DEFENDANTS IN "RACHEL ROBOCALLS" CASE FOUND BY COURT TO BE LIABLE FOR $1.7 MILLION

FROM:  U.S. FEDERAL TRADE COMMISSION
Court Finds Defendants in FTC’s Treasure Your Success “Rachel Robocalls” Case Liable for $1.7 Million

Universal Processing Services (UPS) of Wisconsin, LLC, a payment processor, and telemarketer Hal E. Smith and his company HES Merchant Services Company, Inc. (HES), defendants in the Federal Trade Commission’s case against a deceptive robocall credit card interest rate reduction scheme, were jointly ordered to pay $1,734,972 to the Commission by a Florida district court. The money will be used to provide refunds to defrauded consumers.

 “The defendants blasted thousands of people with illegal robocalls and lied about helping relieve their credit card debt,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Now they’re out of the robocall business. The court’s decision also shows that it’s bad business for payment processors to help scammers take people’s money.”

The final orders announced today against UPS, which did business as Newtek Merchant Solutions, Smith, and HES follow the court's November 2014 order granting the FTC’s motion for summary judgment against these three defendants who took part in the Treasure Your Success (TYS) scheme. The rest of the defendants had previously agreed to final orders settling the agency’s charges against them.

The court held Smith and HES liable for 11 violations of the FTC Act and the Commission’s Telemarketing Sales Rule (TSR), based on their participation in a deceptive telemarketing scheme purporting to be a credit card interest rate reduction service that used robocalls to solicit consumers. The defendants failed to disclose the identity of the person(s) responsible for placing the robocalls and unlawfully calling numbers that had been registered on the FTC’s Do Not Call Registry.

In February 2015, the court entered a permanent injunction against Smith and HES that includes 20-year bans on robocalls, telemarketing, and marketing debt relief products or services. It also permanently prohibits Smith and HES from making misrepresentations in the sale or marketing of any product or service, including financial products or services, and imposes the $1.7 million judgment.

The court also found UPS liable for “assisting and facilitating” the TSR violations of the other defendants by providing the interface with the banks to handle credit card payments while knowing (or avoiding knowing) of the underlying TSR violations. Among other things, the court found that UPS had ignored numerous red flags that, if properly investigated, would have led UPS to decline TYS as a client. The court imposed the same $1.7 judgment million against UPS.

After the summary judgment ruling, UPS agreed to a settlement permanently barring the company from processing payments for clients whom it knows or should have known: 1) fall into certain categories that have received close industry attention, such as debt relief services; 2) make misrepresentations to consumers; 3) charge consumers without their authorization; and 4) otherwise violate the FTC Act or the TSR. It also requires UPS to put screening and monitoring provisions in place for use when accepting future clients.

The Commission vote approving the proposed stipulated final order against UPS was 5-0. The proposed stipulated final order was entered by the U.S. District Court for the Middle District of Florida, Orlando Division, and has now been signed by the judge.

The following defendants previously agreed to stipulated final orders settling the FTC’s charges against them:

On September 23, 2013, a permanent injunction against defendants Willy Plancher; Valbona Toska, WV Universal Management, LLC; Global Financial Assist, LLC; and Leading Production, LLC banning them from robocalling, telemarketing, and marketing debt relief products or services;
On October 6, 2014, a permanent injunction against Ramon Sanchez-Ortega barring him from robocalling and telemarketing;
On November 19, 2014, a permanent injunction and $25,000 financial judgment against Derek Depuydt, UPS’s former president prohibiting him from acting as a payment processor, independent sales organization, or a sales agent for high-risk clients; and
Also on November 19, 2014, a permanent injunction against Jonathon E. Warren; Business First Solutions, Inc.; and Voiceonyx Corp. barring them from robocalling, telemarketing, and marketing debt relief products or services.
NOTE: Stipulated final orders have the force of law when approved and signed by the district court judge.

COURT ORDERS TEMPORARY HALT TO COMPANY COERCING PEOPLE TO PAY DEBTS THEY DON'T OWE

FROM:  U.S. FEDERAL TRADE COMMISSION
FTC, Illinois Attorney General Halt Chicago Area Operation Charged With Illegally Pressuring Consumers to Pay ‘Phantom’ Debts

The Federal Trade Commission and the Illinois Attorney General’s Office have obtained a court order temporarily halting a fake debt collection scam located in Aurora, Illinois, a western suburb of Chicago. The defendants are charged with illegally using threats and intimidation tactics to coerce consumers to pay payday loan debts they either did not owe, or did not owe to the defendants.

The FTC’s case against K.I.P., LLC, Charles Dickey, and Chantelle Dickey is the agency’s seventh ‘phantom’ debt collector matter.

 “This company scared and tricked people into paying debts they didn’t owe,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Working with terrific partners like the Illinois Attorney General, we will keep going after phantom debt scams like this one and shutting them down.”

“The defendants have threatened and intimidated their way into stealing hundreds of thousands of dollars from unsuspecting people all across the country,” Illinois Attorney General Lisa Madigan said. “Between our two offices, we have hundreds of complaints. It is clear they must be stopped.”

According to the complaint, since at least 2010, the defendants used a host of business names to target consumers who obtained or applied for payday or other short-term loans, pressuring them into paying debts that they either did not owe or that the defendants had no authority to collect.

Often armed with sensitive financial information, the defendants would call consumers and demand immediate payment for payday loans that were supposedly delinquent.  To pressure consumers to pay, the defendants threatened that they would:

Garnish consumers’ wages;
Suspend or revoke their drivers’ licenses;
Have them arrested or imprisoned; or
File a lawsuit against them.
In response to the defendants’ repeated calls and alleged threats, many consumers paid the debts, even though they may not have owed them, because they believed the defendants would follow through on their threats or they simply wanted to end the harassing phone calls.

The complaint also charges the defendants with failing to provide consumers with a notice containing: 1) the amount of the debt; 2) the name of the creditor to whom the debt is owed; 3) a statement that unless the consumer disputes the debt, it will be assumed to be valid; 4) a statement that if the consumer does dispute the debt in writing, the defendants will verify the debt is correct; and 5) a statement that upon the consumer’s written request, the defendants will provide the consumer with the name and address of the original creditor if different from the current creditor.

Finally, the complaint charges that the defendants: called consumers at work when they knew such calls were prohibited by consumers’ employers; harassed and abused consumers; used obscene or profane language; and called consumers repeatedly with the intent of annoying or abusing them.

The complaint also alleges that the defendants violated the Illinois Consumer Fraud and Deceptive Business Practices Act and the Illinois Collection Agency Act, and that the defendants are not licensed debt collectors as required by Illinois law.

Defendants named in the case include: K.I.P., LLC; Charles Dickey, individually and as an owner, member, or managing member of K.I.P., LLC, and also doing business as (d/b/a) Ezell Williams and Associates, Corp.; Ezell Williams, LLC; Excel Receivables, Corp.; Second Chance Financial Credit, Corp.; Second Chance Financial, LLC; Payday Loan Recovery Group, LLC; Payday Loan Recovery Group; Payday Loan Recovery; International Recovery Services, LLC; International Recovery Services; and D&R Recovery. The complaint also names Chantelle Dickey, also known as Chantelle Rudd and Chantelle Williams, as an individual and as a manager of K.I.P.

The FTC and the Illinois Attorney General’s Office appreciate the Aurora Police Department, North Aurora Police Department, Better Business Bureau of Chicago and Northern Illinois, and the U.S. Postal Inspection Service Chicago Division for their valuable assistance with this matter.

FTC, DUTCH AGENCY SIGN MEMORANDUM OF UNDERSTANDING ON PRIVACY

FROM:  U.S. FEDERAL TRADE COMMISSION
FTC Signs Memorandum of Understanding with Dutch Agency On Privacy Enforcement Cooperation

The Federal Trade Commission has signed a memorandum of understanding (MOU) with the Dutch Data Protection Authority to enhance information sharing and enforcement cooperation on privacy-related matters.

FTC Chairwoman Edith Ramirez and Dutch Data Protection Authority Chairman Jacob Kohnstamm signed the MOU, which is similar to agreements the FTC has with data protection authorities in Ireland and the United Kingdom. The two agencies already cooperate as part of several privacy-related initiatives.

“In our interconnected world, cross-border cooperation is increasingly important,” Chairwoman Ramirez said. “This arrangement with our Dutch counterpart will strengthen FTC efforts to protect the privacy of consumers on both sides of the Atlantic.”

Chairman Kohnstamm said, “In this day and age of increasing cross-border data flows, it is important that the data protection and privacy authorities across the globe increase their cooperation as well. The signing of this MOU between the Dutch DPA and the FTC is a great step in this and marks the good relationship between our offices.”

The FTC increasingly seeks to secure the assistance of international privacy and data protection authorities in its efforts to protect consumer privacy. The MOU recognizes the need for increased cross-border enforcement cooperation and sets out the two agencies’ intent regarding mutual assistance and the exchange of information for investigating and enforcing against privacy violations.

The FTC is the chief U.S. consumer privacy agency. Its comprehensive privacy program uses law enforcement, research, policy initiatives, and consumer and business education to protect consumers’ personal information. In the Netherlands, the Dutch Data Protection Authority enforces the Dutch Data Protection Act, which implements the European Union’s 1995 Data Protection Directive.

The Commission vote authorizing Chairwoman Ramirez to sign the MOU on behalf of the agency was 5-0.

FTC TOUTS ACTIONS TAKEN AGAINST ABUSIVE AND FRAUDULENT DEBT COLLECTORS

FROM:  U.S. FEDERAL TRADE COMMISSION 
FTC Continues to Protect Consumers from Abusive, Fraudulent Debt Collectors
Agency’s Activities over the Past Year Detailed in Annual Summary Provided to CFPB

Over the past year, the Federal Trade Commission has continued its vigorous work on behalf of U.S. consumers suffering from unlawful debt collection practices, including bringing law enforcement actions against abusive and fraudulent operations, conducting education and public outreach initiatives, and implementing research and policy programs.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Consumer Financial Protection Bureau (CFPB) is required to submit annual reports to Congress on the Fair Debt Collection Practices Act (FDCPA). Since the CFPB and FTC jointly enforce the Act, the FTC’s summary of its own recent work on debt collection issues assists the CFPB in preparing the report to Congress. In 2014, the Commission:

filed 10 new debt collection cases against 56 new defendants, more cases than the FTC has ever filed before in a given year;
resolved nine cases and obtained nearly $140 million in judgments against abusive and deceptive debt collectors, including one case in which the agency obtained a record $90.5 million in judgments, shutting down more than 20 debt collection companies employing nearly 500 collectors, and has collected $16.5 million from the judgments to date;
banned 47 companies and individuals that engaged in serious and repeated law violations from ever working in debt collection again;
filed two joint amicus briefs with the CFPB on key debt collection issues; and
co-hosted, along with the CFPB, a day-long roundtable exploring issues related to the collection of debts from Latino consumers.
According to the summary, the FTC’s work over the past year has focused on: 1) egregious debt collection practices, including “phantom debt collection”; 2) security of consumer data in the buying and selling of debts; and 3) protection of limited-English-proficiency consumers from illegal debt collection practices.

The FTC also has worked to educate consumers and businesses about their rights and responsibilities under the FDCPA and the FTC Act.  In 2014, the agency distributed 14.8 million printed publications about debt collection to consumers nationwide and worked to educate industry by delivering speeches, blogging, participating in industry conferences, and providing education materials, among other things.

The Commission vote approving the letter was 5-0.

DEFENDANTS SETTLE FTC CHARGES OF REMOTELY DEBITING SENIORS' BANK ACCOUNTS

FROM:  FEDERAL TRADE COMMISSION  

Two Defendants in Cross-Border Telemarketing Scheme Settle FTC Charges
Scheme Used Remotely Created Checks to Debit Money from Seniors’ Bank Accounts

Two defendants who participated in an alleged multi-million dollar telemarketing fraud that targeted U.S. seniors and withdrew money from their accounts without authorization have agreed to settle Federal Trade Commission charges. The settlement orders bar them from using remotely created checks drawn on consumers’ bank accounts, require them to obtain consumers’ consent before debiting their accounts, and prohibit them from misrepresenting any goods or services.

The individuals Marc Ferry and Robert Barczai, also will turn over the proceeds of the scheme from their personal and corporate accounts. The FTC has filed for default judgments against the corporate defendants, and summary judgment against the leading individual defendant in the scheme, which took in nearly $11 million between 2010 and March 2014.

“Scammers thought they could cover their tracks by operating across borders, but law enforcement caught up with them,” said Jessica Rich, Director of the Bureau of Consumer Protection. “We’ve shut down their scheme of lying to older people and stealing their money.”

According to the FTC’s March 2014 complaint, defendant Ari Tietolman and his associates established a network of U.S. and Canadian entities to carry out their scam. The defendants used a telemarketing boiler room in Canada, where Tietolman lives, to cold-call seniors claiming to sell fraud protection, legal protection, and pharmaceutical benefit services for $187 to $397.

In some instances, the telemarketers convinced consumers they were affiliated with banks or government entities, leading consumers to disclose their bank account information. The defendants then used that information to create checks drawn on the consumers’ bank accounts. They deposited these “remotely created checks” into corporate accounts set up by defendants Ferry and Barczai in the United States. The U.S.-based defendants then transferred the money to accounts in Canada, the FTC alleged.

The FTC charged the corporate and individual defendants with violating the FTC Act and the agency’s Telemarketing Sales Rule. A U.S. district court temporarily shut down the operation in late March 2014, pending the resolution of the FTC’s action.

Two defendants in the case, Ferry and Barczai, have now agreed to stipulated orders settling the FTC’s charges against them. The order against Ferry bans him from using remotely creating checks and payment orders, requires him to get consumers’ authorization before charging their financial accounts, and prohibits him from making misrepresentations regarding any goods or services. It imposes a judgment of $325,449 against him, which will be partially suspended after he pays the FTC $68,412.

The order against Barczai contains the same conduct provisions as the order against Ferry, and imposes a judgment of $9,655,638, which will be partially suspended after he pays the FTC $21,367.

The Commission vote approving the two proposed stipulated final orders was 5-0. They were filed in the U.S. District Court for the Eastern District of Pennsylvania.

The FTC subsequently filed a memorandum seeking default judgments against the following corporate defendants on January 13: First Consumers LLC; PowerPlay Industries LLC; Standard American Marketing, Inc.; 1166519075 Quebec Inc., doing business as (d/b/a) Landshark Holdings Inc; and 1164047236 Quebec, Inc. d/b/a Madicom, Inc.

Finally, on January 13, the FTC filed a memorandum seeking summary judgment against Tietolman, who ran the operation and collected money funneled into Canada. The FTC alleges that Tietolman controlled the deceptive scheme, and therefore is seeking to permanently bar him from the conduct alleged in the complaint and hold him liable for the $10.7 million in harm he caused defrauded consumers.

The FTC received valuable help throughout this case from the U.S. Postal Inspection Service and the Royal Canadian Mounted Police.

NOTE: Stipulated orders have the force of law when approved and signed by the District Court judge.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them.

CFTC ORDERS MAN AND COMPANY TO PAY $9.6 MILLION FOR ROLES IN PRECIOUS METALS FRAUD

FROM:  COMMODITY FUTURES TRADING COMMISSION 
January 26, 2015
CFTC Orders Florida Resident Anthony Lauria and His Company Gold Coast Bullion, Inc. to Pay More than $9.6 Million in Restitution and a Civil Monetary Penalty in Off-Exchange Precious Metals Fraud

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today entered an Order filing and simultaneously settling charges against Anthony Lauria and his company, Gold Coast Bullion, Inc. (GCB), operating out of Fort Lauderdale, Florida, for engaging in illegal, off-exchange precious metals transactions, for committing fraud in connection with those illegal transactions, and for operating GCB as an unregistered Futures Commission Merchant (FCM).

The CFTC Order requires Lauria and GCB jointly to pay restitution totaling $5,940,124.16 and a civil monetary penalty of $3.75 million. In addition, the Order imposes permanent registration and trading bans on Lauria and GCB.

The CFTC Order finds that, from at least January 2012 to February 2013, GCB was a telemarketing firm that solicited retail customers to engage in financed precious metals transactions. The Order further finds that Lauria solicited customers directly and supervised other telemarketers involved in solicitation.

When soliciting customers for financed precious metals transactions, Lauria and other GCB telemarketers represented that to purchase a certain quantity of metal, 1) the customer needed to deposit only a percentage of the total metal value, typically 25 percent, 2) that GCB would arrange for the customer to receive loan for the remaining 75 percent, and 3) that the customer would have to pay a finance charge on the loan, as well as a service charge, according to the Order.

As the Order finds, financed transactions in commodities with retail customers, like those in which GCB engaged, must be executed on or subject to the rules of an exchange approved by the CFTC, which GCB did not do. In addition, the Order finds that GCB accepted money from or extended credit to its customers to margin, guarantee, or secure trades when it was not registered with the CFTC as an FCM. Finally, the Order finds that GCB never actually delivered any precious metals in connection with these transactions, but received commissions and fees totaling more than $2.6 million.

According to the CFTC Order, GCB did not purchase or sell any physical metals, but instead contacted another company, AmeriFirst Management LLC (AML), to execute the customers’ buy or sell orders. The CFTC Order states that GCB then confirmed the execution of the transactions by issuing false trade confirmations to the customers. The CFTC Order further states that AML, for its part, also did not purchase or sell any physical metals in connection with these transactions. AML managed its own exposure on these transactions using derivatives in margin trading accounts with several entities, and made book entries which tracked the value of the customer’s account, according to the Order.

On July 30, 2013, the CFTC sued AML in federal court in Florida, charging it with engaging in illegal, off-exchange precious metals transactions, fraud, and other violations (see CFTC Press Release 6655-13). On July 24, 2014, the court entered a supplemental consent Order against AML and the three individual Defendants in that case requiring them to pay more than $25 million in restitution and $10 million in civil monetary penalties (see CFTC Press Release 6973-14).

The CFTC cautions victims that restitution orders may not result in the recovery of money lost because the wrongdoers may not have sufficient funds or assets. The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.

CFTC Division of Enforcement staff members responsible for this action include Thaddeus Glotfelty, Judith McCorkle, Joseph Konizeski, Scott Williamson, and Rosemary Hollinger.

FTC ANNOUNCES $21 MILLION PAYOUT FROM ONLINE PAYDAY LENDING COMPANIES

FROM:  U.S. FEDERAL TRADE COMMISSION 
 Online Payday Lending Companies to Pay $21 Million to Settle Federal Trade Commission Charges that They Deceived Consumers Nationwide
Lender Will Waive $285 Million in Other Charges

Two payday lending companies have settled Federal Trade Commission charges that they violated the law by charging consumers undisclosed and inflated fees. Under the proposed settlement, AMG Services, Inc. and MNE Services, Inc. will pay $21 million – the largest FTC recovery in a payday lending case – and will waive another $285 million in charges that were assessed but not collected.

“The settlement requires these companies to turn over millions of dollars that they took from financially-distressed consumers, and waive hundreds of millions in other charges,” said Jessica Rich, Director of the Bureau of Consumer Protection. “It should be self-evident that payday lenders may not describe their loans as having a certain cost and then turn around and charge consumers substantially more.”

The FTC filed its complaint in federal district court in Nevada against AMG and MNE Services and several other co-defendants, in April 2012, alleging that the defendants violated the FTC Act by misrepresenting to consumers how much loans would cost them. For example, the defendants’ contract stated that a $300 loan would cost $390 to repay, but the defendants then charged consumers $975 to repay the loan.

The FTC also charged the defendants with violating the Truth in Lending Act (TILA) by failing to accurately disclose the annual percentage rate and other loan terms and making preauthorized debits from consumers’ bank accounts a condition of the loans, in violation of the Electronic Funds Transfer Act (EFTA). MNE Services lent to consumers under the trade names Ameriloan, United Cash Loans, US Fast Cash, Advantage Cash Services, and Star Cash Processing. AMG serviced the loans.

In May 2014, a U.S. district court judge held that the defendants’ loan documents were deceptive and violated TILA, as the FTC had charged in its complaint.

In addition to the $21 million payment and estimated $285 million in waived charges, the settlement also contains broad prohibitions barring the defendants from misrepresenting the terms of any loan product, including the loan’s payment schedule, the total amount the consumer will owe, the interest rate, annual percentage rates or finance charges, and any other material facts. The settlement order prohibits the defendants from violating TILA and EFTA.

The Commission vote approving the proposed stipulated final order was 5-0. It was filed in the U.S. Court for the District of Nevada on January 15, 2015. The FTC’s action remains in litigation as to defendants SFS, Inc., Red Cedar Services, Inc., AMG Capital Management, LLC, Level 5 Motorsports, LLC, LeadFlash Consulting, LLC, Black Creek Capital Corporation, Broadmoor Capital Partners, LLC, Scott A. Tucker, the estate of Blaine A. Tucker, Don E. Brady, and Robert D. Campbell, and relief defendants Park 269, LLC and Kim C. Tucker.

NOTE: Stipulated orders have the force of law when approved and signed by the District Court judge.

FTC APPROVES 2 FINAL ORDERS IN CASE INVOLVING CAFFEINE-INFUSED SHAPEWEAR UNDERGARMENTS

FROM:  U.S. FEDERAL TRADE COMMISSION 
FTC Approves Final Orders Banning Two Companies From Making Unsubstantiated Slimming Claims for Shapewear Undergarments

Following a public comment period, the Federal Trade Commission has approved two final orders settling charges that two companies, Norm Thompson Outfitters. Inc., and Wacoal America, Inc., misled consumers regarding the ability of their caffeine-infused shapewear undergarments to reshape the wearer’s body and reduce cellulite.

According to the FTC’s complaints, announced in September, the two companies’ marketing claims for their caffeine-infused products were false and not substantiated by scientific evidence.

In settling the charges, the companies are banned from claiming that any garment that contains any drug or cosmetic causes substantial weight or fat loss or a substantial reduction in body size. The companies also are prohibited from making claims that any drug or cosmetic reduces or eliminates cellulite or reduces body fat, unless they are not misleading and can be substantiated by competent and reliable scientific evidence.

The final orders also require the companies to pay $230,000 and $1.3 million, respectively, that the FTC can use to provide refunds to consumers.

The Commission vote approving each final consent order was 5-0.

DATING SERVICE WILL NO LONGER USE FAKE PROFILES

FROM:  U.S. FEDERAL TRADE COMMISSION 

Online Dating Service Agrees to Stop Deceptive Use of Fake Profiles
Note: Steve Baker, Director of the FTC’s Midwest Region Office, will take reporters’ questions by phone:
Date: October 29, 2014
Time: 2 p.m. ET

In its first law enforcement action against an online dating service, the Federal Trade Commission has reached a settlement that prohibits JDI Dating Ltd., an England-based company,  from using fake, computer-generated profiles  to trick users into upgrading to paid memberships and charging these members a recurring monthly fee without their consent. The settlement also requires the defendants to pay $616,165 in redress.

“JDI Dating used fake profiles to make people think they were hearing from real love interests and to trick them into upgrading to paid memberships,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Adding insult to injury, users were charged automatically to renew their subscriptions – often without their consent.”

According to a complaint filed by the FTC, JDI Dating and William Mark Thomas operate a worldwide dating service via 18 websites, including cupidswand.com, flirtcrowd.com and findmelove.com. The defendants offered a free plan that allowed users to set up a profile with personal information and photos. As soon as a new user set up a free profile, he or she began to receive messages that appeared to be from other members living nearby, expressing romantic interest or a desire to meet. However, users were unable to respond to these messages without upgrading to a paid membership. Membership plans cost from $10 to $30 per month, with subscriptions generally ranging from one to 12 months.

The messages were almost always from fake, computer-generated profiles – “Virtual Cupids” – created by the defendants, with photos and information designed to closely mimic the profiles of real people. A small “v” encircled by a “C” on the profile page was the only indication that the profiles were fake. Users were not likely to see – much less understand – this icon. The fake profiles and messages caused many users to upgrade to paid subscriptions.

In addition, the defendants failed to tell subscribers that their subscriptions would be renewed automatically and that they would continue to be charged until they canceled. To avoid additional charges, members had to cancel at least 48 hours before their subscriptions ended. Information about the automatic renewal feature was buried in multiple pages of densely worded text that consumers could see only by clicking a “Terms and Conditions” hyperlink. Consumers were not required to access this hyperlink as part of the enrollment process.

The Commission’s complaint charges JDI Dating and Thomas with violating the FTC Act by misrepresenting the source of the communications from fake profiles and by failing to disclose the automatic renewal terms. The complaint also charges the defendants with violating the Restore Online Shoppers’ Confidence Act (ROSCA) by failing to: disclose clearly the terms of the negative-option plan, obtain express informed consent before charging consumers, and provide a simple way to stop recurring charges.

The settlement order prohibits the defendants from misrepresenting material facts about any product or service and, from failing to disclose clearly to potential members that they will receive communications from virtual profiles who are not real people. The order requires that, before obtaining consumers’ billing information for a product with a negative-option feature, the defendants must clearly disclose the name of the seller or provider, a product description and its cost, the length of any trial period, the fact that charges will continue unless the consumer cancels, the deadline for canceling, and the mechanism to stop recurring charges. The order also bars the defendants from using consumers’ billing information to obtain payment without their informed consent.

The injunction also bars the defendants from misrepresenting refund and cancellation policies, and failing to disclose clearly the terms of a negative option plan – before a consumer consents to pay. In addition, the defendants are prohibited from failing to honor a refund or cancellation request that complies with their policies, and failing to provide a simple mechanism for consumers to stop recurring charges – at least as simple as the mechanism consumers used to initiate them.

The order also prohibits JDI Dating and Thomas from violating the ROSCA and selling or otherwise benefitting from customers’ personal information, and requires them to pay $616,165 in redress.

The Commission vote authorizing the staff to file the complaint and proposed stipulated order for permanent injunction was 5-0. The complaint and stipulated final order were filed in U.S. District Court for the Northern District of Illinois, Eastern Division, on October 27, 2014.

NOTE: The Commission authorizes the filing of a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. Stipulated orders have the force of law when signed by the District Court judge.

MARKETERS OF CREDIT/DEBIT CARD PROCESSING SERVICES SETTLE ALLEGED DECEPTION CLAIMS BY FTC

FROM:  U.S. FEDERAL TRADE AND COMMISSION 

Marketers Agree to Settle FTC Charges They Deceived Small Businesses Into Buying Credit/Debit Card Processing Services

A company that sold credit and debit card payment processing services to small businesses has agreed to settle Federal Trade Commission charges that it used deception and unsubstantiated claims when signing businesses up for its services and processing equipment. The defendants also agreed to settle similar charges the Washington Attorney General’s Office filed in state court.

Under separate settlements with the FTC and the Washington State Attorney General, the defendants behind Merchant Services Direct LLC (MSD) will pay $175,000 and be prohibited from continuing to use the allegedly deceptive sales tactics.

In addition, the defendants must provide to merchants (1) a separate document disclosing all fees, charges, and rates before merchants sign any contracts with the defendants, and (2) a complete copy of any documents merchants sign before submitting the merchants’ applications for payment processing services.

According to the FTC’s complaint, MSD was an “independent sales organization” that sold small businesses the ability to accept credit and debit card payments. The businesses paid fees whenever their customers paid with a credit or debit card.

The FTC charged MSD, also doing business as Sphyra Inc., and its associates with making false representations and failing to disclose key facts concerning their processing services and equipment, and with misleading merchants about the fees and costs of services and equipment.

For example, MSD agents allegedly:

tricked merchants into signing binding contracts by telling them the documents were just applications to obtain price quotes;
led merchants to believe they were associated with the merchants’ current card processor, Visa or MasterCard, or their bank and tricked them into signing new contracts by telling them they were just updating existing account paperwork;
duped merchants into leasing new card processing terminals for two to four years, falsely claiming their current “swipe” terminals were outdated or incompatible with its services; and
falsely told merchants they could cancel at any time.
In addition to MSD, the settling defendants are Boost Commerce Inc., Kyle Lawson Dove, and Shane Patrick Hurley. Charges against another defendant, Generation Y Investments LLC, were voluntarily dismissed as part of the settlement.

The FTC acknowledges the assistance of the Washington State Attorney General’s Office and the Better Business Bureaus of Eastern Washington, Northern Idaho, and Montana in this case.

The Commission vote authorizing the stipulated final orders was 4-0-1, with Commissioner Julie Brill abstaining. The orders were filed in the U.S. District Court for the Eastern District of Washington. The Washington State Attorney General’s Office filed its proposed settlement with the defendants in the Superior Court for Spokane County, Washington.

NOTE: Stipulated orders have the force of law when approved and signed by the District Court judge.

FTC APPROVES FINAL ORDER TO BAN 'FAT BURNER' PILL MARKETER FROM MAKING, SELLING WEIGHT-LOSS PRODUCTS

FROM:  U.S. FEDERAL TRADE COMMISSION 

FTC Approves Final Orders Banning Marketer Behind ‘Fat Burner’ Diet Pills From Making or Selling Weight-Loss Products

Following a public comment period, the Federal Trade Commission has approved two final orders settling charges that the former CEO and co-founder of an Atlanta-based marketing operation and his company deceived consumers with promises that their Healthe Trim supplements would burn fat, increase metabolism, and suppress appetite.

According to the FTC’s complaint, announced last month, John Matthew Dwyer III and HealthyLife Sciences, LLC made false and unsubstantiated claims that Healthe Trim supplements would cause rapid and substantial weight loss. Advertisements for Healthe Trim, which used the tagline “Get High School Skinny,” relied heavily on consumer testimonials that portrayed losing weight as easy.

In settling the FTC’s charges, Dwyer has agreed to be banned from the weight-loss industry, and is prohibited from manufacturing or marketing weight-loss products. HealthyLife Sciences is banned from making any of the seven weight-loss claims that the FTC has publicly advised are scientifically infeasible, with respect to any supplement, over-the-counter drug, or any product rubbed into or worn on the skin. The settlement with HealthyLife Sciences also requires that the company have two randomized, double-blind, placebo-controlled human clinical trials to support other claims relating to weight loss, increased metabolism, or appetite suppression.

COURT SHUTS DOWN TECH SUPPORT SCAMMERS WHO SOLD SOFTWARE AVAILABLE FOR FREE

FROM:  FEDERAL TRADE COMMISSION 

At FTC’s Request, Court Shuts Down New York-Based Tech Support Scam Business

At the request of the Federal Trade Commission, a federal court has shut down a company that scammed computer users by tricking them into paying hundreds of dollars for technical support services they did not need, as well as software that was otherwise available for free.

According to the FTC’s complaint, Pairsys, Inc., cold-called consumers masquerading as representatives of Microsoft or Facebook, and also purchased deceptive ads online that led consumers to believe they were calling the technical support line for legitimate companies.

“The defendants behind Pairsys targeted seniors and other vulnerable populations, preying on their lack of computer knowledge to sell ‘security’ software and programs that had no value at all,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “We are pleased that the court has shut down the company for now, and we look forward to getting consumers’ money back in their pockets.”

Whether consumers were cold-called by the company or drawn in by deceptive ads, the FTC’s complaint notes that what followed was a deceptive and high-pressure sales pitch conducted by scammers in an overseas call center. The scammers would convince a consumer to allow them to have remote control over the individual’s computer, in order to analyze the supposed issues.

Once they had access to a consumer’s computer, the FTC alleges, the scammers would lead the consumer to believe that benign portions of the computer’s operating system were in fact signs of viruses and malware infecting the consumer’s computer. In many cases, they implied that the computer was severely compromised and had to be “repaired” immediately.

At that point, consumers were pressured into paying for bogus warranty programs and software that was freely available, usually at a cost of $149 to $249, though in some cases, the defendants charged as much as $600 for the supposed products. The FTC’s filings in the case allege that the company made nearly $2.5 million since early 2012.

The defendants have agreed to the terms of a preliminary injunction issued by the court that prohibits the defendants in the case from making misrepresentations to consumers about what company they represent or whether consumers have viruses or spyware on their computer. They are also banned from deceptive telemarketing practices, and may not sell or rent their customer lists to any third party. The injunction requires that their websites and telephone numbers must be shut down and disconnected, and their assets be frozen.

The defendants in the case, Pairsys, Inc., Uttam Saha and Tiya Bhattacharya, are accused by the FTC of violating both the FTC Act and the Telemarketing Sales Rule. In its complaint, the FTC asks the court to permanently shut down the company and require the defendants to return their ill-gotten gains. The FTC previously brought cases against a number of tech support scammers in 2012 and has received settlements and judgments totaling more than $5 million in those cases.

The Commission vote authorizing the staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the Northern District of New York. The stipulated preliminary injunction was entered by the court on Oct. 9. 2014.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest. The case will be decided by the court.

EDUCATIONAL SERVICE COMPANY SETTLES CHARGES IT MADE UNSUPPORTED CLAIMS ABOUT PRODUCTS

FROM:  U.S. FEDERAL TRADE COMMISSION

FTC Settlement Bars WordSmart from Deceiving Parents With Unsupported Claims About its Education Products

Educational services company WordSmart Corporation and its president have agreed to settle Federal Trade Commission charges that they deceptively marketed the company’s programs to the parents of school-age children in advertising that included a television infomercial featuring quiz show host Alex Trebek.

The settlement order prohibits WordSmart and David A. Kay from misrepresenting the benefits of educational goods or services, and from violating the agency’s Telemarketing Sales Rule (TSR).

The FTC’s complaint alleges that the defendants targeted parents who wanted to improve their children’s performance in school or help them prepare for standardized tests, such as the SAT or ACT. They sold the programs via telemarketing and their website, charging between $15 and $300 for each program.

The defendants’ allegedly false and unsubstantiated claims included that, by using WordSmart for a total of 20 hours, students were guaranteed to improve letter grades by at least one GPA point, SAT scores by at least 200 points, ACT scores by at least four points, GRE and GMAT scores by at least 100 points, and IQ scores. They also falsely claimed they would provide a full refund within 30 days if the buyer was not satisfied.

In addition, the defendants allegedly repeatedly called consumers whose phone numbers are listed on the National Do Not Call Registry, refused to honor requests to stop calling, and failed to connect a consumer to a sales representative within two seconds after a consumer answered the phone, as required by the TSR.

The stipulated final order prohibits the defendants from misrepresenting the benefits, performance, or efficacy of their educational goods or services, including claims that the products will help students learn faster, improve reading speed, or increase grades, IQ scores, or test scores. It also bars them from misrepresenting the terms of their refund policy and violating the TSR’s Do Not Call rules.

The order imposes a $18.7 million judgment that will be suspended when the defendants have paid $147,400. The full judgment will become due immediately if they are found to have misrepresented their financial condition.

The Commission vote authorizing the staff to file the complaint and proposed stipulated final order was 5-0. The order was entered by the U.S. District Court for the Southern District of California on October 7, 2014.

FTC VIDEO: OPERATION EMPTY PROMISES: JOB AND BUSINESS OPPORTUNITY SCAMS

FEDERAL TRADE COMMISSION VIDEO: DEALING WITH DEBT COLLECTORS

COURT HALTS TELEMARKETERS WHO CLAIM TO BE WITH MEDICARE

FROM:  U.S. FEDERAL TRADE COMMISSION 

FTC Halts Fake Medicare Scheme that Took Money from Seniors’ Bank Accounts

At the Federal Trade Commission’s request, a federal court halted a telemarketing scheme that tricked senior citizens  by pretending to be part of Medicare, and took millions of dollars from consumers’ bank accounts without their consent. As part of its ongoing work to protect every community from fraud, the FTC seeks to permanently end the operation and return victims’ money.

According to a complaint filed by the FTC, the defendants called consumers – including many whose numbers were listed on the National Do Not Call Registry – and said they were providing a new Medicare card or information about Medicare benefits.

The defendants allegedly misrepresented that they were working on behalf of Medicare, and said they needed to verify consumers’ identities using personal information that included their bank account numbers. The defendants allegedly assured consumers that the information would not be used to debit their bank accounts, and that there was no charge for the new Medicare card or information about Medicare benefits.

However, within a few weeks, consumers learned their bank accounts had been debited either $399 or $448 via remotely created checks (RCCs), the complaint alleges. Despite these charges, consumers did not receive any kind of product or service from the defendants. In some instances, the defendants debited the accounts of consumers they had not even contacted.

The FTC charged the defendants with violating the FTC Act and the FTC’s Telemarketing Sales Rule. The defendants are Sun Bright Ventures LLC, Citadel ID Pro LLC, and Benjamin Todd Workman. The FTC named Trident Consulting Partners LLC and Glenn Erickson as relief defendants who profited from the scheme.

The Commission vote authorizing the staff to file the complaint was 5-0. The FTC filed the complaint, under seal, in the U.S. District Court for the Middle District of Florida. On September 4, 2014, the court entered a temporary restraining order halting the defendants’ deceptive scheme and freezing the defendants’ and relief defendants’ assets. The defendants and relief defendants agreed to preliminary injunctions, which the court entered on September 18, 2014. The preliminary injunctions continue the conduct prohibitions and asset freezes set forth in the temporary restraining order.

FTC TARGETS OVER 60 ADVERTISERS FOR NOT MAKING FULL DISCLOSURES IN TV ADS

FROM:  U.S. FEDERAL TRADE COMMISSION 

Operation ‘Full Disclosure’ Targets More Than 60 National Advertisers

FTC Initiative Aims to Improve Disclosures in Advertising

After reviewing numerous national television and print advertisements, staff of the Federal Trade Commission has sent warning letters to more than 60 companies – including 20 of the 100 largest advertisers in the country – that failed to make adequate disclosures in their television and print ads. The initiative – Operation Full Disclosure – is the FTC’s latest effort to ensure that advertisers comply with federal law and do not mislead consumers.

Operation Full Disclosure focused on disclosures that were in fine print or were otherwise easy to miss or hard to read, yet contained important information needed to avoid misleading consumers. In the warning letters, staff identified problematic ads, recommended that advertisers review all of their advertising to ensure that any necessary disclosures are truly “clear and conspicuous,” and asked them to notify the staff of the actions they intended to take with respect to their advertising. The response to staff’s letters has been extremely positive.

“Consumers depend on information in advertising to make their buying decisions – whether it’s computers or cleaning products, televisions or tools, hotel rooms or hair care,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Through efforts like these, the Federal Trade Commission ensures that consumers can have confidence that the ads they see are not hiding important information.”

The FTC’s longstanding guidance to companies is that disclosures in their ads should be close to the claims to which they relate – not hidden or buried in unrelated details – and they should appear in a font that is easy to read and in a shade that stands out against the background. Disclosures for television ads should be on the screen long enough to be noticed, read, and understood, and other elements in the ads should not obscure or distract from the disclosures.

The staff letters advised advertisers that to meet the “clear and conspicuous” standard, their disclosures should use clear and unambiguous language and should stand out in the advertising – consumers should be able to notice disclosures easily; they should not have to look for them.

FTC staff directed the warning letters to advertisers in a wide range of industries, covering English- and Spanish-language advertising for many different types of products. Staff attempted to identify a representative sample of advertisers making inadequate disclosures; advertisers who did not receive a letter should not assume that their advertisements are fine. Staff is not disclosing the recipients of the letters at this time.

The inadequate disclosures staff identified in the ads it reviewed fell into many different categories. Many ads quoted the price of a product or service, but did not adequately disclose the conditions for obtaining that price, while others did not adequately disclose an automatic billing feature. Other ads claimed a product capability or that an accessory was included, but did not adequately disclose the need to first own or buy an additional product or service.

In some ads, the advertiser claimed that a product was unique or superior in a product category, but did not adequately disclose how narrowly the advertiser defined the category, while other comparative ads did not adequately disclose the basis of their comparisons.  Ads promoting a “risk-free” or “worry free” trial period did not adequately disclose that consumers would need to pay for initial and/or return shipping. Numerous other ads made absolute or otherwise broad statements and had inadequate disclosures explaining exceptions or limitations.

Weight-loss ads featuring testimonials claiming outlier results did not adequately disclose the weight loss that consumers generally could expect to achieve. A handful of ads did not adequately disclose issues related to the safety or legality of a product or service. Several ads included a demonstration that was materially altered and did not adequately disclose the alteration. A couple of ads made false claims that the advertisers attempted to cure with contradictory disclosures, which are not sufficient to prevent ads from being deceptive.

While, Operation Full Disclosure focused on television and print advertisements, it follows a recent FTC effort to address online disclosures in new media.

FTC HALTS ABUSIVE DEBT COLLECTION COMPANY FROM THREATENING CUSTOMERS WITH ARREST

FROM:  U.S. FEDERAL TRADE COMMISSION 

FTC Stops Abusive Debt Collection Operation That Threatened Consumers with Legal Action and Arrest for Not Paying ‘Phantom’ Debts

The Federal Trade Commission has halted the abusive debt collection practices of an operation that used fictitious names and threatened consumers into paying debts they may not have owed.

Under settlements with the FTC and a default judgment by the court, Pinnacle Payment Services, LLC and its principals have been barred from debt collection activities and are subject to a $9,384,628 judgment, which has been suspended for most of the defendants, due their inability to pay.

“The Fair Debt Collection Practices Act is designed to ensure that debt collectors do not use abusive tactics to coerce consumers into making payments,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “In this case, Pinnacle threatened many consumers by telling them their bank accounts would be closed, their wages garnished, they would face felony fraud charges, or they would be arrested if they failed to pay the phantom debts. This is unacceptable, and the Commission will act swiftly to stop such flagrant law violations.”

According to an FTC complaint filed in 2013, the Pinnacle defendants, operating out of Atlanta and Cleveland, used fictitious business names that implied an affiliation with a law firm or a law enforcement agency, such as Global Legal Services, Allied Litigation Group, and Dockets Liens & Seizures. Using robocalls and voice messages that threatened legal action and arrest unless consumers responded within a few days, the defendants collected millions of dollars in payment for phantom debts – debts many of the consumers contacted did not owe. Their illegal practices generated nearly 3,000 complaints to the FTC’s Consumer Sentinel database.

Based on their alleged violations of the FTC Act and the FDCPA, on October 24, 2013, the U.S. District Court in Atlanta temporarily stopped the alleged illegal conduct, pending final resolution.

The settlements with the corporate defendants and individual defendants Dorian Wills, Lisa Jeter, Nichole Anderson, Hope Wilson, Demarra Massey, and Angela Triplett and the default judgment against Tobias Boyland ban the defendants from debt collection activities, including helping anyone else engage in debt collection or selling debts. They also are prohibited from making misrepresentations related to the provision of any financial products or services, and must destroy all consumer information they have on file.

The settlements with each defendant except Massey require them, jointly and severally, to pay judgments of $9,384,628, which represents the total consumer injury caused by their allegedly illegal conduct. The settlement with Massey includes a judgment of $1,558,657, which reflects the consumer injury caused during her tenure with the operation. Under the settlements, the monetary judgments against Jeter, Wilson, Anderson, Triplett, and Massey will be partially suspended due to their inability to pay.

The actions announced today settle the FTC’s charges against all of the defendants in this matter. The Commission vote approving each proposed stipulated order was 5-0.

TWO COMPANIES SETTLE FTC CHARGES OF IMPROPERLY COLLECTING PERSONAL INFORMATION ON CHILDREN

FROM:  U.S. FEDERAL TRADE COMMISSION 

Yelp, TinyCo Settle FTC Charges Their Apps Improperly Collected Children’s Personal Information

Online review site Yelp, Inc., and mobile app developer TinyCo, Inc., agreed to settle separate Federal Trade Commission charges that they improperly collected children’s information in violation of the Children’s Online Privacy Protection Act, or COPPA, Rule. Under the terms of the settlements, Yelp will pay a $450,000 civil penalty, while TinyCo will pay a $300,000 civil penalty.

“As people – especially children – move more of their lives onto mobile devices, it’s important that they have the same consumer protections when they’re using an app that they have when they’re on a website,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “Companies should take steps as they build and test their apps to make sure that children’s information won’t be collected without a parent’s consent.”

COPPA requires that companies collecting information about children under 13 online follow a number of steps to ensure that children’s information is protected, including clearly disclosing how the information is used directly to parents and seeking verifiable parental consent before collecting any information from a child.

Yelp, Inc.

The FTC’s complaint against Yelp alleges that, from 2009 to 2013, the company collected personal information from children through the Yelp app without first notifying parents and obtaining their consent. When consumers registered for Yelp through the app on their mobile device, according to the complaint, they were asked to provide their date of birth during the registration process.

According to the complaint, several thousand registrants provided a date of birth showing they were under 13 years old, and Yelp collected information from them including, for example, their name, e-mail address, and location, as well as any information that they posted on Yelp.

The FTC’s complaint alleges that Yelp failed to follow the COPPA Rule’s requirements, even though it knew – based on registrants’ birth dates – that children were registering for Yelp through the mobile app. According to the complaint, Yelp failed to implement a functional age-screen in its apps, thereby allowing children under 13 to register for the service, despite having an age-screen mechanism on its website. In addition, the complaint alleges that Yelp did not adequately test its apps to ensure that users under the age of 13 were prohibited from registering.

In addition to the $450,000 civil penalty, under the terms of its settlement with the FTC, Yelp must delete information it collected from consumers who stated they were 13 years of age or younger at the time they registered for the service, except in cases where the company can prove to the FTC that the consumers were actually older than 13.

The settlement will also require the company to comply with COPPA requirements in the future and submit a compliance report to the FTC in one year outlining its COPPA compliance program.

TinyCo, Inc.

The FTC’s complaint against TinyCo alleges that many of the company’s popular apps, which were downloaded more than 34 million times across the major mobile app stores, targeted children. Among the apps named in the complaint are Tiny Pets, Tiny Zoo, Tiny Monsters, Tiny Village and Mermaid Resort. The complaint alleges that the apps, through their use of themes appealing to children, brightly colored animated characters and simple language, were directed at children under 13 and thus, TinyCo was subject to the COPPA Rule.

Many of TinyCo’s apps included an optional feature that collected e-mail addresses from users, including children younger than age 13. In some of the company’s apps, by providing an e-mail address, users obtained extra in-game currency that could be used to buy items within the game or speed up gameplay. The FTC’s complaint alleges that the company failed to follow the steps required under the Rule related to the collection of children’s personal information.

In addition to the $300,000 civil penalty, under the terms of its settlement with the FTC, TinyCo is required to delete the information it collected from children under 13. The settlement will also require the company to comply with COPPA requirements in the future and submit a compliance report to the FTC in one year outlining its compliance with the order.

The Commission vote to authorize the staff to refer the complaints to the Department of Justice, and to approve the proposed stipulated orders, was 5-0. The DOJ filed the complaints and proposed stipulated orders on behalf of the Commission in U.S. District Court for the Northern District of California on Sept. 16, 2014. The proposed stipulated orders are subject to court approval.

NOTE: The Commission authorizes the filing of a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. Stipulated orders have the force of law when signed by the District Court judge.

FTC HALTS PHONY HEALTH CARE 'DISCOUNT' SCHEMES AIDED AT SENIORS, SPANISH-SPEAKING CONSUMERS

FROM:  U.S. FEDERAL TRADE COMMISSION 

FTC Stops Marketers of Phony Health Care ‘Discount’ Schemes Directed at Older Americans and Spanish-Speaking Consumers

The Federal Trade Commission has halted two health care scams that were designed to trick consumers into paying for phony “discount” cards, which the scammers falsely claimed would provide consumers with health insurance, or help them pay for prescription drugs.

Under settlements with the FTC and a default judgment entered by the court, the operators of a drug discount scheme directed at seniors have been banned from selling healthcare-related benefits or discount programs. In a separate action, a federal court temporarily halted a scheme that targeted Spanish-speaking and other consumers by pitching them a nearly worthless discount card and falsely claiming it would provide them with health insurance. The FTC seeks to permanently shut down the operation and return victims’ money.

AFD Medical

According to an FTC complaint filed in 2013, 10 defendants, calling from a call center in Montreal, Canada, pitched prescription drug discount cards they said would provide consumers with substantial discounts or even free prescription drugs. But the cards were available for free elsewhere and typically provided no discounts for anyone who had insurance. The defendants also led consumers to believe they had to buy the $299 card to continue receiving Medicare, Social Security, or medical insurance benefits. The court halted the scheme and froze the defendants’ assets, pending litigation.

Under the settlement orders, Fawaz Sebai and 9210-7838 Quebec Inc., and Stephane Scebba and 9262-2182 Quebec Inc., also are banned from telemarketing.  All of the settling defendants are permanently prohibited from misrepresenting any good or service, failing to provide information for consumer redress, disclosing or otherwise benefiting from customers’ personal information, and failing to dispose of such information properly.

The settlement orders against Sebai and 9210-7838 Quebec Inc., and Scebba and 9262-2182 Quebec Inc., impose a $1,091,450.68 judgment, reflecting the amount of consumer harm.  The judgments will be suspended when Sebai has surrendered certain investments, and Scebba and 9262-2182 Quebec Inc. have turned over $7,752.51.

The settlement orders against Dupont, and Lamborn and CAL Consulting LLC, also bar them from deceptive and abusive telemarketing tactics, and they impose judgments of $887,841.68 and $203,609, respectively, reflecting the total consumer payments each processed. The judgments will be suspended when Dupont has surrendered his interest in a house in Weston, Wisconsin, and Lamborn and CAL Consulting have given up $39,329.38. The full judgments under each order will become due immediately if the covered defendants are found to have misrepresented their financial condition.

The court entered a default judgment against the remaining three defendants, AFD Advisors LLC, AMG Associates LLC, and Park 295 Corp. It bans them from selling healthcare-related benefits or discount programs, permanently prohibits them from deceptive and abusive telemarketing tactics, and from misrepresenting any good or service, and imposes a monetary judgment of $887,841.68.

The Commission vote approving the proposed settlement orders was 5-0. The settlement orders and default judgment were entered by the U.S. District Court for the Northern District of Illinois, Eastern Division.

In connection with this scheme, a federal grand jury in East St. Louis, Illinois, recently returned an indictment charging Sebai and others with defrauding older Americans. The United States Attorney’s Office for the Southern District of Illinois is prosecuting the matter. More information is available here about the FTC’s Criminal Liaison Unit, which works to increase the criminal prosecution of consumer fraud.

The FTC would like to thank the Better Business Bureau Serving Wisconsin; the Wisconsin Department of Agriculture, Trade and Consumer Protection; the Wisconsin Department of Justice; the Oregon Department of Justice; the Canadian Anti-Fraud Centre; and the Royal Canadian Mounted Police for their valuable assistance in this case.

Partners In Health Care

At the FTC’s request, a federal court temporarily halted, pending litigation, a scheme that tricked Spanish-speaking and other consumers into buying a nearly worthless discount card. The defendants’ telemarketers told consumers they were buying a qualified health insurance plan under the Affordable Care Act (ACA).

According to an FTC complaint against Partners in Health Care, the defendants targeted consumers who needed health insurance or were paying high premiums for coverage because they had lost their jobs or had pre-existing medical conditions. Many of the consumers had submitted their contact information to lead-generation websites that claimed to provide information about health insurance. Others responded by telephone after hearing Spanish-language radio ads that falsely claimed the discount card was an ACA-qualified health plan.

The defendants’ telemarketers allegedly assured consumers that the “insurance” would pay for doctor and emergency room visits, and other services, in many cases with very low co-pays or deductibles. Instead, consumers received nearly worthless “discount cards” and were left uninsured, despite paying an enrollment fee and monthly payments ranging from $99 to several hundred dollars.

The defendants are Gary L. Kieper and Partners In Health Care Association Inc., also doing business as Partners In Health Care Inc., and their marketers, Walter S. Vargas, Constanza Gomez Vargas, and United Solutions Group Inc., also d/b/a Debt Relief Experts Inc. Kieper and Partners In Health Care provided the medical discount cards that various marketers, including United Solutions Group Inc., offered consumers.

All of the defendants allegedly misrepresented the discount cards as health insurance, in violation of the FTC Act. Kieper and Partners In Health Care also allegedly violated the Telemarketing Sales Rule (TSR) by misrepresenting the cards and assisting and facilitating telemarketers that were violating the TSR.

The Wisconsin Department of Agriculture, Trade and Consumer Protection and the Better Business Bureau Serving Wisconsin provided valuable information in support of the FTC’s investigation.

The Commission vote authorizing the staff to file the complaint was 5-0.  The complaint was filed in the U.S. District Court for the Southern District of Florida. On August 25, 2014, the court entered a temporary restraining order halting the deceptive scheme, freezing the defendants’ assets and appointing a receiver to manage the corporate defendants.