent
- The purpose of the call
- Whether the call is being recorded.
The salesperson has to use their REAL name, no fake names or aliases allowed.
They have to be forthcoming on why they’re calling, who they’re representing, and how they got their information, if asked.
For example, you could say, “My name is [Name], calling on behalf of [Company]. I noticed your recent book purchase online, and I’m calling on a recorded line to make sure you’re happy and to offer any further assistance. How are you today?”
It’s really that simple.
Remember though, you must have express written consent before contacting a prospect over the phone or by text!