The Federal Trade Commission announced that it reached a settlement with Ponte Investments, resolving charges that the company misled consumers about its affiliation with the U.S. Small Business Administration and the SBA's Paycheck Protection Program.
The FTC alleged that Ponte Investments, operating under the name SBA Loan Program, targeted businesses through phone calls, e-mails, and its website, falsely claiming that it represents the SBA and that it could provide loans under the SBA's Paycheck Protection Program. The FTC said that the company made claims such as, “WE ARE A DIRECT LENDER FOR THE PPP PROGRAM!” and “We are currently offering stimulus relief spending under the Economic Security Act (Cares Act).” Notwithstanding these claims, the FTC alleged that the company is not, in fact, an SBA-authorized lender.
In its complaint, the FTC noted that, at the bottom of the website, the company did include a disclaimer in "small-print text, in faint grey typeface against a white backdrop" which states, "We are not the US Government, If you wish to apply for a Disaster Relief Loan follow this link to the SBA website www.sba.gov/disaster. The Paycheck Protection Program is not provided by the SBA.”
The FTC alleged that the company collected hundreds, if not thousands, of loan applications for PPP loans that it never made. As part of the settlement, the company agreed to stop misrepresenting its affiliation with the SBA or the U.S. government and to not misuse the information that it collected from loan applicants.
Here are some key take-aways from the FTC's action.
First, tell the whole truth. Don't claim to offer products and services that you can't actually offer. When you promote a product to draw consumers in, really planning to try to sell them something else, it's just a bait-and-switch.
Second, use disclaimers properly. A disclaimer can be helpful to qualify claims to prevent consumers from being misled. But, a disclaimer shouldn't be used to contradict the main message of the advertising. If an ad communicates "we're an SBA lender," a disclaimer that says, "we're not an SBA lender" is highly unlikely to cure the confusion.
Third, disclaimers must be clear and conspicuous. A disclaimer that is in "small-print text, in faint grey typeface against a white backdrop" isn't likely to be effective at qualifying your claims. In order to be "clear and conspicuous," a disclaimer needs to be seen, read, and understood by consumers. In other words, it needs to be easy to read, prominently placed in close proximity to the claim that it modifies, and easy to understand.
Finally, be extra careful when referencing government agencies in your advertising. Don't use the name of an agency, an agency seal, or any other reference to a government agency in a manner that is likely to cause confusion about whether the agency has approved or endorsed your product.
"SBA Loan Program preys on small businesses seeking financial relief from the devastating effects of the coronavirus pandemic" -- FTC's complaint