The Federal Trade Commission today announced it has received a final court order barring several Canadian-based telemarketers from misleading U.S. consumers about their ability – for a fee – to shield them from other unwanted telemarketing calls, as well as various types of fraud, including bank fraud and identity theft.
According to the Commission, the defendants often operated under the guise of the FTC, another government agency, or a bank to convince elderly consumers to provide them with their bank account information. They then used this information to steal hundreds of dollars from each victim, using either direct electronic debits or “demand drafts,” which operate like a check but do not require the consumers’ signature. In reality, the Commission alleged, the defendants provided nothing at all for their $399 up-front fee and had no way to sign consumers up for the National Do Not Call Registry as promised.
In July 2004, the FTC charged the defendants with operating a deceptive “consumer protection service,” engaging in telemarketing calls that targeted elderly consumers in the United States and promised to protect them from telemarketing and unauthorized banking. During the calls, the Commission alleged, the defendants often posed as government or bank officials in an attempt to trick consumers into disclosing their bank account numbers. They then used this information to debit money from the consumers’ accounts. The FTC alleged that the defendants stole some victims’ money even after the consumers specifically said they did not want the “services” offered.
The FTC also charged the defendants with misrepresenting the cost of their products, sometimes telling consumers they were free, then automatically debiting $399 from their bank accounts. In other cases, they allegedly promised consumers a $500 credit to offset the $399 charge, or claimed they would deduct the $399 in small installments. In all cases, the defendants never received written permission to debit consumers’ accounts.
According to the complaint, the defendants violated the FTC Act, the Telemarketing Sales Rule (TSR), and the Gramm-Leach-Bliley (GLB) Act by making false promises as to the “services” being offered, misrepresenting the charge to consumers’ bank accounts, debiting payments for consumers’ accounts without their express consent, misrepresenting their affiliation with a bank or government agency, and pretexting – obtaining consumers’ financial information under false pretenses. On July 19, 2004, at the FTC’s request, a U.S. district court judge entered a temporary restraining order barring the defendants’ illegal activities and freezing their assets.
The court order settling the Commission’s charges permanently bars the defendants from selling or marketing any goods or services that supposedly protect consumers against fraud, deception, telemarketing, identity theft, or bank fraud. It also contains provisions prohibiting:
1) misrepresentations that would violate the FTC Act, including all misrepresentations alleged in the complaint; 2) violations of the TSR, including those cited in the complaint; and 3) violations of the anti-pretexting provisions of the GLB. The order also requires the defendants to give up more than $345,000 to the FTC for consumer redress. Finally, the order contains a suspended judgment against the defendants of $1.97 million, which would become due if the Commission determines they have misrepresented their assets, along with standard compliance requirements. In addition to the redress ordered in this final order, approximately $44,000 was returned to consumers during the litigation.
The court order announced today settles the Commission’s charges against the following defendants: 1) 4086465 Canada, Inc., doing business as International Protection Center and Consumers Protection Center; 2) Alain Chikhani, also known as Allain Chikani, individually and as an owner, officer, director, and/or administrator of the corporate defendant; and 3) Rafik Chikani, individually and as an owner, officer, director, and/or administrator of the corporate defendant.
The Commission vote approving the complaint and stipulated judgment and order was 4-0. The FTC filed the judgment and order in the U.S. District Court for the Northern District of Ohio, Eastern Division, on November 4, 2005. It was signed by the judge and entered by the court on November 7, 2005.
NOTE: Stipulated final judgments and orders are for settlement purposes only and do not constitute an admission by the defendant of a law violation. Consent judgments have the force of law when signed by the judge.
Copies of the complaint and stipulated final order 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, DC 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 in English or Spanish (bilingual counselors are available to take complaints), 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. X040062; Civ. No. 1:04 CV 1351)