FTC blows the whistle on business coaching program

Rockne, Lombardi, Landry, Shula. Behind every sports dynasty, there’s a legendary coach. But according to the FTC, marketers of “business coaching” services took consumers for millions by using offside sales tactics that will likely disqualify them from the Truth-in-Advertising Hall of Fame.

One notable feature of the cases is that it took two pages just to list the interconnected companies and individuals involved in the operation, but it boils down to this. The complaint alleges that a Utah-based company called Guidance hired telemarketing outfits – “sales floors” – to pitch its supposedly personalized business coaching services. According to the FTC, based on misleading promotional materials and testimonials supplied by Guidance, telemarketers used a host of deceptive practices to get people to pay thousands of dollars on the false promise that the services would enable them to start their own successful internet businesses.

Here’s an example from a videotaped testimonial of the kind of claims the defendants used to get consumers on their team: “I’ve grossed over $12,000 last month alone. Everything gets better all the time. I’ve got a whole stack of orders over here to prove it. Right behind me, this laptop, I bought this to start my online business. Before that I never owned a computer, I never touched a computer.”

The pleadings includes details of other tactics the defendants used to recruit customers. According to the FTC, telemarketers pitched the coaching services as an exclusive one-on-one program of business know-how and specialized market research available only to a limited number of qualified people. Under the guise of screening to see if consumers “qualified,” telemarketers probed for their story – their financial status, personal hardships, or other circumstances the defendants referred to behind closed doors as the person’s “pains.” The defendants then used that information to tailor the sales pitch and to set the price where a prospect was likely to bite.

If consumers appeared interested, they were transferred to a “closer” who encouraged them to use their credit card to pay for the program as part of the OPM (“Other People’s Money”) strategy. In other words, put it on plastic, pay it back with the big bucks you’ll rake in from the program, and then pocket the profits. Once people signed up – the initial cost sometimes topped $10,000 – the FTC says the defendants blitzed them with pricey upsells.

The FTC alleges in two separate complaints that Guidance, its predecessor Thrive Learning, and two of the sales floors – Discover and PLI – violated the FTC Act and the Telemarketing Sales Rule. According to the lawsuits, most people didn’t get the advertised services or the promised earnings. If anything, the only “coaching” they got was basic info about online auctions and PayPal accounts – pointers available for free on eBay. In fact, the FTC says that the overwhelming majority of people who bought the defendants’ business coaching services were never able to establish a business. In addition, the lawsuits charge the defendants with collecting consumers’ financial information under false pretenses. The complaint against the Thrive defendants also includes a credit card factoring charge.

To settle the case, the defendants have agreed to broad injunctive provisions and lifetime bans from business coaching or work-at-home opportunities, with narrow exemptions for certain lawful business activities. (Thrive will be banned from credit card factoring, too.) The orders include financial judgments which, based on the defendants’ financial condition, will be partially suspended after they turn over a total of $2.1 million in cash and assets worth as much as $300,000.

Aside from the usual reminders about the breadth of TSR liability and the need to substantiate earnings claims, the complaints in the case offer insights into the behind-the-scenes world of the lead generation industry. One of the primary “products” the defendants were buying and selling were the names of consumers amenable to business opportunity offers, some of which were obtained from companies whose conduct was at issue in other FTC actions.

It’s understandable that people facing fourth-and-long financial prospects would look for ways to supplement their income. But if you take a snap from a questionable “coaching” offer, you could be dropped for a big loss. Before doing business with a business “coach,” consider these extra points from the FTC.