Legal Document Preparation Franchisors Settle FTC Charges

A company that sells legal document preparation franchises has agreed to pay a $286,000 civil penalty to settle Federal Trade Commission charges that it violated federal law by failing to disclose lawsuits against it to prospective franchisees. The FTC alleges that We The People Forms and Service Centers USA, Inc., (We The People), which assists consumers in preparing legal documents, including bankruptcy petitions, violated the FTC’s Franchise Rule. In addition to paying a civil penalty, the defendant agrees to receive training to assist it in complying with the Franchise Rule.

The FTC’s Franchise Rule requires a franchisor to provide prospective franchisees with a complete and accurate basic disclosure document containing 20 categories of information, including information about the franchisor and its principals, the terms and conditions under which the franchise operates, and certain pending or prior litigation.

According to the FTC, since 1996, the California-based company sold legal document preparation franchises nationwide. We The People franchises provide legal document preparation services to consumers who choose to represent themselves in “basic, uncontested legal matters.” These legal disputes or transactions are described as matters not opposed by another party to or person interested in that legal matter – such as bankruptcy petitions, divorce petitions, wills, and trusts. The defendant assists franchisees in preparing legal documents by distributing various workbooks.

Consumers are instructed to insert required information into the workbook designed for their particular legal matter. The franchisees then forward the completed workbook to a We The People documentation preparation center, along with a purchase order. Using the workbook information, the documentation preparation center prepares and returns a completed legal document to the defendant’s franchisees. The customer can either pickup and file the legal documents with the appropriate court or purchase filing services from the defendant’s franchisees.

The complaint alleges that We The People failed to disclose the existence of three lawsuits initiated against it by the United States Trustee Program, a component of the Department of Justice that supervises the administration of bankruptcy cases and trustees. These lawsuits were filed in connection with the preparation of bankruptcy petitions.

The proposed stipulated judgment and order for permanent injunction to settle the charges requires We The People to pay $11,000 per violation, for a total civil penalty of $286,000. The order prohibits the defendant from violating the Franchise Rule in the future. In addition, the order requires the defendant to participate in the Franchise Rule compliance training program offered by the International Franchise Association. The program provides specific guidance on complying with the Rule, and enables the FTC to monitor better the defendant’s compliance efforts.

Finally, the order contains various recordkeeping provisions to assist the FTC in monitoring the defendant’s compliance.

The Commission vote authorizing staff to send the complaint and proposed stipulated judgment and order for permanent injunction to the Department of Justice for filing was 5-0. The complaint and proposed order were filed at the FTC’s request by the Department of Justice in U.S. District Court for the Central District of California on December 10, 2004. The proposed order is subject to court approval.

NOTE: The Commission authorizes the filing of a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant actually has violated the law. The case will be decided by the court.

NOTE: This stipulated judgment and order is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Stipulated judgment and orders have the force of law when signed by the judge.

Copies of the complaint and stipulated judgment and order for permanent injunction are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint in English or Spanish (bilingual counselors are available to take complaints), or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.