Canadian Telemarketers Ordered to Pay $5 Million

Consumers never received the goods they were promised

May 5, 2008

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A U.S. District Court judge in Illinois has ordered a telemarketing company based in Ontario, Canada to pay $5 million for defrauding U.S. consumers.

Under the terms of the final order and judgment, the defendants – collectively known as Pacific Liberty – are barred from violating the Federal Trade Commission Act and the Commission's Telemarketing Sales Rule (TSR). The $5 million judgment represents estimated losses suffered by consumers.

The FTC's complaint charged the defendants with using outbound telemarketing to call U.S. consumers. For an advance fee of $319, which they electronically debited from the consumers' bank accounts, the defendants promised that they could deliver Visa or MasterCard credit cards, along with free gifts such as cell phones.

No consumers who paid the money received either credit cards or "complimentary" gifts.

Instead, consumers received only a "member benefits" package with items such as booklets on how to improve their creditworthiness. Some also received a "member merchandise" card valid only for purchases from a catalog supplied by the defendants.

The defendants also called consumers offering them a brand-name personal computer if they agreed to have a fee debited from their bank account. No one received the promised computers. Instead, they received certificates purportedly redeemable for off-brand computers, but the consumers first had to pay additional fees. The FTC is not aware of any consumer who ultimately obtained a computer.

The court order and final judgment found that the defendants failed to respond to an FTC motion for summary judgment, as well as to other information requests. According to the order, the commission submitted considerable additional evidence to support the allegations in the complaint, including that the defendants engaged in deceptive acts or practices, and that they are accordingly liable for them.

Specifically, the order states that the defendants:

1) misrepresented that after paying a fee, consumers would, or were highly likely to, receive an unsecured major credit card such as a Visa or Mastercard; and

2) requested and received a fee from consumers before arranging to provide them with such a card.

In addition, the court found the defendants or their employees misrepresented or failed to disclose a variety of information to consumers, including that they would receive a specific brand-name computer and the total cost to buy and receive the computer.

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