Here are steps to setup a user and allow the user access only via FTP (i.e. no SSH) and also limit access to a specific (user home) directory on proftpd:

1. Add new user: adduser newusername
2. Set password: passwd newusername
3. Modify user home directory from default to a new folder:

usermod -d /target/directory username

4. Edit shells file: vi /etc/shells and add /dev/null at the end
5. Modify newusername entry in the passwd file: vi /etc/passwd to add /./ before the newusername so that the entry looks like this:

newusername:x:502:502::/home/ftp/./newusernamehomedirectory/:/dev/null

6. Edit /etc/proftpd/proftpd.conf file and uncomment the line DefaultRoot ~