Telemarketing Lawsuits and Scams

The Federal Trade Commission (FTC) wants to take away some of the favorite tools that fraudulent telemarketers use to separate consumers from their money.

The proposed amendments to the Telemarketing Sales Rule (TSR) would strengthen the protections against bogus charges and services. Specifically, they would curtail the use of four payment methods favored by con artists and scammers. The proposed changes would:

• Stop telemarketers from dipping directly into consumer bank accounts by using unsigned checks and “payment orders” that have been “remotely created.” These instruments can make it easy for unscrupulous telemarketers to debit bank accounts without permission, according to the FTC.
• Bar telemarketers from getting paid with traditional “cash-to-cash” money transfers, as well as “cash reload” mechanisms, that scammers rely on to get money quickly and anonymously from consumer victims.

Unscrupulous telemarketers rely on these payment methods, according to the agency, because they are largely unmonitored and provide consumers with fewer protections against fraud. The FTC’s proposed changes would make it a violation for telemarketers and sellers to accept any of these payment methods in any telemarketing transaction.

Consumer protections

The proposed changes also would expand the TSR’s ban on telemarketing “recovery services” in exchange for an advance fee. The commission found that telemarketers who call consumers offering to help recover losses they suffered through an earlier fraud are often engaged in deceptive practices. The ban, which is currently limited to offers to recoup losses suffered in a prior telemarketing transaction, would be expanded to include offers to recoup losses suffered in any prior transaction.

Other proposed amendments to the Rule would clarify and improve various provisions of the TSR, which requires certain disclosures and prohibits misrepresentations during telemarketing calls. It also bars abusive practices, including charging up-front fees for certain services such as credit repair, recovery services, and loan or credit offers presented as “guaranteed” or having a high likelihood of success.

Previous amendments to the TSR created the National Do Not Call Registry, curtailed telemarketing calls that deliver prerecorded messages, and combated deceptive and abusive telemarketing of debt relief services.

If you would like to comment on the proposal, you may do so using this form.   

Five individuals and their company, NHS Systems, Inc.,  have been banned from telemarketing, charging consumers’ bank accounts, and making false and misleading statements.

The judgment, entered by U.S. District Court Judge Juan R. Sánchez at the request of the Federal Trade Commission (FTC), also requires them to pay almost $6.9 million -- the amount their scheme took from defrauded consumers. 

“All defendants have acted with reckless disregard for the financial interest and security of thousands of consumers,” according to Judge Sánchez. “They have demonstrated their continued ability, desire, and success in committing the same deceptive acts. The danger of recurrent violations is real.”

Operation Tele-PHONEY

The FTC filed its complaint as part of ‘Operation Tele-PHONEY,’ a 2008 crackdown on deceptive telemarketing. An amended complaint filed in 2009 accused the defendants of using third-party telemarketers to unfairly and deceptively market and charge consumers for one or more discount health programs.

The telemarketers allegedly led consumers to believe they were from, or affiliated with, U.S. government agencies, including the Social Security Administration, the Internal Revenue Service, and Medicare, the complaint states. Consumers were told that they would receive substantial deposits into their bank accounts -- in the form of grants, tax refunds, or tax rebates -- if they first provided their account or credit card information. In many instances, the callers told consumers that they had been unconditionally selected.

Medicare scam

Medicare beneficiaries were told, in some cases, that they had to provide their financial information to continue receiving their benefits. In other cases, the defendants charged consumers’ financial accounts without any notice and without their authorization.

Consumers often were charged $29.95 to receive health care information, $299.95 to enroll in the program, and $19.95 per month thereafter, finding themselves in a “discount health care program” they never agreed to purchase.

The court found that the conduct of the NHS defendants, was unfair, as it “caused and was likely to cause substantial financial injury to the consumers.” It also determined their conduct was deceptive and that the telemarketers made the alleged misrepresentations to consumers, in violation of the FTC Act.

Numerous violations

Finally, the court ruled that the defendants violated several provisions of the FTC's Telemarketing Sales Rule (TSR) by:

• misrepresenting the total cost of the programs;
• overcharging consumers;
• charging consumers who were not enrolled in the healthcare program;
• charging consumers to enroll in what was supposed to be a free program;
• misrepresenting aspects of goods and services sold; and
• using audio authorizations that did not comply with the Rule.

May 12, 2009
The marketers of a work-at-home scam who led consumers to believe they could earn $500 or more per week processing medical bills and would receive training and access to customers have agreed to settle Federal Trade Commission charges that their deceptive claims violated federal law. The settlements bar future violations and require them to pay more than $15,000 in consumer redress.

The FTC sued the defendants in February 2005 as part of a crackdown on deceptive business opportunity and work-at-home schemes. The defendants agreed to a court order that barred them from further violations and froze their assets. Subsequently, the defendants were found to be in contempt for violating the order.

The settlement with Chris Taylor and Medical Billers Network Inc. (MBN) bars them from misrepresenting material facts in any medical billing employment opportunity, work-at-home opportunity, or business venture, and from making earnings claims without a reasonable basis and supporting materials.

Taylor and MBN are also barred from misrepresenting material facts in the sale of any goods or services, such as the total cost; any restrictions, limitations, or conditions; and the nature or terms of a refund, cancellation, exchange, or repurchase policy. They are also prohibited from violating the Telemarketing Sales Rule, including failing to disclose any refund, no-refund, cancellation, exchange, or repurchase policy before a customer pays.

The settlement with Wilson Jose Caceres and Caceres Quality Distribution Inc. (CQD) permanently bans Caceres from marketing or selling any medical billing employment opportunity, work-at-home opportunity, or business venture. In addition, Caceres and CQD are prohibited from misrepresenting material facts in the sale of any goods or services, violating the Telemarketing Sales Rule, and failing to disclose any refund, no-refund, cancellation, exchange, or repurchase policy before a customer pays.

The settlement with Taylor and MBN imposes a $4 million judgment against them and a $840,000 judgment against relief defendant Knarek Kalantaryan. The settlement with Caceres and CQD also imposes a $4 million judgment. The judgments are suspended based on the defendants inability to pay. The full judgments will be imposed if they are found to have misrepresented their financial condition. Under the settlements, Taylor and Caceres must pay the FTC about $15,000 in ill-gotten gains.

The settlements bar the defendants from selling or otherwise disclosing personal information about anyone who paid them. The settlements also contain record-keeping and reporting provisions to allow the FTC to monitor compliance with the orders.

In what it says will be a blow for freedom from rising cable television rates, the Federal Communications Commission (FCC) is expected to issue a new rule this week that would outlaw contracts giving cable companies exclusive rights to provide service in apartment buildings and other multi-family dwellings.

On the other hand, critics say the move is another in a long string of FCC decisions favoring AT&T and Verizon, which have been lobbying for just such an action.

FCC Chairman Kevin Martin says the exclusive contracts are a primary factor in the rapid rise of cable prices. Many consumer groups, satellite television companies and some smaller rivals support the measure.

Industry insiders note that many, though not all, non-profit consumer groups have become accustomed to large grants from telecom companies. Such grants have been known to color the groups' perspective, these individuals suggested.

AT&T and Verizon have spent billions of dollars upgrading their networks to carry digital television and high-speed Internet services. Meanwhile, their army of lobbyists has successfully lobbied the FCC to allow the telecoms to invade local cable markets without going through the franchise application process required of cable companies.

In effect, the FCC has been steadily "federalizing" telecommunications, taking away regulatory powers previously held by state and local governments, promising that rampant competition will break out as soon as AT&T and Verizon are allowed to crush their rivals.

Minority appeal

The big telephone companies and the FCC are portraying the looming decision as a victory for minority and low-income families. With 40 percent of Hispanic and African-American households living in apartment buildings, the new rule will supposedly bring them relief from the high cable rates that are said to result from exclusive contracts.

The exclusive contracts were originally intended to encourage the wiring of older residential buildings by cable and satellite companies.

Many landlords were wary of allowing antennas, distribution panels and extensive cabling to be installed in their buildings. In some cases, landlords were permitted to charge a fee in exchange for granting the contracts.

In arguing for the exclusive contracts a decade or two ago, the cable television industry used the argument now being used by the telecom companies -- the contracts were necessary to entice the cable companies to make the investment required to wire multi-family buildings.

Now the telecom companies say that, besides supposedly encouraging competition, outlawing the exclusive contracts will give them the incentive they would otherwise lack to begin wiring the buildings and poaching the cable companies' customers.

Inside out

"Nothing in the world of telecommunications is what it seems, or maybe everything is," said one longtime Washington consultant who has worked on telecom issues for decades.

"Basically, every argument can be applied to almost any situation, so you hear the warring parties using the same arguments their opponents used. Everything simply gets turned inside out and used over and over again," he said. "It's recycling at its best and, other than hot air, it doesn't contribute to global warming."

"It's your basic three-card monte game. Where's competition? Here it is. No, wait, it's over here."

Telecom welfare

Under Martin, the FCC has been quick to do the telecoms' bidding, always promising that its actions on behalf of AT&T and Verizon would benefit consumers.

Besides virtually eliminating the local franchise process for telephone companies -- but not for cable companies -- Martin's FCC last month approved a measure that requires the big cable companies to allow the telephone companies to buy the rights to programs produced by the cable companies or their affiliated firms.

The commission is also considering a measure that would require cable companies to lease channels to independent producers while at the same time considering rules that would allow the telephone companies to jack up the rates they charge to independent competitors who use their circuits.

Each of the seemingly conflicting measures is being promoted as a boon to competition.

The FTC estimates that as many as 90,000 consumers were victims.

U.S. District Court Judge Robert Clive Jones has issued a temporary restraining order to halt the scam and freeze the defendants' assets. The FTC will seek a permanent ban on the scheme and request that the frozen funds be preserved for consumer redress.

In papers filed with the court, the FTC charged that since January 2004, defendants using the name "Pharmacycards.com" electronically debited thousands of consumers' accounts for $139, without consumers' knowledge or consent. Prior to the unauthorized debiting of their checking accounts, consumers had no contact with the defendants.

According to the FTC, the defendants attempted to debit more than $10 million from consumers' checking accounts in less than three months. The FTC alleges that the defendants gained access to the banking system via third-party payment processors by claiming that they were engaged in a legitimate business selling pharmacy discount cards.

Their Web site touted the benefits of their cards and advertised retailers such as Target and Wal-Mart that participated in the discount program. The Web site also listed a toll-free customer service number and a mailing address in Canada. According to the FTC, the major retailers' logos were hijacked they didn't participate in the program. The mailing address was false and mail sent to the address was returned.

Some consumers received letters after money had been withdrawn from their account explaining the program and saying that because the consumer had previously purchased a product from one of the defendants' "marketing partners" using their checking account, the consumer did not need to provide the account number again. The letter said that consumers who were not interested could call the toll-free customer service number to cancel within five days of receiving the letter. By this time, the money already had been debited from their accounts.

According to the complaint, the defendants provided consumers' checking account numbers to the third-party payment processors with whom they had contracts. One processor alone debited more than 72,000 checking accounts for the defendants, generating more than $10 million in attempted debits.

While more than 50,000 of those transactions were cancelled or returned, many other consumers were unaware of the transaction or unable to have it reversed, and $139 was removed from their accounts without their authorization.

The FTC alleges that the scam violates federal law and will ask the court to order a permanent halt to the practices and order consumer redress.

The FTC advises all consumers to regularly review their bank statements and quickly dispute any unauthorized charges.

Defendants in the case are 3rd Union Card Services, Inc., doing business as Pharmacycards.com, a Delaware Corporation; Helmcrest Ltd., a company incorporated under the laws of Cyprus, doing business as Pharmacycards.com; David Graham Turner, and Steve Pearson.

WASHINGTON, Oct. 8, 2002 -- The Federal Trade Commission today said it has settled a complaint alleging that unscrupulous marketers misled thousands of consumers into paying $480 apiece for a worthless medical billing work-at-home business opportunity. The settlement is the second law enforcement action of its type in the last three weeks.

The latest action brings to a close the FTC's case against Nevada-based Electronic Processing Services, Inc. (EPS) and its principal David Stewart. The FTC alleged that these defendants defrauded consumers by misrepresenting their relationship with physicians, how willing those physicians would be to sign up for medical billing help, and what consumers could expect to earn by working at home.

"Companies claiming that consumers can make easy money rarely deliver on their promise," said Howard Beales, III, Director of the FTC's Bureau of Consumer Protection. "Unfortunately, the purveyors of fraudulent medical billing work-at-home scams continue to trap unwary consumers in their web of misrepresentations. We urge all consumers to look very carefully at these pitches before spending their hard-earned money."

According to the FTC's complaint, EPS and Stewart violated Section 5 of the FTC Act through a variety of misrepresentations to consumers. The final order announced today prohibits EPS and Stewart from misrepresenting that they have job openings or work-at-home positions to fill, that work-at-home opportunities are available in particular parts of the country, that they will provide consumers with the names of doctors who are likely to become billing clients, or that they have established relationships with doctors. The order also prohibits the defendants from telling consumers that they can earn a specific level of income through work-at-home medical billing and from failing to disclose material information concerning refunds or guarantees.

The order requires the defendants to pay $23,400 in redress, plus an estimated $5,000 from merchant account reserves. However, as the cost of administering any redress program would far exceed funds available for redress, the FTC does not anticipate that defrauded consumers will obtain reimbursements.

The cases included advance fee credit card, credit repair, pay day loan, debt adjustment, and debt negotiation schemes, as well as new credit identity scams. The FTC has filed a series of federal court complaints alleging violations of law in the following areas:

• Seven separate enterprises offer consumers "major credit cards," such as a MasterCard or Visa, or a loan, for a one-time advance fee, that never produce the promised credit cards or loans.
• A California firm calling itself a "debt negotiation" company promises financially strapped consumers that it could reduce their debt and restore their credit by negotiating with creditors. But the company does little other than charge exorbitant fees while consumers stop making required payments to their creditors and plunge deeper and deeper into financial ruin.
• An Oregon firm calling itself a "financial finder and matching service," offers to match consumers to charitable foundations that are most likely to give cash grants - which, unlike loans, never need to be repaid - to individuals who have "genuine reasons for needing the money," regardless of credit history or collateral. But what consumers receive is a useless list of foundations and general instructions on applying for a grant.

"In these uncertain economic times, finance-related scams are especially outrageous because they prey on the most vulnerable consumers - those out of work, those with poor credit ratings, or those who need money right away for emergencies," said J. Howard Beales, III, Director of the FTC's Bureau of Consumer Protection. "Working with our federal, state, and local partners, we are stopping scam artists who make false promises with no intention of delivering the goods. Our warning to these disreputable businesses is: we will track you down and stop your illegal practices."

Advance-fee credit schemes continue to be among the most commonly-reported complaints in the Consumer Sentinel database that the FTC maintains and that hundreds of law enforcement agencies use. In advance-fee credit card scams, the perpetrators tell consumers that for an advance fee - sometimes several hundred dollars - they will receive an unsecured credit card. Frequently, the consumers get nothing of value. Other times they only receive a list of banks or a booklet of tips on how to obtain a credit card. In no case did the defendants issue a major credit card to a consumer.

Among companies charged in the latest crackdown are:

• Jubilee Financial Services, Inc., of Downey, California; Jabez Financial Group, Inc., and company officers.
  
  These defendants allegedly lured consumers with false promises that consumers would be able to eliminate all of their unsecured debt by paying off only a fraction of what the consumers actually owed. According to the FTC, the defendants told consumers that if the consumers made monthly payments to the defendants' debt negotiation program, the consumers would eliminate their debt and improve their credit rating. The defendants also told consumers to allow the defendants to handle all aspects of the debt negotiation. The FTC alleges that the defendants rarely contacted consumers' creditors, causing consumers to damage their credit ratings and accrue additional late fees and finance charges.



• Grant Search, Inc., Grant Pac, Inc., of Ashland, Oregon; company officers.
  
  The defendants allegedly told consumers that they would match consumers with a suitable foundation "most likely to approve your grant," regardless of the purpose of the grant. The defendants offered the purported grants as substitutes for traditional credit to consumers who have bad credit histories.
  
  The FTC alleges that although consumers could buy the program at two different prices, they received the same outdated list of foundations regardless of which program they purchased. Consumers learned that individuals were not eligible for the vast majority of the grants. The defendants offered a 100 percent money-back guarantee of the application fee, but when consumers requested a refund, the defendants denied the refund based on certain conditions or restrictions that the defendants did not previously disclose.



• Bay Area Business Council, Inc.; Bay Area Business Council Customer Service Corp.; America Leisure Card Corp., of Largo, Florida; Peter J. Porcelli, II; Christopher Tomasulo; and Bonnie A. Harris.
  
  The defendants purportedly offered consumers guaranteed low-interest unsecured MasterCard credit cards. According to the FTC, although consumers paid as much as $499 to receive the credit card, most consumers did not receive the promised credit cards. A few received a "temporary" or "dummy" card with the MasterCard logo, the name "Bay Area Business Council," and a non-magnetic black stripe on the back. When consumers called to activate the card, the defendants told them for the first time that they had a debit card and not a credit card. The defendants also told consumers that they had to pay an additional fee and deposit money for any purchases made on the account. The FTC alleges that the defendants told consumers a specific amount during the sales call, but charged additional amounts.



• Credit Card Services and Destyni Enterprises, of Dallas, Texas, and the companies' owner.
  
  The defendants allegedly told consumers that for a $79 up-front fee, they would receive a Visa or MasterCard credit card. The FTC alleges that in many instances consumers received nothing from the company after they paid the fee. In a few instances, consumers received bank credit card applications that included additional fees or only offered secured credit cards. When consumers requested a refund, the defendants either ignored the request or informed the consumers that they must meet specific criteria that the defendants did not previously disclose.



• 1st Beneficial Credit Services LLC, doing business as First Beneficial Credit Services; First Beneficial Credit Services, Inc.; and American Capitol, of Toronto, Canada; and Viktor Golub, doing business as Platinum Express.
  
  The defendants' telemarketers, operating out of the Toronto area, called U.S. consumers and offered guaranteed Visa or MasterCard credit cards with substantial credit limits for a $199 advance fee. The FTC alleges that consumers never received the promised credit card.



• Premier Financial Services International, Inc., of Coral Springs, Florida; Premier Financial Services of Tennessee, Inc., of Nashville; First Financial Debt Consolidation Inc., of Oakland Park, Florida; and company officers.
  
  The defendants' telemarketers told consumers that they had been pre-approved for a major credit card, Visa or MasterCard, for a one-time fee ranging from $189 to $219. The defendants told consumers that the one-time charge was for the credit card and purported benefits packages. According to the FTC, the defendants assured the consumers that if the consumers paid the required fee, they would receive a credit card. In fact, the banks had not approved the consumer's request for a credit card. Consumers had to complete an additional bank application with the bank's own credit criteria, a fact not disclosed to consumers before the defendants debited the consumers' bank accounts.



• Westcal Equipment, Inc., doing business as Pioneer First; PF Member Services., Inc., of Buffdale, Utah; Robert Barr, Candace Rodriguez, Charles Schmidt, and Wayne Wrath.
  
  The defendants advertised their Pioneer First Platinum credit card in exchange for an advance fee of $189. The ads guaranteed consumers a Pioneer First Platinum card, with a $5000 credit limit and zero percent interest for 12 months, as long as the applicant is 18 years old, a legal U.S. resident, and has a checking account. The advertisements included the logo of a major credit card. In fact, the FTC alleges, the Pioneer First credit card is not a major credit card but a catalog card good only for purchasing merchandise through Pioneer First. The FTC alleges that the defendants debited consumers' checking accounts without authorization.



• Star Credit Services Inc. and company officers.
  
  The defendants guaranteed that the consumers who paid an advance fee would always obtain a loan for a desired amount regardless of past credit history, and further guaranteed refunds to any consumer who did not get a loan. Consumers typically did not receive the loans the defendants promised. Consumers also discovered, after they paid the advance fee, that they were required to submit a rejection letter from each and every lender before the defendants would issue refunds. According to the FTC, even those consumers who fulfilled the requirements to receive a refund were unsuccessful.



• Tyme Lock 2000, Inc., of Nevada, doing business as United Family Services and USA Membership Services; Total Resources, Inc.; and company officers.
  
  The defendants make unsolicited phone calls to consumers in some instances, telling them that for a fee of approximately $189, they will receive a major credit card, and either a personal computer, cell phone, or camera. Consumers paid by having the defendants debit their checking accounts. The FTC alleges that instead of receiving a credit card or other promised items, consumers received a packet of materials which included applications to banks for credit cards, and offers for computers or cell phones which required the consumers to contract with an internet service provider or a telephone company.

The FTC alleges that the defendants in all nine of the cases listed above engaged in deceptive practices in violation of the FTC Act and the Telemarketing Sales Rule (TSR). In each case, the FTC is seeking permanent orders prohibiting the defendants from engaging in similarly deceptive finance-related schemes, and is asking the courts to freeze the defendants' assets. Where appropriate, the FTC is also seeking the appointment a receiver.

The FTC also is launching an extensive consumer education campaign, including a Spanish language component, to help consumers avoid credit-related fraud. The FTC has several consumer publications: Advance-Fee Loan Scams Campaign, Knee Deep in Debt, Credit Repair: Getting Back in the Black Campaign; and Payday Loans. They are available on the Internet at http://www.ftc.gov/bcp/conline. Publications can also be obtained in Spanish at www.ftc.gov/spanish.

July 31, 2002
A federal court has ordered Medicor LLC to pay more than $16.5 million in redress for consumers who were victims of the company's medical billing scam.

In March 2001, the Federal Trade Commission charged the Van Nuys, California-based company and its principals, Andrew Rubin and Matthew Rubin, with engaging in a variety of fraudulent practices.

The FTC alleged that the defendants engaged in a telemarketing scheme from mid-1999 to 2001 in which they deceptively sold work-at-home medical billing opportunities to more 40,000 people. Typically, consumers responded to advertisements in local newspapers touting large salaries and the need for at-home workers to perform medical billing work for doctors in their community.

When consumers called the defendants' toll-free number, telemarketers made additional claims. Specifically, the FTC's complaint alleged that the defendants misrepresented: 1) how much consumers who purchased the medical billing opportunity would earn; 2) that the defendants would arrange for consumers to receive medical billing work from physicians; and 3) that consumers would readily obtain refunds upon request. The defendants charged consumers $375 for the supposed opportunity.

On July 18, 2002, the U.S. District Court for the Central District of California granted the FTC's motion for summary judgment against the defendants, entered a judgment for the full amount of consumer redress, and issued a permanent injunction against all defendants.

In addition to ordering the defendants to pay restitution to consumers and disgorge ill-gotten gains, the Court permanently barred the defendants from the promotion, advertising, marketing, sale, or offering for sale of any medical billing work-at-home opportunity.

The Court's order also prohibits the defendants from engaging in, or assisting others in engaging in, deceptive acts or practices in the business of telemarketing. The order further enjoins the defendants from making, or assisting others in making, any false or misleading oral or written statement or representation in connection with the promotion, advertising, marketing, sale, or offering for sale of any work-at-home opportunity, product, service, or investment.

July 18, 2002
A federal district court has ordered a temporary halt to an Arizona-based telemarketing operation which, according to the Federal Trade Commission, has used deceptive and unfair practices to bilk consumers across the country out of millions of dollars.

The FTC charges that Harvey Sloniker and Tye Sloniker telemarketed non-existent products and services through a maze of interrelated companies, which include the corporate defendants Corporate Marketing Solutions, Inc., Corporate Industries, Inc., ATM Machine Wrap, Inc., Bankcard Recovery Services, Inc., Direct Wireless+, Inc., National Consolidation Foundation, Inc., and Sierra Management Properties, Inc.

At the Commission's request, the court froze the defendants' assets, and appointed a temporary receiver pending a hearing on the FTC's motion for a preliminary injunction. The FTC sought this relief to bring an immediate halt to the defendants' fraud and to prevent the destruction of evidence and dissipation of assets pending the preliminary injunction hearing.

The complaint, filed in the U.S. District Court for the District of Arizona, alleges that since at least 1998, the Slonikers and their various companies have been engaged in deceptive telemarketing on behalf of a string of third-party client companies. According to the FTC, the defendants operated numerous telemarketing boiler rooms known as "contract rooms" that employed large numbers of telemarketers trained to deceive consumers. From these contract rooms, the defendants sold non-existent credit cards and bogus identity theft and telemarketing fraud protection services to consumers for hefty advance fees, the FTC alleged.

The complaint alleges that the defendants violated the FTC Act and the Telemarketing Sales Rule by engaging in numerous misrepresentations in the sale of advance-fee credit cards and various consumer fraud protection services. The defendants often began their sales pitches by representing to consumers that they are affiliated with, or calling on behalf of, a bank or financial institution or, depending on the product or service, a consumer protection agency. They then represented that the consumer had been pre-approved for a major credit card, such as a VISA or Mastercard credit card, and was guaranteed or highly likely to receive such a card in exchange for an advance fee. In some instances, the defendants also represented that the consumer will receive additional bonus products or services in conjunction with obtaining a credit card. In fact, according to the complaint, the defendants are not affiliated with any banks, financial institutions or consumer protection agencies, and no consumers ever received the promised credit cards or the promised bonus products or services.

The complaint further alleges that the defendants represented to consumers that criminals are stealing from the Internet consumers' personal information, such as their social security numbers and credit card numbers. The defendants then allegedly told consumers that without the defendants' protection service, the consumers would be liable for any unauthorized charges on their credit card accounts. The defendants promised the consumers that, in exchange for a fee, they would remove the consumers' identity information from the Internet and remove the consumers' names from lists used by telemarketers and merchants. According to the FTC, neither of these alleged services was ever performed by the defendants, nor are they even possible to perform.

The complaint also alleges that the defendants routinely obtained consumers' personal financial information through false pretenses, and that this practice constitutes illegal "pretexting," which is a violation of Section 521 of the Gramm-Leach-Bliley Act. In addition, the complaint alleges that the defendants engaged in the unauthorized charging or debiting of consumers' credit card or bank accounts, in violation of the FTC Act.

WASHINGTON, April 15, 2002 -- The Federal Trade Commission (FTC) today announced the filing of 11 federal district court complaints against inbound telemarketers. Among those charged were the purveyors of advance-fee loans and credit cards, at-home medical billing programs, work-at-home envelope stuffing schemes, and a "consumer protection" agency that was, in reality, no more than a shill for a vending machine business opportunity.

The FTC said it was potentially the most far-reaching law enforcement sweep ever against inbound telemarketing fraud _- where consumers call companies based on classified ads, Internet banners, or other promotions.

"Consumers spotting a classified ad or telephone pole promotion and acting on their curiosity by calling the number face the same risk of being misled, deceived, or defrauded as they do when responding to a high-pressure sales call from a telemarketer," said FTC Bureau of Consumer Protection Director Howard Beales III. "If the offer appears too good to be true, be on guard."

"White collar crime is on the increase and a favorite weapon of choice is the telephone. Don't abandon common sense just because you initiated the call, and it would be wise to check with the Better Business Bureau first," Ken Hunter, president and CEO of the Council of Better Business Bureaus, advised consumers.

A Focus on Medical Billing Scams

Beales said that in addition to the general message that consumers should be careful when calling companies in response to classified ads or similar promotions, five of the cases filed by the FTC illustrate the fact that consumers interested in working at home doing medical billing should be particularly wary of pitches that promise easy money with little or no effort. While the telemarketers may provide lists of local doctors they say are interested in having their billing done by consumers, many times these doctors have not consented to have their information distributed, are not looking for outside help, or may need more skilled employees to complete this technical task.

"I would advise someone looking to start his or her own medical billing business to learn about the challenges involved in medical billing, including the complex laws which apply to [it]," said Cyndee Weston, Executive Director of the American Medical Billing Association. "I would also advise them that up to one year of training may be necessary in order to even begin to market his or her medical billing services to healthcare providers."

In 2001, the FTC and 43 Better Business Bureaus (BBBs) across the United States and Canada surfed the Internet and newspaper classifieds looking for ads promising consumers they could make fast, easy money running medical billing businesses from home. Hundreds of ads from dozens of companies were identified, with the worst purveyors of medical billing fraud targeted by the five cases announced today. The remainder received warning letters that their practices may be in violation of federal law.

The Commission's Complaints

The 11 complaints announced today were filed against the following companies and individuals for alleged violations of either the Federal Trade Commission Act, the Telemarketing Sales Rule, or both.

• Credit Enhancement Services, LLC, et al. Based in Camden, New Jersey and Woodhaven, New York, the defendants allegedly used postcard mailers and in-bound telemarketing to pitch advance-fee credit cards to consumers for a one-time fee ranging from $219.99 to $289. According to the FTC, some consumers who made the payments for their "pre-approved" and "unsecured" card got nothing, while others simply received an information package welcoming them to a discount buying card service, along with applications for major credit cards (for an additional fee).
• Antoine J. Peissel, d/b/a The Woodway Group, et al. Operating out of telemarketing boiler rooms in Houston, Texas, the defendants allegedly operated an advance-fee scheme, originating through "want ads" that promised consumers a loan or other extension of credit after they paid a "processing fee" of between $69 and $89. Few, if any, consumers ever received the loan promised them.
• Capital Choice Consumer Credit, Inc., et al. Operating a large-scale advance-fee scam based in Miami, Florida, the defendants allegedly either debited customers' bank accounts of $199.95 or obtained payments of $43 after promising to provide a credit card with a $4,000 to $7,000 credit limit. For their money, however, consumers only received an "approval certificate" and application package, and were told that to "activate" their card they had to pay even more money up front. The defendants also sent consumers a blue plastic card - that was not a bank card - for use only with the defendants' merchandise catalog.
• Universal Bancom, LLC and John Sarabia, d/b/a Nissan Bancorp. Based in Chatsworth, California, the defendants allegedly misrepresented to consumers that they could get a Visa, MasterCard, or other major credit card by paying a $287.25 fee. They also did not disclose that the card was actually a merchant card, not a bank card; that the card could only be used to purchase items from the defendants' catalog; or that consumers could only pay for 50-75 percent of the cost of the items with the card.
• Electronic Processing Services, Inc., et al. Based in Las Vegas, Nevada, the defendants marketed a $480 medical billing work-at-home opportunity, allegedly misrepresenting that the doctors whose names were supplied were likely to hire consumers to process their billing claims, and that consumers could expect to make a certain amount of money as medical billers.
• International Trader, d/b/a Premier Business Solutions, et al. A Nevada corporation, based in Los Angeles, California, the defendants marketed work-at-home medical billing opportunities through classified advertisements for $189. Through their telemarketing pitch, they allegedly misrepresented: 1) that they would provide consumers with the names of doctors likely to use them to process billing claims from home; 2) that consumers buying their materials could expect to earn a specific level of income (between $15 and $45 per hour); and 3) that consumers could readily obtain a refund upon request. Medical-Billing.Com, Inc., d/b/a Professional Management Consultants, et al. A Texas corporation based in Carrollton, Texas, the defendants sold their medical billing package for between $3,500 and $9,500. In telemarketing their program, they allegedly made numerous misrepresentations, including promises that:
  
  1) they would help recruit doctors who would use the consumers to process their billing; 2) customers would earn substantial income providing billing services for health care professionals; and 3) they would give customers a full refund if the program did not meet their performance expectations.
• Electronic Medical Billing, Inc., et al. A Nevada corporation operating in Mission Viejo, California, the defendants sold a medical billing work-at-home business opportunity to consumers for $325. They allegedly misrepresented: 1) that the doctors whose names they provided to consumers were likely to hire them to do their billing; and 2) that consumers could expect to make a certain level of income through medical billing (between $25,000 and $50,000 a year, according to their classified ads).
• Physicians Healthcare Development (PHD Billing), Inc., et al. Based in Burbank, California, the defendants pitched a work-at-home medical billing opportunity for $319 to $425, telling consumers that they could make between $3 and $15 for each claim processed. They allegedly misrepresented that the system they sell will instantly enable consumers to launch a home-based billing business, that consumers can earn substantial income for this work, and that the doctors whose names they provided were prepared to hire the consumers to process their claims.
• Terrance Maurice Howard, d/b/a True Techniques and Absolute Mailers. Based in San Antonio, Texas, the defendants marketed an at-home envelope stuffing business opportunity that they deceptively told consumers could earn between $2,000 and $4,000 a week. They also allegedly deceptively represented that after paying an initial "registration" fee, consumers could expect to make $5 for each envelope stuffed.
• Affiliated Vendors Association, Inc. et al. A for-profit company operating out of Grand Prairie, Texas, the defendants allegedly ran a sham Better Business Bureau-type organization that gave consumers glowing reports about its members - sellers of vending machine business opportunities. The company was allegedly paid by the vending machine sellers for pitching their businesses to consumers over the phone, never told consumers of its connection to the sellers, and misrepresented the support and services that they would provide to business opportunity purchasers.

WASHINGTON, July 12, 2001 -- Data Medical Capital, Inc., and its principal, Bryan D'Antonio, will be permanently banned from selling business ventures, employment opportunities or work-at-home opportunities, and from telemarketing as part of a settlement with the Federal Trade Commission. They will also be required to pay more than $559,000 in consumer redress.

The Commission had alleged that the defendants were engaged in a scheme to sell bogus work-at-home medical billing opportunities.

"The ability to make a decent living working from home would be a dream come true for many young parents and people who have difficulty leaving the house, such as some people with disabilities and seniors," said Howard Beales, Director of the FTC's Bureau of Consumer Protection.

"Unfortunately, the dream in this case did not come true. The fact is that few consumers who purchase a medical billing business opportunity are able to find clients, start a business and generate revenues. Consumers should be very skeptical of pitches for work-at-home opportunities that sound too good to be true."

In October 1999, the FTC filed a complaint in federal district court against Data Medical Capital, Inc., also doing business as Datamed and MedCo, and Bryan D'Antonio, alleging that they misrepresented their medical billing work-at-home opportunities by bolstering false earnings claims and misrepresented the assistance that consumers would receive in getting medical billing work.

According to the FTC, the defendants promised consumers that they could earn a minimum of $23,400 per year by using their home computers to process medical bills for physicians with whom the defendants had established relationships. The court issued a temporary restraining order with asset freeze against the defendants.

In addition to the ban from engaging in the sale of business ventures, employment opportunities, or work-at-home opportunities and telemarketing, the proposed settlement would also require the defendants to stop any collection attempts and to return any uncashed checks to consumers. The defendants would also be prohibited from selling their customer lists.

March 9, 2001
A federal district court has ordered a temporary halt to a California-based telemarketing scheme that purportedly sold work-at-home medical billing opportunities. Medicor LLC and its manager, Andrew Rubin, promised consumers that they could earn up to $1,500 per week using their home computers to process medical bills for physicians in the consumers' community.

The Federal Trade Commission alleges that the defendants misrepresented their medical billing work-at-home opportunities by touting false earnings claims, misrepresenting the assistance that they would arrange for consumers to get medical billing work and that refunds were readily available. At the Commission's request, the court froze the defendants' assets, and appointed a temporary receiver pending a hearing on the Commission's motion for a preliminary injunction.

The FTC filed its complaint in the U.S. District Court in the Central District of California against Medicor and Rubin as part of "Project Homework" - a law enforcement action targeting work-at-home scams that typically victimize stay-at-home parents, the physically disabled, non-English speakers, and people who cannot secure employment outside the home. Companies that promote these schemes promise consumers that they can reasonably expect to earn substantial income by working from home performing various tasks, such as assembling crafts, stuffing envelopes, or performing medical billing services for physicians.

The defendants promoted and sold medical billing work-at-home opportunities to consumers throughout the United States via newspaper ads and an Internet web site, www.medicorllc.com. According to the FTC, Medicor, based in Van Nuys, California, advertised in the "help wanted" section of various local newspapers touting the high earnings consumers could make using Medicor's medical billing software. A typical ad stated:

"EARN $$$ HELPING DOCTORS process claims from home. $20 - $40/ hour potential. Computer & modem required. We train. (888) 736-9051 Ext. 895."

When consumers responded to the ad, the telemarketers falsely represented that stay-at-home parents or others who wish to work from their homes could make from $20 to $40 per hour processing claims for doctors, or as much as $40,000 per year.

To further induce consumers to purchase Medicor's billing software, the defendants' telemarketers would falsely represent that they would arrange for doctors whose claims the consumers would be processing. In an attempt to convince consumers that Medicor was a legitimate company, the defendants would sometimes refer potential customers to their web site, which offered testimonials from purportedly successful Medicor billers. The defendants charged from $325 to $495 for their business opportunity. When consumers complained that Medicor's business opportunity had been misrepresented, the defendants would often refuse to refund the purchase price. At this point, most consumers were told for the first time that company policy was not to give a refund if the software package was opened.

The FTC complaint alleges that the defendants misrepresented how much consumers who purchased the medical billing opportunity would earn; that they would arrange for consumers to receive medical billing work from physicians; and that consumers would readily obtain refunds upon request. According to the FTC, consumers, in fact, did not earn the promised income, Medicor did not arrange for consumers to receive medical billing services from physicians, and consumers could not readily obtain refunds.

FTC Files Suit Against Bogus Medical Billing "Opportunity"

Data Medical Capital, Inc. and its owner Bryan D'Antonio, promised consumers that they could earn a minimum of $23,400 per year using their home computers to process medical bills for physicians with whom the defendants had established relationships. 

The Federal Trade Commission alleges that the defendants misrepresented the opportunities by bolstering false earnings claims and misrepresenting the assistance that consumers would receive in getting medical billing work.

The Commission has asked the court to continue the asset freeze, issue permanent injunctions and order the defendants to pay consumer redress.

The FTC filed its complaint in the U.S. District Court in the Central District of California against Data Medical Capital, Inc., doing business as DataMed and MedCo, and Bryan D'Antonio, also known as Brian D'Antonio. The defendants promoted and sold medical billing work-at-home opportunities via newspaper ads and an Internet web site, "www.medco.net".

According to the FTC, the scam worked like this: Data Medical advertised in the "help wanted" section of various newspapers seeking medical processors. A typical ad stated:

MEDICAL BILLING Nationwide company seeking Billers. PC required. No exp. necessary. Earn $31,500 plus. Call 1-800-262-6595.

The defendants' web site also encouraged consumers to call the listed toll-free number to learn more about the job opportunity. 

When consumers called, they were connected to telemarketers, who went into their sales pitch, emphasizing doctors' need for people to perform electronic medical billing. Consumers were told that the defendants would arrange for the consumer to receive generally between 150-250 claims per week from doctors with whom the defendants had business arrangements, and that consumers would earn from $3 to $5 per claim. 

Consumers were then told that in order to take advantage of the Data Medical opportunity all they would have to do is pay $299 - $399 for a software package, which would include the medical billing software, a tutorial and instruction manual, and the names of their prearranged physician clients. When consumers complained that the Data Medical opportunity had been misrepresented, the defendants would not refund the purchase price.

The FTC complaint alleges that the defendants falsely represented that consumers who purchased the medical billing opportunity would earn a minimum of $23,400 per year. The complaint also alleges that the defendants falsely represented that they would arrange for consumers to receive medical billing work from physicians with whom the defendants had established relationships. According to the FTC, consumers, in fact, did not earn the promised income, and the physicians referred to did not even know of Data Medical and did not want or need the services offered.

The Commission vote to authorize staff to file the complaint in district court was 4-0.

The Commission filed the complaint in the U.S. District Court, Central District of California, Southern Division, in Santa Ana, on October 14, 1999. The judge signed the TRO with Asset Freeze on October 15.