Antitrust Lawyer Blog

On February 2, a Canadian telemarketer that falsely claimed it could reduce U.S. consumers’ credit card rates, was stopped by a federal court.

The FTC’s complaint alleges that the defendants have sold credit card interest rate reduction services since December 2005, claiming affiliation with consumers’ credit card companies. The defendants promise to effect credit card rates between 4.75 percent and 9 percent, thus saving consumers at least $2,500, and that if consumers do not save that amount their money will be refunded. The complaint also alleges that the defendants engaged in Caller ID spoofing, causing consumers’ caller identification services to display telephone numbers that do not belong to the defendants, but rather to innocent victims whose telephone numbers are misappropriated.

The defendants sent consumers promotional materials with promises to reduce their interest rates, and a “financial profile form” that the consumers had to mail back for $675 plus $20 for shipping and handling. The form asks consumers to list their current balance, credit limit, interest rate, and suggested minimum payment for each of their credit card and other debts, as well as their social security number and other personal information.

On January 8th, a payment processor violated federal law when it debited, or tried to debit, more than $9.9 million from consumers’ bank accounts – at $139 each – without their approval. According to a complaint the FTC filed in federal court, Nevada-based InterBill Ltd. acted on behalf of a fraudulent enterprise known as “Pharmacycards.com.” In 2004 the FTC charged Pharmacycards with debiting millions of dollars from consumers’ checking accounts, without their consent, for nonexistent discount pharmacy cards.

InterBill’s business is processing payments for merchants, including those its industry considers “high risk,” such as online gaming and mail and telephone marketing. Using consumers’ names and bank account information provided by Pharmacycards, InterBill debited thousands of consumers’ accounts despite indications that the operation was bogus. Consumers had no contact with InterBill or Pharmacycards before money was taken from their checking accounts.

According to the complaint, InterBill did not follow its own guidelines for new merchants before doing work for Pharmacycards, including collecting information, checking references, and verifying a physical address. Pharmacycards provided a London, England, mail drop as a business address and conducted all of its business by pre-paid, virtually untraceable cellular phones and free, anonymous e-mail and facsimile accounts. The Pharmacycards Web site provided a toll- free customer service number that was answered at a call center in Montreal, Quebec, Canada and a fake address in British Columbia, Canada. Pharmacycards operators used the identity of a Cyprus corporation and directed that their funds be wired to a Cyprus bank account.

The FTC filed complaints on January 4th, in four separate cases alleging that weight-loss and weight-control claims were not supported by competent and reliable scientific evidence. Marketers of the four products -Xenadrine EFX, CortiSlim, TrimSpa, and One-A-Day WeightSmart -settled with the FTC, surrendered cash and other assets worth at least $25 million, and agreed to limit their future advertising claims.

Xenadrine EFX

Two marketers of Xenadrine EFX will pay at least $8 million and as much as $12.8 million to settle FTC allegations that Xenadrine EFX’s weight-loss claims were false and unsubstantiated. The funds will be used for consumer redress. In a bankruptcy case not involving the Commission, the defendants also agreed to pay at least an additional $22.75 million to settle claims brought by creditors and consumers, including personal injury claims for an earlier ephedra-based product.