Three federal district court judges in Los Angeles this week ordered a temporary halt to the allegedly deceptive sales practices of three California-based companies that sell informational guides on how to purchase seized and repossessed cars and foreclosed homes. The orders follow Federal Trade Commission charges filed on June 19, 2000, that the companies billed or debited consumers' credit cards or bank accounts without authorization; failed to disclose material terms and conditions of their refund policies; and made misrepresentations about the auction guides that they sell. In two of the cases, the defendants also doubled-billed consumers by sending and charging for additional guides without the consumers' authorization. At the FTC's request, in each of the three cases, the courts froze the defendants' assets and appointed a receiver to manage the business affairs of each corporate defendant. The FTC is also seeking preliminary and permanent injunctions in the three cases, as well as other equitable relief.
The announcement of charges against these companies is part of "Operation Auction Guides II," a continuing law enforcement and consumer education campaign whose goal is to stop these fraudulent practices and to inform consumers of the need for caution in dealing with companies that sell auction guides.
"These fraudulent schemes have caused substantial economic injury to thousands of consumers nationwide," said C. Steven Baker, Director of the FTC's Midwest Regional Office in Chicago.
"Consumers should be very wary of responding to ads touting information on how to obtain bargains on seized vehicles and repossessed homes. Cars sold at government auctions and foreclosed homes typically sell for their market value. And information about the government's sales programs is available for free on the Internet and from other sources," Baker said.
The FTC charged the following three companies, and individuals associated with them, with violations of the FTC Act: Nationwide Information Service, Inc., and Stevan P. Todorovic; Productive Marketing, Inc., doing business as Data Information Services, Data Services, National Property Services, and Formula Solutions, Matthew B. Hyman, Zachary A. Hyman, and Joshua Hyman; and The Kohl Group, LLC., doing business as Federal Information Services, and Gregory Stewart Hall, Benjamin Kim, Douglas Lee and Mark Aaron Osborne. Nationwide Information Service and Productive Marketing are based in Santa Barbara, California, and The Kohl Group is based in Los Angeles.
According to the FTC complaints, the companies advertise on the Internet and in local newspapers, providing consumers toll-free numbers to call for further information about bargain-priced foreclosed homes and seized and repossessed cars. The defendants purport to have current local listings of foreclosed homes that are available for purchase, as well as general information on how to purchase them. They also purport to have current local listings of vehicle auctions and information about purchasing items at auction. During the sales pitch, the telemarketers of each of these companies employ a series of deceptive tactics. The complaints allege that, for example, the defendants regularly assess charges to consumers' credit cards and automatically withdraw money from their checking accounts without authorization. They frequently do so after obtaining the account information under false pretenses. Two of the three companies also regularly charge consumers for both of their guides even if only a single guide was ordered.
The FTC complaints further allege that each of these companies represents that consumers may simply try the programs and get their money back if not satisfied. But in each case, the company fails to inform consumers until after they have been charged for the products that they must satisfy burdensome conditions to get their money back. According to the complaints, those conditions make it very difficult for consumers ever to obtain refunds.
The complaints against Productive Marketing, Inc. and The Kohl Group, LLC also allege that telemarketers associated with those companies make false, misleading, and/or unsubstantiated statements about the bargains generally available on seized and repossessed vehicles or foreclosed homes. According to the FTC, the represented deals are rarely, if ever, available because seized vehicles and foreclosed properties generally sell for at or near their market values.
Finally, the FTC alleges that Nationwide Information Service falsely represents that it will provide consumers with periodic updates of its vehicle listings for a full year. The defendants represent to consumers that those listings will include the times and dates for the auctions, and the make, model, year, and mileage of the cars available for sale. In fact, according to the FTC, Nationwide provides consumers with only generic information on local auction houses that is easily obtained from the Yellow Pages.
The Commission vote to authorize staff to file the three complaints was 5-0. The FTC's Midwest Region coordinated this project. All three cases were filed in U.S. District Court, Central District of California, Western Division, in Los Angeles.
The FTC received invaluable assistance from the Santa Barbara District Attorney's Office, the Santa Barbara Police Department, the Better Business Bureau of the Tri-Counties (Central Coast of California), the United States Postal Inspection Service, and the Internal Revenue Service in these matters.
The FTC has released a consumer brochure, "Auction Guides: Not So Hot Properties" that offers tips for consumers. The brochure is available on the FTC's Website.
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 complaints are available from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 877-FTC-HELP (877-382-4357); TDD for the hearing impaired 1-866-653-4261. Copies of the consumer education materials and other documents pertaining to previous auction guide cases are available from the FTC's web site at http://www.ftc.gov To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.
(Nationwide Information Service - FTC File No. 0023132; Civil Action No. CV-00-06505 TJH (Ex) (Chief Judge Terry J. Hatter))
(Productive Marketing -- FTC File No. 0023154; Civil Action No. CV-00-06502 NM (BQRx) (Judge Nora M. Manella))
(Federal Information Services -- FTC File No. 0023067; Civil Action No. CV-00-06507 RSWL (MANx) (Judge Ronald S. W. Lew))