The Federal Trade Commission (“FTC”) recently entered into multi-million dollar settlements shutting down the operations of several companies that allegedly used robocalls to contact consumers in order to trick them into paying upfront fees to get low credit card interest rates (which they ultimately never received).
Background: The Robocalls and Purported Scam
In lawsuits commenced late last year, the FTC alleged that the companies behind “Ambrosia Web Design” and “Treasure Your Success” placed automated calls to consumers containing a pre-recorded message from “Rachel” or someone else at “Cardholder Services.” The subject pre-recorded message would advise consumers that the company was calling with an “important message” that contained an opportunity to reduce their high credit card interest rates. The message would urge consumers to “press 1” to speak to a live representative to learn more about the great offer. If the consumer connected to the telemarketer, the telemarketer would, in some cases, claim to be from the consumer’s credit card company. In other cases, the telemarketer would claim to be from “Cardholder Services,” which would imply that the telemarketer had a relationship with a bank or credit card company. According to the FTC, the applicable caller ID information contained a spoofed (fake) telephone number so that it was impossible for consumers to know who was actually calling them.
If the consumer expressed interest in reducing his/her credit card interest during the call (according to the FTC, consumers often were promised a rate reduction to as low as zero percent), he/she would then be placed on hold so that the telemarketer could conduct an “audit” to determine if the consumer qualified for the offer. According to the FTC, that audit was typically used to determine whether the consumer had sufficient credit available on his/her credit card to pay the company’s upfront participation fee.
Once the consumer was “approved” for the offer, he/she would be charged a fee ranging from several hundred to several thousand dollars. In some cases, the fee was not disclosed. Otherwise, to convince the consumer that the “program” was worth the steep fee, the telemarketer would tell the consumer that the fee would be more than offset by the money the consumer would save by not paying higher interest rates over the course of paying off his/her credit card debt.
After collecting their fees, the FTC alleged that the companies would do little to nothing. In some cases, the company would contact the consumer’s credit card company to request a lower interest rate (which the consumer himself/herself could have done), which usually was denied. In some cases, the company would just apply for a new credit card on behalf of the consumer with a low-to-zero percent introductory interest rate, which the consumer himself/herself also could have done.
After close to a year of litigation, the companies and their owners settled with the FTC, agreeing to large suspended judgments totaling over ten million dollars (combined) and injunctive relief. The owners behind the Ambrosia scheme agreed to liquidate their personal assets in order to contribute to part of their settlement. Among other restrictions, all of the owners are prohibited from ever engaging in, or using a third party to engage in, telemarketing.
Of course, the takeaway here is to ensure that you comply with all applicable Federal and State laws if you are, or someone on your behalf is, engaged in telemarketing.