Federal Crackdowns on the Coaching Industry has become a hot topic, staying compliant the coaching industry has become a challenge for many businesses. Businesses in high-risk industries are often particularly susceptible to fraud, they tend to get special scrutiny by the Federal Trade Commission (FTC). One such industry that the FTC has been giving much attention in recent years is the online coaching industry. The issues that have drawn the attention of the FTC are also issues that have contributed to online coaching businesses being labeled high risk. This comes down to the high risk of scams, false advertising, and significant financial harm.
The International Coaching Federation (ICF), the “main credentialing body for the global coaching community,” predicts that the coaching industry will continue to see significant growth, particularly in niche sectors.
That growth has increased those risks, and will likely continue to do so in the future. The coaching industry has escaped regulation to a great degree, but is currently becoming more regulated. That is also likely to continue.
While this increased scrutiny may help eliminate dishonest and predatory coaching businesses, it can end up being an unnecessary drain on time and money for legitimate coaching businesses. So, what can you do to keep the FTC off your back so you can focus all of your resources on building and improving your business?
One complicating factor in this is the inconsistency of requirements between individual states and between states and the federal government. Some states require that business coaches, personal life coaches, and other types of coach obtain licensing and certification, but some states do not. In some cases, there may be reciprocity between states, but in some cases there may not. The amount of impact that has on your business mainly depends on whether or not you provide your services outside your state.
Whether it is required or not in the locations you do business, officially registering your business and obtaining the relevant licensing and certification are the first steps in demonstrating to the FTC, etc., that your business is legitimate. The FTC may investigate perfectly legitimate businesses because they don’t “look” legitimate. Accurate or not, the absence of business registration, licensing, and certification is a red flag to the FTC.
Registering trademarks, copyrights, domains, your business name, and other intellectual property also can go a long way toward demonstrating that everything is in order and compliant in your business.
In any business, it is very important to be careful about the promises that you make regarding your products and services. If a company sells toasters, let’s say, promising that plugging it in, putting bread in the slots, and pressing the designated lever or button will result in a piece of toast poses very little risk of an accusation of false advertising (assuming that your product is not defective). In almost every case, toaster manufacturers can control whether the toaster toasts bread or not.
In the case of something like coaching, however, the outcomes are determined to a great degree by factors that are not under your control. Coaching outcomes can also be difficult to measure, so the degree to which they live up to your promises can be a matter of interpretation or debate. Extreme and outrageous promises are out, of course, but even reasonable promises may be difficult to prove.
The promises you make on your website, in your marketing materials, or through direct conversation will be one of the first targets of FTC scrutiny, so you need to keep your enthusiasm in check and be very, very careful about your claims.
Transparency and thorough, appropriate disclosure of relevant information about you, your staff, and your business are an important part of avoiding accusations of false advertising. The lack of such transparency is another red flag to the FTC. Be strictly honest and upfront about what you actually can do and what you cannot do. In addition to keeping the FTC away, it will help keep requests for refunds and chargebacks to a minimum.
Related to transparency and disclosure is documentation. Don’t promise anything that you can’t deliver, but document everything that you do promise. Require a contract to provide customers with your services. Be sure to include things like your refund policy, details of the services to be provided, what outcomes are and are not promised, deadlines and schedules, etc. If you don’t have an attorney draw up the contract, at least have it reviewed by an attorney for both thoroughness and legality.
The final area that can impact the FTC’s perception of your business and either trigger or prevent an investigation is payment processing and accounting. Inconsistent payment processing and murky accounting are good ways to attract the attention of other federal and state agencies in addition to the FTC. If you lack the expertise to conducting accounting that is compliant with the relevant laws, regulations, and standards, it will be worth the time, effort, and money to hire or contract someone who does.
Meanwhile, not having any problems with the FTC or compliance with laws and regulations will help you acquire a merchant account. Your online coaching business is a high-risk business, so banks and payment processors will review your request for an account with a strict eye. Ultimately, utilizing a high-risk payment processor is probably the best route to take. Their expertise and systems will be an important part of achieving and maintaining the level of compliance that will keep the FTC off your business’ back.