Defendants Targeted Consumers with Poor or No Credit
A federal district court has halted allegedly deceptive pitches made by telemarketers who targeted consumers with poor or no credit with offers of a general-use credit card for an up-front fee of as much as $250. In their telemarketing calls, the defendants also claimed that consumers would receive access to a significant line of credit on the cards that could be used for cash advances, and that the consumers’ payment histories would be reported to the three major credit bureaus. In fact, as alleged by the FTC, once consumers paid the fee, they received nothing more than an online shopping card that could be used only to buy products from the defendants’ Web sites, and their credit histories never were reported to the credit bureaus.
The Commission also charged the Florida-based defendants with debiting consumers’ bank accounts for card-related fees without the consumers’ authorization, failing to disclose to consumers that they would not be able to get a refund of the up-front fee, and calling consumers whose telephone numbers were on the National Do Not Call (DNC) Registry.
According to the Commission’s complaint, since 2006, the defendants have telemarketed a series of limited-use shopping cards that they have pitched to consumers as general-use cards that could be used to make purchases in department stores, supermarkets, and other retail establishments. Targeting consumers with bad credit or no credit, the defendants offer consumers a card with a credit line of between $2,500 and $10,000 that could purportedly be used like a major credit card. The defendants also claim that consumers would have access to cash-advance loans that could be taken against the cards’ credit limits and that the defendants would report the consumers’ line of credit and payment history to the major credit bureaus. The defendants require an advance fee payment of up to $250 that they debit from consumers’ bank accounts.
Furthermore, the FTC alleged, only after the defendants debited the payment from consumers’ accounts did the consumers learn that the “credit card” they were offered could only be used to make purchases from the defendants’ catalog Web sites, that consumers could not secure cash advances against the cards’ credit limits, and that the defendants did not report any information about consumers’ credit histories to the major credit bureaus. In addition, consumers quickly learned that the defendants failed to disclose significant material facts related to the use of the cards, including that defendants would deduct various fees from consumers’ bank accounts. The defendants also required consumers to make cash down payments of between 20 and 80 percent on all purchases, and failed to disclose that the advance fee payment was non-refundable.
The FTC’s complaint states that in June 2008, the defendants also began to market their online shopping cards on the Internet. The defendants again targeted consumers with poor or no credit, and used checking account information provided by third-party payday loan brokers to debit $149 from consumers’ bank accounts without the consumers’ authorization.
The Commission contends that the defendants’ conduct in both telemarketing their online shopping cards and selling them on the Internet was deceptive and their unauthorized debiting of consumers’ bank accounts was unfair, in violation of the FTC Act. The agency also has charged the defendants with violating the Telemarketing Sales Rule (TSR) through their misrepresentations and omissions.
Finally, the Commission charged the defendants with violating the Do Not Call provisions of the TSR by calling consumers whose numbers are on the Do Not Call Registry, failing to pay the required Registry fee, and calling consumers who were on their entity-specific do not call lists.
The complaint was filed against the following defendants: Group One Networks, Inc., doing business as (d/b/a) Credit Line Gold Card, The USA Workers, TheUSAWork.com, and TheUSAWorkers.com; US Gold Line, LLC, d/b/a USGoldLine.com, Gainsway Credit, and GainswayCredit.com; My Online Credit Store, LLC d/b/a MyOnlineCreditStore.com, MYOnlinecr.com, Diamond Executive, NewECredit, and NewECredit.com; James Nicholson, individually and as president of Group One Networks, Inc., and manager of US Gold Line, LLC and My Online Credit Store, LLC; and Brett Fisher, individually and as the chief executive officer of Group One Networks, Inc., and manager of US Gold Line, LLC and My Online Credit Store, LLC.
The Commission vote authorizing the filing of the complaint was 4-0. It was filed in the U.S. District Court for the Middle District of Florida, Tampa Division, on February 25, 2009. That same day, the court granted the FTC’s request for a temporary restraining order barring the defendants’ practices, temporarily freezing the defendants’ assets, and appointing a temporary receiver for the corporate entities.
The FTC received invaluable assistance in this matter from the U.S. Postal Inspection Service, the University of Central Florida Police Department, Largo Police Department and the Better Business Bureau of West Florida, Inc.
NOTE: The Commission authorizes the filing of 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 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. 072-3230; Civ. No. 08:09-cv-352-T-26MAP)
Office of Public Affairs
Bureau of Consumer Protection
Stephen L. Cohen,
Bureau of Consumer Protection