Crammers Settle FTC Charges

"Rebate" Checks Sent To Consumers Were Contracts When They Were Cashed

For Your Information

Operators who used bogus "rebate" checks to deceive consumers into signing up for Internet yellow pages directory and Internet service have agreed to settle Federal Trade Commission charges that their operations were deceptive and violated federal law. The settlements will bar the deceptive practices in the future; require clear and conspicuous disclosure that by depositing a check a consumer is agreeing to sign up for the service; and provide consumer refunds.

In June 2000, the FTC filed suit in U.S. District Court for the District of Arizona, against Mesa-based YP.Net; Telco Billing, Inc.; Publication Management Inc.; and individual defendants Gregory B. Crane, William D. O'Neal, Michael K. Bloomquist and Joseph T. Carlsen. At the FTC's request, the court issued a temporary restraining order, froze the defendants' assets and appointed a receiver to oversee the businesses, pending trial. The FTC alleged that the defendants sent checks for $3.50 marked "REBATE ACCOUNT" to consumers all over the country. Nothing on the front of the check alerted consumers that, by cashing the check, they were agreeing to purchase the Internet yellow page listing at the rate of $19.95 per month for a year, or that the charge would automatically be placed on their telephone bill. Only a notice printed on the inside of the envelope spelled out the terms and conditions of the agreement. The FTC charged that failure to disclose clearly and conspicuously that the check represented agreement to sign up for their services was deceptive and violated the FTC Act. The settlements announced today will end the court action.

The settlements will bar misrepresentations that consumers can obtain rebates without incurring any obligation and that defendants have an ongoing business relationship with consumers. The settlements also will bar the defendants from using the term "rebate" on solicitation checks. YP.Net, TBI, PMI, Gregory Crane and William O'Neal also are required by their settlements to clearly and conspicuously disclose the obligations consumers will incur in cashing solicitation checks and will be required to send notices to consumers to confirm service and billing agreements and to give them the opportunity to cancel. In addition, they are required to give consumers who signed-up for their services between April 1, 2000 and July 14, 2000 the option of a two month refund. All the settlements contain record keeping provisions to allow the agency to monitor compliance.

In the course of preparing for trial, the FTC identified a related company, Simple.Net, engaged in a similar marketing scheme. The company marketed Internet access services using "rebate" checks. A stipulated final judgment and order for permanent injunction filed with the court would bar their misrepresentations of rebates and require them to send customers who signed up for their service confirmation notices giving the consumers the opportunity to cancel and receive a refund. The companies covered by the order with Simple.Net include Simple Access, Inc., Dial Up Services, Inc., and ISP Marketing, Inc.

The Commission votes to accept the settlements were 5-0.

NOTE: Stipulated Final Judgments and Orders are for settlement purposes only and do not constitute an admission by the defendant of a law violation. Consent judgments have the force of law when signed by the judge. 

Copies of the settlements 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 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.

James A. Kohm
Bureau of Consumer Protection
202-326-2640

(FTC File No. X000 074)
(Civil Action No. 001210)

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