|Received:||6/13/2006 9:47:07 AM|
|Organization:||Pre-Paid Legal Services|
|Subject:||Business Opportunity Rule|
|Title:||Notice of Proposed Rulemaking|
|CFR Citation:||16 CFR Part 437|
Comments:I am writing this letter because I amconcerned about the proposed New Business Opportunity Rule R511993. I am afraid that in its present form, it could severely hurt Pre-Paid Legal Services. I understand that part of the FTC's responsibilities is to protect the public from "unfair and deceptive acts or practices," but some of the sections in the proposed rule will make it very difficult if not impossible for Pre-Paid Legal Services to continue as business. Pre-Paid Legal was founded 34 years ago. We sell legal and identity theft services. We have more than 300,000 with approximately $900,000,000 in annual sales. One of the most confusing and burdensome sections of the proposed rule is the seven day waiting period to enroll new Associates. Pre-Paid Legal does not require a person to purchase a sales kit but if they do, it only costs $49. Consumers make many purchases such as TVs, cars, and other items that cost much more than that and they do not have to wait seven-days. This waiting period creates the impression that there might be something wrong with the plan. This seven-day waiting period is unnecessary, because Pre-Paid Legal Services already has a 100% buyback policy for all products including sales kits purchased by a salesperson within the last 90 days. Under this waiting period requirement, Pre-Paid Legal Services will need to keep very detailed records when a Pre-Paid Legal Services Associate first makes contact with a prospective purchaser and will then have to retain these documents for three years. The related administrative costs will be very expensive. Under the proposed rule, Pre-Paid Legal Service's plan would fall under FTC regulatory authority, since the existing $500 threshold under existing franchise rule will be eliminated and Pre-Paid Legal Services will now have to produce numerous pieces of documented materials in order to comply with the proposed rule. The proposed rule also calls for the release of any information regarding prior litigation and civil or criminal legal actions involving misrepresentation, or unfair or deceptive practices. It does not matter if the company was found innocent. Today, anyone or any company can be sued for almost anything. We at Pre-Paid Legal Services see little value in disclosing these lawsuits unless Pre-Paid Legal Services is found guilty. Otherwise, Pre-Paid Legal Services is put at an unfair disadvantage even though we have done nothing wrong. It seems appropriate to include only litigation that is related to the earning opportunity offered to the prospective distributor. The proposed rule requires direct sellers to gather information such time periods, Associates demographic/geographic data and earnings claims. We are concerned that this approach will be ineffective in preventing the targeted business opportunity fraud, since those perpetuating fraudulent business opportunities will not provide accurate data. However, direct sellers such as Pre-Paid Legal Services, which will try to faithfully comply, will have the difficult if not impossible challenge of interpreting and meeting some of the proposed requirements. Finally, the proposed rule requires the disclosure of a minimum of 10 prior purchasers nearest to the prospective purchaser. Pre-Paid Legal Services is glad to provided references, but in these days of identity theft, we are very uncomfortable giving out the personal information of individuals (without their approval) to strangers. Ironically, the requirement to provide references may result in privacy lawsuits, which under the proposed rule, we would have to report. We appreciate the work of the FTC to protect consumers, but we believe this proposed new rule has many unintended consequences, which may destroy my business. We also believe that there are less burdensome alternatives available in achieving the consumer protection goals stated in the proposed rule. Thank you for your time in considering our comments.