Cross-Border Cops Crack down on Bogus Advance-Fee Loans, Advance-Fee Credit Card Schemes

United States and Canadian law enforcers have joined forces to target a scam that affects millions of consumers a year, bilking each of them out of hundreds of dollars or more, for loans they never get. The “loans” are promoted by Ontario-based telemarketers who target U.S. citizens by running ads in U.S. newspapers that they pay for with stolen or compromised credit cards. The three-prong initiative, advanced by the Toronto Strategic Partnership, a group of law enforcement agencies in the United States and Canada that shares information and collaborates to combat cross-border fraud, involves law enforcement cooperation, an alert to consumers, warning them about these scams, and an effort to enlist newspapers across the country to check out questionable ads with law enforcers before running them. The FTC also announced an advance-fee credit card case developed through work with the Partnership. Since the Partnership was created in 2000, it has worked to bring 16 FTC cases and over 380 Canadian criminal charges.

“Our recent consumer fraud survey showed that advance-fee loan scams were the most frequently reported type of consumer fraud,” said Deborah Platt Majoras, Chairman of the Federal Trade Commission. “Four-and-a-half million consumers – 2.1 percent of the U.S. adult population – paid advance-fees but did not receive the promised loan or card.”

Advance-fee scams are launched from “boiler rooms” in Canada that advertise loans in the classified ad sections of newspapers or use telemarketing to market major credit cards to consumers for an advance-fee. The sales pitches entice consumers with promises of “guaranteed” loans or credit cards regardless of a consumer’s credit history. When applying for these services, consumers often are asked to wire hundreds – or even thousands – of dollars to Canadian addresses.

“Consumer fraud is going global at a rapid pace; with our strategic law-enforcement partnerships, so are we,” Majoras said.

The Toronto Strategic Partnership works to identify and locate advance-fee scammers and shut down their operations. Today, the FTC and the Partnership issued a new consumer alert with tips to avoid advance-fee scams, and has sent letters to 28 state press associations urging them to let their members know that ads that guarantee loans, even to consumers with poor credit histories, may be fraudulent.

The FTC announced a law enforcement action against Prime One Benefits, a Canadian-based company that falsely claimed that consumers who paid a fee ranging from $159 to $236 would be guaranteed a low-interest rate, high-credit limit, and no-annual-fee MasterCard or Visa credit card.The FTC charged that since August 1999, Prime One Benefits has operated boiler rooms in Toronto, targeting U.S. consumers, often the elderly or university students. After paying the fee, consumers did not receive credit cards. Instead, they received packages containing coupons and discounts for travel, recreation, auto, medical plans, satellite service, and cellular telephones.

“The FTC’s Telemarketing Sales Rule (TSR) prohibits telemarketers from charging an advance-fee for credit or loan services,” Majoras said. “Legitimate lenders, banks, and credit card companies never charge consumers in advance.”

The FTC’s complaint names 120194 Canada Limited, doing business as Veritech Communications, Veritech Communication Services, Veritech, Prime One Benefits, Prime One Financial, Prime One, First National Credit Service, and U.S. National Credit, Prime One
Financial Group, Inc., d/b/a Prime One Benefits, Prime One Financial, Prime One, First National Credit Service, and U.S. National Credit, Marketing Directives, Inc. The FTC complaint also alleges that this group of companies is owned and operated by individual defendants Paul Price and Elissa R. Price, also known as Lisa Price and Lisa Wells. The FTC received substantial assistance in this case from the U.S. Attorney’s Office for the Southern District of Illinois. The Commission vote authorizing 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, on November 8, 2004.

The Toronto Strategic Partnership was created in 2000 as part of a broad initiative by the U.S. and Canadian government to enhance cooperation between the two countries in fighting fraud. The members include the FTC, the U.S. Postal Inspection Service, the Toronto Police Service, the Ontario Ministry of Consumer and Business Services, the Ontario Provincial Police, and the Canadian Competition Bureau.

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 consumer alert “Alert Scammers Impersonate Legitimate Lenders, Promote A Loan for a Fee; Then Take the Money and Flee,” are available at
http://www.ftc.gov/bcp/edu/pubs/consumer/telemarketing/tel16.shtm The alert tells consumers how they can spot a scam and avoid losing their money. Rule number one: Legitimate lenders never "guarantee" or say that you are likely to get a loan or a credit card before you apply, especially if you have bad credit, no credit, or a bankruptcy.

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 compla law enforcement int in English or Spanish (bilingual counselors are available to take complaints), 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.