FTC Bars Telemarketing Program

A Colorado-based telemarketing firm and its principal have agreed to settle Federal Trade Commission charges that they deceived consumers in financial distress out of more than $200 each with offers for credit cards and promises to help them rebuild their credit. The settlement permanently bars Sainz Enterprises, LLC, and owner Joe P. Sainz III from marketing certain credit products, making any claims that violate the FTC’s Telemarketing Sales Rule (TSR), or knowingly assisting others who are violating the TSR. The order also requires the defendants to review all sample scripts and other marketing materials from any telemarketer or seller in connection with their business.

According to the FTC, from 2002 through early 2003, the defendants telemarketed advance-fee credit cards and credit repair materials, which they billed as “Credit Securities Resources.” The defendants allegedly targeted consumers who needed financial assistance or were trying to repair their credit, including consumers who had recently filed for bankruptcy, and offered them a “Credit Repair Kit.” The defendants promised that consumers would receive an “unsecured” Visa or MasterCard for a fee of $209, which they debited from consumers’ bank accounts. Instead, consumers allegedly received a stored-value card that could only be used if they loaded money onto it.

The FTC’s complaint alleged that the defendants violated the FTC Act by misrepresenting that consumers could get an unsecured major credit card for an advance fee. The FTC also charged that the defendants violated the TSR by deceiving consumers through telemarketing and collecting money from consumers after promising them a credit card. Further, the FTC alleged that the defendants violated the Gramm-Leach-Bliley (GLB) Act and the FTC’s Privacy Rule by failing to notify consumers of their privacy practices after collecting sensitive personal financial data from consumers and by obtaining such information from consumers under false pretenses.

The order permanently bars the defendants from knowingly assisting fraudulent telemarketers. To ensure that the defendants comply with this provision, the order requires the defendants to review all scripts and direct mail samples they receive from third-party sellers – if they fail to do so, they will be charged with consciously avoiding knowledge of the telemarketers’ illegal practices. The order also prohibits the defendants from misrepresenting that they can guarantee consumers a credit card for an advance fee; taking consumers’ money after promising them an extension of credit; failing to provide consumers with privacy notices when required to do so; reusing consumers’ personal financial information in certain circumstances; or using false information to get consumers to divulge their personal financial information.

The order also contains a suspended judgment of $75,000, which the defendants will be required to pay if it is found that they misrepresented their financial situation. The defendants are required to provide a copy of the order to all employees and clients. Finally, the order contains standard reporting and recordkeeping provisions to assist the FTC in monitoring the defendants’ compliance.

According to the FTC, the defendants also employed telemarketers from Infinium, Inc., a Cedar City, Utah-based operation that settled FTC charges that it participated in an international telemarketing network illegally pitching advance-fee credit cards to U.S. consumers using boiler rooms around the world. The FTC alleges that Infinium telemarketers called consumers on Sainz’s behalf to sell Credit Securities Resources to consumers. The February 2003 settlement with Infinium barred the operation’s illegal conduct, froze its assets, and appointed a receiver to assume control of its business. See press release dated February 27, 2003 (http://www.ftc.gov/opa/2003/02/assail.htm).

The Commission vote to authorize staff to file the complaint and stipulated final order was 5-0. Both pleadings were filed in the U.S. District Court for the District of Colorado.

NOTE: This stipulated final order is for settlement purposes only and does not constitute an admission by the defendant of a law violation. A stipulated final order requires approval by the court and has the force of law when signed by the judge.

Copies of the complaint and stipulated final 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 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.

(FTC File No. 032 3180)