FTC Settlement Bans Billing Scheme Operators from Negative-Option Sales

The Federal Trade Commission has stopped an operation that targeted payday loan seekers and charged them for worthless programs without their consent. A settlement order, reached as part of the FTC's ongoing efforts to stamp out online fraud, requires the defendants to pay more than $9.9 million and bans them from marketing negative-option programs, which charge recurring fees until a consumer cancels.

According to the FTC's complaint, filed in March 2011, Michael Bruce Moneymaker, Daniel de la Cruz, and their companies obtained consumers' personal information from websites that claimed to match consumers with payday lenders. Then, without consumers' consent, they enrolled them in negative-option programs that cost an initial fee of up to $49.99, plus weekly or monthly recurring fees of up to $19.98, and did not provide promised refunds. The court subsequently halted the allegedly illegal practices and froze the defendants' assets, pending trial.

The settlement order also bans the defendants from marketing secured loan products, and permanently prohibits them from:

• obtaining consumers' account information from third parties;
• charging consumers without clearly disclosing all material terms before consumers provide account information;
• charging consumers without their consent;
• disclosing consumers' account information for any commercial purpose other than the transaction for which it was obtained;
• failing to disclose clearly the seller's name, a product/service description, the fact that the consumer will be charged and the amount, the terms of any refund or cancellation policy, and all material terms of any loan, credit, or credit improvement product.

In addition, the order bars the defendants from making the following misrepresentations:

• that they will use consumers' authorizations to further consumers' payday loan applications;
• the purpose for which consumers' account information will be used;
• any material aspect of any refund or cancellation policy, including that consumers provided their consent to buy something and would pay, that consumers are entitled to a refund only if they ask for a refund during a trial period, and that the defendants will provide a refund;
• the benefits of a product or service unless substantiated;
• that the consumer has contacted a third-party customer service, call center, or consumer rights organization;
• any affiliation with a bank or bank processing center, or with a customer of a financial institution;
• the status of any user or endorser of a product or service;
• any material terms of a credit-related good or service, or that a loan or credit-related good or service will increase a consumer's credit score or credit worthiness; and
• any other material facts, such as the total costs, the timing or manner of any charge, any restrictions or limitations, or any material aspects of a product's benefits.

The order imposes a judgment of almost $10 million against Michael Bruce Moneymaker, also known as Bruce Moneymaker and Michael Bruce Millerd, and also doing business as Fortress Secured; Daniel de la Cruz; Belfort Capital Ventures Inc., also doing business as Centralized Customer Service; Dynamic Online Solutions LLC; HSC Labs Inc.; Red Dust Studios Inc.; and Seaside Ventures Trust. The order requires the defendants to surrender cash and bank accounts, and proceeds from the sale of two houses in California. The judgment against de la Cruz will be suspended. The full judgment will become due immediately if he is found to have misrepresented his financial condition.

The Commission vote approving the proposed consent order was 4-0. The order was entered by the U.S. District Court for the District of Nevada on January 24, 2012.

For more information about negative-option plans, read Continuity Plans: Coming to You Like Clockwork, Prenotification Negative Option Plans, and Payday Loans Equal Very Costly Cash: Consumers Urged to Consider the Alternatives. Some negative-option plans involve "free" trial offers. For information about them, click Free Trial Offers, or watch an FTC video, free trials, which is also available at youtube.com/ftcvideos.

NOTE: Settlement orders have the force of law when approved and signed by the District Court judge.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC's online Complaint Assistant or call
1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC's website provides free information on a variety of consumer topics. Like the FTC on Facebook and follow us on Twitter.

(FTC File No. X110021)
(Moneymaker settlement)