The FTC sued me out of business two years ago yesterday- here is my story

104 replies
These latest rule changes have triggered a number of threads on this forum over the past week or so.

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.

Bob
#ago #business #ftc #story #sued #years #yesterday
  • Profile picture of the author garyv
    This sounds extremely frightening to me. However, if your company is already toast, why not give the name of it out here? It would better the credibility of your story.
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    • Profile picture of the author bobsedge
      Originally Posted by garyv View Post

      This sounds extremely frightening to me. However, if your company is already toast, why not give the name of it out here? It would better the credibility of your story.
      That's silly, but ok. The name of my company was Edge Solutions, Inc.

      Why do I need to "better the credibility" of my story? who would make up such a thing
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      • Profile picture of the author garyv
        Originally Posted by bobsedge View Post

        That's silly, but ok. The name of my company was Edge Solutions, Inc.

        Why do I need to "better the credibility" of my story? who would make up such a thing
        I've seen grander tales than this told in this forum, only to find out later that none of it was true. Shoot, there are grander tales than this on many a clickbank sales page.

        But to be honest, I don't know why anyone would make this up.

        PS - I'm not calling you a liar. I'd just like to verify the truth. It would make your post even more potent.
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  • Profile picture of the author garyv
    Well that only took a short google search to find your story extremely credible. Thank you for posting it.

    Federal Trade Commission, Plaintiff, v. Edge Solutions, Inc., et al
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    • Profile picture of the author bgmacaw
      Time to whip out the Rand again...

      "Economic power is exercised by means of a positive, by offering men a reward, an incentive, a payment, a value; political power is exercised by means of a negative, by the threat of punishment, injury, imprisonment, destruction. The businessman's tool is values; the bureaucrat's tool is fear."
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      • Profile picture of the author mikemcmillan
        Originally Posted by bgmacaw View Post

        Time to whip out the Rand again...

        "Economic power is exercised by means of a positive, by offering men a reward, an incentive, a payment, a value; political power is exercised by means of a negative, by the threat of punishment, injury, imprisonment, destruction. The businessman's tool is values; the bureaucrat's tool is fear."
        Anyone on this forum who reads Ayn Rand titles such as Capitalism: The Unknown Ideal, or especially Atlas Shrugged is a personal hero of mine.

        For those who say that capitalism in America is evil--they are wrong, true capitalism has never been tried--the government wouldn't allow it to happen. It would destroy their nanny state grip on the economy.

        bgmacaw, objectivist thinkers praise John Galt or Dagny Taggart. Me--I'll settle for reincarnation as a Ragnar Danneskjöldest figure. He's da real man!

        Anyway, interesting post--it made me think.
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  • Profile picture of the author Zach Booker
    I was just talking to someone else - last Thursday - who got taken down by the FTC and the story is basically the same. (Of course he was into different stuff though...)

    It's really great to hear people with actual experience in this area talk about it.

    Thanks for taking the time to make the post,

    Zach
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  • Profile picture of the author David McKee
    This appalls me to the core - as I have said about the FTC on other posts, they, like all government, destroy everything it touches. And the reason is as clear as the Ayn Rand quote.

    Makes me think there could be money in Ebooks that tell how to monkey wrench the government for underground black market gain, and how to set up your own hidden community - Galt's Gulch!

    Grrrrrrr.

    -DTM
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  • Profile picture of the author DogScout
    I was in the car biz for 25+ years. In that time 2 FTC regulations came out. Stickers on used cars disclosing warranties and the privacy laws.

    The only dealerships targeted by the FTC were large multi-dealership conglomerates that were able to pay the fine. The USDA is a big fan of having any fines covering the investigation expenses. If a 'target' isn't worth hundreds of thousands or millions of dollars, they won't spend the hundereds of thousands of dollars it takes to investigate them. In all the time the used car stickers have been required, I have seen plenty of large fines levied against large dealerships and never seen a small one (who are usually the biggest offenders) even looked at.

    The other thing is, it isn't whether you are guilty or not, it is can they win a case or not. In America, we do not have a justice system, we have a legal system. It is mostly a game played with large stakes. If you are a small IMer, you could probably break any rule you want and they will ignore you. If you have a certain net worth... even if you do everything right, if they think they can talk a jury into returning a guilty verdict they are likely (or more likely) to show up.

    The same applies to the privacy laws and the money laundering laws. I have only seen large companies investigated. In all those years I NEVER saw a small dealership that was not cash rich even looked at.

    Mark
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  • Profile picture of the author lisaann
    I'm sorry to hear about this Bob and wish you and your family some peace of mind with this now. I hope things are moving back on track for you.

    Sincerely,

    Lisa
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    • Profile picture of the author bobsedge
      Originally Posted by lisaann View Post

      I'm sorry to hear about this Bob and wish you and your family some peace of mind with this now. I hope things are moving back on track for you.

      Sincerely,

      Lisa
      Thanks Lisa.

      This is not an easy process because it's not like losing a business the traditional way, which is not easy as well.

      The local publicity and the google stigma is not pretty. It kind of follows you around everywhere you go. And my wife was involved in the business so she was dragged down with me.

      For the first year I kind of stumbled along in a fog trying to figure out what to do next.

      I'm finally at the point where I don't think about it every day.
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  • Profile picture of the author bobsedge
    Thanks guys. This post was partially therapy because the anniversary day is always tough.

    The story is actually worse.

    When the industry started getting beat up I made a conscious decision to transition out. I spent approximately four years developing an online software application to help people manage their finances, make decisions, etc. I had just launched it and was offering it for free.

    I had refinanced my house and threw all of my resources into the project. Unfortunately for the FTC, I had very little money left by the time they got to me because it all went into this project.

    Well, they got everything, even this software. It had nothing to do with debt settlement but they took it all.

    And here is the worse part of all. My customers got royally screwed because in the end almost all of their money went into paying the FTC lawyers and accountants. That is the case with almost every FTC suit of this kind that I know of. So who exactly is being protected?
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  • Profile picture of the author LB
    I'm very sorry to hear your story...hopefully you can use this tragedy to rebuild your life for the better still.

    I have tried to explain to people on this board that if you go up against a government agency- you lose. That's it. No fight, no test, no chance. You lose. If you're targeted then you've already lost.
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    • Profile picture of the author bobsedge
      Originally Posted by LB View Post

      I'm very sorry to hear your story...hopefully you can use this tragedy to rebuild your life for the better still.

      I have tried to explain to people on this board that if you go up against a government agency- you lose. That's it. No fight, no test, no chance. You lose. If you're targeted then you've already lost.
      You could not be more right.

      They are bullies with unlimited resources.

      But do you know who I really have disdain for? The BBB.

      That agency controls the welfare of so many businesses yet it is nothing more than a membership organization. If you are fortunate enough to be in an industry they approve of, they will take you in and shelter you. Complaints are essentially swept under the rug.

      Thanks, I am rebuilding my life but truthfully, this is not a tragedy. There are so many worse things going on in the world that I made a conscious effort from day one of this not to indulge in self pity.

      I use to tell my clients all the time that it's only money. In the end, that's all it really was for me and I would be a hypocrite to make it out to be more than what it is.

      Sure, my ego and self confidence took a major hit. After all, none of us depict ourselves as a dishonest person and that was how this was being framed. And you would be shocked to discover how easy it is for people to think the worst. Employees that were with us for ten years started to question us. That was the ugly part.

      But true friends and family were great. I think I will look back at some point and say that I am in a better place because of what went down. I'm not quite there yet, but hopefully soon...
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  • Profile picture of the author LB
    And here is the worse part of all. My customers got royally screwed because in the end almost all of their money went into paying the FTC lawyers and accountants. That is the case with almost every FTC suit of this kind that I know of. So who exactly is being protected?
    But gee...aren't they there to protect us? They're super-nice-happy-friendly people! Just like all government agencies!

    I hope some people here realize just how easily bad things can happen once the government gets involved.
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  • Profile picture of the author Zeus66
    Anyone who clings to the quaint belief that we're all "free" in America is naive in the extreme. Yes, you're free... as long as you follow all the rules and don't attract the attention of the entrenched bureaucracies. Just don't look them in the eye, bow obsequiously in their presence, and they might let you keep a few scraps.

    Where is the modern day Thomas Paine when we really need him?

    John
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  • Profile picture of the author Marian Berghes
    Man do you guys have some wacky legal system...its tough to beat a gov agency in my country too, but I know plenty of cases where people won against the "FTC" in my country.

    And how the hell could they take your other project? that just doesn't make sense to me
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    • Profile picture of the author bobsedge
      Originally Posted by Marian Berghes View Post

      Man do you guys have some wacky legal system...its tough to beat a gov agency in my country too, but I know plenty of cases where people won against the "FTC" in my country.

      And how the hell could they take your other project? that just doesn't make sense to me
      Here is the big difference in this country. Lawyers. The legal system is really geared toward the lawyers. If there is a lawsuit, lawyers win no matter the outcome. In other countries, the loser pays the legal expenses. Not here. Winning can kill you almost the same as losing.

      The end result is that I really don't believe anything I read anymore. There is always a side you never hear.

      As for my other project, I had it set up under a different corporation but the corporation and the project were housed in the same building. They lumped all my corporations together and took everything ( by the way, corporate protection means nothing when the government gets involved). I had no access to servers, pc's, etc.

      The only thing I walked out with was 1000 books I had just published and they gave me a hard time about that as well.
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      • Profile picture of the author gjabiz
        Originally Posted by bobsedge View Post

        Here is the big difference in this country. Lawyers. The legal system is really geared toward the lawyers. If there is a lawsuit, lawyers win no matter the outcome. In other countries, the loser pays the legal expenses. Not here. Winning can kill you almost the same as losing.

        The end result is that I really don't believe anything I read anymore. There is always a side you never hear.

        As for my other project, I had it set up under a different corporation but the corporation and the project were housed in the same building. They lumped all my corporations together and took everything ( by the way, corporate protection means nothing when the government gets involved). I had no access to servers, pc's, etc.

        The only thing I walked out with was 1000 books I had just published and they gave me a hard time about that as well.
        Lawyers.

        There is a "bounty" paid to attornies who bring a juicy case (read settlement) to the FTC table, and it is a career move on many AG's part to find cases (with the help of the BBB and others) that give them the spotlight.

        A good read about how the FTC and for that matter, the FDA operate can be found in Ben Suarez' best selling book, 7 Steps to Freedom II. Also, the late Bud Weckesser of Green Tree Press, Inc. engaged in a long and costly battle with the FTC, the result...a very RARE apology from the FTC IN WRITING (its a remarkable document)...but it cost Bud over a MILLION dollars to get that apology.

        An apology. OOOPS we's wrong, Sorry. But not one dime in legal fees recovered.

        When a gov't pays bounty hunters to go after small businesses, you have to ask yourself if you want to be a "Face" on TV or a well known marketer that attacts a lot of attention...or is it better to Fly Low and Collect the Dough? Just something to consider as the spotlight, as PREDICTED over 3 years ago on many forums, is NOW shining on Internet marketers of all shapes and sizes. There will be much MORE of this to come.

        Do some homework on the FTC, FDA, BBB, COC, etc. and you'll want to stay in your basement bat cave and not come out at all.

        The best solution I've found, is AVOID the areas where they like to fish and get yourself a nice TOLL POSITION on a mundane consumable that is sold in Walmart every day and avoid the circus altogether.

        THANKS Bob for sharing your story. It is personal, but NOT unique.

        gjabiz
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      • Profile picture of the author JakeDaly
        Originally Posted by bobsedge View Post

        The only thing I walked out with was 1000 books I had just published and they gave me a hard time about that as well.
        All of the U.S. government agencies are willing to manipulate, cheat & steal but if you say anything about free speech they go running.
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        • Profile picture of the author seasoned
          Originally Posted by JakeDaly View Post

          All of the U.S. government agencies are willing to manipulate, cheat & steal but if you say anything about free speech they go running.
          If you think a claim of free speech will cause them to just stop and run away, MAN are you WRONG!
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  • Profile picture of the author FBisMoney
    What a valuable post. Thanks for sharing your experiences with us.
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    • Profile picture of the author bobsedge
      Originally Posted by FBisMoney View Post

      What a valuable post. Thanks for sharing your experiences with us.
      I have spoken about my ordeal in the past but this is the first time I have really gone into this much detail.

      I really value this forum and I was bothered that so many people had misconceptions. And perhaps it's the final stage of my own self-therapy.
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  • Profile picture of the author Rod Cortez
    Bob, thanx for sharing your story. I agree with everything you wrote about the FTC. They can be as bad, if not worse, bullies than the IRS. I also have contempt for the BBB. The BBB also tries to bully some businesses into paying them their monthly membership to have to deal with any "negative" complaints against them. I have shouting matches with those *******s on more than one occasion.

    I think you have a great attitude about what happened to you and it will be instrumental in helping you move on. Take care.

    RoD
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    • Profile picture of the author bobsedge
      Originally Posted by Rod Cortez View Post

      Bob, thanx for sharing your story. I agree with everything you wrote about the FTC. They can be as bad, if not worse, bullies than the IRS. I also have contempt for the BBB. The BBB also tries to bully some businesses into paying them their monthly membership to have to deal with any "negative" complaints against them. I have shouting matches with those *******s on more than one occasion.

      I think you have a great attitude about what happened to you and it will be instrumental in helping you move on. Take care.

      RoD
      Rod,

      I would never have advised this is the past but back off the BBB.

      I am telling you that they have more power than you can imagine. And it's not just the FTC. They influence the AG's, DA, and the post office.

      And speaking of the post office. I am fortunate to have not found this out but I understand that if the post office goes after you, it makes you wish it was the FTC. They are brutal and when they are involved, it's a federal crime.

      The FTC is usually just civil.
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  • Profile picture of the author Marian Berghes
    Couldn't you get a court order or something against them taking the pc's and all that...by claiming something that you have valuable business data that could reach in competitor hands or something?

    Like Facebook did with that company that sued them and asked for their source code so they can "check it out" for patent infringement...then facebook got a court order that allowed them to only show the parts that were directly related to the lawsuit.

    Or against a gov agency this cant be done?
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    • Profile picture of the author bobsedge
      Originally Posted by Marian Berghes View Post

      Couldn't you get a court order or something against them taking the pc's and all that...by claiming something that you have valuable business data that could reach in competitor hands or something?

      Like Facebook did with that company that sued them and asked for their source code so they can "check it out" for patent infringement...then facebook got a court order that allowed them to only show the parts that were directly related to the lawsuit.

      Or against a gov agency this cant be done?
      $1 million to start a defense.

      Plus if anyone knows Joe Sugarman, ask him what happens when you fight back against the FTC. From what I understand, he lost everything.
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  • Profile picture of the author klinvie
    Thanks Bob for sharing your story. Surely make you think for sure. Can't be too careful no matter what you are selling these days!
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  • Profile picture of the author Slin
    Dang...wow.

    Well in better news my neighbor took the IRS to court and won.
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  • Profile picture of the author bobsedge
    gjabiz,

    I always wanted to be a world beater, but not anymore.

    Now, I'm just looking for more my thin slice of the pie. In another lifetime I'll be another Bill Gates.
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  • Profile picture of the author jacktackett
    Thanks Bob - very informative and helpful. I can imagine this was painful to dredge up again - but hopefully somewhat therapeutic.

    I've often wondered about the BBC here. I've tried several times to lodge complaints - and against some high profile developers etc who I now know paid large membership fees. I don't have any proof except my own experiences - but what you've said here adds another data point to the mix. Our BBC makes lodging complaints pretty complex so only if you're very determined can you get through. Makes one go hum....

    I do have one question - did you approach your congressional representatives and if so how did they respond? I'm wondering if our elected officials are willing to go against the FTC or if these are losing battles too.

    peace,
    --Jack
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    • Profile picture of the author bobsedge
      Originally Posted by jacktackett View Post

      Thanks Bob - very informative and helpful. I can imagine this was painful to dredge up again - but hopefully somewhat therapeutic.

      I've often wondered about the BBC here. I've tried several times to lodge complaints - and against some high profile developers etc who I now know paid large membership fees. I don't have any proof except my own experiences - but what you've said here adds another data point to the mix. Our BBC makes lodging complaints pretty complex so only if you're very determined can you get through. Makes one go hum....

      I do have one question - did you approach your congressional representatives and if so how did they respond? I'm wondering if our elected officials are willing to go against the FTC or if these are losing battles too.

      peace,
      --Jack
      Jack,

      I didn't approach any government representatives because frankly, the FTC is a product of them.

      Anyway, they hit you with so much crap that you are buried in details. Imagine, one day someone dropping ten boxes of legal lies on you. I was basically in shock and everything happened really fast after that.
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  • Profile picture of the author George Wright
    Hi,

    This has been a frightening yet enlightening account. Thanks so much for your firsthand insights.

    One question, you touch on the P.O. The FTC and BBB, etc. Any experiences with the Chamber of Commerce (anyone) to me they seem "friendly" enough, but,???

    George Wright
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    • Profile picture of the author bobsedge
      Originally Posted by George Wright View Post

      Hi,

      This has been a frightening yet enlightening account. Thanks so much for your firsthand insights.

      One question, you touch on the P.O. The FTC and BBB, etc. Any experiences with the Chamber of Commerce (anyone) to me they seem "friendly" enough, but,???

      George Wright
      George,

      As far as I know the Chamber is a benign membership organization. They are not in the same category as the others.

      In some areas of the country Consumer Affairs basically has the same role as the BBB and they will help the AG.
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  • Profile picture of the author bettersocial
    What the FTC is calling "pro consumer", I call "pro stupidity".

    a) If you can't gauge that a guy selling his "$80 million secret" in a $17 ebook is just BSing, you, sir, are an idiot, and I daresay that you deserve to be robbed off your $17.

    b) If you can't take action on solid, proven money making solutions and cry out "scam!", then you too, sir, are an idiot.
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    • Originally Posted by sashas View Post

      What the FTC is calling "pro consumer", I call "pro stupidity".

      a) If you can't gauge that a guy selling his "$80 million secret" in a $17 ebook is just BSing, you, sir, are an idiot, and I daresay that you deserve to be robbed off your $17.

      b) If you can't take action on solid, proven money making solutions and cry out "scam!", then you too, sir, are an idiot.
      I SO agree with this. This damn "modern" society, educational system, Big Brother-like bureaucracy and all around overzealous welfare system is turning people into mindless, naive and stupid Lemmings.

      Just like the credit crunch: so many people were mortgaging and remortgaging their homes to oblivion just to buy themselves a cliche beach hut and a new SUV. And then, when they're swimming in credit debts, they cry out for mercy even though it's been nothing but their own stupidity what's ultimately taken them down.
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      • Profile picture of the author bobsedge
        Originally Posted by Anonymous Affiliate View Post

        I SO agree with this. This damn "modern" society, educational system, Big Brother-like bureaucracy and all around overzealous welfare system is turning people into mindless, naive and stupid Lemmings.

        Just like the credit crunch: so many people were mortgaging and remortgaging their homes to oblivion just to buy themselves a cliche beach hut and a new SUV. And then, when they're swimming in credit debts, they cry out for mercy even though it's been nothing but their own stupidity what's ultimately taken them down.
        AA and sasha,

        What you say is true but that doesn't take away our responsibility of painting a truthful picture.

        People want things to be easy. They want a formula. That is human nature.

        Perhaps we have a professional responsibility to tell them it's not true.

        Madoff was allowed to happen because he was part of a food chain. It was greed and gullibility because those that could have stopped the chain turned the other way.
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  • Scary stuff... very scary... thanks for posting your story man. Sometimes life hits us hard and the recovery path becomes a truly painful crawl.
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  • Profile picture of the author bobsedge
    Originally Posted by NathanFalkner View Post

    In retrospect, do you think your outcome would
    have been different had you followed similar basic
    guidelines to the ones you suggest while running
    your business? I ask since the picture that seems
    to be presented is one where the FTC throws a dart
    and selects a company to go after and then works
    to find technical errors and/or omissions as a legal
    pretext to file suit and freeze bank accounts.

    (Under that scenario, if generally accurate, how
    can any IMer really be "fine" even if they follow the
    excellent and thought provoking advice provided?)
    Nathan,

    Excellent question. I have asked this of myself a million times.

    I don't think my company was perfect. We definitely made some mistakes. When we started in the industry there was no template. We had to invent everything we did. And there was a time that our growth was unhealthy and we were probably in over our heads.

    But in the end I can honestly say that we were one of the good guys.

    My outcome would have been different if we didn't take on the BBB. That made us stand out.

    Remember, they don't look for a company, they look for an industry. Then they find someone within the industry.

    The BBB put us on their radar. At that moment, we were history. Our business practices and the facts did not matter.
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    • Profile picture of the author Daniel Brock
      Originally Posted by bobsedge View Post

      Nathan,

      Excellent question. I have asked this of myself a million times.

      I don't think my company was perfect. We definitely made some mistakes. When we started in the industry there was no template. We had to invent everything we did. And there was a time that our growth was unhealthy and we were probably in over our heads.

      But in the end I can honestly say that we were one of the good guys.

      My outcome would have been different if we didn't take on the BBB. That made us stand out.

      Remember, they don't look for a company, they look for an industry. Then they find someone within the industry.

      The BBB put us on their radar. At that moment, we were history. Our business practices and the facts did not matter.
      Isn't the BBB a private organization? It's really messed up that a private company can pretty much put you out of business at will.

      Your whole story is pretty Effed up. It makes me sick, it really does.

      What is the point of even complying to their so called rules if they are just going to find something to take you down anyway?

      Even if you did everything 100% by the book, I'm sure there is always something they can find to put you out of business...

      United States is done.
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  • Profile picture of the author yourreviewer
    I am just curious. Is this the case for other countries as well? Just reading this story gives the creeps and makes me scared. Reminds me of De Niro's lines in Casino,

    Nicky's methods of betting weren't scientific, but they worked. When he won, he collected. When he lost, he told the bookies to go f*** themselves. I mean, what were they going to do, muscle Nicky? Nicky was the muscle.


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  • Profile picture of the author garyv
    Hey Bob, I've been doing business online for over a decade. And like most businesses that handle a lot of transactions, I've had a few bbb reports over the years. My method for handling them is to simply ignore them. Would you suggest a different method?

    Like others I think the bbb is just a large bully organization. And from what I've read and experienced, they can only wield their power, if you allow them to by feeding their credibility. Is this true in your experience?
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    • Profile picture of the author bobsedge
      Originally Posted by garyv View Post

      Hey Bob, I've been doing business online for over a decade. And like most businesses that handle a lot of transactions, I've had a few bbb reports over the years. My method for handling them is to simply ignore them. Would you suggest a different method?

      Like others I think the bbb is just a large bully organization. And from what I've read and experienced, they can only wield their power, if you allow them to by feeding their credibility. Is this true in your experience?
      Gary,

      From a consumer standpoint, I think the BBB has less of an impact today than they did years ago, particularly for internet businesses. They have more of an impact on brick and mortar businesses. Ripoff Report (an even bigger bs entity, if you can believe that) wields more power online because it reaches Google.

      That being said, I one hand I would say ignoring them makes sense because you don't want to fill them in that a real business exists behind the website. On the other hand, you don't want complaints to mount because that could trigger something else.

      My recommendation is to keep consumer complaints to a minimum and appease them whenever possible.
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      • Profile picture of the author Kay King
        I think you are correct that the BBB is not the force it was - but it may take years for the FTC to catch on to that, mightn't it?

        Thanks for sharing this. I can only imagine what a painful time it's been. It's a realistic scenario that many people simply don't want to accept. It may sound good to threaten to fight back or to claim "they can't do that" - but truth is, few can afford to fight them...and yes, they can.

        Keep your head down.

        kay
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  • Profile picture of the author lakshaybehl
    FTC really could be coming down hard on you US guys.

    Guess I'm going to have change of plans (see my sig).

    @OP
    Also, am I right in assuming that they basically took everything you had? Home, Cars and assets?
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    • Profile picture of the author bobsedge
      Originally Posted by lakshaybehl View Post

      FTC really could be coming down hard on you US guys.

      Guess I'm going to have change of plans (see my sig).

      @OP
      Also, am I right in assuming that they basically took everything you had? Home, Cars and assets?
      It's really a misconception that the FTC is hitting any harder now than before. They've been at it for many years, now it's just hitting our industry so we are aware.

      I lost some assets but I didn't lose my home. I really believe that they understood from early on that they barked up the wrong tree so I came away better than most people in the same circumstance.
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      • Profile picture of the author lakshaybehl
        Originally Posted by bobsedge View Post

        It's really a misconception that the FTC is hitting any harder now than before. They've been at it for many years, now it's just hitting our industry so we are aware.

        I lost some assets but I didn't lose my home. I really believe that they understood from early on that they barked up the wrong tree so I came away better than most people in the same circumstance.
        Bob,

        Yes, I kinda realize this world ain't a free world like the 'fourth age' of this world under the leadership of Lord Aragorn, lol.

        It's never been this way.

        However, just curious- can you do nothing at all if FTC decides they're after you? I mean sue them... without a million dollar retainer or something? Or maybe use press and media to present your case to the world?

        Also, lets say you have 5 cos. and they go after one of them... then what happens to the other 4? Are they officially under the radar too?

        You see. I have been thinking about moving to US for a long time, but recently I have developed a nomadic taste, so I am having second thoughts about that. Some of these things will help influence my decision. Rio is great in Feb., and Sydney in December. There isn't an Indian authority that can not be challenged (and defeated) in a court, and they don't generally go after companies that easily too. That's one thing I love aboout this place.

        -Lakshay
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        • Profile picture of the author bobsedge
          Originally Posted by lakshaybehl View Post

          Bob,

          Yes, I kinda realize this world ain't a free world like the 'fourth age' of this world under the leadership of Lord Aragorn, lol.

          It's never been this way.

          However, just curious- can you do nothing at all if FTC decides they're after you? I mean sue them... without a million dollar retainer or something? Or maybe use press and media to present your case to the world?

          Also, lets say you have 5 cos. and they go after one of them... then what happens to the other 4? Are they officially under the radar too?

          You see. I have been thinking about moving to US for a long time, but recently I have developed a nomadic taste, so I am having second thoughts about that. Some of these things will help influence my decision. Rio is great in Feb., and Sydney in December. There isn't an Indian authority that can not be challenged (and defeated) in a court, and they don't generally go after companies that easily too. That's one thing I love aboout this place.

          -Lakshay
          Lakshay,

          I could never have won. I'm a fighter, so it killed me to do the smart thing and not fight in this case.

          I can just tell you the story I heard about Joe Sugarman. I heard this second hand, so I'm not sure it's 100 percent accurate, but the source is very good.

          Joe Sugarman is a marketing guru from way back. The FTC came after him. He fought back hard. Among other things, he took out a full page ad in the NY Times essentially comparing the FTC to the Mafia.

          From what I hear, they bit back hard and he walked away with literally just the shirt on his back.

          I would not run scared. If you have honest intentions and stay away from "hot" industries (those on the regulatory radar) you should be ok.

          My industry was "hot". I knew it for many years and that is why I was trying to get out.

          That being said, I can't imagine that the US is the most business friendly country so if you have a choice...
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  • Profile picture of the author TelegramSam
    They tend to go for businesses that make it worth their while.

    So don't put all your eggs in one basket.

    Keep as low a profile as possible (which is hard for us marketeers).

    At least don't go bragging off in your ferrari or lambo.

    If a bureaucrat calls, just say "yes sir, how quickly do you want me to bend over".

    Take it on the chin.

    Then one day in the future if society does break down, you can get intense pleasure from watching these leeches squirm in the mud where they belong.

    The sad thing is we can't hitch up the wagons and head west anymore.

    If anyone watches Deadwood, you can see the horror they face as the bureacrats start to follow the pioneers out west.

    Sam
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    • Profile picture of the author yourreviewer
      Originally Posted by TelegramSam View Post


      If a bureaucrat calls, just say "yes sir, how quickly do you want me to bend over".

      Sam
      LOL! Classic.
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  • Profile picture of the author spartanic
    From reading Frank Kern's own experience with the FTC they usually get leads from complaints. I'm not suprised Amway sued the FTC and won. They sure do make buckets of cash with their training tapes, lol.
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  • Profile picture of the author garwil200
    Thanks to all for your posts on this subject. Allow me to put in my 2 cents worth. I am an affiliate marketer, and just beginning my online business. I have been in traditional business for over 44 years, and have extensive experience in offline marketing. I have never joined the BBB, because they only favor their larger contributers. I have also avoided a high public profile, and the 3 complaints I received, I promptly handled directly with my clients.

    As for the FTC, they are a corrupt organization, just like all the other Alphabet Soup of Government agencies. I was one of the marketing leaders in Ben Suarez premature online marketing company called "International Home Shopping" I know Ben personally, and what he went through with the AG of Ohio, as well as the FTC. before he established IHS. Ben also wrote a treatise on the World Wide Elite Socialist movement. That was 20 years ago, and today unfortunetly we find ourselves here in the US living under a facist, anti Capitalist goverment. All of the abuses seem to be increasing with all of our Goverment agencies. Enough of all the negative crap, I am an optimist by nature. So where do I go from here?

    Here is what I plan to do about my online affiliate marketing business. The 2 main guidlines the FTC has added has to do with income claims, and endorsements. As far as income claims are concerned, I already have tired of reading long sales letters with screen shots of all the money Guru's have made. I am only interested in a realistic look at what I can make. I know these guys have made what they said, but spare me all the details. WIIFM.

    Along the same lines, I am tired of all the endorsements in sales letters. They all sound the same. I am already in information overload. I have dozens of videos I have downloaded that I haven't watched yet. So when I look at my Email Inbox, I only open those from some of the well known marketers I recognize. I don't even open all of theirs. It depends on the Subject. When I open an email, I usually just read the first page, scroll down and read some bullets, sroll past all of the bragging screenshots of their income. Scroll past all of the endorsements. Scroll down to the PS, and then scroll down to the price. I make my decision, one way or the other, and then move on to the next email.

    The political environment, is what it is, at least until the next election, so I will just adjust, follow the rules, keep a low profile, and find better ways to sell online. Marketing rules are still the same online, just like offline. When writing an email or salesletter, I will follow the AIDA guidelines. Get their Attention with a headline, build up their Interest with a subheadline and opening paragraphs, built the Desire in the body of the letter, using short paragraphs and lots of bullets, and then give them the Action to take. It doesn't take a long sales letter to do that, when you eliminate the endorsements, and pages of income screen shots. I already believe they made the money, or I wouldn't be reading their sales letter.

    Finally, I will be making liberal use of short videos to explain the sales message, and to build trust in me and my message. Those of us, who can adjust to the new regulations faster and better, will have a competitive advantage.

    Well that was more than 2 cents worth. What do you plan to do about the new regulations?
    Jerry Garner
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    • Profile picture of the author bobsedge
      Originally Posted by garwil200 View Post


      The political environment, is what it is, at least until the next election, so I will just adjust, follow the rules, keep a low profile, and find better ways to sell online. Marketing rules are still the same online, just like offline. When writing an email or salesletter, I will follow the AIDA guidelines. Get their Attention with a headline, build up their Interest with a subheadline and opening paragraphs, built the Desire in the body of the letter, using short paragraphs and lots of bullets, and then give them the Action to take. It doesn't take a long sales letter to do that, when you eliminate the endorsements, and pages of income screen shots. I already believe they made the money, or I wouldn't be reading their sales letter.
      I agree with your assessment for the most part but this is not a product of a political party.

      My problems occurred under the Bush administration. The FTC has always been there but businesses don't notice until it hits their industry.

      Here is the basic rule of them.

      When Republicans are in charge, rules and laws generally favor big business.

      When Dems are in charge, rules and lawyers generally favor consumers for the sake of lawyers.
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  • Profile picture of the author Marian Berghes
    like Lakshay said about his country...its true in mine also, you can sue any entity in the country and win if you have the proper evidence and lawyers.

    I'm planning on moving to the US in the future too and I'm not really scared of all that...to me its not a problem of IF I get sued its a problem of WHEN.

    Thats just the way I see the things...no matter the industry there will always be some organization or some customers that will complain about everything and tell you that because of your "golf swing course my husband got athletes foot" and sht.

    I saw that there are lawyers in the US specialized in how to build and organize your business so that WHEN the FTC or somebody sues you they can't go for everything you got. I don't know how effective they are, I just saw that Mike Filsaime (I think) said something about this stuff in one of his products.
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    • Profile picture of the author bobsedge
      Originally Posted by Marian Berghes View Post


      I saw that there are lawyers in the US specialized in how to build and organize your business so that WHEN the FTC or somebody sues you they can't go for everything you got. I don't know how effective they are, I just saw that Mike Filsaime (I think) said something about this stuff in one of his products.
      I wouldn't trust that claim one bit.

      They hang you upside down and shake the change out of your pockets. And if you hide funds overseas and don't disclose them, if and when they do find out you really have a problem
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      • Profile picture of the author raiko
        I agree with Bob. The political party in charge doesn't really make a difference. Most of those entities such as the FTC wield sufficient power that they can, many times, influence the administration more than the administration can influence them.

        The current polarization of the political scene in the US right now is blinding many people to the fact that we are gradually losing our ability to live our lives the way we want to. It's somewhat sad that people should be afraid of their government but that's the way it's shaping up. Sure government authority is useful in many cases but when the average person starts to become wary or actually fear their own government then things have taken a turn for the worse.
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  • Profile picture of the author Charann Miller
    Bob,

    I'm so sorry to hear your story and I'm still reeling from it. The fact that they could act so quickly is disturbing, they were basically judge, jury and executioner and unless you were an Amway with incredibly deep pockets then they're counting on the little guy to go quietly into the night.

    Another thing that stood out in particular with regards to what you said was that their guidelines were vague for a reason, it suits their purposes because it leaves so much open to interpretation.

    Thank you for coming on here and sharing your experiences, I can only imagine what yourself and your family have gone through.
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  • Profile picture of the author Don Schenk
    Bob, I am so sorry to hear about what happened to you. I can't imagine your pain and the emotional suffering that came with the process. Thank you for sharing a difficult story.

    I remember reading something Joe Sugarman wrote after his run-in with the feds. As I recall, a major snow storm in Chicage knocked out power and caused the computers running his business to die - and lose data. Remember, we are talking computers from 35 years ago.

    The lost data prevented him from fulfilling customers' orders within the 30 day zone, and the feds had a field day with it.

    I may be wrong, but I thought he did not lose everything. The $100,000 number as a fine sticks in my head. Of course that would be equivalent to a million dollar fine today.

    Even Mr. Kern "only" paid a $240K fine. Ouch!


    :-Don
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    • Profile picture of the author bobsedge
      Originally Posted by Don Schenk View Post

      Bob, I am so sorry to hear about what happened to you. I can't imagine your pain and the emotional suffering that came with the process. Thank you for sharing a difficult story.

      I remember reading something Joe Sugarman wrote after his run-in with the feds. As I recall, a major snow storm in Chicage knocked out power and caused the computers running his business to die - and lose data. Remember, we are talking computers from 35 years ago.

      The lost data prevented him from fulfilling customers' orders within the 30 day zone, and the feds had a field day with it.

      I may be wrong, but I thought he did not lose everything. The $100,000 number as a fine sticks in my head. Of course that would be equivalent to a million dollar fine today.

      Even Mr. Kern "only" paid a $240K fine. Ouch!


      :-Don
      Don,

      I'm not sure of the facts about Sugarman's story. I heard it from someone who knows him.

      Actually, I wasn't fined at all. They usually only fine people to the extent of the money they have. So chances are that Sugarman and Kern were fined because that was the amount of money they had to pay.

      The final settlement I reached did not include any admission of guilt and I agreed to a $7 million suspended judgment.

      In the industry I was in, they were more interested in the grand standing of getting people out of the business so others would do so voluntarily.
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    • Profile picture of the author seasoned
      Originally Posted by Don Schenk View Post

      Bob, I am so sorry to hear about what happened to you. I can't imagine your pain and the emotional suffering that came with the process. Thank you for sharing a difficult story.

      I remember reading something Joe Sugarman wrote after his run-in with the feds. As I recall, a major snow storm in Chicage knocked out power and caused the computers running his business to die - and lose data. Remember, we are talking computers from 35 years ago.

      The lost data prevented him from fulfilling customers' orders within the 30 day zone, and the feds had a field day with it.

      I may be wrong, but I thought he did not lose everything. The $100,000 number as a fine sticks in my head. Of course that would be equivalent to a million dollar fine today.

      Even Mr. Kern "only" paid a $240K fine. Ouch!


      :-Don
      Kern BROKE THE LAW! The FTC was right in that case!

      The JS&A deal, if what I heard was correct, was unfortunate. It is HARD to believe that he had NO backup strategy though! 35 years ago?!?!?!? Do you know how expensive ram was back then!?!?!? That was 1974(BTW I could SWEAR it was more like 1979!). Let's see! Assuming he had 10,000 customers(probably LOW), and that each one required 1K of memory(probably LOW), that is 10 MB of memory. If stored in ram, that would cost about $80,000, and the computer would be GIGANTIC. It would also be INCREDIBLY DUMB! So he would HAVE to use mass storage. GRANTED disk drives would cost a lot also, but STILL less than the memory. He could also have had 9 track tapes. The technology WAS there.

      Steve
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      • Profile picture of the author Black Hat Cat
        Banned
        Originally Posted by seasoned View Post

        Kern BROKE THE LAW! The FTC was right in that case!

        Steve
        Did he really?

        http://masscontrolsite.com/blog/?p=57
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        • Profile picture of the author seasoned
          Originally Posted by Black Hat Cat View Post

          YEP! He said that you could make x USD, by simply copying, etc...., and the FTC figured that that was IMPOSSIBLE! I read the FTC description of the case. Maybe frank is talking about a further aspect, because BOTH had to do with "Instant Internet Empires". That very name implies the problem.

          If others were claiming to be him, etc.... He would have a criminal case against them, and could have the FTC investigate THEM! Anyway, I have only aluded to this for years, and never even mentioned names. I am simply saying the FTC had a case. THIS is one of the incidents that got people to be serious about disclaimers.

          Steve
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  • Profile picture of the author Steven Carl Kelly
    Thanks for your story, I'm sorry to hear about your loss and appreciate reading your experience, but I have a question:

    Are you saying that theae allegations in the FTC action are completely and totally untrue?

    The complaint alleges that consumers who call the defendants' toll-free number are told that the defendants will obtain settlements that will substantially reduce their debt. The defendants allegedly promise to negotiate with creditors and begin making payments to them within several weeks after consumers join their program, and to provide personalized financial counseling. As noted in the complaint, consumers allegedly are told to set up a direct debit from their checking account for deposit into a bank account established by the defendants, who will debit their fees and pay creditors. They also are told to have no further contact with their creditors, and to stop paying them immediately, enabling the defendants to negotiate for them.

    The defendants allegedly often fail to contact each creditor as promised, and consumers often continue hearing from creditors about their debts. According to the complaint, in someinstances the defendants fail to negotiate settlements with all of consumers' creditors and don't pay them, resulting in wage garnishment or debt collection agency action. When consumers tell the defendants that they have received a creditor's summons, they allegedly are told not to worry, that it is just a "scare tactic." In some instances, the complaint states, creditors sue these consumers, who have to pay the cost of the creditors' litigation.
    The complaint alleges that, as a result of being in the defendants' program, many consumers experience substantially increased debt because of late fees, finance charges, and overdraft charges, and suffer damage to their credit rating because of significant negative information such as late payments, charge-offs, collections, and garnishments, all of which may appear on their credit report for up to seven years.



    If you don't mind, I would appreciate it if you would address the above complaints.
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    • Profile picture of the author bobsedge
      Originally Posted by Steven Carl Kelly View Post

      Thanks for your story, I'm sorry to hear about your loss and appreciate reading your experience, but I have a question:

      Are you saying that theae allegations in the FTC action are completely and totally untrue?

      The complaint alleges that consumers who call the defendants' toll-free number are told that the defendants will obtain settlements that will substantially reduce their debt. The defendants allegedly promise to negotiate with creditors and begin making payments to them within several weeks after consumers join their program, and to provide personalized financial counseling. As noted in the complaint, consumers allegedly are told to set up a direct debit from their checking account for deposit into a bank account established by the defendants, who will debit their fees and pay creditors. They also are told to have no further contact with their creditors, and to stop paying them immediately, enabling the defendants to negotiate for them.

      The defendants allegedly often fail to contact each creditor as promised, and consumers often continue hearing from creditors about their debts. According to the complaint, in someinstances the defendants fail to negotiate settlements with all of consumers' creditors and don't pay them, resulting in wage garnishment or debt collection agency action. When consumers tell the defendants that they have received a creditor's summons, they allegedly are told not to worry, that it is just a "scare tactic." In some instances, the complaint states, creditors sue these consumers, who have to pay the cost of the creditors' litigation.
      The complaint alleges that, as a result of being in the defendants' program, many consumers experience substantially increased debt because of late fees, finance charges, and overdraft charges, and suffer damage to their credit rating because of significant negative information such as late payments, charge-offs, collections, and garnishments, all of which may appear on their credit report for up to seven years.



      If you don't mind, I would appreciate it if you would address the above complaints.
      Steven,

      I'm not going to go into this whole thing, but there are truths and half truths. Most of it is not true, but some of it is true and just a characteristic of joining this type of program.

      Debt settlement is likened to oncology. We dealt with the most severe financial situations and some people did not survive it.And even the ones it worked for, their situation often got worse before it got better.

      These people could not make the payments to their creditors with or without this program. So of course, their balances were going to go up and they were going to be hit by fees. But when we settled, it didn't matter. And credit was not an issue because their credit was already bad.

      But here is the important thing. Every person that joined our program knew the risks. We made sure of it by recording the confirmation call. We didn't trust counselors because they were either money or job motivated, so we had a check and balance.

      This is the point of the whole issue and we should take heed as business people. I could never win. Take the new rules (and it was true two years ago as well). My people would say that we could settle debt for ____. But to combat an FTC complaint, it's not enough to say that results may vary. You need to be able to prove that what we say can be the expectations.

      There are so many variables, what are the expectations? If people followed our lead and put up with the discomfort of the program, they got results. But if they didn't, the program didn't work. That's the problem. We can't control the actions of the customers and that predicates the expectations.

      If I knew then what I know now, I wouldn't have allowed any claims to be made. We wouldn't have sold a thing because 1,000 other companies were making outrageous claims, but I wouldn't have done. And in the end, it still wouldn't have made a difference because they would have found something else.
      Signature
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  • Profile picture of the author seasoned
    bobsedge,

    TWO things I don't understand.

    1. You said that the first two stipulations to the court, that you denied here, are TRUE!
    2. The Judgment says you played the same garbage I have seen almost every other "debt solution" firm, that I have seen, do.

    If those two are true, the FTC was only doing its proper job!

    I don't care WHAT your relationship is with a given bank. That doesn't mean you can guarantee, or even APPEAR to guarantee, a 60% reduction for anyone.

    Steve
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    • Profile picture of the author Steven Carl Kelly
      Originally Posted by seasoned View Post

      If those two are true, the FTC was only doing its proper job!
      I have read the actual complain by the FTC:

      http://www.ftc.gov/os/caselist/07230...tionscmplt.pdf

      and there are a number of things therein that disturb me about the operation of this particular business. If any of these are true, then I would support the FTC's action. If every single one of these allegations are false, then this is a shameful abuse of power by the FTC.

      Apparently, unless they're flat-out lying, they received numerous complaints about Bob's business, including some of his customers being the subject of lawsuits by their creditors. Again, if this is false, then this is a terrible miscarriage of justice. However, if true, then I can understand why the FTC would have taken action.
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    • Profile picture of the author bobsedge
      Originally Posted by seasoned View Post

      bobsedge,

      TWO things I don't understand.

      1. You said that the first two stipulations to the court, that you denied here, are TRUE!
      2. The Judgment says you played the same garbage I have seen almost every other "debt solution" firm, that I have seen, do.

      If those two are true, the FTC was only doing its proper job!

      I don't care WHAT your relationship is with a given bank. That doesn't mean you can guarantee, or even APPEAR to guarantee, a 60% reduction for anyone.

      Steve
      I don't know what you are talking about. Who said I stipulated to anything. In the final settlement there was no admission or assumption of guilt.

      In the settlement it just states the allegation, not any admission.
      Signature
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      • Profile picture of the author seasoned
        Originally Posted by bobsedge View Post

        I don't know what you are talking about. Who said I stipulated to anything. In the final settlement there was no admission or assumption of guilt.

        In the settlement it just states the allegation, not any admission.
        OH, I thought you were the defendant. What I was referring to was page 2 of the order which said you agreed to it.

        Steve
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  • Profile picture of the author Steven Carl Kelly
    Thanks for the response, Bob, I appreciate it. I'm also very familiar with how debt settlement companies work, I've consulted on Web strategies for several high-profile financial institutions here in the US and specifically with several other agencies involved in the area of credit and debt settlement.
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  • Profile picture of the author Steven Carl Kelly
    BTW:

    If the story above about Sugarman is accurate (I have no idea) then he surely was a seriously bad businessman who clearly didn't care one bit about his customers. That's my opinion, anyhow.
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  • Profile picture of the author Steven Carl Kelly
    BTW, I found this article on the Sugarman situation:

    Joe Sugarman: Free Enterprise Hero?

    Sounds like Sugarman is truly an expert marketer. He took the FTC's $75,000 action against him and leveraged the average man's disdain for big government into a marketing campaign that earned him perhaps many times the amount of the fine.
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    • Profile picture of the author bobsedge
      Originally Posted by Steven Carl Kelly View Post

      BTW, I found this article on the Sugarman situation:

      Joe Sugarman: Free Enterprise Hero?

      Sounds like Sugarman is truly an expert marketer. He took the FTC's $75,000 action against him and leveraged the average man's disdain for big government into a marketing campaign that earned him perhaps many times the amount of the fine.
      From what I understand, the end result was not that great for him.
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      • Profile picture of the author Steven Carl Kelly
        Originally Posted by bobsedge View Post

        From what I understand, the end result was not that great for him.
        I'm not familiar with the whole story, but I'll take a deeper look. To be honest, if he did actually fail to ship customer orders within the required 30 days, there's really no acceptable excuse, particularly if he blamed computers for it.
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        • Profile picture of the author bobsedge
          Originally Posted by Steven Carl Kelly View Post

          I'm not familiar with the whole story, but I'll take a deeper look. To be honest, if he did actually fail to ship customer orders within the required 30 days, there's really no acceptable excuse, particularly if he blamed computers for it.
          I don't know the inside story as to what happened, but do you really think the FTC goes after every business that misses a shipping deadline?

          There has to be some reasonableness here.

          I'm sure you jaw walked before. How would you feel if you were ticketed? Sure, jay walking is technically against the law, but is anyone ever prosecuted for it?

          The rational is, perhaps we did break the letter of the law but did it warrant the slap?

          I can't judge that.
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          • Profile picture of the author Steven Carl Kelly
            Originally Posted by bobsedge View Post

            I don't know the inside story as to what happened, but do you really think the FTC goes after every business that misses a shipping deadline?
            Of course not, they don't have the resources. But if Sugarman did, then he deserves to have action taken against him.

            Originally Posted by bobsedge View Post

            I'm sure you jaw walked before. How would you feel if you were ticketed? Sure, jay walking is technically against the law, but is anyone ever prosecuted for it?
            I watch the TV show "Speeders" so, judging by the people on that show, I'd be considered the exception and not the norm. If I were ticketed for jaywalking I wouldn't like it, but I certainly would recognize that I broke the law and deserved the punishment.

            I've gotten a speeding ticket before. Hundreds of others were speeding and didn't get pulled over but I did. I deserved the ticket -- the fact that many others got away without one is completely irrelevant.

            Originally Posted by bobsedge View Post

            The rational is, perhaps we did break the letter of the law but did it warrant the slap?

            I can't judge that.
            Hard to say. But if you admit you broke the law, then I guess while it may seem unfair from your POV, it still may have been warranted.
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          • Profile picture of the author SuperSand
            Hi Bob,

            You are one of the members that involve directly with this matter. I feel sorry for you and hope the very best of your upcoming business and anything you do in future.

            Just want to clarify something - I got this email form one of the top marketer, i thank him for the information given to me and other subscribers too.

            They did mentioned something on how to make it works with FTC rules and how we can get out from it.

            Here is the email that I get from them:

            " Hi nizam,

            As you may of heard the FTC has released some new guidelines which
            will affect all affiliates working online.

            We got many questions about this recent change so we decided to
            give you all the facts and answer all your questions in this
            newsletter.

            What's the short version of what the FTC changes are?
            -----------------------------------
            The U.S. Federal Trade Commission released their new guidelines on
            10/05/2009. You'll find the complete guidelines at
            FTC Publishes Final Guides Governing Endorsements, Testimonials.

            It's a long read, so let's see if we can summarize the main points
            for you quickly:

            1) If you have a relationship with someone whose product you're
            endorsing (which also means promoting), you must disclose that
            relationship. That means you have to say explicitly if you got a
            free copy of the product and/or any payment for your endorsement.

            2) If you use testimonials to sell a product (yours or someone
            else's), you can't use testimonials that give specific results
            without also telling readers/viewers what the typical results are.

            They'll fine you $11,000 per violation.

            There are more details in the guidelines, which we strongly
            recommend that you read, but those are the key points. And by the
            way, we're not lawyers, so by all means get true legal advice from
            a lawyer as you're figuring out how you'll respond to the new
            regulations.

            Frankly, some parts of the new guidelines are vague. The FTC says
            they did that somewhat on purpose, and they'll handle things on a
            case by case basis.

            That makes it more difficult to know how to comply in certain
            situations, because it's hard to figure out how the guidelines
            apply, but that's the way it is.

            That means there are plenty of unresolved questions, too...and we
            won't know the answers until the FTC starts enforcing the
            regulations.

            The FTC has said that the guidelines are really meant to clarify
            things for bloggers and for corporations, but it's easy to see how
            they could go after just about any marketer due to the vague
            language.

            When do the new rules take effect?

            -----------------------
            They go into effect on December 01, 2009.

            They were approved by a unanimous vote (4-0), so there's no chance
            they won't go into effect on the scheduled date. This is just
            something we'll all have to live with, whether we like it or not.

            What about for marketers with businesses outside the U.S.?
            ---------------------------------------
            If you're outside the U.S. and you're not selling to people inside
            the U.S., you're not affected at all.

            But really, how many web businesses never sell to people in the
            U.S.? Not many. It's safer to assume that folks in the States will
            buy your stuff, and that you should follow the FTC guidelines.

            What does this mean for testimonials on a sales page?
            -----------------------------------
            We know you've seen testimonials on sales pages that say things
            like, "I made $14,576 in 20 minutes with just the tip on page
            12!!!" Those are likely to disappear.

            It used to be perfectly acceptable to cherry-pick great results
            like that and cover yourself with a simple disclaimer like this:

            "These results aren't typical." Not anymore.

            The guidelines say, "advertisements that feature a consumer and
            convey his or her experience with a product or service as typical
            when that is not the case will be required to clearly disclose the
            results that consumers can generally expect."

            That means if you're going to mention specific results in
            testimonials, you have to tell people what the typical results are.

            We all know what the typical results are for most information
            products... people buy them and do nothing with them. That means
            it's nearly impossible for you to quantify a "typical" result. If
            you don't know what results at least a statistically significant
            sample of buyers got, you can say what's typical!

            All of that means (get ready for it) you simply can't use
            results-based testimonials. Period. Unless you want to risk an
            $11,000 fine each time you get caught.

            You can still use testimonials where people say they love your
            product, or like you a lot, or generally think you're swell. Those
            tend not to be powerful selling tools, but they pass muster.

            But that's not all the guidelines mean.

            You also have to disclose if your friends wrote your testimonials.

            Again, will you get caught if you don't? Probably not, but it's a
            risk. Honesty is the best way not to get in trouble.

            The best advice is not to depend on testimonials to sell your
            product. Make your offer good enough to sell on its own.

            In a way, this is bad for new marketers, because it can be tough to
            come up with a good offer. But it's also good, because you don't
            have to worry as much about getting testimonials!

            What does this mean for affiliate marketing?
            -----------------------------
            It's actually simpler for affiliates than for product sellers.

            If you're an affiliate, you have to disclose that you're getting
            paid when people buy through your affiliate link.

            Yes, that means you need to tell people that your ClickBank link is
            indeed a ClickBank link, even if you've made it prettier by saying

            "yoursite dot com/productx" or whatever.

            There are two ways to do this. The first way is to include a
            general statement on your site (maybe in your privacy policy),
            something like this:

            "Links on this site for product reviews are affiliate links. I get
            paid a commission when you buy a product after clicking on one of
            those links."

            The second way is to be explicit about each link. You might say
            something like, "I get paid a commission when you buy through this
            link."

            Do both approaches cover you legally? Hard to say, and the FTC
            hasn't cleared that up yet. So do whichever one you think is safer.

            Finally, as an affiliate be VERY careful about using the
            promotional email templates product sellers give you.

            Those emails often contain claims about results, and the new FTC
            guidelines frown on that unless you tell people what the typical
            results are.

            The new FTC guidelines don't specifically talk about email
            marketing, but odds are good this will be considered covered as
            well (hey, it's selling). So when in doubt, leave it out.

            So what should I do?
            -------------
            First and foremost, you'll want to get some genuine legal advice,
            especially if you have a big site and/or a large mailing list.

            Don't just take our word for this stuff.

            If you're an affiliate marketer, get busy adding disclosures to the
            sites you use to promote products. That includes blogs and review
            pages/sites. At a minimum:

            1) Add a general disclosure to your site saying that your
            promotional links are affiliate links, and that you get paid when
            people buy through those links

            2) If you offer an free items (front-end sign-up enticements or
            bonuses), make sure you tell people that any affiliate links in
            those items are getting you paid

            Beyond that, it's up to you. When in doubt, disclose more
            information than you think you need to. It doesn't pay to get on
            the wrong side of the FTC.

            If you're a product marketer, you'll probably have more work to do.

            Here's a very brief (and probably incomplete) checklist:

            1) Start scrubbing your results-based testimonials from your sales
            pages. If you actually CAN quantify typical/average results, go
            ahead and do that, but most people won't be able to. In fact,
            during the comment period on the rules, some folks brought that up
            with the FTC, specifically for weight loss products...and the FTC
            promptly ignored it.

            2) Modify your affiliate email templates (and other things, like
            solo ads) to remove any results claims.

            3) Contact your affiliates to tell them you did that, and to give
            them new stuff they can use instead.

            4) Scrub your products of any results claims as well, unless
            they're your personal results and you include ALL of your results
            (results for every single trial of your free traffic strategy, for
            example).

            5) If you use any testimonials from people you gave a free copy of
            your product to, say so.

            Bottom line, disclose, disclose, disclose. Did we mention disclose?

            In the end, these new guidelines aren't the death of Internet
            marketing, or of affiliate marketing. And if you sell a product on
            the web, you aren't out of business.

            That said, if you don't want to risk racking up some eye-popping
            fines, please take some reasonable steps to comply with the new
            guidelines as soon as you can... and as completely as you can,
            given that they're a little vague at the moment.

            We all have to make changes, unless we just got lucky and were
            completely untouched by the new guidelines. That's probably rare.

            So make the changes you need to make and get used to the new world.

            And look on the bright side. The new guidelines are going to make
            it harder for people to sell with hype and false promises. Those
            kind of fraudulent sellers hurt everybody by giving Internet
            marketing a bad name.

            The marketers who can pass muster and sell well even when being
            completely honest can still make a killing."
            ----------------------------------------

            Bob, what do you think of that?

            I think some of the information given will helps us especially for internet marketers that live outside USA.

            Cheers,

            Nizam
            {{ DiscussionBoard.errors[1272026].message }}
            • Profile picture of the author SuperSand
              Yes Bob, That's sound logical to what is happening right now... i do believe not many marketers will change their think and business style... Until somebody get ripped by FTC.

              Thank you to Andrew X and Steven Lee Jones for their great information to us.

              Well Bob - Life's go on... Good Luck.

              Originally Posted by bobsedge View Post

              Nizam,

              I'm not a lawyer and I'm not an expert on the new rules, but the advice looks pretty sound.

              But here is my guess as to what is going to happen.

              Ninety percent of marketers won't change a think. Out of the ten percent that change their practices, most will revert back to the old ways when they see that most people are not abiding by them and its costing them business.

              Then the FTC will hammer someone in the industry and scare some people out of the industry entirely and many others will really start abiding.

              Me personally, I will abide by these rules. I will try to find a way of putting a positive spin on it.

              I believe the claims and testimonials have gotten ridiculous. They are so wild that I'm not sure they mean anything anyway. It makes it really tough on new people who don't have those testimonials in their pocket and feel compelled to either make them up or buy them.

              Maybe to a certain extent this will level the playing field.
              Originally Posted by SuperSand View Post

              Hi Bob,

              You are one of the members that involve directly with this matter. I feel sorry for you and hope the very best of your upcoming business and anything you do in future.

              Just want to clarify something - I got this email form one of the top marketer, i thank him for the information given to me and other subscribers too.

              They did mentioned something on how to make it works with FTC rules and how we can get out from it.

              Here is the email that I get from them:

              " Hi nizam,

              As you may of heard the FTC has released some new guidelines which
              will affect all affiliates working online.

              We got many questions about this recent change so we decided to
              give you all the facts and answer all your questions in this
              newsletter.

              What's the short version of what the FTC changes are?
              -----------------------------------
              The U.S. Federal Trade Commission released their new guidelines on
              10/05/2009. You'll find the complete guidelines at
              FTC Publishes Final Guides Governing Endorsements, Testimonials.

              It's a long read, so let's see if we can summarize the main points
              for you quickly:

              1) If you have a relationship with someone whose product you're
              endorsing (which also means promoting), you must disclose that
              relationship. That means you have to say explicitly if you got a
              free copy of the product and/or any payment for your endorsement.

              2) If you use testimonials to sell a product (yours or someone
              else's), you can't use testimonials that give specific results
              without also telling readers/viewers what the typical results are.

              They'll fine you $11,000 per violation.

              There are more details in the guidelines, which we strongly
              recommend that you read, but those are the key points. And by the
              way, we're not lawyers, so by all means get true legal advice from
              a lawyer as you're figuring out how you'll respond to the new
              regulations.

              Frankly, some parts of the new guidelines are vague. The FTC says
              they did that somewhat on purpose, and they'll handle things on a
              case by case basis.

              That makes it more difficult to know how to comply in certain
              situations, because it's hard to figure out how the guidelines
              apply, but that's the way it is.

              That means there are plenty of unresolved questions, too...and we
              won't know the answers until the FTC starts enforcing the
              regulations.

              The FTC has said that the guidelines are really meant to clarify
              things for bloggers and for corporations, but it's easy to see how
              they could go after just about any marketer due to the vague
              language.

              When do the new rules take effect?

              -----------------------
              They go into effect on December 01, 2009.

              They were approved by a unanimous vote (4-0), so there's no chance
              they won't go into effect on the scheduled date. This is just
              something we'll all have to live with, whether we like it or not.

              What about for marketers with businesses outside the U.S.?
              ---------------------------------------
              If you're outside the U.S. and you're not selling to people inside
              the U.S., you're not affected at all.

              But really, how many web businesses never sell to people in the
              U.S.? Not many. It's safer to assume that folks in the States will
              buy your stuff, and that you should follow the FTC guidelines.

              What does this mean for testimonials on a sales page?
              -----------------------------------
              We know you've seen testimonials on sales pages that say things
              like, "I made $14,576 in 20 minutes with just the tip on page
              12!!!" Those are likely to disappear.

              It used to be perfectly acceptable to cherry-pick great results
              like that and cover yourself with a simple disclaimer like this:

              "These results aren't typical." Not anymore.

              The guidelines say, "advertisements that feature a consumer and
              convey his or her experience with a product or service as typical
              when that is not the case will be required to clearly disclose the
              results that consumers can generally expect."

              That means if you're going to mention specific results in
              testimonials, you have to tell people what the typical results are.

              We all know what the typical results are for most information
              products... people buy them and do nothing with them. That means
              it's nearly impossible for you to quantify a "typical" result. If
              you don't know what results at least a statistically significant
              sample of buyers got, you can say what's typical!

              All of that means (get ready for it) you simply can't use
              results-based testimonials. Period. Unless you want to risk an
              $11,000 fine each time you get caught.

              You can still use testimonials where people say they love your
              product, or like you a lot, or generally think you're swell. Those
              tend not to be powerful selling tools, but they pass muster.

              But that's not all the guidelines mean.

              You also have to disclose if your friends wrote your testimonials.

              Again, will you get caught if you don't? Probably not, but it's a
              risk. Honesty is the best way not to get in trouble.

              The best advice is not to depend on testimonials to sell your
              product. Make your offer good enough to sell on its own.

              In a way, this is bad for new marketers, because it can be tough to
              come up with a good offer. But it's also good, because you don't
              have to worry as much about getting testimonials!

              What does this mean for affiliate marketing?
              -----------------------------
              It's actually simpler for affiliates than for product sellers.

              If you're an affiliate, you have to disclose that you're getting
              paid when people buy through your affiliate link.

              Yes, that means you need to tell people that your ClickBank link is
              indeed a ClickBank link, even if you've made it prettier by saying

              "yoursite dot com/productx" or whatever.

              There are two ways to do this. The first way is to include a
              general statement on your site (maybe in your privacy policy),
              something like this:

              "Links on this site for product reviews are affiliate links. I get
              paid a commission when you buy a product after clicking on one of
              those links."

              The second way is to be explicit about each link. You might say
              something like, "I get paid a commission when you buy through this
              link."

              Do both approaches cover you legally? Hard to say, and the FTC
              hasn't cleared that up yet. So do whichever one you think is safer.

              Finally, as an affiliate be VERY careful about using the
              promotional email templates product sellers give you.

              Those emails often contain claims about results, and the new FTC
              guidelines frown on that unless you tell people what the typical
              results are.

              The new FTC guidelines don't specifically talk about email
              marketing, but odds are good this will be considered covered as
              well (hey, it's selling). So when in doubt, leave it out.

              So what should I do?
              -------------
              First and foremost, you'll want to get some genuine legal advice,
              especially if you have a big site and/or a large mailing list.

              Don't just take our word for this stuff.

              If you're an affiliate marketer, get busy adding disclosures to the
              sites you use to promote products. That includes blogs and review
              pages/sites. At a minimum:

              1) Add a general disclosure to your site saying that your
              promotional links are affiliate links, and that you get paid when
              people buy through those links

              2) If you offer an free items (front-end sign-up enticements or
              bonuses), make sure you tell people that any affiliate links in
              those items are getting you paid

              Beyond that, it's up to you. When in doubt, disclose more
              information than you think you need to. It doesn't pay to get on
              the wrong side of the FTC.

              If you're a product marketer, you'll probably have more work to do.

              Here's a very brief (and probably incomplete) checklist:

              1) Start scrubbing your results-based testimonials from your sales
              pages. If you actually CAN quantify typical/average results, go
              ahead and do that, but most people won't be able to. In fact,
              during the comment period on the rules, some folks brought that up
              with the FTC, specifically for weight loss products...and the FTC
              promptly ignored it.

              2) Modify your affiliate email templates (and other things, like
              solo ads) to remove any results claims.

              3) Contact your affiliates to tell them you did that, and to give
              them new stuff they can use instead.

              4) Scrub your products of any results claims as well, unless
              they're your personal results and you include ALL of your results
              (results for every single trial of your free traffic strategy, for
              example).

              5) If you use any testimonials from people you gave a free copy of
              your product to, say so.

              Bottom line, disclose, disclose, disclose. Did we mention disclose?

              In the end, these new guidelines aren't the death of Internet
              marketing, or of affiliate marketing. And if you sell a product on
              the web, you aren't out of business.

              That said, if you don't want to risk racking up some eye-popping
              fines, please take some reasonable steps to comply with the new
              guidelines as soon as you can... and as completely as you can,
              given that they're a little vague at the moment.

              We all have to make changes, unless we just got lucky and were
              completely untouched by the new guidelines. That's probably rare.

              So make the changes you need to make and get used to the new world.

              And look on the bright side. The new guidelines are going to make
              it harder for people to sell with hype and false promises. Those
              kind of fraudulent sellers hurt everybody by giving Internet
              marketing a bad name.

              The marketers who can pass muster and sell well even when being
              completely honest can still make a killing."
              ----------------------------------------

              Bob, what do you think of that?

              I think some of the information given will helps us especially for internet marketers that live outside USA.

              Cheers,

              Nizam
              {{ DiscussionBoard.errors[1273575].message }}
        • Profile picture of the author seasoned
          Originally Posted by Steven Carl Kelly View Post

          I'm not familiar with the whole story, but I'll take a deeper look. To be honest, if he did actually fail to ship customer orders within the required 30 days, there's really no acceptable excuse, particularly if he blamed computers for it.
          As I recall, companies TYPICALLY said things like "please allow 4-6 weeks for delivery", but that was not actually REQUIRED. I think the laws were CHANGED because of JS&A! NOW you HAVE to state that there may be a delay and, if it is further delayed, you must give the customer the option to back out of the deal.

          ALSO, as I recall, he said he had NO ACCESS to the customer list. I think it may even have been that he had no access to the hardware.

          Well, that gives everyone MORE reason to have offline backups.

          Steve
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  • Profile picture of the author bobsedge
    I think I have been fairly transparent here. Was my company perfect? No. We were imperfect an an imperfect industry. And when we were growing very rapidly, I'm sure we made a ton of mistakes. But we also put in safeguards as quickly as we could to correct them. And I know this for sure. Not one day did I ever wake up and say today I'm going to screw people.

    Any complaint by the FTC or any other agency will be one sided. They are not going to be even handed so believe what you want.

    There was an agenda here and we were unlucky enough to come up as the target. It could have been 1,000 other companies in that industry alone,but for the reasons I mentioned, we came up. It is what it is.
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  • Profile picture of the author bobsedge
    Steve,

    In that last quote I actually meant to say "he" (referring to Joe Sugarman) not "we". I don't admit that I broke the law.
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  • Profile picture of the author HeySal
    This is precisely the kind of thing that I was trying to stress in the thread that I had the link to the pdf in. There are no hard and fast rules. You can be judged so arbitrarily that it doesn't matter what you try to comply with - there are loops that allow them to get you if they want you. No black and white can and can'ts.

    I also pointed out the fines - $11,000 isn't "we're going after the big boys". It's the little guys that they can take down real easy. Would a major company even blink at an $11,000 fine? Some of them don't do much more than shrug if you give them six figures.

    Also - as far as industry. We have the CODEX alimeterus going into effect n January, so that is any business in alternative health that is at risk. That's my niche even if in only an offhanded way. I'm ripping my testimonials off my salespages then going to go over them with a fine-toothed comb. I have a background in ethnolinguistics that covers a lot of linguistic fields so I can counter any semantics based arguments and I have a feeling that many arguments will turn completely semantics - another area where there aren't many experts that know where black and white stops and grey begins - and one they will use. Trust me on that one.

    bobsedge - congratulations on keeping your home. There are over 200 laws on the books now that allow the government to walk in and take every darned thing you own. You got very lucky.
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  • Profile picture of the author bobsedge
    Nizam,

    I'm not a lawyer and I'm not an expert on the new rules, but the advice looks pretty sound.

    But here is my guess as to what is going to happen.

    Ninety percent of marketers won't change a think. Out of the ten percent that change their practices, most will revert back to the old ways when they see that most people are not abiding by them and its costing them business.

    Then the FTC will hammer someone in the industry and scare some people out of the industry entirely and many others will really start abiding.

    Me personally, I will abide by these rules. I will try to find a way of putting a positive spin on it.

    I believe the claims and testimonials have gotten ridiculous. They are so wild that I'm not sure they mean anything anyway. It makes it really tough on new people who don't have those testimonials in their pocket and feel compelled to either make them up or buy them.

    Maybe to a certain extent this will level the playing field.
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  • Profile picture of the author bobsedge
    Nathan,

    These cases look interesting. They all occurred after my case commenced so I wouldn't have come across them in the few days I had to decide my path.

    I'm glad I didn't have to make that decision because I still would not like to play the odds.
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  • Profile picture of the author mprey
    Sorry to hear that Bob. It makes me wonder why affiliates are generally not thinking about moving offshore. It seems like that would make things so much easier...
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  • Profile picture of the author pcpupil
    Thanks for the post and honesty.I know of a person,that had his own company years ago.Not a long time,but ago.
    Now this was by the IRS,but since there was something mentioned in this post ill say and see what a few of you think.
    He repported what he earned.The IRS said different.So they sent out these 2-3 guys,people to look at his house,cars,assets,whatever.
    When they got there,looked t his house and,cars,ect,they filled out some paper work after looking at one another.And left.He recieved a letter in the mail saying there basiclly was a mistake and to forget about it.
    The reason was they thought,he didnt have anything they wanted.And trust me,if he was padding anything,and had illions,he sure as h##l didnt show it.
    Maybe he had his boat or other items in his kids name at there house,ect.
    But,bottom line,they quit.Left him alone.
    Like said in this post,keep it low,honest,ect,and youll prpbably be fine.
    Wonder if i could start my own BBB.
    Maybe IM.Would they leave me alone then?
    Mat
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    • Profile picture of the author St Croix
      This actually raises some interesting questions for the whole "move offshore" thing and the benefits overseas people may have. There are more than two sides to the coin too.

      For example, I am in Australia, but if my sites are hosted on Hostgator etc. then am I selling affiliate products from American soil to Americans? Yes. Could I be done? Not sure, but maybe a take down notice could be sent to hostgator and I could lose my web sites...

      -Or- the FTC will go straight to the product vendor and sting them with the fine as they hadn't properly vetted their affiliates and false/non disclosed claims were being made about their product.

      Now if this happens, let's look at what will probably happen to cross-shore affiliate marketing....

      I'm an American with a Clickbank product to sell. My policy is no longer to accept non US affiliates as there is no skin off their nose if they don't comply with FTC regulations - increasing the risk that the FTC will come straight to me when one of them royally screws up. At least my US affiliates will be more inclined to comply as it's their asses on the line as well.

      So it could potentially be a lose-lose for those of us overseas.
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  • Profile picture of the author psresearch
    Originally Posted by bobsedge View Post

    These latest rule changes have triggered a number of threads on this forum over the past week or so.

    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.

    Bob
    These are some great points and I think are worth addressing further. Having talked to FTC attorneys and one investigator directly about one of their recent Operation Shortchange cases you bring up some interesting observations worth paying attention to.

    *Re: Fallacy #1 - I'm not sure about some of this, but the observation that the investigators are not very good certainly seems to fit my opinion from my conversations and experience with the investigator I spoke with there was - the investigator was NOT very good. There was often data he could not find that most members of this forum would be able to find within minutes.

    As annoying as it may be for the reasons pointed out about the strange and ethically paradoxical nature of the BBB already discussed, staying on the right side of the BBB is probably a good idea.

    Staying on the right side of your local AG is also key as many cases that hit the FTC originally start at the AG level. And while I'm not convinced that the FTC is a corrupt organization, I think it's been clearly demonstrated that AGs can be quite prone to corruption or at least contamination due to campaign contributions in deciding what actions they pursue. Not, I am NOT saying to contribute to your local AG, however if they pursue your business but are obviously ignorning a real trouble business that may be what's going on and you may be able to use that to your advantage.

    You can see a great example of this here:
    A story of fraud, drugs, waterboarding and the call-center companies that gave Attorney General Mark Shurtleff $187,500 in 2008

    I've run across a similar example which I can't recall at this point.

    *Re: Fallacy #2: The FTC will send you a warning.

    Certainly the FTC has been known to give companies "clean up periods", but don't count on it. Think about it logically, if they believe they have a case against you they are NOT going to want to tip you off and potentially lose access to evidence that they could collect.

    So it really goes back to staying off the complaint radar.

    *Re: Fallacy #3: The truth will come out in court...

    Whether it's ONE case that the FTC has lost or a few, the FTC typically only proceeds with cases it thinks it can win. Whether they can win for some of the nefarious reasons presented or because they actually have a winnable case, I think its safe to say that if the FTC files against you, you are probably toast.

    What really stinks in my opinion is that the actual criminals and organized crime stay out of reach:

    1. Because they are so much harder to investigate (see Fallacy #1)
    2. Because the FTC has limited resources (unlike what some people seem to bizarrely believe about FTC and Federal Law Enforcement funding in General).

    *Re: Fallacy #4: "they find the company they want to target first then they find ways you broke the rules"

    That statement doesn't really seem to true if you just randomly sample some of the FTC cases. While they transparently go after certain industries - after all they actually NAME their operations after the the industries they go after - a lot of the companies they go after are driven by the volume of complaints...it definitely seems like yours may have been an exception if you only had 25 comlaints, though.

    *Re: 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."

    Not sure about this one. They definitely want higher exposure/impact cases, but I think that's more about the litigators chance of getting a case approved for prosecution.
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  • Profile picture of the author bhola badshah
    I am sorry to hear this all, there must be some thing better for you in it. some lesson or future planning. Pray to one God , who helps all
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  • Profile picture of the author TristanPerry
    Sounds absolutely awful.

    I'm glad I'm a British citizen (especially after, as a host, also hearing of some cases where the FBI have raided an entire datacentre and kept power to all servers off for many hours), although I am fully aware that such companies will try to bully their way outside of their jurisdiction, too.

    Sorry to hear this.
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    • Profile picture of the author TelegramSam
      Originally Posted by TristanPerry View Post

      Sounds absolutely awful.

      I'm glad I'm a British citizen...

      Don't sit too comfortably. The EU is working on this right now too.
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      • Profile picture of the author Ruka
        Originally Posted by TelegramSam View Post

        Don't sit too comfortably. The EU is working on this right now too.
        I'm UK based, but my market is worldwide including the US. I plan to make sure I comply with the FTC regulations, and the UK ASA regulations.

        TelegramSam, do you know what other regulations are coming in for the UK/EU?
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        • Profile picture of the author Steven Wagenheim
          Wow...what an amazing thread. I don't even know where to begin.

          Bob, first of all, I am sorry about what happened to you. Right or wrong, it's
          not something I'd wish on anyone unless they were an outright thief.

          Having said that, your business model was a damn risky one to begin with,
          something I personally wouldn't tackle unless my life depended on it. My
          point is, what happened to you is probably not the typical worry that
          somebody who is selling ebooks on how to learn Chinese has to worry
          about. Some businesses, because of their low profile, will probably be able
          to get away with more...not that I am condoning lying. I'm just saying that
          the FTC is less likely to come after Joe Blow who is selling alternative
          heating for your home through solar panels than somebody who is selling
          debt relief.

          You made a good suggestion...don't mess with the BBB. Hell, don't tangle
          with anybody. The more noise you make, the more they will look at you.
          Flying under the radar is not a bad thing. Will you maybe make less money?
          Probably...but you'll end up in less trouble too.

          As others have said, nobody really knows how this is going to play out,
          so we're just going to have to wait and see.

          My personal advice to anyone is simple.

          If you think something you're going to put on your blog or sales page
          MIGHT get you in trouble...don't put it there.

          It's really THAT simple.
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          • Profile picture of the author bobsedge
            Originally Posted by Steven Wagenheim View Post

            Wow...what an amazing thread. I don't even know where to begin.

            Bob, first of all, I am sorry about what happened to you. Right or wrong, it's
            not something I'd wish on anyone unless they were an outright thief.

            Having said that, your business model was a damn risky one to begin with,
            something I personally wouldn't tackle unless my life depended on it. My
            point is, what happened to you is probably not the typical worry that
            somebody who is selling ebooks on how to learn Chinese has to worry
            about. Some businesses, because of their low profile, will probably be able
            to get away with more...not that I am condoning lying. I'm just saying that
            the FTC is less likely to come after Joe Blow who is selling alternative
            heating for your home through solar panels than somebody who is selling
            debt relief.

            You made a good suggestion...don't mess with the BBB. Hell, don't tangle
            with anybody. The more noise you make, the more they will look at you.
            Flying under the radar is not a bad thing. Will you maybe make less money?
            Probably...but you'll end up in less trouble too.

            As others have said, nobody really knows how this is going to play out,
            so we're just going to have to wait and see.

            My personal advice to anyone is simple.

            If you think something you're going to put on your blog or sales page
            MIGHT get you in trouble...don't put it there.

            It's really THAT simple.
            Steven,

            In retrospect, it was a risky business model but it wasn't when I started out. Remember, a bank even invested in my business.

            What made it risky were the players that followed me into the business. People looking to make the quick buck and knowing they were pushing the envelope to do so, but not caring.

            Think about what I just said.

            Is this the same internet marketing arena that you first entered?

            I've been in this space a few years and I would say the product launch hype is ten times worse than it was when I started.

            I have not seen a sales letter on a big product launch that the FTC would not be able to rip apart in seconds. It has gotten really bad.

            The point is, most marketers have nothing to worry about. But I can definitely see a time when the FTC comes after a BIG guru just to make a point and takes down the JV partners with him. It would be too easy. And believe me when I say that they are not shy about throwing everyone and everything into the soup.

            I don't want to scare anyone but it is fair to point out that it's not enough for you to keep a low profile. You also need to ask whether the people in your upline are also keeping a low profile.

            Now in my case, we had affiliates and they were not touched other than their clients were also caught up in this.

            I can't predict what is going to happen but I do suggest to everyone to let that little voice come out and play and ask the right questions. Don't assume.
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  • Profile picture of the author scrofford
    I used to be proud to be an American...I served in the military and vowed to defend her. Now I am disgusted with just about EVERY PART of our government. We are not free...I believe that its going to get worse also. They want to control EVERY aspect of our lives. I have no trust in our system or our government. As soon as I can I will be leaving this country.
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  • Profile picture of the author Robyn8243
    Originally Posted by NathanFalkner View Post

    For fun, and out of some degree of boredom,
    one of my roommates typed "FTC loses" into
    Google to see what might show up.

    My guess, after reading this thread, was that
    there would be no results.

    How could there be?

    The FTC never loses.

    Well, except for that Amway case that was
    cited earlier in this thread.

    So okay, there might be 1 result.

    But when my roommate IM'ed me a link to the
    search results, I was surprised by what I saw.

    Here are the raw search results:

    Google

    And here are a few cases that jumped out from
    the first few pages of results:

    Realtors Win, FTC Loses Multilist Case | ABA Journal - Law News Now

    Stunner: FTC Loses Affiliate Marketing Case

    FTC loses case against Dutchman Enterprises LLC — Autoblog Green

    Maybe there are more cases like this? It would
    be interesting to see what percentage of cases
    that go to trial are actually won by the FTC.

    Clearly, a lot of individuals and companies
    choose the path of least resistance and settle
    -- and I'm inclined to agree that path makes
    sense in many instances where the defendants
    objectively don't have strong cases or where a
    variety of factors make pursuing litigation too
    burdensome (emotionally, financially, etc).

    But I think that we as a community might need
    to re-think the notion that the FTC never loses
    cases, or that the entire U.S. judicial system is
    rigged to ensure that the FTC never loses, and
    that 100% of all defendants targeted by the FTC
    are guaranteed to lose if they choose to fight
    in court. I truly am curious what the FTC's win
    rate is in cases adjudicated in a court.
    I wonder how much money had to be spent in order to get these wins. The cost of litigation is so high especially when it is you against the government. Add to that the fact that your assets can be tied up and unavailable to you during the process, and it is hardly a level playing field.

    The financial costs of litigation are only a tiny part of the equation. Litigation, especially when it it is you versus the government, takes a huge emotional toll on you and your family. More so, when as others have noted, the government is also looking for publicity. People love to gossip and most people assume that if the government is coming after you, you must be guilty.

    Throw in the reality that you can be 100% right and still lose in Court, and it is no wonder that most people eventually give in to the tyranny. The reality for most targets is that the cost of battle is too high.

    Most people have no clue just how brutal the FTC, IRS or any other government entity can be, with little or no regard to the actual facts, until it happens to someone you know.

    Thanks for sharing your experiences Bob. I sincerely hope things continue to improve for you and your family. You have opened the eyes of many people with this post.

    Robyn
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  • Profile picture of the author JD Nunes
    Man Bob, that's crazy. I really feel for you. Personally I think any entity that claims authority over someone is inevitably going to abuse that power - it's just human nature, as they would say. I didn't bother to see if this was covered, but could you say exactly what it was that the FTC sued you over?
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    • Profile picture of the author bobsedge
      Originally Posted by nuneybopper View Post

      Man Bob, that's crazy. I really feel for you. Personally I think any entity that claims authority over someone is inevitably going to abuse that power - it's just human nature, as they would say. I didn't bother to see if this was covered, but could you say exactly what it was that the FTC sued you over?
      Sorry, I don't really have the strength to re-hash it but if you go through the threads you will put it together.

      Here is something to keep in mind that I don't think has been brought up.

      The FTC does not evaluate the product. They don't care if you sell a pet rock, but they do care if you claim the pet rock will bark and it doesn't. If it's a rock and you call it a rock, you can sell it for $1 million.

      The FTC formula is basically limited to "is the product what they say it is?"

      So in that regard, these new rules make a lot of sense. When we are all writing our copy we need to ask ourselves if we are framing the product or service in a truthful light? Will the customer really get what we are pitching?

      It is basically common sense.
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  • Profile picture of the author bobsedge
    Originally Posted by NathanFalkner View Post

    Bob -- just wondering. Did your home ever get raided
    as part of the FTC investigation process to search for
    assets that could be used to provide consumer redress?

    Also, assuming your banking (and related) assets were
    "frozen" upon filing of their initial lawsuit, how were you
    able to pay for legal representation?

    Thanks again for being willing to talk about this a little
    and to provide an insight into the real-world events that
    surround someone and their company being targeted by
    the FTC -- it's really thought provoking.
    Ok, here is the way it goes down.

    My home nor my office were raided. We were simply served with a forest worth of paperwork and given two days to answer to an order requesting that assets be frozen and a receivership put in place.

    We received an extension of one week. On the last day we negotiated to consent to the order.

    We were able to pay a retainer prior to the asset freeze.

    Generally, an FTC action is not criminal, though it can be. I actually know another business in my industry that was raided. The FTC and FBI actually leased office space in his building for six months so they can keep an eye on the business.

    I really believe that the FTC realized they made a mistake in coming after us. Not because they thought we were innocent, but because they realized we didn't have the assets they normally like to capture. Based on what I could tell, their investigation began at least 18 months prior to that fateful day.

    I think later on they realized that we weren't bad people, but they never say "my bad" and go away.
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  • Profile picture of the author HeySal
    Generally, an FTC action is not criminal, though it can be. I actually know another business in my industry that was raided. The FTC and FBI actually leased office space in his building for six months so they can keep an eye on the business.

    I really believe that the FTC realized they made a mistake in coming after us. Not because they thought we were innocent, but because they realized we didn't have the assets they normally like to capture. Based on what I could tell, their investigation began at least 18 months prior to that fateful day.
    Of course - we need to remember that WF is the most well known IM forum on the planet at this time. It would be extremely naive to think that there is not FTC infiltration here. I have been absolutley amazed myself at the amount of hype generated for launches, websites, etc. and would be very surprised if this forum wasn't browsed on a weekly basis by regulators.

    Can we be certain that none of our own members are not regulators of some sort?
    Do a click through of the sig files here -- can you imagine how much money there is to be made by the FTC right here in this forum? I can't even start to imagine the totals being drooled over by investigators breezing through forums with less reputable marketing norms (I won't mention names, but we all know examples I'm rather sure).

    I would think that anyone frequenting anyplace where masses of marketers convene might smartly be a tad bit more inclined to really watch out for anything they put out to the public right now
    Signature

    Sal
    When the Roads and Paths end, learn to guide yourself through the wilderness
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    • Profile picture of the author Tom B
      Banned
      Well, this industry got crazy with all the reviews sites, fake blogs, fake endorsements and so on...

      Heck, I know not to trust all the review sites out there knowing they are getting paid for their endorsements. Most people don't know how it works and a little more transparency isn't a bad thing.

      I would imagine this is the type of thing the FTC should be jumping on.
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  • Profile picture of the author MrLD
    This could be the end to all those fake reviews and testimonials....
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    Bernz

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  • Profile picture of the author nuz
    All this government bullying reminds me of the zeitgeist addendum documentary. If you haven't seen it yet, you should. No matter what country you live in. Just google it and watch the video. A MUST SEE!!
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  • Profile picture of the author UBotBuddy
    Thanks for sharing Bob. I hope you find a slice you can be happy with.
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    Just Ask Me! Psst...for ubot training I give discounts
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