The Federal Trade Commission settled charges against six credit card marketers that allegedly deceived consumers into paying for what the agency said were “bogus” cards and charged illegal fees.
The agency reached a settlement with the six defendants in Oregon federal court.
According to the FTC’s complaint, the defendants targeted consumers with credit problems by using mailers that promised to “build” credit with a “GUARANTEED” $7,500 credit line and cash advance benefit.
Although the cards looked like typical credit cards, they could only be used to purchase products from the defendants’ merchandise catalog, the agency said.
The defendants falsely claimed that the cards could be used to fully finance purchases and that they could improve the users’ credit ratings, the FTC alleged, and that users would have access to a low-cost, no-fee, or guaranteed cash advance benefit.
In addition, the agency said the defendants falsely claimed that if consumers returned the card, they would receive a refund for the $120 activation fee.
Under the terms of the settlement, the defendants agreed to stop engaging in certain marketing practices and to the imposition of a $28.5 million judgment that will be suspended when the proceeds from sales of certain properties are surrendered.
Specifically, the defendants are barred from violating the Telemarketing Sales Rule, must disclose all fees and costs as well as the refund or cancellation policy before consumers are asked to pay, and cannot misrepresent any material fact in connection with the sale of any product or service.
Why it matters: Advertisers should be careful to comply with relevant FTC rules such as the Telemarketing Sales Rule, make all necessary disclosures, and reveal any material facts of their offers.