Florida Defendants to Pay $700,000 in Redress for Alleged Misrepresentations Related to the Telemarketing Of Worthless Credit Card Protection
April 24, 2002
Complaint Filed in October 2000 as Part of FTC’s “Operation Protection Deception” Sweep
An Orlando, Florida-based company doing business as Advanced Consumer Services (ACS) and its principals caught up in the Federal Trade Commission’s 2000 “Operation Protection Deception” law enforcement sweep will pay approximately $700,000 to settle charges that they made misrepresentations when telemarketing worthless credit card “protection” packages to consumers. The payment is the largest redress settlement to date obtained by the Commission in a credit card protection fraud case. In addition, defendants Anthony and Tracy Andrews will be permanently banned from selling credit card protection or any credit-related goods or services.
According to the FTC, ACS used telemarketers to contact consumers, falsely claiming that they were calling on behalf of the consumers’ credit card issuers or a government agency. They would then claim that criminals were using the Internet to steal consumers’ credit card numbers, and that consumers would be held fully liable for any unsubstantiated charges made by such online thieves. The defendants claimed that consumers would be covered in case of such theft if they purchased the defendants’ credit card “protection.” They offered the protection on an unconditional basis, with an unconditional money-back guarantee. In truth, all of these claims were misrepresentations, the FTC stated. Additionally, the Commission charged, ACS occasionally obtained the consumers’ credit card numbers and charged them for the “protection” package whether they wanted it or not. Under federal law, consumers are covered for all but $50 of any unauthorized charges made to a credit card account and $500 for unauthorized debits to a debit card account.
The stipulated judgment and order for permanent injunction announced today were reached with the individual defendants and corporate defendants TNT Talks, Inc., and Least Cost Utilities, Inc., all of which were doing business as Advanced Consumer Services. Through the order, which requires approval of the federal district court, the individual and corporate defendants have settled allegations that their actions violated the FTC Act and the Telemarketing Sales Rule (TSR).
Terms of the Stipulated Final Order
Under the terms of the stipulated final order, the defendants will be required to post a $300,000 performance bond before conducting any telemarketing activities. This bond requirement is designed to ensure that consumers are protected from misleading practices if the defendants decide to telemarket any other products or services in the future.
Next, the order contains terms specifically designed to stop the defendants from making similar misrepresentations or violating the law in the future. For example, they will be prohibited from misrepresenting: 1) that they are calling from, or on behalf of, consumers’ credit card issuers or a government agency; 2) that consumers could be held liable for any unauthorized charges to their credit card accounts; 3) that consumers had agreed to the purchases for which their card was debited; and 4) that the defendants will provide unconditional and/or unrestricted refunds. The order also contains language prohibiting the defendants from misrepresenting any fact material to a consumer’s purchasing decision, and from violating the TSR.
Further, the order provides that the defendants will pay consumer redress totaling approximately $700,000, including more than $630,000 in currently frozen assets and between $60,000 and $80,000 from the sale of a condominium in Orlando, Florida. The order also contains a $2 million suspended judgment against the defendants, which would be due if they are found to have misrepresented their financial condition.
Finally, the order lifts the freeze on the individuals’ and the company’s assets, prohibits them from transferring their customer lists and contains standard monitoring, compliance, and record-keeping provisions.
The FTC would like to thank the Central Florida Better Business Bureau and the Florida Attorney General’s Office for their help with the investigation and resolution of this matter.
Consumers Duped by Telemarketers Claiming To Provide Identity Theft Protection
October 1, 2002
Defendants Allegedly Pitched Worthless Credit Card “Protection”; Laundered Credit Card Purchases for Products Sold by Others
Two Canadian citizens and the five corporations they operated will pay $436,000 to settle Federal Trade Commission charges that they tricked consumers into paying as much as $299 for one of two worthless credit card “protection” packages and laundered credit card purchases for other sellers for products including lottery tickets, British bonds, and consumer benefits packages.
“This case represents another step in the Commission’s crackdown on sellers of bogus credit card protection services. Rather than protecting consumers, these scams victimize them,” said J. Howard Beales, III, Director of the FTC’s Bureau of Consumer Protection. “In this case, the defendants not only sold worthless credit card protection, but also laundered credit card receipts for other telemarketers through offshore companies and books.”
The five corporate defendants named in the complaint are: 1) Farpoint Services International, Ltd.; 2) Garrison Corporation, Inc.; 3) American Card Services, S.A.; 4) Consolidated Group of Companies, LLC; and 5) Hyperion, LLC. Farpoint is a British corporation, incorporated in the name of defendant Roberta Galway. It allegedly contracted with telemarketers to sell the Garrison Assurance and American Card Registry credit card loss- protection packages, and arranged for credit card processing for telemarketers of products other than those that the defendants sold. The two individual defendants named in the complaint, Philip Arcand and Galway, allegedly are principles of the five corporate defendants.
Arcand created the Garrison and American Card Registry products and scripts, processed transactions for third parties, and kept property in Galway’s name. Both Arcand and Galway lived in Las Vegas for at least six months of the year while they operated the alleged scam. They currently are incarcerated in Los Angeles awaiting trial on charges of mail fraud and committing fraud against the elderly.
Garrison Corporation, Inc., incorporated in the British Virgin Islands, allegedly was set up to act as a conduit, through its account at the Bank of Bermuda, for funds processed through the defendants’ merchant account at Compass Bank. Garrison currently is inactive, and Compass Bank has frozen all of its assets. Hyperion LLC was an assumed business name that was used to obtain a merchant account at Compass.
American Card Services, S.A. (ACS) was incorporated in Managua, Nicaragua, to facilitate offshore banking in that country. The company contracted with telemarketers to sell the credit card loss-protection in the name of Garrison Assurance and American Card Registry. Like Garrison, ACS is no longer in business.
Consolidated Group of Companies is a Nevada limited liability corporation that Arcand owns. Originally incorporated with the name Polo Holdings LLC, the defendants changed its name to CGC in March 2001. The company is a shell with no assets and never was engaged in any business. Arcand used the company (Polo Holdings) to launder credit card charges for several telemarketing companies.
According to the FTC, the defendants created and deceptively marketed two credit card loss protection programs – the Garrison Assurance Credit Card Registry and the American Card Registry – in violation of the FTC Act and the Telemarketing Sales Rule. The defendants’ telemarketers used sales scripts that allegedly employed scare tactics, telling consumers that their credit card numbers were accessible over the Internet and that unless they purchased the “protection,” they would be liable for unauthorized charges when criminals used their cards to make purchases. The scripts implied that the defendants’ protection would cover all potential losses, and that consumers would not have to pay for the unauthorized charges. The cost of these “services” was between $279 and $299. In addition, the FTC alleged that the defendants used merchant accounts established in their names to process credit card transactions for unrelated companies.
Terms of the Stipulated Order
The stipulated final order bans the defendants from telemarketing credit card loss-protection packages and from credit card laundering. The order also bars them from making misrepresentations similar to those alleged in the complaint and from disclosing their consumer lists to anyone besides the FTC or other enforcement agencies. The defendants received approximately $3.3 million through their deceptive practices. The order imposes a judgment for that amount, with all but $436,000 suspended due to the defendants’ inability to pay. If the defendants are found to have misrepresented their assets, the full amount will be due immediately.