FTC: Loud Bark, No Bite

As an example of just how badly we need an aggressive Consumer Financial Protection Bureau, as Prof. Sovern suggests above, see the press release below, which was posted on the Federal Trade Commission’s blog this week, a classic of the genre. That’s because FTC is a typical neutered federal agency, which loudly trumpets all the hard work it does, never mentioning that it only charges onto the field to protect consumers . . . months and years after the bandits have left the scene, long after the wounded have expired from their wounds.

Like the narcotics agencies who always hand journalists stories about drug busts with eye- popping numbers about “tons of drugs seized” while staying mum on what percentage of drugs that bust represents, the FTC m.o. is to publicize the size of the judgments awarded (what the judge SAYS the crooks should pay), and while never posting a followup about how much money is actually recovered from the crooks and paid back as restitution to victimized consumers.

Anyone who wants to hamstring the CFPB — and there is one whole political party that very much wants to, along with corrupt members of the other who agree — has only to look at the sleepy watchdog that is the FTC for an example of how to do it.

Weeding out deceptive and unfair data practices

Ask any gardener and they’ll tell you it’s a fool’s errand to lop weeds off at the surface. You also have to target the root system that allows them to propagate in the first place. That’s one of the messages to take from a judgment in the FTC’s case against Ideal Financial Solutions, Inc., and previous actions against data brokers and others who lent their green thumbs to Ideal’s large-scale consumer scam.
Ideal Financial acquired massive quantities of confidential consumer information – Social Security numbers, account numbers, and the like – and used it to make unauthorized withdrawals from consumers’ bank accounts.


How did they get their hands on such sensitive stuff? It turns out many of the consumers had applied for payday loans online. The personal data they turned over in the hope of getting a loan was compiled by purported loan sites and data brokers who – without batting an eye, it appears – sold it to Ideal Financial. 


It’s hard to imagine things could get worse, but they did. Ideal Financial set up a sudoku-like puzzle of shell corporations and fake business names that made it even harder for consumers to figure out who was pilfering their already-depleted accounts.


The FTC sued Ideal Financial in 2013. The just-announced order imposes a $43 million judgment against the company, its subsidiaries, and four defendants, and an additional $36 million judgment against one of the ringleaders. That follows a $25 million partially suspended judgment entered in 2014 against two others involved in the operation. That order required one of them to liquidate his assets and turn them over to the FTC.


Put it all together and the orders suggest it’s a good time for all seven defendants to consider a new line of work. They’re all prohibited from collecting or disclosing account numbers except for transactions specifically authorized by the consumer. The most recent judgment also bans three ringleaders — Jared Mosher, Steven Sunyich, and Christopher Sunyich — from the marketing, sale, and handling of any credit-related products or services.


What about the companies that sold the data to Ideal Financial in the first place? The FTC has already announced settlements with Sitesearch Corporation (also known as LeapLab), Gen X Marketing Group, and Sequoia One.


What can other companies conclude from this announcement?

First, the FTC isn’t fooled by mounds of mulch. We’ll till the soil necessary to unearth exactly what’s going on. Complicated corporate structures and evasive tactics won’t deter us from protecting consumers.

Second, when evaluating liability, the FTC looks at the entire ecosystem of deception. Operations like Ideal Financial’s can’t germinate without the cooperation of information sellers. Therefore, it’s unwise for data brokers to get down in the dirt by selling sensitive information without a closer examination of how it will be used.