UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF OKLAHOMA

FEDERAL TRADE COMMISSION, and
STATE OF OKLAHOMA, Plaintiffs

v.

UNIVERSAL MARKETING SERVICES, INC., a corporation,
STEVEN BRETT WIMBERLEY, individually and as an officer of Universal Marketing Services, Inc.,
UNITED MARKETING GROUP, LTD. a corporation, and
LOUIE PAULOZZA, individually and as an officer of United Marketing Group, Ltd., Defendants.

Civil Action No.

COMPLAINT FOR PERMANENT INJUNCTION, CONSUMER REDRESS AND OTHER EQUITABLE RELIEF

Plaintiffs, the Federal Trade Commission ("FTC" or "Commission") and the State of Oklahoma, for their complaint allege:

1. The FTC brings this action under Sections 13(b) and 19 of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C.  53(b) and 57b, and the Telemarketing and Consumer Fraud and Abuse Prevention Act ("Telemarketing Act"), 15 U.S.C. 6101 et seq., to obtain a permanent injunction, consumer redress, and other equitable relief against defendants for their deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C.  45(a), and the FTC's Telemarketing Sales Rule ("TSR"), 16 C.F.R. Part 310.

2. The State of Oklahoma brings this action under Section 4(a) of the Telemarketing Act, 15 U.S.C.  6103(a), to secure similar injunctive and equitable relief.

JURISDICTION AND VENUE

3. This Court has jurisdiction over this matter pursuant to 28 U.S.C. 1331, 1337(a), and 1345, and 15 U.S.C. 53(b), 57b, 6102(c), and 6105(b).

4. Venue in the Western District of Oklahoma is proper under 28 U.S.C.  1391(b) and (c), and 15 U.S.C.  53(b), and 6103(e).

PLAINTIFFS

5. Plaintiff, FTC, is an independent agency of the United States Government created by statute. 15 U.S.C. 41 et seq. The Commission is charged, inter alia, with enforcement of Section 5(a) of the FTC Act, 15 U.S.C. 45(a), which prohibits unfair or deceptive acts or practices in or affecting commerce. The Commission is authorized to initiate federal district court proceedings by its own attorneys to enjoin violations of the FTC Act and the TSR to secure such equitable relief as may be appropriate in each case, and to obtain consumer redress. 15 U.S.C.  53(b), 57b, 6102(c), and 6105(b).

6. Plaintiff the State of Oklahoma is one of the fifty sovereign states of the United States. W. A. Drew Edmondson is the duly elected Attorney General acting for the State of Oklahoma and brings this action in his official capacity as its chief law enforcement officer. The chief law enforcement officer of a state is authorized to initiate federal district court proceedings to enjoin telemarketing that violates the Commission's TSR, and in each such case, to obtain damages, restitution, and other compensation on behalf of residents of the state, and to obtain such further and other relief as the Court may deem appropriate. 15 U.S.C.  6103(a).

DEFENDANTS

7. Defendant Universal Marketing Services, Inc. ("UMS"), also trading under the names Registration Center, Consumer Card Services, National Card Registration Bureau, and Nationwide Card Services, is an Oklahoma corporation. UMS transacts or has transacted business in the Western District of Oklahoma, and its principal place of business is at 2500 South McGee, Norman, Oklahoma 73070.

8. Defendant Steven Brett Wimberley ("Wimberley") is president of UMS, and owns 100% of the corporation's capital stock. Individually, or in concert with others, he formulates, directs, participates in, or controls the acts and practices of UMS, including the acts and practices complained of herein. In addition, individually, or in concert with others, he participates in the acts and practices of United Marketing Group, Ltd., including the acts and practices complained of herein. Wimberley transacts or has transacted business in the Western District of Oklahoma.

9. Defendant United Marketing Group, Ltd., ("UMG") is a Canadian corporation registered in Ontario as "United Marketing Group" under the Business Names Act; its Business Identification Number is 971342449. UMG's principal place of business is at 9251-8 Yonge Street, No. 241, Richmond Hill, Ontario, Canada L4C 9T3. UMG transacts or has transacted business in the Western District of Oklahoma.

10. Defendant Louie Paulozza is an officer of UMG. Individually, or in concert with others, he formulates, directs, participates, or controls the acts and practices of UMG, including the acts and practices complained of herein. Louie Paulozza transacts or has transacted business in the Western District of Oklahoma.

COMMERCE

11. At all times relevant to this complaint, defendants' course of business, including the acts and practices alleged herein, is or has been in or affecting commerce, as "commerce" is defined in Section 4 of the FTC Act, 15 U.S.C.  44.

DEFENDANTS' BUSINESS PRACTICES

12. Since at least December 1997, defendants have telemarketed credit card protection services to consumers throughout the United States.

13. To induce consumers to purchase credit card protection services, defendants, using names such as The Registration Center and/or Nationwide Card Services, have represented, either expressly or by implication, that defendants are calling from Visa International ("Visa"), MasterCard International ("MasterCard"), or the consumer's credit card issuer and that the purpose of the call is to update the company's records.

14. Defendants have represented to consumers that thieves have been breaking into computers, stealing consumers' credit card account information, and using that information to make unauthorized charges.

15. Defendants have represented to consumers that if the consumers' credit cards are lost or stolen, or if someone uses stolen account information without authorization, consumers have only 48 hours to report the loss to their credit card issuer.

16. Defendants also have represented that the consumers' failure to report such credit card loss, theft, or unauthorized use within 48 hours could make the consumers liable for any unauthorized charges.

17. Defendants have represented that their credit card protection service guarantees that consumers will not have to pay for any unauthorized charges.

18. In addition, since at least December 1998, defendants have telemarketed their credit card protection package for the prevention of problems related to the supposed inability of credit card processing software to process dates after December 31, 1999 ("Y2K-related problems").

19. In marketing the Y2K-related problems credit card protection package, defendants have called consumers and have represented, either expressly or by implication, that defendants are calling from, or on behalf of the consumers' credit card issuers.

20. Defendants have represented to consumers that consumers' credit cards may fail to function on or about January 1, 2000 due to Y2K-related problems. Defendants have represented that their credit card protection package, consisting partly of adhesive stickers, will safeguard against potential Y2K-related problems as soon as a sticker is applied to the credit card.

21. Defendants have persuaded consumers to disclose their credit card account numbers by reciting one or more of the first digits of the consumers' credit card account numbers and then requesting the consumers to state the remaining digits of the consumers' credit card account numbers.

22. In numerous instances, defendants have obtained consumers' credit card account numbers and, without consumers' authorization, have caused charges to be posted on those accounts.

23. Defendants have charged consumers a fee of $189 to $199 for these services.

VIOLATIONS OF SECTION 5 OF THE FTC ACT

COUNT I

(By Plaintiff Federal Trade Commission)

24. In numerous instances, in connection with the telemarketing of credit card protection services to consumers, or in the course of billing, attempting to collect, and collecting money from consumers, defendants have represented, expressly or by implication, that:

a. Defendants are affiliated with, or are calling from, or on behalf of, the consumer's credit card issuer;
 
b. The consumer has only 48 hours to report to the consumer's card issuer the loss, theft, or unauthorized use of the consumer's credit card, and that the consumer's failure to do so could make the consumer liable for any unauthorized charges made to his or her credit card accounts;
 
c. If consumers do not purchase defendants' services, consumers can be held fully liable for any unauthorized charges made to their credit card accounts;
 
d. Defendants' credit card protection package will also safeguard against, mitigate, or correct potential failures or errors in credit card transactions resulting from Y2K-related problems; and
 
e. Consumers purchased or agreed to purchase goods or services from defendants, and therefore owe money to defendants.

25. In truth and in fact:

a. Defendants are not affiliated with, or calling from, or on behalf of, the consumer's credit card issuer;
 
b. Under Section 226.12(b) of Regulation Z, 12 C.F.R.  226.12(b), and Section 133 of the Truth in Lending Act, 15 U.S.C.  1643, a consumer is not required to report the loss, theft, or unauthorized use of the consumer's credit card to the consumer's card issuer within 48 hours, and the consumer cannot be held liable for more than $50 for any unauthorized charges to a credit card account;
 
c. Under Section 226.12(b) of Regulation Z, 12 C.F.R.  226.12(b), and Section 133 of the Truth in Lending Act, 15 U.S.C.  1643, a consumer cannot be held liable for more than $50 for any unauthorized charges to a credit card account
 
d. Defendants' credit card protection package will not safeguard against, mitigate, or correct potential failures or errors in credit card transactions resulting from Y2K-related problems; and
 
e. In numerous instances, consumers did not purchase or agree to purchase goods or services from defendants, and therefore do not owe money to defendants.

26. Therefore, defendants' representations, as set forth in paragraph 25, are false and misleading and constitute deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. 45(a).

THE FTC'S TELEMARKETING SALES RULE

27. In the Telemarketing Act, 15 U.S.C.  6101, et seq., Congress directed the Commission to prescribe rules prohibiting deceptive and abusive telemarketing acts or practices. On August 16, 1995, the Commission promulgated the TSR, 16 C.F.R. Part 310. The TSR became effective on December 31, 1995.

28. Defendants are "sellers" or "telemarketers" engaged in "telemarketing," as those terms are defined in the TSR, 16 C.F.R. 310.2(r), (t), and (u).

29. The TSR prohibits telemarketers and sellers from "making a false or misleading statement to induce any person to pay for goods or services." 16 C.F.R. 310.3(a)(4).

30. Pursuant to Section 3(c) of the Telemarketing Act, 15 U.S.C. 6102(c), and Section 18(d)(3) of the FTC Act, 15 U.S.C. 57a(d)(3), violations of the TSR constitute unfair or deceptive acts or practices in or affecting commerce, in violation of Section 5(a) of the FTC Act, 15 U.S.C.  45(a).

VIOLATIONS OF THE TELEMARKETING SALES RULE

COUNT II

(By Plaintiffs Federal Trade Commission and State of Oklahoma)

31. In numerous instances, in connection with the telemarketing of credit card protection services, or in the course of billing, attempting to collect, and collecting money from consumers, defendants have represented, expressly or by implication, that:

a. Defendants are affiliated with, or are calling from, or on behalf of, the consumer's credit card issuer;
 
b. The consumer has only 48 hours to report the loss, theft, or unauthorized use of the consumer's credit card to the consumer's card issuer, and that the consumer's failure to do so could make the consumer liable for any unauthorized charges made to his or her credit card accounts;
 
c. If consumers do not purchase defendants' services, consumers can be held fully liable for any unauthorized charges made to their credit card accounts;
 
d. Defendants' credit card protection package will also safeguard against, mitigate, or correct potential failures or errors in credit card transactions resulting from Y2K-related problems; and
 
e. Consumers purchased or agreed to purchase goods or services from defendants, and therefore owe money to defendants.

32. In truth and in fact:

a. Defendants are not affiliated with, or calling from, or on behalf of, the consumer's credit card issuer;
 
b. Under Section 226.12(b) of Regulation Z, 12 C.F.R.  226.12(b), and Section 133 of the Truth in Lending Act, 15 U.S.C.  1643, a consumer is not required to report the loss, theft, or unauthorized use of the consumer's credit card to the consumer's card issuer within 48 hours, and the consumer cannot be held liable for more than $50 for any unauthorized charges to a credit card account;
 
c. Under Section 226.12(b) of Regulation Z, 12 C.F.R.  226.12(b), and Section 133 of the Truth in Lending Act, 15 U.S.C.  1643, a consumer cannot be held liable for more than $50 for any unauthorized charges to a credit card account;
 
d. Defendants' credit card protection package will not safeguard against, mitigate, or correct potential failures or errors in credit card transactions resulting from Y2K-related problems; and
 
e. In numerous instances, consumers did not purchase or agree to purchase goods or services from defendants, and therefore do not owe money to defendants.

33. Therefore, defendants' representations, as alleged in paragraph 33, constitute false or misleading statements to induce a person to pay for goods or services, and are deceptive telemarketing acts or practices in violation of Section 310.3(a)(4) of the TSR, 16 C.F.R.  310.3(a)(4).

COUNT III

(By Plaintiffs Federal Trade Commission and State of Oklahoma)

34. The TSR also requires telemarketers using outbound calls to disclose promptly in a clear and conspicuous manner to the person receiving the call that the purpose of the call is to sell goods or services. 16 C.F.R.  310.4(d).

35. In numerous instances, in connection with the telemarketing of credit card protection services, defendants have failed to disclose promptly and in a clear and conspicuous manner that the purpose of the telemarketing call is to sell goods or services, in violation of Section 310.4(d)(2) of the TSR, 16 C.F.R.  310.4(d)(2).

CONSUMER INJURY

36. Consumers throughout the United States, including the State of Oklahoma, have suffered substantial monetary loss as a result of defendants' unlawful acts or practices. Absent injunctive relief, defendants are likely to continue to injure consumers and harm the public interest.

THIS COURT'S POWER TO GRANT RELIEF

37. Section 13(b) of the FTC Act, 15 U.S.C.  53(b), empowers this Court to grant injunctive and other ancillary relief, including consumer redress, disgorgement, and restitution, to prevent and remedy any violations of any provision of law enforced by the Commission.

S38. ection 19 of the FTC Act, 15 U.S.C.  57b, and Section 6(b) of the Telemarketing Act, 15 U.S.C.   6105(b), empower this Court to grant such relief as the Court finds necessary to redress injury to consumers or other persons resulting from defendants' violations of the TSR, including the rescission or reformation of contracts, and the refund of money.

39. Section 4(a) of the Telemarketing Act, 15 U.S.C.  6103(a), authorizes this Court to grant to the State of Oklahoma, on behalf of its residents, injunctive and other equitable relief, including damages, restitution, other compensation, and such further and other relief the Court deems appropriate.

40. This Court, in the exercise of its equitable jurisdiction, may award other ancillary relief to remedy the injury caused by defendants' law violations.

PRAYER FOR RELIEF

WHEREFORE, plaintiffs Federal Trade Commission and State of Oklahoma, pursuant to Sections 13(b) and 19 of the FTC Act, 15 U.S.C. 53(b) and 57b, Sections 4(a) and 6(b) of the Telemarketing Act, 15 U.S.C.  6103(a) and 6105(b), and the Court's own equitable powers, request that the Court,

1. Permanently enjoin defendants from violating the FTC Act and the TSR as alleged herein;
 
2. Award such relief as the Court finds necessary to redress injury to consumers resulting from defendants' violations of the FTC Act and the TSR, including but not limited to, rescission or reformation of contracts, restitution, the refund of monies paid, and the disgorgement of ill-gotten monies; and
 
3. Award plaintiffs additional relief as the Court may determine to be just and proper.

DATED:

Respectfully submitted,

DEBRA A. VALENTINE
GENERAL COUNSEL

PABLO M. ZYLBERGLAIT
Federal Trade Commission
600 Pennsylvania Ave., N.W.
Washington, D.C. 20580
202-326-3260
fax 202-326-2558

SUSAN E. ARTHUR
Federal Trade Commission
1999 Bryan Street, Suite 2150
Dallas, Texas 75201
214-979-9370
fax 214-953-3079

Attorneys for Plaintiff
Federal Trade Commission

W. A. DREW EDMONSON
Attorney General of Oklahoma

JANE F. WHEELER
Assistant Attorney General
4545 North Lincoln, Suite 260
Oklahoma City, Oklahoma 73105
405-521-4274
fax 405-528-1867

Attorneys for Plaintiff
State of Oklahoma