Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: FTC targets new defendants in case against alleged credit card interest rate reduction scam, adds payment processor, (Jun 21, 2013)

By Tobias J. Gillett, J.D., LL.M.

The FTC has amended its complaint in the federal district court in Orlando against an alleged credit card rate reduction scam to assert claims against eight additional defendants, including a payment processor (FTC v. WV Universal Management, LLC, FTC File Nos. 122 3190 and X130007, Case No. 6:12-CV-1618-ORL-22KRS).

According to the complaint, certain defendants, doing business as Treasure Your Success (TYS), telemarketed a credit card interest rate reduction scheme through prerecorded voice messages. The messages would claim that TYS could substantially reduce consumers’ credit card interest rates in exchange for an upfront fee. Although TYS representatives would claim that a fee would not be charged until a consumer had received the promised rate reductions, or until the consumer signed a contract, the fees would generally be charged to consumers’ credit cards during the telephone call or immediately afterward.

TYS typically failed to obtain any rate reductions for consumers, but would refuse to provide refunds. Although TYS would claim that it would provide a tablet computer for consumers to track their finances, the computer would be of very poor quality if a consumer received it at all. TYS would also place phone calls to consumers on the Do Not Call Registry and to consumers that had asked TYS not to call them again.

Certain other defendants, including Business First Solutions, Inc. (BFS) and VoiceOnyx Corp., allegedly assisted the scheme by providing (1) consulting services in connection with setting up a telemarketing sales room; (2) advice on setting up verification and fulfillment operations; (3) monitoring services; (4) information technology services; (5) a client records management database; (6) a business website at www.treasureyoursuccess.com; (7) template contracts and forms; and (8) telephone equipment and services, including several telephone numbers. In exchange, BFS received one percent of monthly gross sales, and VoiceOnyx received monthly payments.

HES Merchant Services Co., Inc. (HES) and its principal also facilitated TYS’s activities, according to the complaint. HES provided (1) merchant accounts that enabled TYS to charge fees to consumers’ credit card accounts; (2) chargeback recovery services to dispute and reverse chargebacks; (3) monitoring services; and (4) tablet computers provided to consumers. In exchange, HES and its principal received up to 42 percent of TYS’s gross monthly sales, as well as ten percent of each reversed chargeback and a percentage of each tablet computer order.

Universal Processing Services of Wisconsin, doing business as Newtek Merchant Solutions, and its principal allegedly assisted the operation by providing credit card payment processing services to TYS. The payment processing services enabled TYS’s charges to consumers’ credit cards to clear through the credit card network. In exchange, Newtek received a substantial fee, and deposited up to 20 percent of TYS’s gross sales in a reserve account to cover chargebacks.

Newtek allegedly provided these services despite knowing, or consciously avoiding knowing, that TYS was engaging in unlawful practices. Newteck allegedly (1) knew at the time of TYS’s principals’ application for processing services that they were connected to accounts that were likely engaged in fraud; (2) could tell from the application that TYS was engaged in telemarketing; (3) did not require TYS to provide its telemarketing scripts, which would have alerted Newtek to TYS’s violations, despite having a policy to request them; (4) obtained credit reports stating that TYS’s principals had substantial debts and delinquencies and were at high risk of fraud; (5) knew that TYS was incurring substantial chargebacks; (6) knew that MasterCard was investigating TYS for fraud; (7) took no action in response to the chargebacks and investigation other than to increase the amount of TYS’s revenue that it withheld in a reserve account; and (8) approved an application for a second merchant account despite the previous indicia of fraud.

The complaint asserts claims against BFS, HES, VoiceOnyx, WV Universal Management, LLC, Global Financial Assist, LLC, Leading Production, LLC, and certain individual defendants for misrepresentations in violation of the FTC Act; unauthorized billing in violation of the FTC Act; misrepresentation of debt relief service in violation of the Telemarketing Sales Rule (TSR); charging or receiving a fee in advance of providing debt relief services in violation of the TSR; initiating telephone calls to numbers on the National Do Not Call Registry in violation of the TSR; failing to honor do not call requests in violation of the TSR; initiating unlawful prerecorded messages in violation of the TSR; failing to make required disclosures in violation of the TSR; failing to pay required fees for access to telephones numbers included in the National Do Not Call Registry in violation of the TSR; and unauthorized billing in violation of the TSR.

The complaint also asserts claims against Newtek and its principal for assisting and facilitating deceptive and abusive telemarketing acts and practices in violation of the TSR.

The FTC seeks preliminary and permanent injunctive relief, redress of injuries to consumers, the costs of bringing the action, and such other relief as the court may consider just and proper.

Attorneys: Michael Milgrom for Federal Trade Commission.

Companies: WV Universal Management, LLC; Global Financial Assist, LLC; Leading Production, LLC; HES Merchant Services Co., Inc.; Business First Solutions, Inc.; VoiceOnyx Corp.; Universal Processing Services of Wisconsin, LLC

News: ConsumerProtection FederalTradeCommissionNews