AgentCFPB / Regulatory

Judge rules Response Marketing must pay $15 million for deceptive practices

Utah district court rules in favor of the FTC and Utah DCP

A U.S. District Court judge in Utah has ruled that the real estate investment training program, Response Marketing, LLC, its principals, and celebrity endorsers used false promises to sell consumers a series of expensive real estate investment training programs.

In the judgment released last Thursday, Judge David Barlow ruled that Response Marketing and its principals must pay a fine of $15 million and they are banned from selling “wealth creation” products and services anywhere in the country. Response Marketing’s two real estate celebrity endorsers, Scott Yancey, the star of Flipping Vegas on A&E, and Dean Graziosi, the author of Millionaire Success Habits, are also being fined $450,000 and $1.25 million, respectively.

In addition to promoting Response Marketing programs, Barlow also found that Yancey and Graziosi were involved in efforts to bury online customer complaints that said Response Marketing failed to deliver on its promises.

“We are grateful to the Utah Division of Consumer Protection for their partnership in obtaining this strong relief, and we will continue cracking down on deceptive moneymaking opportunities and unlawful endorsement practices,” Samuel Levine, Director of the FTC’s Bureau of Consumer Protection, said in a statement.

The lawsuit was filed in November 2019 by the Federal Trade Commission (FTC) and the Utah Department of Consumer Protection (DCP). According to the initial complaint, Response Marketing used infomercials and social media advertisements to attract consumers to free events across the country. At these events, Response Marketing then enticed consumers to purchase three-day workshops for roughly $1,000 by falsely claiming that it would provide workshop attendees with access to special tools that would enable them to become successful real estate investors.

The complaint alleges that at these three-day workshops, Response Marketing deceptively pitched additional training programs that cost tens of thousands of dollars. One of the programs Response Marketing allegedly upsold consumers was a purported coaching program through telemarketing that could cost as much as an additional $30,000. The program was marketed as an “Inner Circle” exclusive training opportunity with a limited number of spots, giving consumers the chance to work one-on-one with a purported real estate expert.

The complaint alleges that the majority of consumers who purchased Response Marketing’s products and services did not become successful real estate investors, let alone even recoup the costs of the Response Marketing training programs.

In a June 2022 opinion, which partially granted the FTC’s motion for summary judgment, the district court judge found that many of Response Marketing’s claims were false or misleading. Some of the claims the judge found false or misleading included that Response Marketing consumers got special access to a purported funding network to allow them to do real estate deals without any of their own money, that Response Marketing had buyers lined up who would purchase homes that students wanted to flip, and that there were limited spots in the firm’s “Inner Circle” program.

The predecessor firm of Response Marketing began selling similar training packages in the early 2010s, but in December 2019, Response Marketing agreed to stop selling these packages following the filing of the initial complaint in this case.

“The FTC started an investigation in 2017 about the company making unsubstantiated earnings claims related to its real estate training. In November 2019, the FTC sought over $1 billion dollars in relief and a worldwide asset freeze, which was denied,” a spokesperson for response marketing wrote in an email. “The company had over 500 employees/agents that were let go after the lawsuit was filed. After approximately four years of litigation, plaintiffs dropped the bulk of their allegations, the Plaintiffs  then settled for a $5 million payment now, certain future payments up to $15M, and limited injunctive relief. The Plaintiffs alleged widespread fraud and harm but couldn’t produce more than a few customers willing to testify at trial regarding their experience with the company.  The company received over 2,800 declarations after the lawsuit was filed from satisfied customers and was prepared to have many of those people testify at trial. On the eve of trial, the Plaintiffs settled after one day in Court arguing evidentiary motions. These facts should be assessed in evaluating the benefits, if any, of the FTC’s and Utah DCP’s efforts.”

Additional parties named in the settlement include two of Response Marketing’s affiliates, Nudge, LLC and BuyPD LLC; Brandon B. Lewis, Ryan C. Poelman, Phillip W. Smith, and Shawn L. Finnegan, who the complaint alleges are the actual owners of Response Marketing; and Clint R. Sanderson, the president of Response Marketing.

“This is the largest consumer protection division settlement in Utah’s history and holds Nudge and its affiliates accountable for the serious financial harm to consumers across the country,” Margaret Busse, the Utah Department of Commerce executive director, said in a statement. “Utah businesses that seek to take advantage of consumers should be put on notice.”

A request for comment sent to the attorneys for Graziosi and Yancey had not yet been returned by the time of publication.