Unscrupulous telemarketers pitching worthless credit card "protection" packages are at it again, according to the Federal Trade Commission, and again the agency has their number. The FTC today announced it has filed complaints against six groups of companies and their principals as part of a nationwide enforcement sweep called "Operation Protection Deception." The Commission's actions follow a similar set of complaints filed against credit card protection fraud artists last year. As the FTC said then, and has since reiterated, under federal law consumers are liable only for up to $50 of any unauthorized credit charge on their card, making any additional protection unnecessary.
"These companies preyed unwary consumers who feared that their credit cards were at risk," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection. "Their lies, directly refuted by law, often scared consumers into spending hundreds of dollars for 'protection' they simply did not, and do not, need."
She noted her appreciation for the Canadian government's help in conducting the sweep, as well as extensive assistance and cooperation by law enforcement including the Attorney General's Office of North Carolina, the Attorney General's Office of Florida, the Attorney General's Office of New York (Buffalo), the Attorney General's Office of Minnesota and the Arizona Attorney General's Office and the Federal Bureau of Investigation (FBI). The Commission also received assistance from various Better Business Bureaus (BBB) throughout the country, particularly the BBB of Western New York, the BBB of the Southland, in Southern California, the BBB of Orlando, Florida and the BBB of Oregon and Western Washington. The U.S. Postal Inspection Service, Toronto Metropolitan Police Department, Canada's Project Phonebusters and the Ministry of Consumer and Commercial Relations were also integral in bringing the complaints.
Today's complaints were brought against: 1) Consumer Repair Services (CRS) of Conyers, Georgia and its principals Mark Steinberg, James DeHart and Frank Ciaravino; 2) First Capital Consumer Membership Services, Inc. (First Capital) of Buffalo, New York, Louis Giambrone, individually and as an officer of First Capital, and World Wide Telecom, Inc. (Worldwide) and Charles Barone, individually and as an officer of First Capital; 3) Forum Marketing Services, Inc. (Forum Marketing) of Seneca, New York, Edward Valasquez, Jr. and William John Valasquez; 4) Advanced Consumer Services of Orlando, Florida, and its principals and d/b/a's Anthony W. Andrews, Tracy A. Andrews, TNT Talks, Inc., and Least Cost Utilities, Inc.; 5) Capital Card Services (Capital Card) d/b/a Capital Card Protection of Scottsdale, Arizona and its president Corey M. Harris; and 6) T.S.I. Financial Services (TSI) of Ontario, Canada, 1306506 Ontario Limited, T.S.I. Limited, T.S.I. Service Corp. and T.S.I.'s owners Vinny Bubic and Errol Alexander.
According to the Commission's complaints, all of the defendants violated Section 5 of the Federal Trade Commission Act by: 1) misrepresenting their identity to consumers; 2) misrepresenting consumers' liability for unauthorized credit card charges; and 3) posting unauthorized charges to consumers' credit card accounts. In addition, the FTC contends that CRS, First Capital and Advanced Consumer Services misrepresented their refund policies to consumers. Finally, the complaints charge all defendants with violating the Commission's Telemarketing Sales Rule (TSR) through their misleading sales pitches. The Commission also alleges that First Capital and Advanced Consumer Services also violated the TSR by failing to disclose the purpose of their calls.
While the specifics of each matter vary, the Commission alleges the defendants used boiler rooms nationwide, or in Canada, to sell consumers credit card protection packages that provided no protection at all. After calling a consumer, they sometimes misrepresented themselves as affiliated with a particular credit card issuer or bank to gain their confidence. Through their pitch, they relied on the consumers' limited knowledge of the United States' credit card protection laws, claiming that if a consumer's card was stolen they could be liable for hundreds, if not thousands, of dollars in unauthorized charges.
At times, the defendants allegedly also said that crooks could get consumers' credit card numbers over the Internet and use these numbers to rack up unauthorized charges - another misrepresentation. They then immediately billed consumers who accepted their offer between $259 and $400 for the "service." Those consumers who declined the offers were often charged anyway. Consumers who later attempted to cancel the "protection" were given the runaround by the defendants, hoping to delay consumers from reporting the charge to their credit card issuer. Many consumers were given misleading information about the defendants' refund policies.
Others, who did not want the protection and were billed for it nonetheless, never received a credit card refund.
In its cases against CRS, First Capital, Advanced Consumer Services, Capital Card, and TSI, the FTC obtained temporary restraining orders with asset freezes against each defendant, their associated businesses and their principals. The Commission also obtained the appointment of a temporary receiver against each corporate defendant (except TSI). In the case filed against Forum Marketing, the Commission is seeking a permanent injunction against all telemarketing activities related to the business practices alleged. In each case, the Commission is also seeking consumer redress, such as refunds of all illegally billed charges.
The Commission today also announced that, in connection with a credit card loss protection case filed as part of last year's sweep, it has returned to court seeking to reopen the judgment against the two defendants. The FTC's motion alleges that defendants, in FTC v. Creditmart Financial Strategies, Inc. and Maurice Verrelli (Civ. No. C99-1461), materially misrepresented or omitted information on their financial statements and made false statements about their assets. The Commission originally had agreed to suspend the final judgment of more than $9 million and require the defendants to pay a lesser amount. Upon discovery of the defendants' false statements, the Commission requested that the court reopen the judgment and assess the full $9 million, pursuant to the stipulated order.
The Commission vote to authorize the staff to file the six new complaints against the proposed defendants was 5-0. The complaints were filed in the following federal district courts: 1) Consumer Repair Services, Central District of California; 2) First Capital Consumer Membership Services, Inc., Western District of New York; 3) Forum Marketing Services, Western District of New York ; 4) TSI, Western District of New York; 5) Advanced Consumer Services, Middle District of Florida; and 6) Capital Card Services, Arizona.
The FTC's Office of Consumer and Business Education has developed three products regarding credit card "protection" offers and the use of credit cards in general. Each is available from the Commission's Consumer Response Center (see address and phone number below) and from the FTC Web site at www.ftc.gov. The first is a consumer alert on the general issue of credit card loss protection offers. It cautions consumers: "Don't buy the pitch-and don't buy the 'loss protection' insurance." The second is a bookmark designed to help consumers understand their rights concerning credit card billing procedures, the Fair Credit Billing Act and receiving credits when billed items are in dispute. The third, a brochure in the Commission's "Facts for Consumers" series, provides more detailed information on fair credit billing, including the types of disputes covered, what to do if you think your bill is incorrect, and other important consumer billing rights.
Specific tips to help consumers recognize and avoid credit card protection fraud include being wary of promoters who:
NOTE: The Commission files a complaint when it has "reason to believe" that the law has or is being violated, and it appears to the Commission that a proceeding is in the public interest. A complaint is not a finding or ruling that the defendants have actually violated the law. The cases will be decided by the courts in which they were filed.
Copies of the complaints 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 and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies worldwide.
Mitchell J. Katz
Office of Public Affairs
Jennifer Larabee (General Inquiries)
FTC Western Region - Los Angeles
Tom Syta and Barbara Chun(CRS)
FTC Western Region - Los Angeles
James Beane (First Capital)
FTC Bureau of Consumer Protection
Susan Arthur (Forum Marketing)
FTC Southwest Region - Dallas
Tom Cohn or Ann Weintraub (Advanced Consumer Services)
FTC Northeast Region - New York
Jerry Steiner or Raymond McKown (Capital Card)
FTC Western Region - San Francisco or Los Angeles
415-356-5266 or 310-824-4343
Steven Baker or David O'Toole (TSI)
FTC Midwest Region - Chicago
(FTC File Nos. 002-3290, Consumer Repair Services; 002-3264, First Capital Consumer Membership Services, Inc.; 002-3282, Forum Marketing Services; 002-3241, Advanced Consumer Services; 002-3244, Capital Card Services; 002-3252, T.S.I. Financial Services)