FTC Acts to Stop Fraudulent Credit Card Protection Offers

Unwary Consumers Paid Millions for "Coverage" They Did Not Need

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In an effort to help consumers protect themselves against fraudulent credit card protection offers, the Federal Trade Commission today filed complaints against two Arizona-based companies and announced a settlement with a third company in Montreal that provides for the payment of $100,000 in consumer redress. According to the FTC, the companies misrepresented their identities to consumers while telemarketing their "services," misled consumers by telling them that they were not currently protected against credit card fraud, and claimed that if the consumers did not purchase their services they could be held fully liable for all unauthorized charges made with their cards. Finally, two of the companies posted unauthorized charges to consumers' credit card accounts.

"Under federal law, the maximum amount for which a consumer can be held liable for charges they didn't authorize is $50," Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection said when today's sweep was announced. "These companies took advantage of students, seniors, and others scared into thinking they were vulnerable. The consumers were misled by telemarketers, spent their hard-earned money and got nothing in return."

Also as part of the sweep announced today, the FTC implemented a major consumer education campaign designed to alert consumers of their credit card rights. This campaign includes the distribution of a Consumer Alert fact sheet that provides important information on credit card loss protection offers, along with a brochure and bookmark with information on fair credit billing and a cooperative effort with the AARP, which plans to make credit card loss protection its primary education effort for the month of September.

In addition, in an attempt to reach out to college students who may be receiving their first exposure to credit cards, the FTC is currently working with the National Association of College Stores (NACS) to distribute over one million of the Credit Rules bookmarks along with students' book purchases. Also, representatives from the offices of the Attorneys General of Mississippi, Texas, Illinois, Rhode Island, Vermont, Nevada, Kansas, New Jersey and Alaska participated in student orientation events at college campuses across the country, distributing information regarding credit card loss protection and credit cards in general. This education program informs the students of their credit rights and enables them to avoid becoming victims in the future.

According to the FTC complaints, the companies used telemarketers to contact consumers offering what they claimed was credit card protection against loss, theft or Y2K-related problems. To avoid the perception that the company was making "cold calls," the telemarketers allegedly told consumers that they were calling from Visa or Mastercard, depending on which credit card the consumer had. They then said that criminals have been stealing credit card numbers via the Internet or other technology, and that consumers need additional protection because they are not currently covered against unauthorized use. The complaints allege that the companies claimed that the service they were providing would protect consumers from liability due to unauthorized credit card charges. Finally, in other instances, the telemarketers claimed that because of the Y2K computer bug, consumers would be exposed to credit card fraud, which could be prevented by purchasing similar protection services. In fact, federal law limits loss due to unauthorized credit card charges to $50 (a fee that is sometimes waived by the credit card company).

Further, the complaints allege that the telemarketers persuaded consumers to divulge their complete credit card numbers by reciting parts of their credit card numbers and requesting the remainder or by claiming to be verifying the consumers' identification or to be changing "security codes" on the consumers' credit cards. Using the credit card numbers, the complaints allege, the companies caused charges to be posted on the consumers' credit card bills without their consent or charged consumers fees ranging from approximately $200 to $400 for protection "services" that did not exist.


The FTC filed its actions in its Credit Card Protection Sweep against:

  • Source One Publications, Inc., an Arizona corporation; and Courtney Wiggs, individually and as an officer of Source One Publications, Inc. For alleged violations of the Federal Trade Commission Act (FTC Act) and the FTC's Telemarketing Sales Rule (TSR), the Commission is seeking to obtain a preliminary injunction, permanent injunctive relief, consumer redress recission or reformation of contracts, and other equitable relief;
  • Liberty Direct, Inc., and The Ascendix Group, Inc., Arizona corporations; and Paul L. Wiggs and David C. Furnia, individually and as officers of Liberty Direct, Inc. and The Ascendix Group, Inc. For alleged violations of the FTC Act and the TSR, the Commission is seeking to obtain permanent injunctive relief, consumer redress, recission or reformation of contracts, and other equitable relief; and
  • Credit Mart Financial Strategies, Inc., and Maurice Verrelli, individually and as an officer of Credit Mart Financial Strategies, Inc. for alleged violations of the FTC Act and the TSR. In this matter, a stipulated consent decree has been reached that will provide for settlement of the Commission's charges, injunctive relief and the payment of $100,000 in consumer redress by the defendants.

In addition to the actions detailed above, six state attorneys general (Illinois, Ohio, Arizona, Florida, West Virginia, and Wisconsin) also have filed complaints against companies allegedly involved in fraudulently telemarketing credit card protection services. A list of the companies against which these states filed complaints, along with the courts where they were filed and a contact for each Attorney General's office, is attached.


The FTC's Credit Card Protection Sweep includes a consumer education campaign to help educate consumers about their credit card rights. Three products have been developed and are available from the FTC's Consumer Response Center (see address and phone number below) and from the Commission's web site at www.ftc.gov. The first product 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 product is a bookmark designed to help consumers know their rights concerning credit card billing procedures, the Fair Credit Billing Act, and receiving credits when billed items are in dispute. The third product, 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 provided in the materials to help consumers recognize and avoid credit card protection fraud include being wary of promoters who:

  • tell you that you are liable for more than $50 of unauthorized charges on your credit card account;
  • tell you that you need credit card loss protection because computer hackers can access your credit card number and charge thousands of dollars to your account;
  • tell you that the Y2K computer bug will make it easy for thieves to place unauthorized charges on your credit card account; and
  • tell you (or imply) that they are calling from "the security department" and want to activate the protection features on your new card.

In addition, the FTC advises consumers not to give out personal information-including their credit card or bank account numbers-over the phone or online for any product unless they are familiar with the business and have initiated the contact. "Scam artists can use your information to commit fraud," the Commission alert points out. Finally, if you have not authorized a charge that appears on your credit card, do not pay it. Instead, call the card issuer to discuss your concerns and follow it up with a letter.

The Commission votes to authorize the filing of the FTC complaints and accept the proposed settlement (with Credit Mart) in this matter were 4-0.

NOTE: This consent decree/judgment is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Consent decrees/judgments have the force of law when signed by the judge.

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 and proposed consent decree, along with a table detailing the state actions taken, 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; 877-FTC-HELP (877-382-4357); TDD for the hearing impaired 1-866-653-4261. Consumers with concerns about credit protection-related fraud or any other potentially fraudulent business practices may also report those complaints to the FTC. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.


(FTC File Nos. 9923244, 9923184, 9923238)

Contact Information

Media Contact:
Mitchell J. Katz,
Office of Public Affairs
Staff Contact:
Source One Publications, Inc. and Liberty Direct, Inc. Monica Tait
FTC Western Regional Office
Los Angeles, CA

310-824-4318 Tanya Nathan
FTC Western Regional Office
Los Angeles, CA

310-824-4317 Credit Mart Financial Strategies, Inc. Mary Benfield
FTC Northwest Regional Office
Seattle, WA