On March 4, the FTC announced updates in its case against targeting an alleged small business finance scheme. The U.S. Court for the Central District of California recently granted the FTC’s motion for a preliminary injunction against a company and its founder and CEO. The injunction would prohibit the company from making false claims about securing small business loans or lines of credit and would forbid them from contacting consumers whose information was obtained before February 20.
In the FTC’s complaint, filed in November 2024, the Commission alleged violations of Section 5(a) of the FTC Act, the Telemarketing and Consumer Fraud and Abuse Prevention Act, the Telemarketing Sales Rule, and the Consumer Review Fairness Act of 2016. The defendants were accused of misleading consumers, primarily new and aspiring small business owners, by promising business loans or lines of credit. Instead, the complaint alleged the defendants applied for multiple credit cards on behalf of these consumers, damaging their personal credit scores and failing to deliver the promised financial products. The defendants allegedly charged consumers fees, amounting to 10 percent of the total credit card limit plus additional charges, and collected over $37 million from more than 5,000 consumers over three years. The complaint also highlighted the defendants’ alleged use of fake positive reviews and contractual clauses prohibiting negative reviews, which are illegal under federal law.
