Case was Filed as Part of Commission's August 2000 "Travel Unravel" Sweep
The Federal Trade Commission today announced that through a stipulated final court order a California-based travel company will be required to cease all allegedly deceptive behavior, pay $20,000 into a fund for consumer redress, and post a $200,000 bond before engaging in any telemarketing services in the future. The FTC's case, brought as part of last year's "Operation Travel Unravel" anti-fraud sweep, charged that Holiday Plus Travel, LLC and its principles Blain Burke, Kevin M. Clarke and Lizzette Templeton (collectively "HPT") misrepresented: 1) that consumers had won a vacation package; 2) that certain incidental fees constituted the total price; 3) the restrictions that applied to the package; and 4) the material terms of its cancellation and refund policies, and in doing so had violated the FTC Act and Telemarketing Sales Rule ("TSR"). The FTC also charged that HPT failed to disclose its policy of not providing refunds or cancellations. The court order bans the defendants from selling or marketing travel products and services in the future.
According to the Commission's complaint, since at least March 1999, HPT operated a business that deceived customers throughout the United States and abroad by deceptively telemarketing vacation travel packages. The complaint alleges that HPT typically invited consumers to fill out a contest form at a public event which supposedly enabled them to participate in a drawing for a free vacation package. Using the leads generated by these forms, HPT's telemarketers told consumers that they had won or had been "specially selected" to receive such a package. During the call, the telemarketers described the contents of the travel package, saying that a variety of vacations were available with options regarding the vacation destination (often within Florida), number of night's lodging, use of a rental car, a cruise to the Bahamas and "mini-vacations" to other destinations. The telemarketers told customers there was an "incidental fee" between $350 and $399 per person to obtain the package, and that the package was worth considerably more than the fee cost. Consumers were also told that the fees were refundable if the consumers were dissatisfied, and that the offer would last only through the length of the telephone call. At the telemarketers' urging, many consumers chose to pay the fees by charging or debiting their accounts.
The FTC's complaint alleges that HPT's sales presentation misrepresented or failed to disclose important information to consumers. For example, the "incidental fee" did not constitute the total cost consumers would have pay to obtain the package. Only after consumers paid the stated incidental fees were they informed of additional fees that had to be paid in order to obtain the package. Moreover, when consumers tried to cancel after learning of the additional fees, they were told that HPT did not accept cancellations and did not provide refunds.
In this way, consumers had to pay for the packages prior to receiving all of the relevant details needed to make an informed purchasing decision.
Based on this behavior, the FTC complaint alleges several law violations including the following:
- That the defendants falsely represented that consumers had won or had been specially selected to receive a travel package;
- That the stated price for the package was falsely represented to be the total cost consumers would have to pay to obtain the package;
- That material restrictions and conditions were not disclosed before consumers were required to pay for the package;
- That the defendants failed to disclose their policy of not providing refunds or allowing for cancellations;
- That the defendants misrepresented their refund policy by suggesting that they would provide refunds when, in fact, they would not; and
- That the defendants also violated the TSR by falsely representing that consumers had won or had been specially selected to receive a travel package.
Through the final order, HPT will be prohibited from engaging in all of the deceptive practices alleged in the FTC's complaint. The defendants will also be barred from selling or marketing travel products or services in the future and will have to post a $200,000 performance bond before conducting any telemarketing services. Based on the company's ability to pay, HPT will also be required to provide $20,000 that will be used for consumer redress, and will be liable for significant additional payments if in the future the defendants are found to have misrepresented their financial condition. Finally, the order contains standard monitoring and reporting requirements to ensure their compliance with its terms.
The Commission vote to authorize staff to file the complaint and stipulated final judgment was 5-0. The stipulated final judgment was filed in the U.S. District Court for the Central District of California on May 29, 2001. The judgment requires the court's final approval and is not binding until signed by the judge.
NOTE: This stipulated final judgment is for settlement purposes only and does not constitute an admission by the defendants of a law violation. Stipulated judgments have the force of law when signed by the judge.
Copies of the documents mentioned in this release 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 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. 002-3197)
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