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FTC Reaches Multimillion-Dollar Settlement for Violations Committed by Lead Generating Vendors

Books and Money

Thu, 09/12/2019 - 20:55

The FTC announced that it had reached a $30 million settlement to resolve charges against Career Education Corp (CEC)—an Illinois-based, for-profit education provider—resulting from unlawful tactics used by third-party lead generators. The FTC complaint alleges that CEC and its lead generators violated the agency’s requirements regarding “clear and conspicuous disclosures” in advertisements.

The primary complaint against Career Education Corp is that its lead generators falsely claimed that the organization had an affiliation with the United States military. In addition to this outright fabrication, the lead generators also falsely informed consumers that their personal information would not be shared with anyone. Furthermore, both CEC and the lead generators called phone numbers that were on the National Do Not Call Registry.

According to the FTC, CEC and its lead generators have been engaged in this illegal telemarketing operation since 2012. The FTC’s investigation determined that CEC had knowledge of the scheme, having reviewed a call script used by lead generators that included the fraudulent military affiliation.

Regarding "clear and conspicuous disclosures," the FTC writes in a March 2013 document on the top, “There is no set formula for a clear and conspicuous disclosure; it depends on the information that must be provided and the nature of the advertisement.” While noting that “advertisers have the flexibility to be creative in designing their ads,” the FTC requires that “the overall message conveyed to consumers [not be] misleading.” The strategy devised between CEC and their lead generators advertising a non-existent military connection certainly seems like a flagrant violation of this rule.

The FTC’s press release on this settlement quotes Andrew Smith, Director of the FTC’s Bureau of Consumer Protection, as saying, “You can’t skirt the law by outsourcing illegal conduct to your service providers.” While some of the specifics of this case may seem unusual—in particular, the audacity to fraudulently claim a relationship with the U.S. military—the case does generally highlight the importance of having comprehensive strategies for compliance with any and all regulations relating to telephone campaigns. Violations committed by lead generators or other vendors may still come back to hurt the companies that hire them. Again, quoting Smith, the FTC expects “companies purchasing leads to implement strong vendor management programs and stay on the right side of the law.”