A federal court has temporarily ordered a halt to the allegedly fraudulent business practices of three companies and one individual that allegedly operated a massive scheme in Schaumburg, Illinois in which the defendants would charge consumers up to $219.95 for a credit card, but then never provide it. The court has also frozen the defendants' assets and appointed a receiver to take control of the corporate defendants. More than 1,000 consumers have complained to consumer protection authorities about the defendants' scheme, which has likely caused millions of dollars of consumer injury, according to the Federal Trade Commission. In addition, the FTC alleges, when the defendants' telemarketers were told by consumers that they did not wish to receive calls by or on behalf of the defendants, the telemarketers continued to call. The defendants continued their scheme even after the Federal Bureau of Investigation (FBI) executed a search warrant against defendant Rockwell Holdings, Inc. on September 6, 2001, the Commission contends.
The FTC and the State of Illinois filed charges against 1st Financial Solutions, Inc., American Benefits Club, Inc., Rockwell Holdings, Inc., and John F. Boone, doing business under their respective names and various fictitious names, including: "1st Freedom," "1st Choice Financial Solutions," and "Card Services." 1st Financial Solutions and American Benefits Club are both headquartered in Park Ridge, Illinois. Rockwell Holdings is based in Schaumburg, Illinois, and John F. Boone is an officer of Rockwell Holdings.
The complaint alleges the defendants used a network of telemarketers nationwide to offer VISA and MasterCard credit cards to consumers for fees ranging from $99.95 to $219.95. The defendants never provided credit cards or any other extension of credit, according to the complaint. Most of the time, consumers received nothing for their money. Some consumers received either promotional literature touting a membership benefits program, or an "ATTM" debit card - a "stored value card"- that could only be used if the consumer deposited a sufficient amount of money into an account to cover the purchases.
The complaint detailing the charges alleges that the defendants violated the FTC's Telemarketing Sales Rule (TSR) and the FTC Act by:
- Repeatedly calling a consumer after they had been told to stop calling;
- Misrepresenting that after paying a fee, consumers would, or were highly likely to, receive major credit cards; and
- Requesting or receiving a fee in advance of providing consumers with credit cards, when the defendants guaranteed or represented a high likelihood of success in obtaining or arranging extended credit for consumers.
In addition, the State of Illinois alleges that the defendants violated the Illinois Consumer Fraud and Deceptive Business Practices Act, as well as the Credit Services Organizations Act, by failing to comply with various registration requirements; failing to post a bond; failing to include certain disclosures in their contracts; charging or receiving fees in advance of completing services; and by making false representations about the services that they provide to consumers.
The FTC and the State of Illinois are ultimately seeking a permanent injunction prohibiting the defendants from any further deceptive practices, as well as money for consumer redress.
The Commission vote authorizing staff to file the complaint in federal district court was 5-0. It was filed in the U.S. District Court for the Northern District of Illinois, in Chicago, on November 20, 2001. The matter was handled by the FTC's Midwest Region - Chicago.
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. The complaint is not a finding or ruling that the defendant actually has 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.
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