Court Settlement Bans Company from Marketing Fraudulent Credit Card "Protection" Services to Unwary Consumers

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Continuing to caution consumers about the dangers of "credit card protection" fraud, the Federal Trade Commission today announced a court settlement with Liberty Direct, Inc. ("Liberty Direct") and individual defendants Paul L. Wiggs and David C. Furnia, the company's two principals, for a variety of alleged activities related to the telemarketing sale of such "services." The FTC's complaint against Liberty Direct, Wiggs and Furnia was filed as part of the FTC's September 1999 credit card loss protection law enforcement sweep.

Through the final judgment and order for permanent injunction announced today, the defendants will be banned from selling credit card loss protection, will have to post a $1 million bond before engaging in telemarketing activities and will be prohibited from engaging in several other deceptive activities, including making misrepresentations in violation of the Commission's Telemarketing Sales Rule ("TSR"). While the settlement does not require consumer redress (due to the defendants' poor financial condition), Liberty Direct has already refunded approximately $2 million to defrauded consumers, including $1.5 million through credit card charge-backs.

According to the Commission, Liberty Direct began selling credit card loss "protection" services through third-party telemarketers in January 1998 and continued doing so until February 1999. During this time, the company used telemarketing scripts to promote its service, typically priced at $199, by falsely representing to consumers that the defendants were affiliated with the consumers' credit card issuer; that consumers would be held liable for all unauthorized charges made against their accounts; and that consumers owed money to the defendants. The complaint also alleges that, in violation of the TSR, the defendants failed to promptly disclose that the purpose of their call was to sell a product or service.

Under the terms of the final order, the defendants are banned from participating in or benefitting from a business that sells credit card loss protection services. A $1 million bond must be posted before the defendants engage in telemarketing. In addition, the order contains relief specific to the complaint, including prohibitions on misrepresenting: 1) that the defendants are affiliated with consumers' credit card issuers or third parties; 2) that consumers can be held liable for unauthorized credit card charges over $50; or 3) that consumers have purchased goods or services from the defendants. Other relief includes prohibitions on consummating a sale for any credit related product or service over the telephone; violating the Commission's TSR; misrepresenting that consumers have been pre-approved for (or are likely to obtain) an extension of credit; and misrepresenting material facts about any goods or services.

The defendants are also permanently enjoined from distributing its customer lists, except as authorized by court order, and are required to meet specific conditions if they want to tape sales calls.

Lastly, the order includes provisions requiring the defendants to keep records, monitor their sales practices and those of their employees and agents, authorizing the Commission to access company records and providing other means by which their compliance with the order's terms can be verified. In addition, if the defendants are found to have misrepresented their financial situation, the order will allow the FTC to seek the full payment for all consumer damage incurred.

The Commission vote to authorize staff to file the complaint and stipulated final judgment was 5-0, with Commissioners Orson Swindle and Thomas B. Leary dissenting to Part III.F of the order, which requires the defendants to obtain consumers' written authorization on a specified form before debiting their credit card or checking account for any product or service.

Commissioner Swindle concluded that the provision is "over-broad and unnecessary to prevent deception and may have unintended negative effects on legitimate activities." He stated that the authorization form duplicates information that consumers already receive in the course of a transaction (for example, cost information on credit card slips), and contains some disclosures that pertain solely to credit-related products or services. He also explained that the use of an authorization form with "warning" written across the top might deter legitimate sales, since consumers may reasonably decide to purchase elsewhere. He noted that the requirement "effectively bars the defendants from engaging in any future telemarketing," and stated that if the Commission intended to ban future telemarketing, the order should clearly state that fact. Commissioner Swindle stated that he believes "there are clearer, more narrowly tailored ways of protecting consumers and ensuring that the defendants comply with the law."

Commissioner Leary stated that he generally agreed with Commissioner Swindle's concerns and was "particularly concerned about the impact of this provision on a face-to-face transaction because it would require the defendants to present a form with specified disclosures to consumers and obtain written consent prior to any transaction that involves a credit or debit charge."

He said the provision is "not necessary to ensure that consumers have consented to face-to-face transactions..." and may "deter consumers from buying at all; and it may also deter potential employers from hiring these defendants, even as over-the-counter sales people, in any business that involves potential credit or debit card transactions." He concluded, "The conduct charged in the complaint fully justifies the injunctive relief otherwise contained in the order, but this particular provision goes too far."

The complaint and stipulated final judgment were filed in the United States District Court for the District of Arizona on April 5, 2001 and signed by the court on April 20, 2001.

NOTE: This stipulated final judgment is for settlement purposes only and does not constitute an admission by the defendants of a law violation. Consent 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 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 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. X990096; Civil Action Number: 2:99-cv-01637-JAT.)

Contact Information

Media Contact:
Mitchell J. Katz
Office of Public Affairs
Staff Contact:
Raymond McKown
FTC Western Region - Los Angeles