Web Crammers Settle FTC Charges (September 2001)

An adult Web site company that illegally billed consumers' credit cards and phone bills without their authorization has agreed to settle Federal Trade Commission charges that the practices violated federal law. The settlement bars the deceptive billing practices in the future, and requires e-mail confirmation of membership requests and prompt refunds of improperly billed charges. It requires implementation of rigorous fraud detection and prevention mechanisms and requires establishment of a $250,000 escrow fund, which will be forfeited if the defendants violate the terms of the settlement.

In October 2000, the FTC filed suit in U.S. District Court in Phoenix, Arizona alleging that RJB Telecom and its principals, Robert and Richard Botto, operated adult web sites that provided viewers a free "teaser" visit and allowed the option of paying by credit cards or telephone bills for membership. According to the FTC, large numbers of consumers complained that they were billed for access to the web sites without their authorization, and in many instances, had never accessed the web sites at all. The agency also alleged that consumers who tried to exit or closed the credit card membership screen were shifted to a screen that gave them a phone dialer option. That option installed a dialer program which disconnected the viewers' computer modem from its internet service provider and dialed an international telephone number to reconnect the computer to the Web sites. Long distance phone charges would show up on consumers' phone bills without notice that the charges were for RJB's services. The FTC charged that billing and attempting to collect money from consumers who had not authorized the charges was unfair and deceptive and violated federal law. The stipulated final judgment and order announced today resolved the court case.

Under the terms of the settlement, consumers who access the Web sites in the future will be sent an e-mail confirming their agreement to purchase RJB's adult services. The settlement bars misrepresentations that consumers have purchased or agreed to purchase goods or services or that they owe the defendants money. It also requires that consumers who have been improperly billed will be credited within five business days. The settlement permanently bars the defendants from billing consumers without their express, verifiable authorization; bars billing through third parties without identifying their corporate name and bars billing phone numbers without the express, verifiable authorization of the line subscriber. The defendants are required to implement rigorous fraud detection and prevention measures for credit and debit cards and the Web masters who run many of their sites. In addition, they are required to establish an escrow account of $250,000, which will be maintained until March 15, 2003, and will be forfeited for violations of the settlement. Finally, there are extensive record keeping provisions so that the FTC can monitor their compliance.

RJB Telecom, Inc., is based in Scottsdale, Arizona.

The Commission vote to approve the settlement was 5-0.

NOTE: A Stipulated Final Judgment and Order is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Consent judgments have the force of law when signed by the judge.

Copies of the Stipulated Final Judgment and Order 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.