Most Recent Case Follows Last Summer's Federal/State "Operation Travel Unravel" Sweep
Following-up on last summer's joint federal and state travel fraud sweep called "Operation Travel Unravel," the Federal Trade Commission today announced a similar complaint filed against a Georgia-based company and its principals for alleged violations of the Telemarketing Sales Rule ("TSR") and the FTC Act. According to the Commission, Travel Express International, Inc. ("TEI") misled hundreds of consumers by not disclosing that by purchasing travel packages they would be required to attend time-share presentations during their trips. TEI also allegedly did not disclose important conditions of the packages, including the company's cancellation policy and significant refund restrictions. The complaint against TEI is very similar to those brought through last year's "Travel Unravel" sweep, which capped investigations by the FTC and 19 state law enforcement agencies, and resulted in 85 actions for alleged violations including failure to disclose the actual cost of travel packages, misleading consumers by telling them they have won a free trip, and failing to tell travelers that in purchasing a package they will be required to attend a timeshare presentation.
"With spring break trips right around the corner and summer vacations soon after that, this is an ideal time to once again highlight how careful consumers need to be when booking travel packages -- especially over the phone or based on an unsolicited fax," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection.
According to the Commission's complaint, TEI and its principals Robert E. Lewis, II and Alan D. Humphries, in offering for sale and selling its vacation travel packages, violated Section 5 of the FTC Act by failing to disclose that consumers were expected or required to attend timeshare sales presentations and by failing to state the full terms of their cancellation policy. In addition, the Commission contends that TEI violated the TSR by failing to disclose material conditions and restrictions to use the travel packages, as well as the terms and conditions of the company's cancellation policy.
Since at least 1998, the FTC contends, TEI has deceptively marketed travel packages throughout the United Sates. The company typically uses telemarketing to pitch its packages, but also employs unsolicited faxes to consumers' workplaces that advertise discounted trips. These faxes, which are addressed to "clients and staff, agents, employee benefits and incentive departments," usually state that the "wholesale travel department" is releasing previously budgeted, price-reduced, corporate closeout discount vacations. These fax pitches lead consumers to believe a division of their company is promoting the packages, or that they have been approved or sponsored by their employer, according to the FTC.
As further inducement to purchase the trips, over the phone or on the fax TEI states that there only a limited number of "price-reduced" vacation packages available, and that consumers must call the company's toll-free number immediately to secure a space. According to the Commission, the company has also used other advertising means, besides unsolicited faxes, to induce consumer to call the toll-free number.
TEI's vacation packages, as explained to consumers on the toll-free line, typically include a one-night stay in Ft. Lauderdale, Florida, a round-trip cruise to Freeport, Grand Bahama Island, and three nights' accommodations on Grand Bahama for a stated per-person room rate, plus port and service charges. As a "bonus," the company also offers a three-day, two-night Florida destination package. Consumers calling the toll-free number are given little information about the details of the vacation package, but are asked to give a credit card deposit equal to about half the cost of the package for two travelers (typically $199 to $229 per person, double occupancy). After they have paid the deposit, they are sent written material more fully describing the vacation and its terms and restrictions.
Upon reading the written material, consumers learn for the first time of previously undisclosed material terms and conditions, such as the company's cancellation policy. They also learn for the first time that travel arrangements for the "Florida Segment" must be made through a third party. Oftentimes, it is when consumers attempt to book the Florida Segment of the package that they are first informed that they will be required to attend a time-share presentation as part of the trip.
The Commission contends that finding out they will be required to attend a time-share presentation after already having paid a deposit for the trip puts consumers in a difficult position, especially because they often have not been informed about the cancellation policy. Also, because this information arrives shortly before the planned trip, consumers have little choice but to go, as their flights often have been booked and cannot be changed without incurring significant additional costs. When they do arrive at the destination, consumers often find that they cannot get their hotel vouchers until attending the time-share tour, or are required to attend a "complimentary breakfast" that is in fact a time-share presentation.
Finally, the complaint states, while consumers are often told up-front that they will be assessed a $100 cancellation fee per package, the defendants fail to disclose that 30 days after the purchase has been made this fee increases to $200 per package, and that after 180 days, consumers will lose their entire deposit. Many consumers attempting to cancel their trips shortly after the initial sales call receive written materials detailing the previously undisclosed terms. However, the company then allegedly routinely denies their request for full refunds or cancellation.
In filing the complaint, the FTC is seeking a final court judgment and order for permanent injunction of the violations alleged, as well as appropriate consumer redress against TEI, Robert E. Lewis, II and Alan D. Humphries. The Commission vote authorizing filing the complaint was 5-0. It was filed in the Northern District of Georgia on April 9, 2001.
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 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. 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.
Office of Public Affairs
Barbara E. Bolton
FTC Southeast Region
(FTC File No. 002-3195)