FTC Challenges Cross-Border Telemarketing Scam Targeting Elderly Americans

The Federal Trade Commission has charged a group of Canadian telemarketers with operating a bogus "consumer protection service" that promises to protect consumers against telemarketing and unauthorized bank activity, then perpetrates that very fraud. According to the FTC, the defendants prey on elderly consumers' financial insecurities by telemarketing a bogus service that promises to stop unwanted telemarketing calls and block unauthorized charges to consumers' bank accounts. The defendants often pose as government or bank officials and dupe unsuspecting consumers into disclosing their bank account numbers, which they subsequently use to steal hundreds of dollars from each victim. On July 19, 2004, at the FTC's request, a U.S. district court judge entered a temporary restraining order barring the defendants' illegal activities and freezing their assets.

The FTC's complaint against Montreal, Canada-based International Protection Center states that since at least February 2003, the defendants have telemarketed various bogus services, which they claim will protect consumers from fraud by blocking telemarketing calls and preventing unauthorized charges to consumers' bank accounts. The defendants allegedly target elderly and infirm consumers, often claiming to represent banks or the U.S. government, including the FTC. They claim that, for a fee of $399, they can register the consumer with the National Do Not Call Registry, send consumers a call-blocking device to attach to their telephone, and shield consumers' bank accounts from fraudulent withdrawals. The FTC alleges that the defendants' "products," when they arrive at all, are poorly-produced brochures and a cheap device that simply plays a recorded message asking the caller not to call again.

The FTC charges that, by masquerading as government or bank agents in an official capacity, the defendants were able to convince innocent consumers to disclose their bank account information. They then cause money to be debited from consumers' accounts electronically, or use a "demand draft" that operates like a check but does not require the consumer's signature. According to the FTC, some victims lost hundreds of dollars even after explicitly rejecting the defendants' services.

The FTC's complaint states that the defendants also misrepresent the cost of their products, sometimes telling consumers they will be free, then automatically deducting $399 from consumers' bank accounts. In other instances, they allegedly promise consumers a $500 credit to offset the $399 charge, or claim they will deduct the $399 in small installments. The FTC alleges that the defendants never get written authorization from their victims.

The FTC's complaint charges the defendants, 4086465 Canada, Inc. (d/b/a International Protection Center and Consumers Protection Center); Alain Chikhani a/k/a Allain Chikani; and Rafik Chikani with violating the FTC Act, the FTC's Telemarketing Sales Rule, and the Gramm-Leach-Bliley Act, for deceptive telemarketing, deducting payments without consumers' express permission, misrepresenting an affiliation with a bank or government agency, and obtaining consumers' financial data under false pretenses, respectively.

The FTC's complaint asks the court to permanently bar the defendants from future fraudulent practices and to award consumer redress.

The Commission vote authorizing staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the Northern District of Ohio, Eastern Division on July 19, 2004.

NOTE: The Commission files a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law. The case will be decided by the court.

Copies of the Commission's complaint 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 in English or Spanish (bilingual counselors are available to take complaints), 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 File No. 032-3210)
(Civ. No. 04CV1351)