Web-Based Scammers to Pay Redress for Deceptively Guaranteeing Consumers Credit Cards

Texas-based defendants who engaged in a scam in which they e-mailed consumers promising to provide them with a credit card agreed to pay $815,000 in consumer redress to settle Federal Trade Commission charges. The defendants, ClickForMail.com, Inc., doing business as AllPreApproved.com, and Harvey B. Vaughn, III, were part of the FTC’s Southwest Netforce sweep that targeted Internet scammers and deceptive spammers. The FTC alleged that the defendants sent spam e-mail telling consumers they were approved and guaranteed to receive major, unsecured credit cards with credit limits up to $5,000 for an advance fee of $49.95. In addition to paying redress, the settlement prohibits the defendants from making any false claims to consumers in the future.

In its complaint, filed in May 2003, the FTC alleged that the defendants sent spam e-mail telling consumers that they were guaranteed to receive a major, unsecured credit card with a high credit limit. Interested consumers then “clicked through” to the defendants’ Web site where they allegedly learned that they were required to pay a $49.95 advance fee to be debited from their checking account before they could get the card. According to the FTC, however, consumers who paid the fee did not receive the promised card. Instead, they allegedly received access to a set of hyperlinks to companies where consumers could apply for credit cards, and even then those were generally for secured credit cards, stored-value cards, or catalog charge cards. The FTC’s complaint alleged that the defendants falsely claimed that: (1) consumers who met minimum qualifying criteria and paid a $49.95 fee would receive unsecured major credit cards; and (2) that the defendants had special arrangements with banks or financial institutions to issue to its customers unsecured major credit cards.

The proposed settlement announced today prohibits the defendants from making false claims that they:

• will provide or arrange for consumers to receive major credit cards;
• have arrangements with banks or financial institutions to offer credit to consumers; or
• will provide consumers with any credit-related products, programs, or services.

The settlement also prohibits the defendants from: (1) misrepresenting any material fact prior to a consumer’s purchase of any products, programs, or services; (2) assisting others who engage in any activity that may violate the order; and (3) selling their customer lists. In addition to the defendants paying redress, the settlement contains an avalanche clause that requires the defendants to pay $3.6 million if the court finds that they materially misrepresented their financial status to the Commission.

Finally, the settlement contains various recordkeeping requirements to assist the FTC in monitoring the defendants’ compliance.

The Commission vote authorizing staff to file the stipulated permanent injunction and final judgment order was 5-0. It was filed in the U.S. District Court for the Northern District of Illinois, Eastern Division, on October 2, 2003, and was approved by the Court the same day.

NOTE: This stipulated permanent injunction and final judgment is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Stipulated final orders have the force of law.

Copies of the stipulated permanent injunction and final judgment 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

(FTC Matter No. X030054; Civil Action No. 03C 3033)