FTC, States Continue Crackdown on Telemarketers and Net 37 Companies and Individuals Offering Loans that Never Arrive

In a continuing effort to target corporations and individuals that guarantee loans for an advance fee and never deliver, the Federal Trade Commission, the state Attorneys General of Illinois and Missouri, and the Idaho Department of Finance announced the results of the latest crackdown on 37 telemarketing firms and individuals allegedly engaged in advance fee loan scams. The crackdown also includes the participation of Canadian law enforcement authorities, who have targeted a company and two individuals allegedly telemarketing from Canada to United States residents. According to the Federal Trade Commission, the latest targets of advance fee loan scams include U.S. military personnel, who, like other consumers, are attracted by promises these scams make of guaranteed credit approval.

"Advance fee loan fraud poses a significant financial threat to consumers," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection. "Recognizing this, the FTC and state law enforcement agencies, together with our Canadian counterparts, have combined our resources to launch an aggressive campaign to attack this form of fraudulent telemarketing. Our current investigations show that the advance fee loan scam artists continue to operate out of Canada. But, by joining forces, Canadian provincial and American federal and state officials are pursuing these operators on both sides of the border. Our message to these fraudulent telemarketers is: We will not permit you to use the border to prey on consumers. We can and will reach out and stop you."

The FTC cases announced include a variety of schemes that the FTC alleged have defrauded more than ten thousand consumers nationwide. Several of the companies and individuals named in the sweep do business under a series of assumed names, promising consumers that in return for the payment of a fee in advance, they will receive a major credit card with a high credit limit. Another telemarketing operation named in the sweep is an individual advance fee loan broker acting as an alleged "turn down room" -- a third-party that denies applications for loans and other credit -- for a number of fraudulent telemarketing companies operating in the United States from Canada. Yet another company named in the sweep is alleged to have used an intricate web of interrelated entities to do not only its own telemarketing, but also to contract with individual third-party telemarketers-for-hire to provide substantial assistance and support to its telemarketing operations.

Fraudulent advance fee loan schemes particularly prey on vulnerable consumers -- the unemployed, those who have bad credit ratings, or those in immediate need of money for emergencies. Most advance fee loan telemarketers snare consumers through advertisements in various local newspapers and tabloids, on cable television, on the Internet and in Yellow Pages telephone directories. Ads promising "money to loan . . . regardless of credit history" lure consumers into paying fees that range from $25 to several hundred dollars in advance of receiving loans or credit cards that are "guaranteed." In many instances, consumers never receive the promised loans or credit cards, and either never hear from the loan companies again or are later told by "turn down rooms" that they are ineligible for the credit, the FTC said.

Under the FTC's Telemarketing Sales Rule, which went into effect December 31, 1995, a telemarketer who guarantees consumers a loan or other form of credit, or who claims he or she can arrange such credit for a consumer, is prohibited from asking consumers to pay any money before they receive the loan or credit. The rule empowers each of the fifty state Attorneys General to file actions in federal district court and seek an order that applies nationwide against violators of the rule. Some of the cases announced today (see attached list) allege rule violations; others allege violations of the FTC Act or state laws that prohibit unfair or deceptive practices. These latest law enforcement actions show a continuing, coordinated effort among domestic and international law enforcement agencies to combat such fraud.

Among the victims of the advance-fee loan scams targeted in this latest crackdown are U.S. military personnel and their families. In addition to other media, advertisements for these scams appear in civilian newspapers circulated on U.S. military bases. "Members of the armed forces and their families should beware of these scams just like other consumers," said Bernstein. "We are pleased to be able to work with the armed services in putting a stop to the despicable practice of targeting scams at the military community."

In conjunction with filing these actions, the FTC has launched a consumer education campaign to alert consumers, and particularly military personnel, to these scams. The FTC is working with U.S. military personnel on the bases, as well as at the Department of Defense, to educate military personnel and their families about these fraudulent schemes. The FTC has also created a new Website at: http://ww.ftc.gov/bcp/conline/edcams/loanshrk to provide information to consumers about advance fee loan scams.

The FTC and the state Attorneys General offer these tips for consumers to keep in mind before responding to ads that promise easy credit, regardless of credit history:

• Beware of lenders who "guarantee" or say that you are likely to get a loan or credit card before you apply, especially if you have bad credit, no credit or a bankruptcy;

• If you don't have the credit offer in hand -- or confirmed in writing -- and a telemarketer asks you to pay up-front for a guaranteed loan or credit card, hang up. It's fraud and it's against the law.

Of the seven FTC cases, three were filed in federal district court alleging, among other things, that the defendants engaged in fraudulent advance fee loan scams. The FTC filed one of the three cases as a co-plaintiff with the Illinois Attorney General and received substantial assistance from the Postal Inspection Service. At the request of the FTC, and in one case, the FTC and the Illinois Attorney General, the federal district courts in all three cases have issued temporary restraining orders to halt the deceptive practices and freeze the defendants' assets pending trial. In the remaining four cases, four individuals doing business under four different company names have agreed to settle FTC allegations.

The FTC's Seattle Regional Office coordinated this project for the FTC.

The FTC votes to file the three federal district court complaints were 4-0. The FTC votes to file the complaint and proposed settlements in the remaining four cases were 4-0, with Commissioner Mary L. Azcuenaga not participating.

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 defendants have actually violated the law. The case will be decided by the court.

NOTE: Consent judgments are for settlement purposes only and do not constitute an admission by the defendant of a law violation. Consent judgments have the force of law when signed by the judge.

Copies of FTC brochures with the tips for avoiding advance-fee loan fraud, the complaints and settlements in the FTC cases, and the list of all cases brought as a part of this project, are available from the FTC's Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-3128; TTY for the hearing impaired 1-866-653-4261. To find out the latest FTC news as it is announced, call the FTC's NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC's World Wide Web Site at: http://www.ftc.gov