The Federal Trade Commission has charged a Toronto-based company with eight telemarketing boiler rooms with operating a fraudulent advance-fee credit card business. The defendants' telemarketers told consumers that they would receive pre-approved MasterCard or Visa credit cards with low interest rates, credit limits of $2,000 or $2,500, and no annual fees. Consumers paid the defendants by agreeing to have their bank accounts debited for the advance fee of $189 to $219. The Commission alleges that the defendants violated the FTC Act and the Telemarketing Sales Rule (TSR) in the promotion of advance-fee credit cards. A federal district court in Chicago has entered a temporary restraining order prohibiting false claims and freezing the defendants' assets.
"Fighting cross-border fraud requires a coordinated effort among law enforcement agencies," said J. Howard Beales, III, Director of the FTC's Bureau of Consumer Protection. "Fraud operators should realize that Canadian and American law enforcement are working as a team to shut them down, no matter which side of the border they're working from."
According to the FTC's complaint, since at least September 2001, First Capital Consumers Group's telemarketers targeted U.S. consumers who have poor credit histories and offered them pre-approved MasterCard or Visa credit cards, with low interest rates, no annual fees, and high credit limit. First Capital charged the consumers a one-time processing/membership fee ranging from $189 to $219, which consumers agreed to have electronically debited from their bank accounts. The FTC alleges that none of the consumers who paid the defendants received the promised credit cards. Some of the consumers received packages of information on buying miscellaneous products or services, such as cellular telephones, magazines, automobile loans, discount prescription programs, or free vacations, which required them to pay additional money. Some consumers received nothing at all, and some received "stored value" cards, which the consumers can only use if they deposit money into an account to pay for any purchases made with the card.
The complaint alleges that the defendants violated the FTC Act and the TSR by falsely representing that they would provide consumers with MasterCard or Visa credit cards, when in fact, consumers did not receive the promised credit cards. The complaint further alleges that the defendants violated the TSR by requesting or receiving a payment in advance of obtaining the loan or credit and representing a high likelihood of success in obtaining the promised credit.
The complaint names 1492828 Ontario, Inc., doing business as First Capital Consumers Group, US Guardian United Consumers, Trans America United Benefits Group, Transglobal National Consumers Group, and First Guardian National Benefits, and its principals, David Dalglish, Leslie Anderson, Lloyd Prudenza, and Mark Lennox.
The FTC investigated this case in conjunction with the Canadian Competition Bureau, which has filed criminal charges against some of the defendants. The Toronto Strategic Partnership, a cross-border fraud law enforcement partnership which, in addition to the Federal Trade Commission and the Competition Bureau, includes the Anti-Rackets Section of the Ontario Provincial Police; the Toronto Police Service Fraud Squad; the Ontario Ministry of Consumer and Business Services; Canada's Competition Bureau; the York Regional Police Service; the United States Postal Inspection Service; and the Ohio Attorney General's Office, provided additional assistance during the investigation.
The Commission vote to authorize staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the Northern District of Illinois, Eastern Division, on October 17, 2002 under seal. The seal lifted today.
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 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.
(FTC File No. 022 3185)
(Civil Action No. 02C 7456)