I've been reading as many as possible and I feel compelled to step in and offer my unique perspective. As you can imagine, it's not easy doing this but I feel there have been many fallacies and misconceptions with regards to the FTC and how they act.
I also think I can help provide some insight on how to avoid problems.
On October 11, 2007 I was forced to stipulate away my 12 year old company and turn it over to receivers for the FTC.
I started the company in 1995 with $5,000 and built it into a $6 million a year business within five years.
The business was in the debt settlement industry. I think I was one of the founding fathers along with a few companies in California. In 1998, a bank thought so much of our model that they invested $600,000 in us and became a minority owner.
Because of our relationship with the bank, we were able to institute certain procedures that no one else could.
For those of you not familiar with debt settlement, it is tough. You are dealing with consumers on the brink of bankruptcy and in many cases, emotionally wrecked.
After Bush took over in 2000, the government and its agencies started to become very pro-bank and started changing rules and laws to protect the banks. A few years later, a wave of actions against debt resolution firms were started mainly by regulatory agencies, AG's, and the FTC.
The industry became very tough because of competition and the economic climate leading to a surge of businesses entering the industry, some of them with not the best of intentions.
Let me hit some key points and I hope these help:
Fallacy #1: The FTC investigates for bad guys. I only wish this were true. Here is the way they work. They first decide on an industry then they find a company. They are not good investigators so if it's an industry not in their face (like in infomercials) they will turn to the Better Business Bureau (BBB) for recommendations. This is where I made my biggest mistake. For years, I had battled the BBB. I even sued them at one point (only to have it thrown out because they are exempt from lawsuit-another story).
Finally, the BBB tired of me and through my company under the bus. In 12 years we touched 40,000 households and had 25 complaints on record at the time. You do the math. At that was in a difficult industry. Giving you perspective, every major bank has thousands of complaints.
If I would have left the BBB alone I would still be in business today. I was not on tv or radio nor was I kicking but on the internet. The BBB was my only connection to the FTC.
But a better lesson is to avoid registered complaints whenever possible. If you do that, you will likely stay off the radar.
Other than the complaints, we had no other major lawsuits and no one ever accused us of fraud or stealing their money. The FTC even thanked the BBB for their help in the complaint.
Fallacy #2: The FTC will send you a warning to stop before they act. Well, here is the way it went down for me and every other business I know of that has gone through this. On October 1, 2007 it was business as usual. I was served on October 2. We were done on October 11. There was no warning.
Fallacy #3: If you are sued and you are honest the truth will come out in court. Well, there is no court. It is my nature to fight and that was my intent. The three claims they made were bogus. We were able to nullify any customer complaint because we taped every customer we signed up to make sure they understood the program.
I contacted a Madison Ave. FTC law firm that specialized in these things and hired them at $750/hr. When I mentioned fighting, they said sure, that will be a $1 million retainer. I was forced to plan my surrender.
In searching Google I found that only one company took the FTC to court and won, Amway. So the bottom line is that if you are sued by the FTC you are toast.
Fallacy #4: If you follow the rules you are safe. The truth is, they find the company they want to target first then they find ways you broke the rules. The FTC guidelines are vague for a reason. They want to have a broad brush in going after people. We put in all kind of safeguards in place to try to ensure consumer integrity. I'm sure we could have done better. But I know we were better than 90 percent of the businesses in the industry.
I'll tell you. I have not seen one long sales letter that wouldn't be torn apart by the FTC, Every single one would be in trouble. I'm not saying you're doing anything wrong, but they would twist your words to fit their needs. If you are targeted they will justify the reason.
Fallacy #5: The FTC's motives are to protect the consumer. This is only partially true. Everything they do is under the guise of protecting the consumers but there is a political agenda. But what the FTC is really after is publicity. They like press. I'm sure they will say it's because it acts as a deterrent, but I don't know. So you have a better chance of getting sued if you live in proximity of a metropolitan media area than if you live in the boon docks.
Here is the bottom line though. You probably have very little to worry about. The action taken against me was not as unpredictable as I first thought it was. I was in an industry that was targeted and I got on the radar of their watch dog, the BBB.
As for IMers, if you follow some basic guidelines, you will be fine.
1. Keep hype to a minimum. Don't go crazy with claims. It's really not that necessary anyway. Don't worry about these new rules so much because they are redundant anyway. As you are writing copy just ask yourself along the way if you can substantiate what you are saying if asked to. Just follow truth in marketing guidelines.
2. Stay away from targeted products. If I were you, I would stay away from selling **** Berry for one. There already has been some rumblings there and the FTC loves to go after health related products. You can easily be caught up in the wrath if you are not careful. Before you start pitching a product Google the category to see if there are any waves of discontent.
3. Make upset customers go away. Be very generous with refunds. It's really not worth the fight and you never know who you are pissing off.
4. Take the limelight for what it's worth. There is a price to pay for becoming a guru, and that is exposure. Let's be honest, was Jeff Paul's infomercial any different than the many sales letters floating around out there. I don't think so. He made a decision to expose himself to scrutiny. I'm not saying don't do it, but understand the risks.
I hope this helps someone because I really don't wish the ordeal my family and I had to go through on anyone. It's been two years and I'm just now starting to emerge from the wreckage.