Curtis Presses FTC on Predatory Timeshare Practices, Burdensome Rulemaking on Utah’s Direct Selling Industry

Senator Curtis highlighted ongoing concerns from Utahns regarding the timeshare industry, including reports of high-pressure sales tactics and misleading claims about costs and resale value. He noted the prevalence of complaints and how the financial harm to consumers is rising significantly—an issue the FTC acknowledged and committed to further examining.

The Senator also raised concerns about proposed Biden-era FTC rulemakings related to earnings claims, emphasizing the potential undue burden they’d put on Utah’s robust direct selling industry. Citing independent analysis, Curtis expressed skepticism over whether the proposed rules are justified and urged the FTC to withdraw them.

The full transcript of the exchange is below, and the video can be found here.

Senator John Curtis: I regularly hear from constituents about what they described as “predatory practices” in the timeshare industry, like high pressure sales tactics and misleading claims about cost and resale value.

The Better Business Bureau reports receiving thousands of complaints against timeshare companies each year, representing millions of dollars in consumer losses.

How is the Commission tracking these deceptive and unfair practices in the timeshare market? What trends are you seeing? And based upon what you’re seeing, do these patterns rise to the level of concern that warrants additional enforcement or scrutiny? 

Chairman Andrew Ferguson: Senator Curtis, we are aware of these concerns. The FTC operates the nation’s premier consumer complaint apparatus into which law enforcement agencies from coast to coast tap in to open law enforcement investigations and to examine trends.

We have examined this exact question. Over the last several years, we have not seen an increase in the number of reports relating to timeshares, but the alleged loss for each of those reports has gone up substantially. 

So, I don’t know if the number of alleged timeshare deception is going up, but the rate at which people are allegedly losing money to them has gone up.

We are aware of this issue. We are taking it seriously and we agree with you. This is something the Commission needs to look at.

Curtis: Thank you. I would welcome any follow up with my office in keeping us posted on that.

Ferguson: More than happy to work with you, Senator Curtis.

Curtis: In the waning days of the Biden Administration, Lina Khan’s FTC rushed out two proposed rulemakings related to earnings claims. These proposed rules disproportionately target the direct selling industry, which represents a substantial part of Utah’s economy.

A recent independent study by the Phoenix Center has identified significant flaws in the proposed rules cost-benefit analysis, including overstated benefits and a failure to fully account for key assumptions. 

Your FTC has demonstrated just this week that it already has authority to take enforcement action against bad actors, further proving the irrelevancy of the proposed rules.

So, my question is why hasn’t the FTC withdrawn these Biden-era rules?

Ferguson: Senator Curtis, as you pointed out, this week, we brought several enforcement actions, involving what I’ll call “bad apples” in the direct selling industry. [There are] lots of honest workers, business owners in the direct selling industry. And it is important that we root out the bad apples.

But as my colleague, Commissioner Meador, very eloquently explained in his opening statement, the fact that I can’t pursue consumer redress for Section 5 violations in the absence of a rule, by and large means that in cases involving bad apples in the direct seller industry, which is all that we’re worried about, is just the bad apples, I can’t put money back in wronged consumers’ pockets with Section 5. With a rule, I could.

And so, what we are doing at this point, as we have undertaken our lawful enforcement regime regarding bad apples in the direct seller industry, is continuing to examine the absence of the ability to put money back into consumers’ pockets, handicapping our ability to enforce our consumer protection laws in this industry. And if the answer is “yes,” I think the possibility of a rulemaking needs to be on the table.

Now, the rulemaking would be lawful. We would check every procedural box, which my predecessor routinely failed to do. But it is important, as we have continued to bring forth lawful Section 5 claims in this industry, that we assure ourselves that Section 5, without the ability to put money back in consumers’ pockets, is sufficient.

And if it’s not, I think a rulemaking needs to be part of the discussion.

Curtis: In regards to this report, let me raise concerns about the underlying analysis, whether the benefits of this proposed rule justify the cost, particularly for legitimate actors. And I encourage you to withdraw it. 

I’d like, Mr. Chairman, to ask unanimous consent to enter the Phoenix Center study into the hearing record.

Commerce Committee Chairman Ted Cruz: Without objection.

Curtis: And let me just ask you to balance, I understand the point that you make, but I hear over and over again—and it’s not just in this industry—that clear rules of the road don’t shift dramatically, that people know what to expect, and by having these underlying rules out there so that you can take advantage when you need to of the bad actors, severely limits the good actors ability to plan and prepare and have stability in their businesses. 

So, I would really ask you to think about that delicate balance of, imagine if you had a business and there was a big hammer out there—somebody could choose to whack you on the head just because they need the ability to whack bad actors on the head, and how that impacts your whole business—your employees, your business model, and everything else.

Ferguson: I totally agree with you.

The balancing is not only prudent, it’s required by the laws Congress established governing our rulemaking authority. And on that point, if the Commission were ever, and I’m not saying we are, considering picking up those rules again and beginning the rulemaking process again, we would be aiming at one issue and one issue only: fraud. These would not be to regulate the direct seller industry.

It would be to weed out the fraudulent bad actors and put money back in people’s pockets.

But that’s what this would be about—not regulation, fraud prevention, and only fraud prevention.

Curtis: I understand that. I’ll only use just a few seconds to make my point. But imagine what that does to the good actors so that you can have the ability to hammer the bad actors, right?

Just know that maybe not everybody is always going to exercise that with as much restraint as you, and they have to take into consideration, any chairman or any situation where somebody can pull that rule out and use that hammer to whack them on the head. 

Ferguson: I totally understand. I agree with you that we would have to be mindful that we won’t always have people here, like Commissioner Meador and I, to make sure that we follow the rules of the road.

If we ever undertook a rulemaking, that would be accounted for.

Curtis: All right. Let me just end with me once again urging you to withdraw the rule. Thank you very much.