Fraudulent Canadian Credit Card Operation Permanently Halted

A Toronto-based company is permanently barred from selling advance-fee credit cards and required to pay $1.3 million for consumer redress, as part of a settlement with the Federal Trade Commission. The FTC filed a complaint in May 2002 in federal court alleging that Efficient Telesales Services Inc., also doing business as U.S. Credit Services, and U.S. Direct Benefits and Savings, and Leonora Khan, deceptively marketed advance-fee credit cards to U.S. citizens who had no credit or bad credit. According to the complaint, the Canadian company promised consumers a major credit card, charged for it in advance, but never delivered the credit card.

The FTC alleged that U.S. Credit told consumers that it was offering pre-approved Visa or MasterCard credit cards with interest rates of 2 percent, 2.9 percent, or 3.9 percent, credit limits of $2,500 or $5,000, and no annual fee, all for an upfront "processing" fee of $199. Consumers were told that they would receive the credit cards by authorizing debits from their bank account. Instead, the FTC alleges, consumers received packages containing information about obtaining credit, repairing credit, and avoiding credit fraud and financial scams. According to the FTC, the defendants never provided consumers with the promised credit cards and are not authorized by Visa or MasterCard to issue credit cards to the public. The FTC alleges this business enterprise sold only to U.S. consumers, and estimates that total sales exceeded $3 million.

The default judgment prohibits the defendants from selling any advance-fee credit cards. In addition, it requires the defendants to pay $1.3 million for consumer redress. The court action announced today resolves charges against the defendants. Finally, the default judgment contains various recordkeeping provisions to assist the FTC in monitoring the defendants' compliance.

The FTC's Midwest Region handled the investigation and court case. The FTC received assistance in this case from the members of the Toronto Strategic Partnership, a cross-border fraud law enforcement effort which includes, in addition to the FTC, the Ontario Provincial Police, the Toronto Police Service Fraud Squad, the Ontario Ministry of Consumer Business Services, Canada's Competition Bureau, and the United States Postal Inspection Service.

Copies of the default judgment are available from the FTC's Web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1 877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

(FTC Matter No. 022-3061)
(Civil Action No. 02 C 8678)