Federal Trade Commission v. Financial Freedom Processing, Inc.
538 F. App'x 488
5th Cir.2013Background
- FTC sued Financial Freedom of America, Debt Consultants of America, and Debt Professionals of America and five owners for deceptive radio ads, websites, and sales calls claiming 30–60% debt reduction in 18–36 months.
- Defendants argued the claims were accurate as understood by a reasonable consumer who would see that fees were excluded and dropouts were excluded.
- District court held deception should be evaluated based on information disclosed up to purchase, adopting defendants' interpretation.
- Appellate court noted that first-contact ads may violate § 5 even if true facts are disclosed later, and questioned the district court’s broader approach.
- FTC did not squarely challenge the district court’s § 5 approach on that ground; instead it attacked the district court’s finding about consumer perception at the point of purchase.
- Court affirmed district court’s judgment, finding substantial evidence that reasonable consumers were not deceived at the point of purchase; some websites did misrepresent dropout rates.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether deception at purchase was correctly determined. | FTC argues misrepresentations during first contact/deceptive ads violate § 5 regardless of later disclosures. | Companies contend disclosures at enrollment/purchase negate deception. | Substantial evidence supports no deception at purchase; district court affirmed. |
| Whether the FTC properly challenged the district court’s legal standard. | FTC challenged the district court's interpretation as misapplied law. | FTC did not clearly challenge the legal standard and relied on factual findings. | Court reviewed factual findings for clear error and affirmed. |
Key Cases Cited
- Exposition Press, Inc. v. FTC, 295 F.2d 869 (2d Cir.1961) (quoting Carter Prods., Inc. v. FTC; §5 deception may arise from initial contact)
- Removatron Intern. Corp. v. FTC, 884 F.2d 1489 (1st Cir.1989) (each representation must stand on its own merit)
- Resort Car Rental Sys., Inc. v. FTC, 518 F.2d 962 (9th Cir.1975) (deception at first contact can violate §5 even if later facts are disclosed)
- Beneficial Corp. v. FTC, 542 F.2d 611 (3d Cir.1976) (impressionistic determination of deception is fact-like)
- Giant Food, Inc. v. FTC, 322 F.2d 977 (D.C.Cir.1963) (meaning of ads and their tendency to mislead are questions of fact)
- Fuji Photo Film Co., Inc. v. Shinohara Shoji Kabushiki Kaisha, 754 F.2d 591 (5th Cir.1985) (review of factual findings for clear error; standard of review)
- Resort Car Rental Sys., Inc. v. FTC, 518 F.2d 962 (9th Cir.1975) (deception can be established by initial contact)
- FTC v. Gill, 71 F.Supp.2d 1030 (C.D.Cal.1999) (each representation must stand on its own merit)
- FTC v. Medical Billers Network, Inc., 543 F.Supp.2d 283 (S.D.N.Y.2008) (material omissions may violate §5)
- Exposition Press, Inc. v. FTC, 295 F.2d 869 (2d Cir.1961) (cf. Carter Prods.; first-contact deception suffices)