Most buyers (and even their attorneys) don't know this rule or how easy it could make it for you to get your refund.

First, here's my CYA statement. I'm not a lawyer. I've paid lawyers probably well over $100,000 in the last few years and I feel like I should own one, but that doesn't count, so therefore: THIS IS NOT LEGAL ADVICE. This is a layman's interpretation of the laws along with my personal experiences.

Here is the information and how you can use this information to get your money back.

The basic FTC rule about Earnings Claims (issued in 1986) says Earnings Claims must have a reasonable basis. That sounds fair enough, but here is the kicker. Recently in the case of FTC vs. Minuteman Press the judge ruled that a franchisor must have a "high degree" of substantiation for any earning claims made.

The judge further ruled that the only thing that would qualify for this high degree of substantiation would be for the franchisor to have written financial statements from franchisees to back up any earnings claims made. Did anyone show you any written financial statements from other franchisees?

Here are some possible problems and your strategy to deal with the problems

Problem: #1 This ruling applied to Franchises and I bought a Business Opportunity.

Your Strategy: First, you don't have to deal with overcoming this objection unless the Seller brings it up or tries to say the ruling doesn't apply. Keep in mind the fact that most cases are NOT going to go to court. The settlement will involve negotiations between you and the Seller. When you say that the FTC ruling about Earnings Claims said this, the seller may be willing to settle because he sure doesn't want any trouble with the FTC.

If you do have to show a judge why the ruling should apply to your case, you can show that the FTC rules for Business Opportunities and Franchises are in the same law. There's no reason why it should be any different.

When there is no clear cut law that applies to your case, the judge looks at previous rulings that were in the same general area. For example: When the judge made the ruling in the FTC vs. Minuteman Press case, there were no previous rulings he could go by so he looked at previous FTC cases involving false advertising claims.

As you can see there are a lot of gray areas and a lot of judgment calls in legal matters. If everything were black and white there wouldn't be nearly so many cases going to court. Likewise, since what can happen in court is unpredictable, many cases are settled before they get court. Neither side wants to risk the uncertainty. This can work in your favor because you have a strong case and when you go to Small Claims Court there is very little time or cost involved. You're not risking much.

Even without this latest "earnings claims" ruling the FTC rule on earnings claims states that when an earnings claim is made the Seller must (at the same time and in the same ad) provide certain disclosures detailing the number and percentages of buyers who have earned the claimed amount. Did your seller give you this information?

Problem #2: The seller said he didn't actually make any earnings claims.

Your Strategy: In my opinion almost all Business Opportunity and Franchise sellers make earnings claims. You had to have some idea that you would make money with your new business or else you wouldn't have bought it. Where did you get the idea that you would make money? Probably the Seller gave you the idea somehow.

Lets look at how the FTC defines an earnings claim: The FTC says an earnings claim is --

". . . information given to a prospective franchisee by a franchisor from which a specific level or range of actual or potential sales, cost, income or profit from franchised or non-franchised units may easily be ascertained."

The FTC further said, "The Franchise Rule provides that it is a deceptive act or practice for any franchisor or franchise broker to make any "oral, written, or visual representation to a prospective franchisee which states a specific level of potential sales, income, gross or net profit," or "which states other facts which suggest such a specific level," unless the franchisor satisfies the substantiation and disclosure obligations set forth at 16 C.F.R. § § 1(b)-(e) and provides the prospective franchisee with an earnings claim document.

The FTC also said, "If a franchisor, or its agent or broker, provides a prospective franchisee with reprints or copies of articles, or encourages a prospective franchisee to read specific news articles, containing earnings claims information then that franchisor has made an earnings representation under the Rule."

Bottom Line: If you bought a Business Opportunity or a Franchise, you had to believe that you were going to make money from the business. What made you think you would make money?

More that likely it was from information the Seller presented to you. Oral statements are hard to prove, so first look through all of your records, advertisements and promotional materials and see what you can find that looks like an earnings claim now that you know what to look for.

Of course, it is okay under the previous FTC ruling made in 1986 to make earning claims as long as there was a "reasonable basis" for the claim AND the Seller gave you information telling you the number and percentages of buyers who have actually earned the claimed amount. Did you get any of this information?

Most Sellers are relying on what they consider to be a "fact" and saying that they didn't make any earnings claims or they are saying they didn't make any earnings claims that were not true. They just don't know the law.

If they made statements such as "Earn up to $10,000 a year" or whatever, the statement may be true. Maybe they have documented evidence that some people are making that much money, but just because the statement is true, doesn't get the Sellers out of trouble unless they gave you the required information at the time. My guess is that they didn't.

Problem #3: If the Seller violates the FTC laws, it does NOT give you the right to cancel the contract and get your money back the way it does if he violates a state law.

Your Strategy: First, look the FTC and State laws section and see if your state has Business Opportunity or Franchise Laws. Look near the end of the law to see what your rights are. You'll see that if a seller violates a state law, state laws have a clause that says the buyer can cancel the contract and get his/her money back.

As I said before, if the seller violates a FTC law the buyer can NOT use that violation as a basis for canceling the contract and getting his/her money back . . . only the FTC can go after the seller and not the buyer. Maybe this doesn't seem fair, but it's the law.

If your state doesn't have any state Business Opportunity or Franchise laws, all is not lost. Your one BIG GUN is that you can file a complaint against the seller with the FTC.

Most people make the mistake of firing this gun too soon. More than likely, you won't get anything out of complaining to the FTC. In a few cases you might get a few cents on the dollar back years later. The seller almost certainly does not have the money to give everyone their money back. So even if the FTC takes everything the Seller has and gives it back to the buyers, you won't get much.

Your best bet is get your money back (or as much as you can) directly from the Seller. Filing a complaint with the FTC probably won't help you, but it could hurt the Seller, so use this as a threat. After you file the complaint with the FTC there is probably no good reason for the Seller to give you a refund. He would rather spend his effort showing why you are not entitled to a refund.

There is a good reason for the Seller to give you a refund to keep you from filing a complaint with the FTC. The Seller doesn't want the FTC to start looking at him under a microscope even if he is doing everything 100% legal. So . . .

Don't file a complaint with the FTC, the Better Business Bureau or the Attorney General of your state until you have given up all hope of ever getting a refund.

Filing the complaints may make you feel better, but it won't get you much money, if any. It is better to accept a small part of your money back than to file complaints and never get anything.

Of course, the Seller doesn't know that you feel that way. Here's where your negotiating skills pay off. You can make the Seller believe that you are so mad that you are going to take this matter to Small Claims Court and also file a complaint with the FTC, the Attorney General of your state and the Better Business Bureau.

The threat of doing these things may go a long way towards getting the Seller to agree to give you a refund to keep you from filing any complaints. But after you have actually filed the complaints, you have lost a lot of negotiating power.

Another big gun you have is to threaten of file a lawsuit in Small Claims Court. Again, let me caution you. Threaten to do this before you actually do it. It's always better to negotiate a refund than it is to have to go to court.

Here is why the threat of a lawsuit can sometimes get you your refund. If there have been any lawsuits filed against the Seller, this has to be reported in his FTC and State Disclosure Document. The Seller has to report this to future prospective buyers even if he wins the suit. Use your negotiating skills and don't file a lawsuit too early.

Now you are armed with some big guns and in moat cases I think you will be able to prove that the seller "Danced Around" (or just down-right violated) the FTC and State earnings claims rules.

This should make it easy for you to negotiate a refund or win in Small Claims Court if you have to go that far.

For more information and background on the Earnings Claims laws and rules see Federal Judge's New Decision.