Feds Eye ‘Money-Making Opportunities’ That Turn into Debt Traps

Everybody would like to make more money. But what look like can’t-miss opportunities from well-known companies often turn out to be money-makers for the company but not for the hapless consumers who fall for them.

If this sounds like we’re talking about multilevel marketing platforms, gig jobs and for-profit colleges, you’re right. The Federal Trade Commission (FTC) is drawing a bead on these and other “opportunities” that all too often don’t pan out for those who invest their time, money and effort.

“Consumers, workers, and prospective entrepreneurs are being bombarded with so-called money-making opportunities that promise the world but leave them deeply in debt,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection, in a news release.

The agency is beginning the process of writing a rule that would allow it to prosecute false, misleading, and unsubstantiated earnings claims. “The FTC will use every tool in its toolbox to deter this economic exploitation and compensate people who got conned,” Levine said.

Supreme Court hinders enforcement

The FTC has actively gone after bad actos in the past and returned hundreds of millions of dollars to consumers who had been scammed or victimized. But the April 2021 Supreme Court decision in the AMG Capital Management LLC v. FTC case has hindered the FTC’s ability to seek monetary relief for consumers.

In that case, the FTC had argued that AMG Services, Inc. “stole more than $1.3 billion from consumers through a deceptive payday lending scheme.”

“By misrepresenting loan terms, the defendant caused borrowers to pay more than seven times the interest they were told they would pay,” the FTC argued. But the high court held that the FTC Act, which governs that agency’s operations, did not allow for that type of redress.

The new rulemaking procedure is intended to come up with a rule that will restore the agency’s ability to win refunds and other redress on behalf of consumers.

FTC’s previous actions

The FTC has a long history of going to bat for consumers. Besides fines and other penalties, it has reached hundreds of settlements that require firms to pay refunds to consumers.

In a statement last week, the FTC cited some of its more recent cases:

  • The agency sued multi-level marketing companies Herbalife and Advocare, alleging they promoted high earnings even though most participants made little or no money. In settlements with the FTC, Herbalife agreed to pay $200 million and Advocare agreed to pay $150 million in refunds to consumers.
  • The agency sued Amazon for allegedly using misleading earnings claims to solicit consumers to deliver packages on its Amazon Flex platform. Despite offering to pay Flex drivers between $18 and $25 per hour and claiming that drivers would “receive 100% of the tips,” Amazon pocketed over $60 million in tips from over 140,000 drivers, the FTC alleged. Amazon settled with the FTC, agreeing to turn over the full amount of the wrongly withheld tips for redress to the affected drivers.
  • The FTC sued for-profit school DeVry University and its parent company, alleging that DeVry falsely claimed that its graduates averaged 15 percent higher incomes one year after graduation than graduates of other schools. The FTC lawsuit got significant financial relief for tens of thousands of DeVry students: $49.4 million in partial refunds and $50.6 million in debt relief.

In the Advanced Notice of Proposed Rulemaking (ANPR) announced last week,, the Commission gives notice of a new potential rulemaking concerning false, misleading, and unsubstantiated earnings claims. If the Commission adopts such a rule, the FTC will have an important new tool to return money to consumers injured by deceptive income claims, and to hold bad actors accountable with civil penalties.

The notice will be published in the Federal Register soon. Instructions for filing comments appear in the notice. Comments must be received 60 days from the publication date of the Notice.