Canadian telemarketers settled Federal Trade Commission (“FTC”) charges on July 26 that they fraudulently marketed and sold credit card loss protection and healthcare discount plans to U.S. consumers in violation of federal law. Their telemarketing boiler rooms were shut down, and they will pay $200,000 in consumer redress as part of the settlement.
According to the FTC's complaint, six Toronto-based individuals and their companies targeted U.S. consumers, telling them that their company was affiliated with credit card issuers or banks and that consumers needed to buy “credit card loss protection” in order to avoid being held fully liable for unauthorized charges on their credit cards. In reality, under federal law consumers cannot be held liable for more than $50 of unauthorized charges on their cards – consumers do not need to pay for this protection. Operating as “National Credit Card Security,” the defendants charged consumers $249, often without authorization. The only things consumers received were useless “anti-fraud” stickers to put on their credit cards, and forms they were supposed to fill out and return to the defendants, listing all of their account numbers.
The defendants' second scheme targeted elderly U.S. consumers with promises of large discounts on prescription drugs and medical services. Their telemarketers used a variety of deceptive tactics to get consumers' money. They led consumers to believe they were calling from insurance companies or government agencies and persuaded consumers to divulge their credit card or bank account numbers by stating that they already knew the numbers but needed to “verify” them. The defendants also misrepresented that consumers would receive a free trial period before being charged the $349 enrollment fee. They also charged many consumers without authorization, and ignored most requests for refunds. The Canadians operated this scheme under a series of different names, including “Med Plan,” “Global Discount Healthcare,” and “MDI.”
The order contains a judgment of $14 million, which is suspended based on the defendants' inability to pay. If the court finds they misrepresented their financial status, they will be liable for the full amount. The settlement bars the defendants from making any misrepresentations about goods or services in the future, and from violating the Telemarketing Sales Rule. The FTC received assistance in this case from the Attorneys General of Missouri and New York, and from the Toronto Strategic Partnership, a cross-border fraud law enforcement partnership which, in addition to the FTC, includes the Competition Bureau of Canada; the Toronto Police Service – Fraud Squad; the United States Postal Inspection Service; the Ontario Ministry of Government Services; the Ontario Provincial Police – Anti-Rackets; the Royal Canadian Mounted Police; and the United Kingdom's Office of Fair Trading.