As part of a settlement with the Federal Trade Commission (FTC), two individuals and four corporate entities are banned from selling business coaching or development services.
According to the agency, the defendants made $8.4 million by scamming consumers hoping to start online businesses from their homes by purchasing consumer contact information from two separate operations that were the subject of recent FTC enforcement actions.
On lengthy phone calls, salespeople for the defendants promoted the business coaching programs that cost thousands of dollars with promises that the services would earn consumers thousands of dollars each month. For example, one salesperson claimed that a $10,000 program would make it “almost impossible” to make less than $3,000 to $5,000 per month using the defendant’s “foolproof” methods.
“[W]e don’t have any students we’ve built the business for that have ever failed,” the salesperson told a consumer in a conversation that was captured on an audiotape obtained by the FTC. “There’s just—there’s literally no way to fail.”
However, the actual services provided only “basic information” about how to list products on online auction sites, according to the agency’s complaint, and most consumers earned little or no money, with some ending up in debt. The defendants often attempted to double down on the scam by trying to sell additional programs and falsely claiming they had special access to lenders who could provide consumers with corporate credit that would eliminate personal liability. Instead of obtaining business loans, consumers ended up with more sales calls, the FTC said.
To settle the charges of violations of Section 5 of the FTC Act, the defendants are permanently barred from the industry and subject to partially suspended judgments of more than $15 million. A federal judge in Utah approved the agreements.
To read the FTC’s complaint and stipulated orders, click here.
Why it matters: The Utah-based defendants had a multipart scheme to bilk consumers, the FTC alleged, from the initial sales of business coaching services (with “foolproof” success touted for consumers) to the upsell of business loans. As the defendants failed to follow through on all their promises, the FTC banned them from the business and imposed substantial monetary judgments.