Canadian Companies Charged by the FTC with Marketing Worthless Credit Card Protection and Advance Fee Loan Programs

The Federal Trade Commission has charged Consumer Alliance, an operation based in Ontario, Canada, with deceptively marketing worthless credit-card protection programs to U.S. consumers. In addition, the FTC alleges that the defendants in the case telephoned consumers and offered low interest credit cards, but never provided consumers with a credit card. According to the FTC, the defendants also placed unauthorized charges on the credit cards of many U.S. consumers. The Commission is asking the court to issue an injunction permanently halting the deceptive claims and requiring that the defendants pay consumer redress.

According to the FTC, the defendants used Canadian boilerrooms to offer credit card protection to U.S. consumers. During the sales pitch, the defendants' telemarketers allegedly misled consumers by saying that:

• The telemarketers were affiliated with, or calling from, Visa, MasterCard, or on behalf of the consumers' credit card issuers;
• Consumers could be held fully liable for any unauthorized charges made on their credit cards if they did not purchase this protection; and
• Consumers would only have to pay a small fee for the service - typically $2.99 or $3.49 - instead of the $299 to $349 the defendants actually charged.

The complaint alleges that the defendants purposely misrepresented their affiliation with a credit card issuer, and tricked consumers into divulging their credit card numbers by stating that they already knew the numbers but needed verification, and then used the information to bill the consumer's credit card without authorization. In addition, the complaint alleges that in other calls the defendants' telemarketers promised U.S. consumers a credit card with a low interest rate, or a low interest rate on the consumers' existing credit card, in exchange for a $349 or $399 fee. In fact, according to the FTC, those consumers only received a list of banks to which they could apply for credit cards. The FTC's complaint alleges that the defendants violated Section 5 of the FTC Act and the Telemarketing Sales Rule (TSR) by, among other things, misrepresenting the cost of their programs and billing consumers without authorization.

The FTC's complaint names three corporations and four individuals. These defendants include Consumer Alliance, Inc., a Delaware corporation; Consumer Alliance, Inc., [also known as 1421914 Ontario Inc.], a Canadian corporation; and Biosource Financial, Inc. Also named are Steven Winter and Gordon Levoy, individually and as officers and directors of the corporate defendants, and Jason C. Williams and Danny Longo, individually and as officers of the corporate defendants. According to the FTC, the three companies operated as a single enterprise out of Central and Western Ontario, Canada.

The Commission investigated this case in conjunction with the Ontario Provincial Police, Anti-Rackets Section, which has filed criminal charges against some of the defendants. Additional assistance during this investigation was provided by all the members of the Toronto Strategic Partnership, a cross-border fraud law enforcement partnership which includes, in addition to the Federal Trade Commission and the Anti-Rackets Section of the Ontario Provincial Police, the Toronto Police Service Fraud Squad, the Ontario Ministry of Consumer and Business Services, Canada's Competition Bureau, the York Regional Police Service, the United States Postal Inspection Service, and the Ohio Attorney General's office.

The Commission vote to authorize staff to file the complaint was 4-0, with Commissioner Sheila Anthony not participating. It was filed in the U.S. District Court for the Northern District of Illinois, Eastern Division, in Chicago, on April 4, 2002.

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. 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. 012 3188)
(Civil Action No. 02-C-2429)