Privasafe, SurfSafe Settle Washington Charges

June 25, 2007

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Thousands of Washington state consumers are eligible for refunds under a settlement with the operators of two Web sites that could ultimately cost the defendants $1 million.

“Consumer Digital Services, JSE Direct and their subsidiaries advertise on their Web sites that they will ‘protect your computer and privacy’ and guard you from ‘unscrupulous marketers,’” said Attorney General Rob McKenna. The sites in dispute are www.privasafe.com and www.surfsafeinternetservices.com.

“But an investigation by our Consumer Protection Division High-Tech Unit found that their business practices were in conflict with their marketing pitch. While promoting their Privasafe and SurfSafe products, the defendants sold the personal information of thousands of consumers and billed consumers for services they did not want.”

In a consent decree filed in King County Superior Court, defendants did not admit to any wrongdoing but agreed to provide full refunds to consumers who were billed for Privasafe or SurfSafe Internet services anytime since Jan. 1, 2004. Defendants will notify eligible consumers by e-mail and mail.

The following are parties to the settlement: Consumer Digital Services, LLC, and its subsidiary Privasafe, LLC; JSE Direct, LCC; and its subsidiary SurfSafe Internet Services; Leverage-CDS, LCC; CDS Family Trust; AMP-CDS, LCC and JG-CDS, LCC. All are located in Fort Lee, N.J. Gary Salmirs, manager of Leverage-CDS, is also a defendant. According to a complaint filed by the Attorney General’s Office, Salmirs controlled Consumer Digital Services’ policies and practices.

The defendants agreed to a variety of injunctive provisions related to how they conduct business in the future and will pay $100,000 in civil penalties and $200,000 in attorneys’ fees. An additional $200,000 in civil penalties is suspended as long as they comply with the settlement terms.

The Attorney General’s Office charged that the defendants lured Washington consumers with online offers for “free” gift cards and merchandise including flat-screen monitors. The “free” products were promoted through pop-up ads, Web site banner ads and e-mail messages.

Consumers submitted their personal information including their address, e-mail address, telephone and birth date, believing they would receive the “free” product. They were subsequently charged $14.95 charge on their monthly phone bills for defendants’ Internet-related services, including e-mail accounts, security-related products and increased Internet connection speed. Defendants used third-party billing companies such as ACI Billing Services and ILD Telecommunications to place the charges.

“More than 13,000 Washington consumers have been billed for Privasafe and SurfSafe since January 2004 to a tune of more than $750,000,” McKenna said. “Only one Washington consumer received the advertised ‘free’ item.”

The bottom of the Web page, viewable only by scrolling down, included a statement that individuals who completed the form would be charged and that only those who paid the $14.95 monthly fees and remained in good standing for 90 days would receive the “free” item.

The statement also included a link to a privacy policy that waives the consumer’s rights under federal laws that restrict telemarketing. The Attorney General’s Office alleged the defendants sold personal information provided by thousands of Washington consumers to numerous third-party marketers.

“The product promotions were a means to obtain personal information. Consumers never saw the statement or the privacy policy,” said Assistant Attorney General Katherine Tassi, of the Consumer Protection High-Tech Unit. “Defendants discouraged scrolling by placing a large button starting ‘click here to continue’ at the bottom of the viewable portion of the Web page.”

The Attorney General’s Office said many consumers who discovered the charges on their phones bills had no idea what they were paying for and who was billing them. To date, more than half of Washington consumers who were billed for the services have requested refunds. Fewer than 5 percent of Washington consumers who were billed ever downloaded the software necessary to use the service.

As a result of the Attorney General’s investigation, the defendants are no longer billing Washington consumers. The settlement prohibits them from selling or sharing any information collected from or about Washington consumers since Jan. 1, 2004.

The settlement terms require the defendants to disclose costs and billing methods for its products prior to collecting personal information from consumers and accurately represent the purpose for collecting and using personal information. They must clearly and conspicuously disclose the terms that apply to any “free” offer and cannot use a pre-checked box to indicate a consumer’s authorization to be billing for a product or service.

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