Stay ADvised: What's New This Week, May 31
In This Issue:
- Cryptocurrency Scams Up Ten-Fold, Cost Consumers $80 Mill, Warns FTC
- Internet Provider Presents a New "Frontier" In Misrepresentations, FTC + AGs Claim
- Quicken Says "No Registration. No Login;" NAD Says "No Substantiation. No Participation. To the FTC You Go."
- Tesla Solar Panel Customers Sue Over Price Burn
Cryptocurrency Scams Up Ten-Fold, Cost Consumers $80 Mill, Warns FTC
Piggy-backing on the buzz about cryptocurrency investments, crypto scams have proliferated. A new Federal Trade Commission (FTC) report warns of a staggering rise in cryptocurrency scams that have cost consumers a whopping $80 million dollars since October 2020.
Gleaned from almost 7,000 consumer reports made to the agency, the FTC's "consumer protection data spotlight" outlines some of the trends in crypto fraud. The agency's data shows there has been a nearly ten-fold increase in such scams, resulting in a median scam loss of $1,900 per consumer—that's compared to an approximate $400 median fraud loss reported to the FTC.
The scams come in many flavors and varieties, says the FTC. Scammers may lure unwitting victims by a tip on an online message board, by a suggestion made by an online dating acquaintance, or by purporting to represent a government authority. One popular scammer technique is to entice consumers to supposed cryptocurrency investment opportunities by using credible-sounding crypto jargon and fake testimonials.
Such scams promise that the bigger the investment, the bigger the "guaranteed" return. When consumers attempt to take out their supposed earnings, they are asked to purchase even more cryptocurrency and never get any money back. As the FTC reminds consumers, "promises of guaranteed huge returns … are almost always scams."
"Giveaway scams" are big as well. Such scams often involve the impersonation of celebrities and promises to immediately multiply the cryptocurrency individuals send. When the ruse is exposed, people realize that they simply sent crypto directly to a scammer's wallet. Scams that impersonate Tesla CEO and cryptocurrency backer, Elon Musk, are particularly popular. The FTC says that people have reported sending more than $2 million in cryptocurrency to Elon Musk impersonators since October 2020.
Aside from staying away from crypto offers that guarantee returns, the FTC gives the following advice for avoiding cryptocurrency scams: remember the cryptocurrency itself is the investment and "don't trust people who say they know a better way." And if a "caller, love interest, organization or anyone else insists on cryptocurrency," it's a scam.
Unlike many scams the FTC monitors that prey on older adults, the majority of cryptocurrency scams—five times as many—targeted consumers in their 20s and 30s. Younger people tend to think they can tell fact from scammer fiction. It turns out, not so much.
Internet Provider Presents a New "Frontier" In Misrepresentations, FTC + AGs Claim
The FTC, together with state partners, has filed a lawsuit in the U.S. District Court for the Central District of California accusing internet provider Frontier Communications of deliberately misrepresenting its internet speeds to consumers.
The suit pits the FTC, attorneys general from Arizona, Indiana, Michigan, North Carolina, and Wisconsin, and the district attorneys of Los Angeles and Riverside Counties, Calif., against Frontier, which provides DSL internet services to approximately 3 million consumers across the United States. The suit alleges that Frontier engaged in a practice of deliberately advertising internet speeds higher than those it could actually provide to consumers.
Frontier ads for its internet services touted the speed of its plans as measured in megabits per second (Mbps), and plans were priced based on Mbps speed. Frontier's ads represented that it offered service "up to" or "as fast as" a particular advertised Mbps. The suit, however, alleges Frontier knew that in many instances it could not provide certain Mbps speeds to certain areas because of network limits set by the company itself and physical factors, such as long distances between Frontier's central networking equipment and a consumer's home.
All in all, the FTC alleges that almost 30 percent of Frontier's DSL customers were "oversold" an internet speed they were never going to receive. Many of these customers complained to Frontier and government agencies over the years, describing internet speeds "that failed to support typical usage and activities that consumers should have been able to perform adequately at the speed tiers to which they were subscribed."
It's no coincidence that the FTC joined forces with state partners for this matter. After the U.S. Supreme Court's recent AMG decision curtailing the FTC's ability to ask for monetary redress under Section 13(b) of the FTC Act, the strategy allows the agency to seek monetary redress in court by hitching itself to states whose unfair and deceptive practices statutes authorize monetary penalties.
Quicken Says "No Registration. No Login;" NAD Says "No Substantiation. No Participation. To the FTC You Go.
The National Advertising Division (NAD) has referred Quicken Loans to the FTC after the mortgage lender failed to respond to NAD's request to substantiate claims the advertising watchdog said give a misleading impression about the lender's use of users' personal data.
As part of its routine monitoring program, NAD asked Quicken Loans to substantiate the company's "No Registration. No Login" claim, which appeared on its social media platforms advertising the company's mortgage refinancing services. The NAD indicated this claim communicates the implied message that Quicken Loans does not collect personal data or share it with any third parties.
According to NAD, the claim did not match the reality users experienced while navigating the Quicken Loans website. Registration or not, users had to enter "a significant amount of personal information … before any information about rates is provided," including personal data such as their credit score and zip code, which was at odds with the claim's implied message that Quicken Loans did not collect or share user data.
The mortgage lender didn't participate in the self-regulatory process and so did not "provide information about how it uses or shares the personal data collected after acting on the link [in the advertisement]." Interestingly, rather than simply referring to the FTC for possible follow-up, NAD reached its own conclusion about the claim based on the evidence at hand to find Quicken Loans' claim unsupported.
"This use of personal data contradicts the reasonable take away from the challenged claim that consumers' personal information will not be shared with third parties," said NAD.
This is not Quicken's first encounter with the FTC. In 2002, Quicken (soon to be rebranded as Rocket Mortgage) settled charges that it failed to provide "adverse action" notices in violation of the Fair Credit Reporting Act. Could Quicken's failure to respond to NAD be motivated by a lack of fear that it will face monetary penalties if the FTC decides to take enforcement action given the U.S. Supreme Court's recent decision in AMG Capital Management about the FTC's ability to seek monetary relief? If so, that could indicate the decision has already had an impact beyond the FTC.
Tesla Solar Panel Customers Sue Over Price Burn
A recently filed class action claims that Tesla pulled a bait-and-switch on its solar panel customers by promising certain pricing and entering into contracts based on that promised pricing, then almost doubling the contract price and changing other terms.
The complaint tells the story of husband and wife plaintiffs in Pennsylvania who agreed to purchase the company's unique solar panels designed to look like roof shingles. In 2019, the couple initially considered but ruled out the idea of purchasing the Tesla solar roof system. In September 2020, after purchasing a Tesla vehicle and receiving marketing promotions from Tesla about the "improved" version of its solar panels, the couple decided to move forward with the solar panels purchase and received a quote at just under $50,000. Plaintiffs agreed to enter into an agreement for the purchase and installation of the solar panels at that price.
In March 2021, Tesla let plaintiffs know that it would be changing the details of the product plaintiffs would receive. The email noted that the solar panels would now feature steel tiles to fit complex roof angles but apparently did not indicate a price increase. However, in April 2021, Tesla informed plaintiffs that it had increased the price of the solar panels and "added adjustments for individual roof complexity." Shortly thereafter, Tesla quoted plaintiffs a price of nearly $80,000 for the solar panels—almost double the amount Tesla originally represented (and agreed upon), say plaintiffs.
According to the allegations, plaintiffs—and other Tesla solar system customers in Pennsylvania—had agreed to purchase the solar panels based on Tesla's representations that they would pay a certain price for the panels, that the panels would be installed in a timely manner, and that they would look a certain way. In fact, plaintiffs say they refinanced their mortgage to purchase the panels in reliance on the original pricing and the agreement with Tesla.
"[T]he Defendant has misrepresented the system components to be installed and its ability to install the solar roof energy systems for the prices and during the time periods for installation offered and agreed to with Plaintiffs and the Class members," allege plaintiffs. Plaintiffs also claim that Tesla failed to live up to its representations to timely install the solar panels.
Though primarily focused on the breach of contract claim, the complaint alleges violations of Pennsylvania's Unfair Trade Practices Act based upon the misrepresentations Tesla made while marketing the solar energy roof systems.
According to media reports but not mentioned in the complaint, Tesla had significantly lowered its solar panel prices in April of 2019. It is unclear whether plaintiffs agreed to purchase the solar panels because of the advertised reduced prices.
As we have covered before on Stay ADvised, Tesla is not the only company selling solar panels accused of misrepresentations—the industry is rife with them. But in this case, the deceptive marketing allegations may take a backseat to the complaint's more well-pled argument for a breach of contract claim.