The truth about income claims

Making income claims to build your buisness is illegal Recently I saw a post on a social networking site where a leader in a network marketing (MLM) company bragged about the number of people in their downline and the gobs of money they were making in such a short time.While it is fairly common especially on places like Facebook and MySpace to see people use income claims as a means for recruitment, this particular post got me thinking.

I know many good, well meaning people that talk about the money they or their upline makes as a decision point for joining their business.

 

Many don’t know that they are, in fact, committing a crime.

I know that sounds harsh, but the truth is the FTC considers making income claims as a means of recruitment illegal.

Many new to network marketing don’t know this nor are they advised by their company or upline to avoid income claims.

What astonishes me is when leaders in the network marketing industry talk about how much money they make to get you to join their business. What does it say about the “leader” that engages in such practice? They are not only putting themselves in danger, but they are putting their entire company in a vulnerable position.Rod Cook over at MLM Watchdog has some good references including a specific court case. He says:

The FTC has a long history of disliking earnings claims in both Business Opportunities and MLM. Here is just a brief summary of the some of the history that allows them to hit your company for earnings claims. For those of you that don’t know prior rulings in court cases have the Effect of Law! This is called “precedent law”

According to Rod Cook, the only way you can legally publish your earnings is if you also fully disclose the incomes of every single person participating in the business opportunity.

Len Clements of Marketwaveinc.com puts it plainly:

Displaying commission checks is considered one of the most taboo acts a distributor could do. No competent attorney, or corporate compliance department, would ever approve this. There is no specific law against it, but based on years of legal precedent we know that state AGs and the FTC consider this to be a “deceptive trade practice” (even when you can prove the checks are real and accurate). Not only that, but the FTC recently changed the law regarding testimonials and what are “typical results”. You can no longer get away with just the disclaimer “results not typical”. Now when you show examples of how well something works, even a business opportunity, you also have to disclose what ARE typical results.

So no, in my laymen’s opinion, this is not legal.

If you take some time to think about this, the FTC has actually done you a favor.

First, using an income claim sets false expectations and is one of the reasons why so many come into this business treating it more like the lottery than what it actually is – a legitimate business that takes time and effort to build. Besides, their earning potential is dependent on their effort and has little to do with how much money is made by you or your upline.

Second, this is the perfect response when a prospect asks you how much money you make in your business. Simply tell them that the FTC forbids you from disclosing your income. It is the truth. You avoid setting false expectations and at the same time demonstrate a high level of integrity. As their sponsor it is your job to help them avoid the landmines that may hurt them and their business.

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5 Responses to “The truth about income claims”

  1. Mike Pedersen says:

    Chris,

    I can’t agree with you more! Especially on the Internet. The thousands of people labeling themselves “gurus” and stating these outrageous incomes in hopes to get people to join their opportunity. When will they get a clue or get busted by the FTC? Ugh!

    Regards,
    MIke

  2. Chris Kavas says:

    Hi Mike,

    My heart goes out to the ones that are good, well meaning people but are given bad advice and taught to edify their upline by talking about how much they are making. That is why having a sponsor with integrity is so important.

    I was at an event once where the “leader” handed me a folder that had copies of all his checks. I have little sympathy for people like that who know better.

    Chris

  3. I didn’t know all of this and I’m one of those stupid people that saw one of those checks. I have tried everything to get out of this mess that company has got me in. There is a company by this millionair that called me after I bought a book and pushed me into doing their course and I tried to do buyers remorse but my mental state could not handle all the calls to talk me into this. The company is PMI by Anthony Morrison and The Tax Club, I hope they don’t get anyone else like this. I’m going skip a coupld of lines to copy and paste a copy of one of the emails I have sent. I sure wish I could get my 3595.00 back from PMI. If this guy is a millionair why is it so hard to give back the money. I wish I had help with this company.

    Advertising Profits from Home Customer Support On Wed, 09 Nov 2011 14:55:11 -0800, Veronica Phinney wrote:> Please, can any of you help me. I have gotten ripped off by a company called PMI and one called The Tax Club in New York, New York. I ordered a book from Anthony Morrison and that is when all the trouble started. I have had a real rough 2 years starting with my daughter being killed in a car accident to having to adopt and raise her son to now needing a couple of surgeries.

    So anyway, I ordered this book and then I got this phone call from a school thing PMI which talked this mentally overwhelmed/broke person into paying for a class, then I got another phone call, this time from The Tax Club, telling me how I need them to fill out all this paperwork for a company and how I need a TAX Advisor and they wanted 1290.00 to do the all the paperwork, call weekly to help, and all that kind of thing. I had told them over and over no that PMI had already used all the credit I had and I had no cash. He kept telling me that it is ok because at the end of the year he would help get it back. I still told him that I didn’t have it and he kept pressuring me until he got the money out of what was let on not one but 2 different cards.

    I go so confused at who was who and totally stressed that I call and told them I could not do that and asked for a refund, I also emailed PMI and asked for buyers remorse which in turn talk me into signing a 6 month agreement but the tax club just said no refund and my phone call was within the 15 day refund status but they were suppose to take out 15% processing fee. They are saying I didn’t call but I did. So, they started calling every week to sell me something else not to give advise or anything but to bully me into more money and they had not even done what I already paid for. When they finally got my paper done to register my company, these so called professionals did not even put my name where it was suppose to go so I ended up paying 1290.00 for a paper that I didn’t need help and was free online that was wrong, the least they could have done was put my name where it was suppose to go.

    I called back again (cussing) asking for a refund they were not doing right or even good and still got a no. I called back the next day and gave the guy I cussed at an apology. So the sells pitches kept coming every week until I got wrangled into another plan of theirs after telling them over and over and over that this would take my credit card over the limit, I thought I was talking to advisors for the financial side of my business and could not understand why they would advise me to over draw my accounts. He just kept hounding me that it is ok to take it over to just let him try and see what he can get. They totally Mentally wore me down till I said go ahead. Yes I agreed to them both times after an Hour of telling them both times I can not do it, I do not have the money or credit and I can’t over draw my account.

    Are these so called Tax Advisors suppose to hound, bully, and mentally tear you down. I’m breaking mentally, totally losing it if I don’t get my money back. The didn’t fulfill there end of any of this and now they only want to refund me 297.00 out of a total of 1590.00 they took that I need desperately need. The following is one of my request for a refund:

    To whom it may concern: Please, will you reconsider my request for buyers remorse and refund the money I have put onto my credit card. I have spoke to customer service a couple of times trying to do a request for buyers remorse but IJerry said I can’t and I’m in a very bad spot right now and can’t make the payments for this or anything else. I need surgery and I really need my credit card to pay for this, I have no other funds to pay for it or my other bills. If you need confirmation of what I’m telling you, I can give you the names of the doctors that I’m having to go to. I am scheduled for surgery on my jaw on thursday but I haven’t came up with the 715.00 that I need by Monday the 7th for pre-op for them to do it on thursday. I also have a neurologist appt on wed the 9th to check on the surgery I need on my neck, you can contact all my doctors to verify all of this. You can also contact PWC and timewarner cable to find out that I can’t even pay my bills which will have my internet and power will be turned off, which means I won’t even have the ability to do my work and what I agreed to do. Please, just listen to what is happening to me and refund my money, I am a single grandmother taking care of my grandson because my daughter died 2 yrs ago and I have to have electricity and my surgery and can’t do either one with out your approval of a refund. Let me know if you want my doctors names and numbers or even mine to talk to me and find out who I am and what we are going through. xxx-xxx-xxxx is my number.

    I have been trying to get a refund for a while, my name was not on the articles of organization which put me way behind and my consultant person doesn’t call like he is suppose to (I do have records of that) you guys are not doing what you are suppose to do and I feel like I deserve a refund of all my money and to be cancelled out of everything you have put me on. I am not capable mentally or physically to open this company now and the stress of the tax club is unbelievable so please reconsider giving me a refund of all the money I have put into this (except the 15% processing fee). I’m going to have to trust that your company will do the right thing and refund my money. I’m sending this to every one that I can come up with at the tax club because I don’t know who to send it to, I need some one to approve this refund so please forward it to the correct person. And yes, I did call one time before the three days were up, and I think I called again before the 15 days but when I talked to anyone they said It could not be done and I don’t think that is right.

    Thank you for reconsidering
    Veronica Phinney

    I thought everything would be ok but it is not and these people just keep pushing, pushing, pushing until you have to give them what they want and I personally don’t think I paid 1290.00 to be pushed, bullied, mentally pressured, and to get my “Articles of Organization”. So Please if anyone can help me, I getting desperate for help with these people. I just want my money back so I can do my surgery and stop stressing over all of this.

    Thank you for anything you can do
    Veronica Phinney

  4. Shanna Dewey says:

    Can you please point me to the law that says you can’t share your personal income. I’ve been searching for two days and can’t find it. I did however find a document from the FTC for consumers that are thinking about entering an MLM. It’s a good one and great advice for anyone considering the opportunity. The only thing that surprised me is that in their own document, they say to ask the sponsor how much money they make as well as the expenses and time they put into the business. If the MLM sponsor can’t share their own income then why did the FTC tell people to ask that question? http://business.ftc.gov/documents/inv08-bottom-line-about-multi-level-marketing-plans

  5. Chris Kavas says:

    Good question Shanna, thanks for asking.

    It is more from court precedence than an actual law. When evaluating a business opportunity understanding the potential is always wise. This is more for those that hype the success from a limited few as a means to recruit which, in court, has been used against distributors as outlined above.

    In the article you will see a link to some care histories where income claims used as recruitment tools were used against distributors.

    This as a common tactic for “old school” MLMers that would show copies of their paychecks without disclosing the full effort required to make that money.

    These days you see folks posting pictures of their checks on Facebook. Many of these go unnoticed by the FTC so I am sure a few of them that know better are “playing the odds”. Personally, I would rather build setting honest expectations.

    I hope that helps.

    Feel free to email me or use the contact page if you have any questions.

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