A ring of defendants who allegedly defrauded thousands of consumers nationwide through a deceptive telemarketing pitch will pay more than $131,000 for consumer redress under a stipulated final court order settling Federal Trade Commission charges that their actions violated the FTC Act and the Telemarketing Sales Rule (TSR). In addition, the defendants, who allegedly either tricked consumers into buying worthless credit card protection or debt-consolidation services or charged them without their authorization, will be subject to strict injunctive provisions in the future, including the requirement that they post a $50,000 performance bond before engaging in any telemarketing activities.
The complaint leading to the order announced today was originally announced as part of the Commission's 2000 "Operation Protection Deception" law enforcement sweep. The stipulated final order settles all Commission claims against Forum Marketing Services, Inc.; QualyCon of New York, Inc.; Edward Velasquez; and William John Velasquez (the Forum defendants). Both Edward and John Velasquez settled the FTC charges as individuals and as officers of Forum Marketing Services, Inc.
According to the FTC, the Forum defendants billed and collected payments for unauthorized charges from consumers nationwide in telemarketing packages of credit card loss protection and debt-consolidation services. Acting through telemarketers, the defendants allegedly made a series of misleading statements to consumers to persuade them to disclose their credit card numbers or to purchase credit card protection and debt-consolidation services.
They then placed charges, typically ranging from $199 to $299, on consumers' accounts, sometimes without their consent.
The Commission's complaint, announced on October 30, 2000, charges that the defendants violated Section 5 of the Federal Trade Commission Act and the TSR by: 1) misrepresenting their identity to consumers; 2) misrepresenting consumers' liability for unauthorized credit card charges; and 3) posting unauthorized charges to consumers' credit card accounts.
The stipulated final order is designed to remedy the allegations in the Commission's complaint and prevent the defendants from engaging in similar deceptive conduct in the future. As detailed below, the order contains both injunctive and monetary provisions.
Under the terms of the order, the defendants are barred from making, or assisting others in making, any false or misleading statements in connection with the sale of any goods or services by telephone or otherwise in commerce. Specifically, the defendants are prohibited from misrepresenting that: 1) they are affiliated with, or are calling on behalf of, a consumer's credit card issuer; 2) consumers who do not purchase their services can be held fully liable for any unauthorized charges made to their credit card accounts; 3) consumers have purchased or agreed to purchase goods or services from the defendants, and therefore owe money to the defendants; and 4) consumers authorized the defendants to post charges to the consumers' credit card, debit card, or checking account.
Further, the defendants are prohibited from misrepresenting: 1) the reasons for obtaining information associated with consumers' credit cards, debit cards, and bank accounts, or the anticipated use of the information; 2) the existence or severity of credit card fraud, computer hacking, or identity theft; and 3) the availability of, and the defendants' ability to obtain for consumers, debt consolidation services or credit cards with a low interest rate or no annual fees.
The stipulated order also requires the defendants to post a $50,000 bond if, either individually or in any combination, they engage in any activity covered by the TSR. It also prohibits them from sharing their customer lists to prevent similar deception by others.
Finally, the order requires the defendants to pay a monetary judgment of $131,720.73 to the Commission that will be used if practicable for redress to compensate consumers injured by the defendants' allegedly deceptive acts and practices. The order also contains standard reporting and monitoring terms to ensure the defendants' compliance with its terms.
The Commission vote to approve the order was 5-0. It was filed on April 4, 2003 in the U.S. District Court for the Western District of New York, and signed by the judge on April 15, 2003.
Today's action follows a settlement with Louis Giambrone; Charles A. Barone; First Capital Consumer Membership Services, Inc.; and Worldwide Telcom, Inc. (the First Capital defendants) - who were the original defendants in this matter before the FTC amended its complaint to include the Forum defendants. The Commission obtained a stipulated final judgment and order against the First Capital defendants on January 10, 2002, under which they must post a $50,000 bond prior to engaging in any activities covered under the TSR. The order also contains strong injunctive provisions regarding false or misleading statements concerning credit card loss protection, as well as a collectable monetary judgment of $387,000 that will be used for consumer redress if practicable.
(FTC File No. X010006; Civ. No. 00-CV-0917C(F))