FTC Charges Telemarketing Network with Selling Bogus Advance-Fee Credit Card Packages

The Federal Trade Commission has filed charges against seven corporations and nine individuals, the Assail Telemarketing Network, for engaging in deceptive and unfair activities in the marketing of advance-fee credit card packages under the names Advantage Capital, Capital First, and Premier One. The Commission alleges that the defendants operate an advance-fee credit card scam through a network of boiler rooms, Canadian front men, and outsourced fulfillment and customer service centers. According to the FTC, the scam targets people with poor credit histories, offering credit cards that never materialize, while upselling various benefit packages through an incomprehensible, computer-generated "verification" tape.

On January 9, 2003, the court temporarily halted the defendants' operation, froze their assets, and appointed a receiver to take over the corporate defendants.

The complaint names: Assail, Inc., headquartered in St. George, Utah, its president, Kyle Kimoto, and two of its officers, Cliff Dunn, and Mike Henriksen; Infinium, Inc., Market-Reps.com, Inc., headquartered in Cedar City, Utah, and their president Brian Schofield; Specialty Outsourcing Solutions, Inc., headquartered in Waco, Texas, and its officers, Jay Lankford, and Lee Murphy; Summit Communications International, Inc., purportedly headquartered in Carson City, Nevada, and doing business as Advantage Capital, and its president, Matthew Ho; Capital First Benefits, Inc., headquartered in Miami, Florida, and its president, Ben Lee; and Premier One Benefits, Inc., based in Idaho Falls, Idaho, and its president, Johnson Salanga.

The FTC alleges that the defendants telemarketed various products and services to U.S. consumers, or provided substantial assistance, facilitation, or support to the telemarketers or sellers of such products or services. Assail, Infinium, and Market-Reps.com provide telemarketing and other services through their own boilerrooms and employees, and through dozens of contract boiler rooms in the United States, Canada, India, and Caribbean countries.

According to the FTC, the scam works as follows: the defendants contact consumers with poor credit records, refer to their purported prior applications for credit, and tell them that they are now guaranteed to receive a credit card. The credit card packages are often sold under the names of Advantage Capital, Capital First, and Premier One. In fact, the defendants do not provide credit cards to consumers. Instead, they use an incomprehensible, digitally recorded "verification" process to conceal that the proffered credit card is actually a "benefit" package that includes an application for a stored value "pay as you go"card. After consumers submit the application, even this card also fails to materialize. In addition, the defendants slip in multiple "upsells" of expensive and dubious products at the end of the verification process. The defendants then debit consumers' bank accounts for the upsells, sometimes with additional recurring monthly charges, without the consumers' authorization. The FTC alleges that consumers commonly incur debits against their bank accounts for approximately $174 for the "credit card" package and an additional $50-$100 for each upsell.

The FTC alleges that when consumers try to cancel their purchases and prevent further debits, they are frequently met with a well-orchestrated "customer service" scheme designed to frustrate consumers' attempts to obtain refunds and cancellations. Even when consumers are successful in canceling some of their debits, the defendants often fail to cancel future debits for other products purportedly purchased during the telemarketing call. As a result, consumers' accounts are later debited for additional sales about which they were not aware.

The complaint alleges that the defendants violated the FTC Act, the Telemarketing Sales Rule, and Gramm-Leach-Bliley Act by:

• making deceptive misrepresentations and engaging in unfair billing practices;
• assisting and facilitating others in fraudulently inducing consumers to pay for goods or services, and requesting payment upfront for the goods or services; and
• obtaining bank account numbers from consumers by means of false, fictitious or fraudulent representations.

The Commission vote to authorize staff to file the complaint in federal district court was 5-0. The complaint was filed in the U.S. District Court for the Western District of Texas, Waco Division, on January 9, 2003, under seal. The seal was lifted on January 16, 2003.

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.

(FTC File No. 022-3147)
(Civil Action No. W03CA007)