FTC Testimony Details Deceptive Negative Option Marketing and the Deceptive Sale of Credit and Credit Card-Related Services

The Federal Trade Commission's recent enforcement action against deceptive negative option marketing programs as well as Commission actions involving credit card sales and credit card loss protection services were detailed today in testimony before the House Committee on Financial Services, Subcommittee on Financial Institutions and Consumer Credit.

The testimony, presented by Elaine Kolish, Associate Director of FTC's Bureau of Consumer Protection's Division of Enforcement, included information about the Commission's recent crackdown against a group of buying clubs, including Triad Discount Buying Service, Inc., its related companies, and their operator, Ira Smolev, for failure to disclose, or to disclose adequately, the terms of negative option or "free trial" offers. "Negative option marketing is particularly troubling," Kolish explained, "when marketers, as they did in the Smolev case, already have consumers' credit card or billing account information and can easily charge consumers' accounts without their permission or when marketers fail to disclose that consumers' credit card numbers will be transferred to another company and charged unless consumers call to cancel."

Kolish also presented examples of FTC's aggressive challenges against deceptive marketing of credit and credit card-related services. The testimony cited the October 18, 2001 FTC filing of nine cases, most of which involved the alleged deceptive telemarketing of "guaranteed loans," worthless credit card protection services, and "protection" from identity theft, and additional cases challenging the deceptive telemarketing of major credit cards, such as VISA and MasterCard.

Included in the testimony was information about the numerous consumer education publications the Commission has disseminated to help consumers protect themselves. Among the publications mentioned were: "Prenotification Negative Option Plans;"Gold and Platinum Cards;" "Secured Credit Card Marketing Scams;" and "Credit Card Loss Protection Offers: They're the Real Steal." Kolish urged consumers who may have had their credit card numbers transferred or charged without their knowledge or consent to report their experiences by filing a complaint with the FTC in writing, online at www.ftc.gov, or by calling the FTC's toll-free number, 1-877- FTC - HELP. "Consumer reports are essential to our investigations," said Kolish, "as information about where such practices are occurring and which companies are engaging in them is critical to effective state and federal law enforcement efforts."

FTC publications mentioned in the testimony are available at www.ftc.gov.

Copies of the testimony 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.

(FTC File No. 992-3255)

Contact Information

Media Contact:
Cathy MacFarlane
Office of Public Affairs
202-326-3657
Staff Contact:
Elaine Kolish
Bureau of Consumer Protection
202-326-3042