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The U.S. Circuit Court of Appeals for the Sixth Circuit has issued a decision upholding a district court ruling that several defendants based in the United States and Canada deceived consumers through a telemarketing scheme designed to sell them phony mortgage assistance and debt relief programs. The district court’s order permanently bars the defendants from working in the debt relief or mortgage assistance industries, and enters judgment, jointly and severally, of $5,706,135.48 to be used for refunds to the injured consumers.

“The court decision announced today is a major win for consumers nationwide,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “It affirms that marketers can’t get away with using misleading sales pitches and then burying ‘disclaimers’ in lengthy documents given to consumers later.”

In 2012, the FTC filed a complaint against E.M.A. Nationwide and several other defendants, alleging that since at least mid-2010 they operated a call center in Montreal that cold-called thousands of U.S. consumers, including those whose numbers were registered on the Do Not Call Registry, pitching programs that would supposedly help them pay, reduce, or restructure their mortgage and other debts.

Based on this conduct, the agency charged the defendants with violating the FTC Act, the Commission’s Telemarketing Sales Rule, and the Mortgage Assistance Relief Services (MARS) Rule, which prohibits mortgage foreclosure rescue and loan modification services from collecting fees until homeowners have a written offer from their lender or servicer that they deem acceptable.

The Court of Appeals upheld the district court’s conclusion that the defendants’ “initial telephone conversations used to solicit consumers consisted almost entirely of material misrepresentations” that created a deceptive “overall net impression” to induce consumers to incur very high costs for virtually worthless services.  The court rejected the defendants’ argument that the district court needed to conduct additional fact-finding proceedings before determining that those misrepresentations were not offset or “cured” by fine-print disclaimers and clarifications in the contracts and other written materials that consumers received only after agreeing to enroll in the defendants’ programs.

In summarizing its ruling, the appellate court wrote, “A court need not look past the first contact with a consumer to determine the net impression from that contact, and a court may consider individual advertisements or messages to determine the net impression. Defendants cannot make considerable material misrepresentations to consumers and then bury corrections and disclaimers in subsequent communications.  . . . Therefore, the district court did not err in granting summary judgment.”

A complete list of the defendants in this case can be found on the FTC’s website.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them.  To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357).  The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad.  The FTC’s website provides free information on a variety of consumer topics.  Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

Contact Information

Mitchell J. Katz
Office of Public Affairs

Christopher D. Panek
FTC East Central Region