Tick. Tick. Tick. For small business owners, gig workers, and freelance workers struggling to survive during the pandemic, every day that goes by without necessary capital puts their future at risk. So when Womply (also known as Oto Analytics, Inc.) and CEO Toby Scammell claim to offer a “PPP fast track” that would allow them to quickly receive funds through the Paycheck Protection Program, it sounds like Time is finally on their side. But under the FTC’s proposed settlement, consumers were beset by defendants’ misleading claims that they could provide people with PPP loans and false promises to process applications quickly. As part of the settlement, the defendants will pay $26 million in damages and are prohibited from making such false statements in the future.
Under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), eligible small businesses can receive emergency loans under the Paycheck Protection Program run by the Small Business Administration. The PPP operates on a first-come, first-served basis and is a time-sensitive program. After funding ran out in May 2021, the SBA stopped accepting new applications. Therefore, small businesses had to take advantage of the PPP boom to go on strike.
The FTC said that the Womply defendants must have launched their offensive during the peak of marketing. Starting in February 2021, they advertised through email and social media, including through referral partners such as influencers and certified public accountants. For small businesses unfamiliar with the details of the program, the company invites “apply for a PPP business loan through Womply and get…” . . “Your PPP loan and as much help as Womply can provide” may get their attention — as does the headline “The government wants to give you money.” The company also uses the iconic image of Rosie the Riveter to tell potential applicants, “We have a PPP for you!”
Womply’s ad emphasizes the need for small businesses to act quickly and the urgency around Womply’s ability to process applications “within 24 hours.” A social media promotion advised people to “Apply soon because funds are limited! Use Womply to get the assistance you need quickly. We’ll help you apply for a PPP loan of up to $41,666 in 5 minutes.” The defendants started in March 2021 After accepting applications, they continue to reinforce this message, telling consumers that “most applications can now be processed within 24 hours” and that their review process will soon be expedited “to just 3 hours.”
Through such accusations, the defendants attracted millions of small business owners, gig workers, and freelance workers to apply for PPP loans through the Womply platform. But according to the indictment, despite the defendants’ promises to provide PPP loans to small business consumers and quickly process their applications, the defendants failed to obtain more than 1.99 million of the more than 3.25 million PPP loan applications initiated on the Womply platform. Doing the math, that means Womply failed to deliver on 61% of the company’s promises. The FTC said many businesses that did not receive funding were eligible for PPP loans, but Womply failed to resolve known technical issues with its platform or otherwise help process applications, leaving these small business consumers crashing, steaming, and stuck. Womply’s Dilemma. – Called the “fast lane.”
Womply’s customer support channel proved useless to thousands of consumers. “In late March 2021, defendants completely discontinued telephone customer service after Womply’s customer service hotline received more than 4,800 calls that month and faced an increasing number of email requests that defendants often failed to resolve,” the FTC said. But despite clear indications that their claims were false or deceptive, the defendants allegedly doubled down on their efforts, continuing to advertise that they could get people PPP loans and process their applications quickly. What’s the result for small businesses struggling to stay open? The FTC said Womply’s actions caused many of them to miss the PPP window and the funding they desperately needed.
The complaint alleges multiple violations of the FTC Act and the COVID-19 Consumer Protection Act. To resolve the case, the defendants agreed to pay $26 million in damages and were prohibited from making broad misrepresentations in connection with the marketing of financial products or services. The FTC will use the $26 million to compensate small businesses harmed by practices challenged in the complaint. Please check the case page in the coming months for announcements regarding damages.
The settlement with Womply sends three messages to businesses.
Don’t promise services you can’t deliver. Of course, companies must have appropriate evidence to back up their objective product claims, but customer service representatives need appropriate evidence, too. For example, promises about how quickly your company can process applications or provide customer support must also adhere to established truth-in-advertising standards. Hope and hype are not enough.
If you find yourself in a hole, stop digging. So what should you do if your company clearly isn’t living up to its advertised results? Now is the time to act quickly to develop real strategies to protect consumers. The worst way to do this is to keep repeating misleading statements.
Small business consumers, the Federal Trade Commission has your back. The complaint cites letters from Womply customers describing the devastating impact the defendants’ actions have had on many small businesses who need the help available. The FTC has brought numerous cases involving deceptive B2B marketing and will continue to protect small business consumers and gig workers from illegal practices. For example, just a few weeks ago, the FTC revised telemarketing rules to cover misrepresentations in B2B calls. Additionally, in addition to the $26 million settlement with Womply, the FTC just announced a $33 million settlement with Biz2Credit to resolve claims that another company allegedly defrauded small business consumers regarding PPP loans.
