Court Awards $39 Million for Consumer Redress

A U.S. District Court has held a magazine subscription telemarketing group in contempt of court and ordered it to pay $39 million in consumer redress for violating the terms of a 1996 Federal Trade Commission settlement. Judge Vicki Miles-LaGrange wrote that despite the 1996 permanent injunction that barred various deceptive selling practices by the telemarketers, evidence presented by the FTC "…clearly and convincingly indicates that defendants' acts and practices in connection with the sale of magazine subscriptions and magazine subscription packages violate the . . . Permanent Injunction." The judge ordered H.G. Kuykendall, Jr., Diversified Marketing Service Corp., H.G. Kuykendall, Sr.; C.H. Kuykendall; National Marketing Service, Inc., NPC Corporation of the Midwest, Inc.; and Magazine Club Billing Service, Inc. to turn over the money to the FTC within 30 days of her order and ordered the FTC to submit a plan for the disbursement of this money to the court for review and approval. The Kuykendalls and their companies are based in Oklahoma City, Oklahoma. The contempt order was issued by the U.S. District Court for the Western District of Oklahoma, on March 4, 2002.

Consumers who think they may have been improperly billed by the companies may call a special FTC hotline at 202-326-2853.

In March 1996, the FTC filed suit charging the defendants with making misrepresentations in connection with the telemarketing of magazine subscription packages to consumers. Specifically, the agency charged that the defendants misrepresented the cost or duration of the subscriptions; misrepresented the reason they obtained consumers' account information; charged consumers' accounts without authorization; refused to cancel subscriptions; misrepresented consumers' rights to cancel telemarketing contracts under state law; and threatened to harm consumers' credit ratings. The court issued a Temporary Restraining Order and Preliminary Injunction, froze the defendants' assets and appointed a receiver to oversee the business operations.

In October 1996, the defendants stipulated to a Permanent Injunction to settle the FTC allegations. The Permanent Injunction prohibits the defendants from making the misrepresentations alleged in the complaint; requires the defendants to comply with the FTC Act, the Telemarketing Sales Rule, and state law regarding cancellation; and calls for $1.5 million in consumer redress.

In papers filed with the court January 28, 2002, the FTC alleged that the defendants were engaged in the same misleading and illegal practices they were charged with in 1996 and that they had agreed to cease. The FTC asked the court to cite the defendants for contempt of court, bar them from the telemarketing business, and order consumer redress.

The original lawsuit and the motion for contempt were brought with the invaluable assistance of the Office of the Attorney General of Oklahoma.

Copies of the legal documents associated with this case and an FTC report, "Project Scofflaw's First Five Years," 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 File No. X960025)
(Civil Action No. CIV-96-388-M)