FTC Attacks E-Mail Scam

The Federal Trade Commission has obtained a federal district court order freezing the assets of a scam that dupes consumers into making costly international telephone calls in an attempt to ward off bills for merchandise they never ordered. The FTC alleges that the scammers make their money from the revenues from the costly audiotext telephone calls and has asked the court to block the revenue stream from American telephone carriers, return the money to the unwitting consumers and bar the alleged deceptive practices.

According to the FTC complaint, the scam works like this: Consumers receive an e-mail informing them that their order has been received and processed and their credit card will be billed for charges ranging from $250 to $899. In fact, the consumers hadn't ordered anything. The e-mail advises consumers that if they have questions about their "order" or want to speak to a "representative" they should call a telephone number in area code 767. Most consumers don't know the area code is in a foreign country, Dominica, West Indies, because no country code is required to make the calls. Consumers who call expecting to speak to a "representative" about the erroneous "order" are connected to an adult entertainment audiotext service with sexual content. Later, consumers receive telephone charges for the international, long-distance call to Roseau, Dominica.

"This scam used low-down tactics and high-tech tools to rob consumers in their own homes," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection. "We used our high-tech tools and our rapid response team to stop this scam three weeks after identifying complaints in our database. We want to be sure that these lawbreakers don't profit from their con and that consumers get their money back."

The FTC alleged that the defendants contacted the consumers using bulk e-mail -- commonly known as spam -- with a variety of forged addresses which prevented consumers from refuting the orders by e-mail. This is the first FTC case filed against unnamed defendants. Upon identifying the defendants, the FTC will move to add them to the court complaint.

According to the FTC, under international agreements, U.S. telephone carriers would ordinarily bill consumers for their pay-per-call charges and forward the funds to the Dominica telephone company which in turn distributes portions of the revenue to the providers of the audiotext service. Due to time lags between billing, collection and remission payments, it would typically take about 60 days for the funds to reach the audiotext business. The FTC has asked the court to prevent the telephone carriers from remitting the funds now in the revenue stream and preserve the money for consumer redress. The FTC has also asked the court to bar the defendants from violating the FTC Act.

The Commission vote to file the complaint was 4-0. The case was filed in the U.S. District Court for the Western District of North Carolina, in Charlotte, on May 11, 1999.

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 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; 202-FTC-HELP (202-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(FTC File No. 992-3190)