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"Diamond Club" Scheme Shut Down

WASHINGTON, Nov. 6, 2001 -- Financial Services of North America, Inc. has agreed to pay $239,793 for consumer redress as part of a settlement with the Federal Trade Commission to resolve allegations that they engaged in the deceptive telemarketing of advance fee VISA or MasterCard credit cards.

The defendants claimed that for a $99 fee, consumers with credit problems were guaranteed to obtain major credit cards. Instead of receiving the promised credit cards, however, consumers received a membership in the "Diamond Club," a merchandise-purchasing club. In addition to paying consumer redress, the proposed settlement would prohibit the defendants from misrepresenting any fact material to a consumer's decision to purchase any good or service.

The defendants were named as part of a law enforcement sweep targeting corporations and individuals that falsely promised consumers loans and credit cards for an advance fee. It is a violation of federal law to request or receive a fee from a consumer in advance of obtaining a loan or other extension of credit when the seller has guaranteed or represented a high likelihood of success in obtaining or arranging for a loan or extension of credit.

The FTC filed its complaint in June 2000 in federal court alleging that the defendants violated the FTC Act and the Telemarketing Sales Rule (TSR) by misrepresenting, among other things, that after paying defendants a $99 advance fee, consumers would receive a major credit card. Instead of delivering the promised credit cards, the defendants mailed consumers a letter welcoming them to a merchandise-purchasing club.

The defendants also sent consumers a credit card application to a South Dakota bank, which often required consumers to pay additional application fees. Further, the complaint alleged, the defendants debited many consumers' bank accounts without their authorization, and, in other instances, they debited consumers' accounts in amounts exceeding the amounts authorized by the consumers.

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