Cross-Border Credit Card Fraud Halted

A federal district court has temporarily halted the business practices of a Toronto-based company charged by the Federal Trade Commission with promising consumers a major credit card, and charging an advance fee for it, but never delivering the credit card. According to the FTC, the defendants, operating under several names, targeted U.S. citizens who had no credit or bad credit with their advance-fee credit card offer. The FTC charges that the defendants violated the Telemarketing Sales Rule and the FTC Act by falsely representing that they would provide consumers with a VISA or MasterCard credit card that had an interest rate of 3.9 or 6 percent, credit limit of $2,500 to $5,000, and no annual fee, all for an upfront "processing" fee ranging from $175 to $199 for the credit cards by authorizing debits from their bank account. Instead, the FTC alleges, consumers received packages containing information about obtaining credit, repairing credit, and avoiding credit card fraud and financial scams. The packages also contained information about discount shopping services and vacation certificates.

According to the FTC, the defendants never provided consumers with the promised credit cards and are not authorized by VISA or MasterCard to issue credit cards to the public. The FTC alleges that this business enterprise sold only to U.S. consumers, and estimates that total sales exceeded $5 million.

The court has issued an injunction prohibiting the defendants from making deceptive claims and freezing the assets of the defendants to preserve funds for possible consumer redress.

The FTC's complaint names Pacific First Benefit, LLC; Key Nation Benefit, LLC; First Federal Benefit, LLC; Federal Credit Services, Limited; and Alex Orphanou. The companies were incorporated in Delaware, but are operating out of the same location in Toronto, Ontario.

According to the FTC, these companies are all one related enterprise.

The FTC's Midwest Region handled the investigation. The FTC brought this matter with assistance from the members of the Toronto Strategic Partnership, a cross-border fraud law enforcement effort which includes, in addition to the FTC, the Ontario Provincial Police, the Toronto Police Service Fraud Squad, the Ontario Ministry of Consumer and Business Services, Canada's Competition Bureau, and the United States Postal Inspection Service. The Postal Inspection Service was particularly helpful in this matter.

The Commission vote to authorize staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the Northern District of Illinois, Eastern Division, in Chicago on December 2, 2002.

NOTE: The Commission authorizes the filing of 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 actually has 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