Federal Enforcers Target List Brokers

The Federal Trade Commission has joined forces with the U.S. Postal Inspection Service and the U.S. Attorney for the Southern District of Illinois to halt an illegal operation that sold lists of consumers to Canadian telemarketers who planned to use them unlawfully. The lists included consumers’ credit card and bank account information, exposing thousands of consumers to possible identity theft, and violating federal law.

The USPIS set up an undercover sting – using postal inspectors who posed as Canadian telemarketers – and sought to buy lists that contained consumers’ credit card account numbers and security codes, and bank account numbers and routing codes, so they could offer credit cards to U.S. consumers for a one-time, up-front fee. It’s a violation of federal law to sell such lists, but Practical Marketing, Inc., sold them to the undercover inspectors. Randy G. Massey, the U.S. Attorney for the Southern District of Illinois, brought federal criminal charges, and Practical Marketing pled guilty to identity theft and was sentenced to a criminal fine of $10,000, and ordered to make payment of $100,000 to the Postal Inspection Service Fraud Fund to assist the Service in investigating and prosecuting fraud cases.

In a separate civil action, the FTC charged Practical Marketing and its principals with assisting telemarketers who were purchasing lists in order to solicit U.S. consumers to pay advance fees to get “guaranteed” credit cards with substantial credit limits. Selling lists with unencrypted credit card and bank account information – so called “full data leads”– violates the FTC’s Telemarketing Sales Rule. In addition, the TSR bars telemarketers from charging fees in advance to obtain credit cards. The FTC charged that the telemarketers violated the Rule by offering advance-fee credit cards, and the list brokers knowingly assisted the telemarketers in that unlawful conduct.

The settlement in the FTC’s action bars the list brokers from “collecting, selling or disclosing” consumers’ account numbers to unaffiliated third parties in the future. It requires that

the defendants turn over any lists of account numbers to the FTC and destroy any copies. The settlement also requires the defendants to take steps to monitor the activities of their clients. It requires them to evaluate the products and services their clients are offering and the truthfulness of their marketing claims; investigate any complaints they receive about their clients; terminate services to clients who are breaking the law; and report any terminated clients to the FTC. The order also bars the defendants from providing assistance or support to marketers who are violating the TSR by requiring that the defendants obtain telemarketers’ scripts prior to selling them lists. The settlement contains standard reporting and recordkeeping provisions to allow the FTC to monitor compliance.

This case was filed in conjunction with, and with the invaluable assistance of, the U.S. Postal Inspection Service and Assistant U.S. Attorney Bruce Reppert in the office of the U.S. Attorney for the Southern District of Illinois.

The defendants named in the FTC complaint are Practical Marketing, Inc., and its principals, Robert and Valerie DeSalvo. They are based in Boca Raton, Florida.

The Commission vote to authorize staff to file the complaint and stipulated final order was 5-0. The complaint and stipulated final order were filed in the U.S. District Court for the Southern District of Illinois.

NOTE: This stipulated final order is for settlement purposes only and does not constitute an admission by the defendant of a law violation. A stipulated final order requires approval by the court and has the force of law when signed by the judge.

The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, click http://www.ftc.gov/ftc/complaint.shtm or call 1-877-382-4357. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to more than 1,600 civil and criminal law enforcement agencies in the U.S. and abroad. For free information on a variety of consumer topics, click http://ftc.gov/bcp/consumer.shtm.