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Published: November 20, 2009 11:24 am    print this story  

PP Legal responds to FTC

By Loné Beasley

Publisher



Pre-Paid Legal stock fell Thursday after the Ada company released information regarding a proposed draft complaint from the Federal Trade Commission as part of an inquiry that began more than two years ago. The firm’s stock started the day at $41.13 a share and closed at $33.27, a drop of more than $7, or 19 percent.

Randy Harp, Pre-Paid Legal’s chief operating officer told the Tulsa World the FTC is not questioning its product. “What the FTC is questioning is really a marketing approach that we use,” Harp said. “They’re not questioning the underlying products.”

Under scrutiny is how the company presents information regarding its identity theft line marketed under the name “Affirmative Defense Response System (ADRS)." According to the regulatory filing, Pre-Paid Legal’s sales associates offer training to employees of client businesses. At issue is that Pre-paid encourages those businesses to hold mandatory employee meetings to give its salespeople a chance to sell subscriptions to its legal services and identity theft products.

A Pre-Paid press release states, “We began ADRS in 2006 as a complimentary program for businesses to learn more about identity theft and data security. The ADRS marketing program is a small part of our core business model, and is associated with a relatively small percentage of our revenues.”

“We have responded to each request from the FTC and will continue to cooperate with the FTC to reach a mutually agreeable resolution,” Harp said.

“We’ve made some voluntary changes in the marketing materials and we thought we were making progress toward mutual resolution,” the Tulsa World quotes Harp as saying. “I have to say we were a little surprised by the notice that we received Wednesday.”

Harp said the company will “vigorously defend our interests in this matter.”

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