Advertising Law Blog

The New York Attorney General has sued not just the marketer, but the finance company that processed the contracts company to recover for alleged false advertising by marketer, even though the finance company was not alleged to have been involved in active wrongdoing. In its announced lawsuit, the Attorney General sued State National Training Services, Inc (SNTS) a marketer of study at-home courses, alleging that they falsely represented that purchasers of their $1000 course materials would obtain jobs.

According to complaints from consumers who attended these sales seminars, SNTS representatives allegedly made false and fraudulent claims, including:

• They were government employees, suggesting that the course they are selling is a government-sponsored program.
• The cost of the study-at-home course they were selling would be reimbursed by various government agencies, namely unemployment offices and departments of social services.
• Those attending the seminar and completing their home study course would be able to apply for employment at the U.S. Department of Homeland Security or other law enforcement positions.
• Those who took the home study course would be able to secure civil service employment. In particular, SNTS representatives failed to advise customers that passing a civil service exam does not guarantee a civil service job.

The Attorney General alleges that SNTS also employed high-pressure sales tactics to convince customers to purchase the $1,000 courses at the conclusion of the presentation before they had an opportunity to examine whether the program would have value to them, verify the

claims that SNTS is a government program, or determine whether SNTS' claims about reimbursement for the cost of the course were accurate. To further pressure consumers to enroll immediately, SNTS offered everyone attending the seminars instant credit with no credit check and no down payment.

Of particular interest is that the Attorney General has sued not just the marketer, but has also sued the factoring company, Conrad Acceptance Corporation (CAC) who processed the retail installment contracts. The suit alleged that even though CAC did not engage in any of the acts and practices alleged in the lawsuit, it should be jointly liable to make full restitution to consumers who financed their purchases from SNTS and signed retail installment contracts with CAC.

This case is another example of how regulators are pursuing those who aid wrongdoers, and thus "facilitate the wrongdoing", even though they themselves are not accused of any wrongdoing. This is because those who provide services to marketers, such as finance companies, list brokers, printers, fulfillment houses, ad agencies, etc. need to exercise due diligence to assure the bona fides of the underlying promotion that they are assisting.

Those who provide goods or services to marketers should be sure to either have their attorney review the promotion that they will be assisting, or obtain an opinion letter from the marketer's attorney evaluating the program from the supplier's perspective.