FTC Cracks Down on Alleged Credit Card Scam

A federal district court has entered a temporary restraining order enjoining the owners of a nationwide telemarketing operation from making misrepresentations to consumers when marketing credit-related products or services. The court’s order also freezes the defendants’ assets. The Federal Trade Commission filed an action against the defendants, who operated under the names “Royal Credit Solutions,” “Imperial Consumer Services,” and “Beneficial Client Care,” alleging that they violated the FTC Act and the Telemarketing Sales Rule by misrepresenting, expressly or by implication, that consumers were likely to receive an unsecured major credit card, like a Visa or MasterCard, in exchange for an advance-fee payment. The FTC also alleges that the defendants violated the Gramm-Leach-Bliley Act by using false or fictitious statements to obtain consumers’ bank account information.

The defendants, who ran their operation from Palm Beach, Florida, and Montreal, Canada, are three Florida corporations (Sun Spectrum Communications Organization, Inc., North American Communications Organization, Inc., and WWCI2002, Inc.) and their principals, William H. Martell and Tracey A. Bascove, and one Canadian corporation (9106-7843 Quebec, Inc.) and its principals, Mitchel Kastner, Ronald Corber, and Jason Kastner.

In its complaint, the FTC alleges that since January 2002, these defendants have telemarketed advance-fee credit cards to U.S. consumers with poor credit histories, offering them a credit card with a $2,500 limit for a one-time “processing” fee of $197 to $300. According to the FTC, the defendants’ telemarketers claimed to have information showing that the consumer had recently been denied credit and pitched the credit card offer as a means of restoring their credit rating. They then requested information regarding consumers’ bank accounts, such as account numbers, routing numbers, and account holder’s name, as well as personal identifying information, such as date of birth, mother’s maiden name, and social security number. The FTC alleges that the defendants never delivered the promised credit cards to consumers who paid the fee. At best, some consumers allegedly received a package containing a credit repair book with coupons, a list of banks that issue credit cards, and other materials with little or no value. According to the FTC, the defendants’ fraudulent business practices have resulted in injury to thousands of consumers throughout the United States.

The FTC received valuable assistance in its investigation of this matter from the Bureau of Financial Investigations of the Florida Office of Financial Regulation in West Palm Beach, the United States Postal Service in West Palm Beach, and the Better Business Bureau of Southeast Florida.

The Commission vote to authorize staff to file the complaint was 5-0. The complaint was filed on December 2, 2003, in the U.S. District Court for the Southern District of Florida. The Honorable Judge James I. Cohn issued the temporary restraining order on December 3, 2003.

Copies of the FTC’s 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.

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(FTC File No. 032 3032)