Advance-Fee Credit Card Telemarketers to Turn Over $1 Million for Consumer Redress

Settlement is First Resulting from Cases Brought inOperation Tele-PHONEY Sweep

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Under the terms of a court order announced by the Federal Trade Commission today, a Florida-based telemarketer and his company have been barred from violating the FTC Act, the agency’s Telemarketing Sales Rule (TSR), and its Do Not Call (DNC) Rule, and will pay nearly $1 million to provide redress to consumers defrauded by their deceptive conduct.

In May 2008, as part of the joint federal, state, and local ‘Operation Tele-PHONEY’ law enforcement sweep, the Commission charged Financial Advisors & Associates Inc. and its principal James Sweet, doing business as Freedom Financial, with fraudulently telemarketing consumers in an attempt to sell them advance-fee “credit cards.” In settling the FTC’s charges, the defendants will turn over virtually all of their liquid assets, as well as the proceeds from the sale of Sweet’s 2000 convertible SL 500 Mercedes, to be used for consumer redress.

According to the FTC, Freedom Financial called consumers pitching an advance-fee “credit card” that could be used just like a traditional Visa or MasterCard, but which in reality only could be used to buy goods from Freedom Financial’s own catalog or Web site. Before receiving the cards, consumers had to pay 10 percent of the “credit line” as a down payment – typically between $200 and $300 – that was debited from the consumers’ bank accounts. The defendants also told consumers that they would repair consumers’ credit scores by reporting payment histories to the major credit bureaus, but never did so.

The Commission’s complaint charges the defendants with violating Section 5 of the FTC Act through their deceptive practices and violating the TSR in three ways – by failing to disclose material information concerning their credit card, calling consumers whose phone numbers are on the DNC Registry, and failing to pay the required Registry fee.

The final court order announced today settles the Commission’s charges against defendants Financial Advisors & Associates Inc. and James Sweet, and contains both conduct and monetary relief. First, it bars the defendants from engaging in any misrepresentations alleged in the complaint, including false representations that they will provide consumers with a general-purpose credit card and that they report consumers’ credit histories to credit bureaus. The order also bars the defendants from making any false or misleading statement of fact in connection with the sale of any goods or services, including false statements about the total cost of any goods or services for sale, how the goods can be used, or the seller’s refund policy.

In addition, the order prohibits the defendants from failing to disclose any material terms or conditions of any sales offer, including all fees and expenses associated with any credit card offer. It also bars them from violating the TSR and the DNC Rule. The order prohibits the defendants from selling their customer lists, or transferring any of the information on them to anyone else. It also requires them to cooperate in any FTC investigations arising from the facts in this case.

The order imposes a monetary judgment of $3,647,778 against the defendants, equal to the full amount they received from consumers they defrauded. Due to their inability to pay, however, the judgment has been suspended, provided the defendants turn over approximately $1 million to the Commission. The funds collected will be used for consumer redress. If the defendants are later found to have misrepresented their financial condition to the FTC, the entire judgment will become due. Finally, the order contains standard reporting, record-keeping, and order distribution provisions to ensure the defendants’ compliance with its terms.

The Commission vote authorizing the filing of the stipulated final order was 4-0. It was filed in the U.S. District Court for the Middle District of Florida, Tampa Division on September 9, 2008, and signed by the judge the same day.

NOTE: This stipulated final order is for settlement purposes only and does not constitute an admission by any 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.

Copies of the stipulated final order are available from the FTC’s Web site at and from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The Federal Trade Commission works for consumers 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, visit the FTC's online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC's Web site provides free information on a variety of consumer topics.

(FTC File No. X080037; Civ. No. 8:08-cv-00907-RAL-TBM)

Contact Information

Mitchell J. Katz,
Office of Public Affairs
Stephen L. Cohen,
Bureau of Consumer Protection

Ethan Arenson,
Bureau of Consumer Protection