Las Vegas-based Companies Charged with Failing to Honor Refund Policies

A federal judge has temporarily halted the operations of two Las Vegas, Nevada-based companies that sell programs and services purported to reduce one's income taxes, for their alleged failure to live up to their refund guarantees. According to the Federal Trade Commission, National Audit Defense Network, Inc. (NADN); Tax Coach, Inc., doing business as Tax Ready (Tax Ready); Robert Bennington, NADN's and Tax Ready's president; Cort Christie, NADN's chief executive officer; and Al Rodriguez, NADN's and Tax Ready's general manager, misrepresented that they will provide consumers with refunds and misrepresented that they will provide consumers with refunds in a timely manner, in violation of the FTC Act. The FTC's complaint also alleges that the defendants failed to credit consumers' credit card accounts within seven business days from the time of acceptance of the return of the tax-information products or other acknowledgment that a refund is owed to the consumers, in violation of the Truth in Lending Act (TILA). At the request of the FTC, the court has issued a temporary restraining order and asset freeze, and has appointed a receiver to take control of the companies.

According to the FTC, the defendants advertise programs and services that purport to assist consumers in reducing their tax liabilities. The defendants have promoted their tax-related services and programs through a variety of media, including advertisements on national radio talk shows. Consumers call a toll-free telephone number in response to the ads, and the defendants' salespeople state that their programs and services will save consumers money on their income tax returns. The defendants' programs cost from around $400 to more than $1,400.

The FTC's complaint states that in connection with the sale of these programs and services, the defendants offer consumers an unconditional 30-day money-back guarantee. The defendants represent that if consumers want to cancel the purchase for any reason, they may do so within 30 days and receive a full refund. The defendants also tell consumers that if they are unable to achieve tax savings of $3,000 after implementing or using defendants' tax-saving strategies, they will receive a full refund.

When describing these guarantees, the defendants allegedly fail to disclose certain conditions. Before consumers are eligible for a refund under the 30-day guarantee, they must obtain a "return authorization" number from the defendants, and before consumers are eligible for a refund under the $3,000 guarantee, they must have attempted for one full year to implement the defendants' recommended tax-saving strategies, most of which require the operation of a home business.

The complaint alleges that when consumers who meet the requirements of the guarantees contact the defendants to attempt to obtain a refund, the defendants fail or refuse to make such refunds, or otherwise frustrate consumers in a variety of ways from receiving refunds in a timely manner. If issued, many refunds take an inordinate amount of time to be received. Some consumers never receive a refund. Other consumers receive refunds only through the intercession of law enforcement agencies or consumer protection organizations such as the Better Business Bureau.

Further, the complaint alleges that NADN and Tax Ready fail to credit consumers' credit card accounts within seven business days from accepting the return of property or forgiving a debt for services, in violation of the TILA and its implementing Regulation Z.

The FTC has asked the court to permanently prohibit the defendants from violating the FTC Act, the TILA, and Regulation Z as alleged, and to order the defendants to pay redress to consumers.

The Commission vote to file the complaint was 5-0. The complaint was filed, under seal, in the U.S. District Court for the District of Nevada, in Las Vegas, on January 30, 2002. The seal was lifted on February 4, 2002.

The FTC was assisted in its investigation by the Office of the Nevada Attorney General, the Nevada Consumer Affairs Division, and the Better Business Bureau of Southern Nevada.

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 complaint is not a finding or ruling that the defendant has actually violated the law. The case will be decided by the court.

Copies of the complaint are available from the FTC's Web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

(FTC File No. 012-3138)
(Civil Action No. CV-S 02-0131-LRH-PAL)