Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: FTC Leads Intensified Effort to Halt Robocalls Through New Cases Alleging Credit Card Reduction Scams, (Nov 1, 2012)

By E. Darius Sturmer, J.D.

The FTC announced on November 1 its filing of five new lawsuits against companies based in Arizona and Florida that are allegedly responsible for millions of illegal pre-recorded calls making phony claims to consumers that they could reduce credit card interest rates in return for an upfront fee. At the Commission’s request, federal courts in both states issued temporary restraining orders halting the operations.

The five cases are part of a federal-state interagency effort to crackdown on illegal robocalls pitching deceptive credit card interest rate reduction schemes, the agency noted. The Offices of the Attorneys General of Arizona and Arkansas not only provided substantial assistance to the FTC with respect to the five new cases, but each filed their own separate law enforcement actions against other companies allegedly deceptively pitching credit card interest rate reduction schemes through the use of robocalls. In addition, the Florida Department of Agriculture and Consumer Services also initiated separate enforcement actions against four Florida-based operations pitching the same schemes through the use of robocalls.

According to the FTC, the newly announced complaints reflect an escalation of its efforts aimed at stopping illegal, unwanted robocalls. The agency, which reported that it gets more than 200,000 complaints each month about telemarketing robocalls, recently held a summit in Washington, D.C to examine the problem, and issued a challenge to the public offering a $50,000 cash prize for the best technical solution to block illegal robocalls on landlines and mobile phones.

In the complaints, the FTC alleges that the defendants place automated calls to consumers, typically with a prerecorded message from “Rachel” or someone else from “Cardholder Services.” The calls purport to have an “important message” regarding an opportunity to reduce high credit card interest rates. Consumers are urged to “press 1” to connect with a live representative, or “press 2” to discontinue getting such calls. Consumers who press 1 are connected to live telemarketers. Most consumers have no way to screen the calls using Caller ID, as the incoming number allegedly is often “spoofed,” or displayed as a false number, the FTC claims.

According to the FTC, consumers who reach a live telemarketer are then pitched allegedly deceptive offers to have their credit card interest rates substantially reduced. The telemarketers allegedly guarantee that lowering card interest rates will save the consumers thousands of dollars in finance charges in a short period of time and will allow them to pay off the balances more quickly without increasing their monthly payments.

If the consumer expresses an interest in the rate reduction offer, the telemarketer sometimes conducts a purported “audit” to determine whether the consumer qualifies. Consumers provide their financial and personal information, and are then put on hold while the “audit” is completed. According to the FTC, the “audit” typically is used only to determine whether consumers have enough credit available on their credit cards to pay the company’s fee.

After consumers have been “approved” for the program, according to the FTC, the telemarketer informs them that there is an up-front fee, typically ranging from several hundred dollars to nearly $3,000. To convince them to pay the fee, telemarketers often say that it will be more than offset by the money the consumer will save through the program. In some cases, the FTC alleges that consumers’ credit cards were charged even if they did not agree to pay for the service. In other cases, the defendants allegedly do not disclose a fee at all, or claim there will be no fee.

The companies allegedly often claim to have a no-risk guarantee, saying that if they don’t provide consumers with the promised rate reductions and finance charge savings, they will refund the fee. However, consumers who later complain to the companies find it difficult, if not impossible, to get their money back.

After consumers pay the up-front fee, the FTC alleges, they typically find that the companies do little or nothing to lower their credit card interest rates. The only thing that some companies do, according to the FTC, is to initiate three-way calls with consumers’ credit card issuers and orally request a rate reduction, a request that consumers could make on their own and that invariably is denied. In some cases, the companies may also apply in the consumer’s name for a new credit card with a low- or zero percent introductory interest rate. But according to the FTC, even if a new card is issued, the consumer is unlikely to see the promised savings, as the credit limits likely are low and the introductory rate often goes up after six or 12 months. Consumers often find that they cannot transfer their balances to these new cards.

Four of the five complaints also charge that the defendants violated the FTC Act by making other misrepresentations, such as claiming that consumers who buy their services will be able to pay off their debts much faster as a result of lowered credit card interest rates and making false claims about their refund policies.

The complaints also charge the defendants with multiple violations of the Telemarketing Sales Rule (TSR), for misrepresenting their services, calling numbers on the Do Not Call Registry, and collecting up-front fees. The TSR also specifically prohibits charging or receiving a fee in advance of providing debt relief services and misrepresenting the terms and conditions of debt relief services.

Finally, the complaints charge that the defendants are responsible for making illegal robocalls, in violation of the TSR. Nearly all pre-recorded telemarketing calls have been prohibited since September 1, 2009. In the FTC’s experience, companies such as these often hire others to make calls on their behalf. The FTC alleges in each case that the defendants themselves are legally responsible for making the robocalls.

The cases are:

FTC v. Ambrosia Web Design LLC, DC Ariz. Case No. CV-12-2248-PHX-FJM, FTC File No. 122 3174. Order Granting Plaintiff’s Ex Parte Application for Temporary Restraining Order with Other Equitable Relief, and Order to Show Cause Why a Preliminary Injunction Should Not Issue, and Request to Appoint Receiver

FTC v. WV Universal Management, LLC, MD Fla. Case No. 6:12-CV-1618-ORL-22KRS, FTC File No. 122 3190. Temporary Restraining Order

FTC v. ELH Consulting, LLC, DC Ariz. Case No. CV-12-2246-PHX-FJM, FTC File No. 122 3195. Ex Parte Temporary Restraining Order with Asset Freeze, Appointment of a Temporary Receiver, Immediate Access to Business Premises, Limited Expedited Discovery, and an Order to Show Cause Why a Preliminary Injunction Should Not Issue

FTC v. A+ Financial Center, LLC, SD Fla. Case No. 2:12-CV-14373-DLG FTC File No. 122 3197. Temporary Restraining Order

FTC v. The Greensavers, LLC, MD Fla. Case No. 6:12-CV-1588-ORL-28-DAB FTC File No. 122 3199. Ex Parte Temporary Restraining Order with Asset Freeze, Appointment of a Receiver, Other Equitable Relief and Order to Show Cause Why a Preliminary Injunction Should Not Issue

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