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What is substantial assistance?

  • Robert Sigman
  • 3rd October, 2021
Credit Repair, TSR

Substantial assistance is a provision of the Telemarketing Sales Rule (TSR) which can impose liability on anyone (even if you’re not a telemarketer) if you substantially assist a telemarketer violating the TSR.

As lawsuits pile up, people are asking detailed questions about the TSR and its relation to credit repair.

And, it’s not just credit repair folks.

This curiosity has consumed not just people who run credit repair companies, but also people who provide products or services to credit repair companies.

In fact, one of the most common questions (circling relevant Facebook groups) concerns “substantial assistance.”

They want to know:

  • What is substantial assistance?
  • How is it defined?
  • To what extent does it apply?

So, let’s collect and review some of the literature, cases, and guidance on the matter so we can all bug our attorneys with more questions.

What does the TSR say?

If you go research the TSR, you might see something like this at the bottom of each page:

Why?

Because the source of the authority of the TSR came from law, not the Federal Trade Commission (FTC).

Congress addressed pervasive harm: telemarketing fraud and abuse.

How?

They created the “Telemarketing and Consumer Fraud and Abuse Prevention” act, finding that certain acts and practices of telemarketing are so severe – and distinct from other types of fraud – that specific, targeted regulation is required.

In that act (the law), Congress gave the FTC authority to promulgate rules in order to carry out the intent of Congress (and, therefore, the will of the people, by the way).

What does the TSR say about Credit Repair?

Of the many industries regulated by the TSR, credit repair is chief among them.

Section 310.4(a)(2) of the Final Rule is intended to limit the telemarketing of deceptive credit repair services. Typically, these services promise consumers that, for a fee paid in advance, they will improve the consumer’s credit record by removing negative information from that record. Once the fee is paid, however, the seller fails to deliver the promised services or achieve the promised results, and the consumer’s credit record does not improve.

60 FR 43853 (Aug. 23, 1995)

As a result, the FTC promulgated the TSR with the following credit repair regulation.

It is an abusive telemarketing act or practice and a violation of this Rule for any seller or telemarketer to engage in the following conduct…[r]equesting or receiving payment of any fee or consideration for goods or services represented to remove derogatory information from, or improve, a person’s credit history, credit record, or credit rating untilthe time frame in which the seller has represented all of the goods or services will be provided to that person has expired…and…[t]he seller has provided the person with documentation in the form of a consumer report from a consumer reporting agency demonstrating that the promised results have been achieved, such report having been issued more than six months after the results were achieved

16 CFR § 310.4 (2)

What does this have to do with those who do not sell credit repair?

Assiting TSR violations is a TSR violation.

It is a violation of the TSR to substantially assist someone violating the TSR.

Couple the easy-to-violate rule above with the TSR provision on substantial assistance below.

It is a deceptive telemarketing act or practice and a violation of this Rule for a person to provide substantial assistance or support to any seller or telemarketer when that person knows or consciously avoids knowing that the seller or telemarketer is engaged in any act or practice that violates §§ 310.3(a), (c) or (d), or § 310.4 of this Rule.

16 CFR § 310.3 (B)

That probably makes sense to anyone reading it, especially on the surface. However, it likely provokes a lot of questions, as well. Indeed, there are a lot of words in there that are not defined in the entire TSR.

Unless you’ve been following these rules for 26 years or recently spent a lot of time digging through policy, it’s unlikely you know what this means, specifically.

How is substantial assistance interpreted and applied?

Different people can interpret this differently. You can assume you understand it. A classroom full of law students may debate it. Groups of business owners may help each other read it. Lawyers may counsel you through it. The FTC may provide guidance on it. Courts may clarify and rule on it.

At the end of the day, what really matters?

What matters is what a Court says about your specific circumstances, heaven forbid you were ever wrapped up in a relevant case.

So, let’s cruise through time, from origin to judicial ruling.

The history of substantial assistance.

Everyone has heard of “accessory” to a crime. Or, aiding and abetting a crime. It’s a very old legal maxim.

While it’s not exactly the same, the accessory to a crime is the origin of substantially assisting a civil violation.

As a historical aside, the FTC almost promulgated a rule that went above and beyond the current version of substantial assistance. They almost imposed a “related to the commission or furtherance” standard.

This was ultimately removed from the proposed rule.

You should note that the FTC was extremely reasonable in their deliberations. Some commenters asked to make the provision stronger while some asked to make it weaker.

They eventually imposed two standards (or one standard with two prongs):

1. Substantial assistance of a violation.

“The Commission further believes that the ordinary understanding of the qualifying word ‘‘substantial’’ encompasses the notion that the requisite assistance must consist of more than mere casual or incidental dealing with a seller or telemarketer that is unrelated to a violation of the Rule.” 60 FR 43852 (Aug. 23, 1995)

2. Knowing or avoid knowing of the violation.

“…in a situation where a person’s liability to pay redress or civil penalties for a violation of this Rule depends upon the wrongdoing of another person, the ‘‘conscious avoidance’’ standard is correct.” 60 FR 43853 (Aug. 23, 1995)

Interestingly, and unfortunately, the FTC intentionally “declined to list in the Rule examples of substantial assistance.”

However, the FTC did say that it “still considers the acts or practices enumerated in former § 310.3(b)(2) of the initially proposed Rule to be illustrative of those that can constitute substantial assistance.”

They listed them, as follows:

  • Providing lists of contacts to a seller or telemarketer that identify persons over the age of 55, persons who have bad credit histories, or persons who have been victimized previously by deceptive telemarketing or direct sales;
  • providing any certificate or coupon which may later be exchanged for travel related services;
  • providing any script, advertising, brochure, promotional material, or direct marketing piece used in telemarketing;
  • or providing an appraisal or valuation of a good or service sold through telemarketing when such an appraisal or valuation has no reasonable basis in fact or cannot be substantiated at the time it is rendered.

The only thing that jumps out as directly relevant to the credit repair industry is lead aggregators (which, in my opinion, is why Google stopped serving credit repair ads).

But, that’s not thorough enough.

Let’s keep going.

Guidance from FTC

The FTC publishes guidance… thorough, well-written guidance.

In searching for the meaning of substantial assistance, you may have found this:

Like many others, your questions may remain unanswered.

Past court rulings.

How will Courts apply substantial assistance?

There are a ton of cases that interpret and apply substantial assistance. The case of FTC v. Chapman, 714 F.3d 1211 (10th Cir.2013) is no exception. The Court in that case did an amazing job of walking through the analysis.

Case facts aside, here’s parts of the substantial analysis section:

  • The defendant argued substantial assistance did not apply because she wasn’t “directly involved”
  • The Court confirmed that “direct connection is not required” to find substantial assitance.
  • The Court confirmed that “the substantial assistance standard will not be met if the third party provides only ‘casual or incidental’ help to the telemarketer.”
  • The Court cites to FTC guidance for what constitutes casual or incidental help: “cleaning a telemarketer’s office, delivering lunches to the telemarketer’s premises, or engaging in some other activity with little or no relation to the conduct that violates the Rule would not be enough to support liability as an assistor or facilitator.”
  • The Court confirmed that providing products or services that were marketed to consumers in misleading ways is substantial assistance.
  • The defendant argued previous examples and definitions of substantial assistance did not apply to her behevior, to which the Court said:

The FTC and courts have not purported to create an exhaustive list of activities that establish substantial assistance, and the law does not provide a special exemption for the first individual to come up with a novel way of assisting telemarketers.

Id. at 1217
  • Substantial assistance was applied because the defendant played “an integral part in the…scheme.”

The Court seems to imply that factually providing substantial assistance is not enough to impose liability. The prosecutors must prove that a defendant also “knew or avoided knowing” that they were substantially assisting a TSR violation, which requires a finding of fact.

The lower Court found a lot of facts in that case, including that the defendant:

  • “knew of inquiries by state attorneys general into the Kansas defendants’ marketing practices”
  • “knew the Kansas attorney general had asked the telemarketers to change the marketing practices”
  • Received a request from the attorney general implying inappropriate marketing.
  • Counseled others to monitor marketing behaviors.
  • Received documents which showed misleading representations.
  • Knew certain products were unavailable but were sold anyway.

The facts of that case clearly showed the defendant knew or avoided knowing about the TSR violations she substantially assisted.

There’s a lot to learn in the defendant’s further arguments and the Court’s rejection of them.

The defendant argued that it was not proven that she “avoided knowing” of violations. The Court basically said that the moment she was on notice of potential improprieties and did not inquire further, she “consciously avoided knowing” about them.

It gets crazier. The defendant argued that there was “no evidence she actually knew of the misrepresentations.”

The Court stated that “actual knowledge is not necessary under the ‘conscious avoidance’ standard.”

Ms. Chapman could easily have reviewed the defendants’ marketing materials to see what representations they were making to consumers. Indeed, she testified that she received a telemarketing sales script early in her relationship with the defendants but chose not to review it. 

Id. at 1219

Other relevant cases:

  • FTC v. Lifewatch Inc., 176 F. Supp. 3d 757 (N.D. Ill. 2016) (manufacturer responsible for the illegal telemarketing practices conducted by independent sellers of their product).
  • F.T.C. v. Capital Choice Consumer Credit, Inc., No. 02-21050 CIV, 2004 WL 5149998, at *42 (S.D. Fla. Feb. 20, 2004)(Ungaro-Benages, J.)(concluding that the defendants “provided substantial assistance or support” to other defendants “when they knew or consciously avoided knowing” about the other defendants’ misrepresentations and advance fees).
  • F.T.C. v. Consumer Health Benefits Ass’n, No. 10 Civ. 3551(ILG)(RLM), 2012 WL 1890242, at *6 (E.D.N.Y. May 23, 2012) (“The threshold for what constitutes substantial assistance is low.”).
  • United States v. Dish Network LLC, 256 F. Supp. 3d 810, 928-29 (C.D. Ill. 2017)(Myerscough, J.)(“The evidence also proves that it is more likely than not that [defendant] Dish [Network LLC] knew about Star Satellite’s use of prerecorded calls, or consciously avoided knowing about such use, and kept paying Star Satellite to continue the violations.”).
  • F.T.C. v. HES Merch. Servs. Co., 2016 WL 10880223, at *5 (describing that the defendants knew of or avoided knowing of another defendant’s TSR violation, because they ignored “red flags” about that defendant’s activities).
  • F.T.C. v. Glob. Mktg. Grp., Inc., 594 F. Supp. 2d 1281 (M.D. Fla. 2008) (the defendant played a key role in the scheme, sufficient to establish substantial assistance, by processing the payments made to the telemarketers, reviewing, editing and approving the sales scripts, and handling customer complaints, as well as detailing the telemarketers returns).

Current (pending) court cases:

The most prolific case concerning substantial assistance – especially relating to credit repair – is the case recently filed against credit repair cloud.

Keep in mind, this is only a case with an allegation consistent with the CFPB’s interpretation (meaning, a Court has not ruled in their favor…yet). Even so, this can inform you how the CFPB thinks.

In that case, the CFPB alleges:

Avoiding substantial assistance.

Unfortunately, there is no clear-cut answer, guidance, or advice that anyone could provide on this matter.

Whether substantial assistance applies to your factual situation is extremely subjective and will most likely be determined by a judge.

Educate and familiarize yourself with the concepts and cases outlined above (and through your own research).

Then, you should take the cases above, go to your attorney, and say “Hey, how do I navigate this safely for me and others?”

Final thoughts:

Substantial assistance is what a Judge says it is after evaluating facts specific to your case.

Technicalities will likely not save the day; substantial assistance will be interpreted in favor of its purpose: preventing one party from helping another party violate the TSR.

Telemarketing is highly regulated, especially in highly scrutinized industries, like credit repair. You have an obligation to know (and to not avoid knowing) the practices of those around you, especially if you provide some kind of product or service to a telemarketer selling a high-risk product or service to others.

Do you know Murphy’s Law? “If anything can go wrong, it will.”

You should think of substantial assistance in the same way. “If it can apply, it does.” Whether that’s factual or not, if you have this kind of thinking, it could keep you out of trouble.

Be careful. Be good.

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