Deceptive sales, whether they take place in person, on the telephone or over the Internet, can cost consumers hundreds of dollars in unpaid claims. And while they may seem harmless, these practices erode consumer trust and undermine the security industry’s reputation in general.
The FTC enforces the unfair and deceptive practices provisions of the Federal Trade Commission Act (FTC Act) by instituting enforcement actions against companies and individuals who engage in these deceptive sales practices. These actionable acts fall into three broad categories:
Representations, Omissions and Practices
In general, a representation, omission or practice must mislead a significant percentage of consumers in order to be considered deceptive. The representation, omission or practice must be either express or implied and must be material. The term “representation” includes any statement, promise or affirmation and can be made verbally, in writing or in some other form. It also covers any advertising or promotional materials that convey the same information to a consumer.
For example, a violation of the FTC’s price-related rules occurs when a retailer advertises a discount from a previous price. The advertised former price must have actually been offered for a substantial period of time in the past for an advertisement to be true. And the advertised discount must be a genuine bargain, not merely a small reduction from the original price.
This type of deception is common in retail, and it is known as “bait and switch.” The retailer baits the consumer with an alluring offer – such as a Steinway grand piano for only $1,000 – and then fails to deliver on the promise by offering a different product or higher priced product. The practice violates the FTC’s Guides against Deceptive Pricing and can result in large fines for retailers that engage in it.
Security dealers are a special category of sellers that are often the target of deceptive sales. Typically, dealers sell security products and services directly to consumers, rather than through third-party distributors like alarm companies. As such, they are able to maintain closer contact with consumers and can be more responsive to concerns. In addition, the personal nature of the security business makes it difficult for many deceptive salespeople to hide behind a corporate entity.
Insurance Sales Practices
It’s easy to imagine how a few bad actors can destroy the reputation of an entire industry, but it’s important to remember that the vast majority of dealer companies are legitimate, honest and reputable. That’s why it’s so disturbing when deceptive practices are reported. From trunk slammers to “rewards” scams, these deceptive acts hurt the overall image of the industry and should be condemned by all who are ethical in their dealings with customers.