How “sponsored” companies and business coaching organizations team up to deceive consumers

For those who want to run their own businesses, the lesson of the FTC’s proposed $2.1 million settlement with Las Vegas-based Seed Consulting, LLC is that neither their future nor their wealth is in their control— That is, credit cards.defendant’s operating mode The conspirators submitted fake credit card applications in the names of consumers (for which they charged exorbitant fees) so that the consumers could use those lines of credit to pay for “business seminars” offered by third-party agencies working with Seed Consulting. According to the FTC, Seed’s tactics left many consumers in deeper financial trouble than they started.

The program begins with promises of financial freedom from companies that claim to offer the secrets to getting rich online or in real estate through seminars, coaching programs or other training. Consumers are often attracted by free or low-cost events, only to find that “real” training costs tens of thousands of dollars—costs that are unaffordable for many who already cannot make ends meet.

So what’s a cash-strapped consumer to do? Enter the seed advisory. According to the FTC, the training company directed consumers to Seed as a source of “funding.” But as the complaint alleges, Seed provided no funding at all. Instead, they persuaded consumers to pay $3,000 to $4,000 so that Seed could apply for a large number of credit cards in their names – cards with large credit limits – a scheme known as “credit card stacking.” To make it appear that consumers qualified for all of these cards, Seed often inflated consumers’ income by $100,000 or more on their applications, falsely telling consumers that they could expect this increase after attending the seminar. Once consumers have credit cards, they often use them to pay for expensive items.

How closely does the cooperation between the training company and Seed work? The complaint includes many examples, but here is just one. The FTC alleges that the defendants often notified seminar companies when consumers received cards so that the companies could market additional plans based on how much credit Seed told them consumers now had. The complaint cites a telling email from a training company executive explaining the partnership. In preparation for a promotional meeting with consumers that evening, the executive asked Seed to provide details on the recommended amounts on each card. One Seed person responded: “Chasing AARP – 15k;” “BOA – 4.2k;” and “Discovering – 10.5k.” The complaint details other examples of seamless loop shenanigans that made Seed and its partners rich but ultimately left consumers thousands in debt with training that was not in line with its money-making statement.

Oh, and there’s also some talk about partners engaging consumers through Seed. FTC watchers may recognize that many of these—MOBE, Digital Altitude, Sellers Playbook, FBA Stores, and Apply Knowledge—have been the subject of FTC (and sometimes even State AG) enforcement. Other seed partners — Nudge and Zurixx — are currently facing charges from the Federal Trade Commission for allegedly making false money-making claims.

The complaint accuses Seed, Credit Navigator, LLC, Erik Gantz and Randy Lang of violating the Federal Trade Commission Act, the Telemarketing Rule, the Credit Repair Organizations Act and the Consumer Review Fairness Act. In addition to $2.1 million in financial relief, the proposed settlement prohibits defendants from applying for or obtaining credit cards for consumers in exchange for fees. The order also prohibits them from misrepresenting any consumer’s financial situation to financial institutions.

The proposed solution is instructive for people in the training workshop ecosystem.

The FTC will evaluate the role of each person whose actions caused consumer harm. Laws like the Federal Trade Commission Act and the Telemarketing Rule recognize that teamwork can make the program work. That’s why companies that provide fuel for fraudulent fires can be found liable. In this case, the FTC alleged that Seed colluded with training companies to conduct a deceptive scheme. Top tip: Don’t make unsubstantiated financial claims, and don’t work with companies that do.

Suppressing feedback may violate the Consumer Review Fairness Act. The defendants and their training company partners attempted to coordinate their response to the growing number of negative online comments. For example, in addition to forcing consumers to withdraw complaints to the Better Business Bureau, defendants often condition refunds on consumers agreeing to abide by “non-disparagement” clauses that prohibit them from making any criticisms of defendants. The Consumer Review Fairness Act has been in effect for more than four years. Are your actions in compliance with the law?

Want to supplement your income?University Teachers‘Don’t burden yourself with too much training debt‘We’ve even started – especially when there are so many free resources available. The Small Business Administration has helpful information and volunteer mentors related to its SCORE program. Other groups eager to assist: There are more than 1,000 Small Business Development Centers (SBDC) across the country, ready to provide free consultations. There are also many methods recommended by successful business people. Reach out to experienced entrepreneurs in your community, at your place of worship, or through your school or veteran network. For the price of a socially distanced cup of coffee, you might be surprised at their willingness to share their winning strategies.

Before you spend a penny on business training or coaching, read the FTC’s Handbook When a Business Opportunity or Coaching Program Is a Scam.