"Triad" Defendant Settles Federal Charges

Richard Kaylor, an officer of Triad Discount Buying Service, Inc. and numerous related companies, has agreed to settle Federal Trade Commission charges that he misled consumers into accepting discount buying club memberships and deceptively obtained consumers' billing information through telemarketers without the consumers' knowledge or authorization. As part of the proposed settlement, Kaylor must post a $1 million bond before engaging in any telemarketing or any sales involving negative options, and must pay $137,500 for consumer redress. In addition, the proposed settlement would require Kaylor to obtain express, verifiable authorization for telemarketing and Internet sales and would prohibit him from sharing certain financial information about consumers with third parties unless he first obtains consumers' express consent to do so. A number of states, including Florida and Missouri, have agreed to settlements with Kaylor that incorporate many of the terms of the FTC settlement.

In October 2001, the FTC and numerous state Attorneys General filed complaints in federal and state courts against a group of buying clubs including Triad Discount Buying Service, Inc. of Boca Raton, Florida, its related companies, and their operator, Ira Smolev. The FTC complaint and some of the state complaints also named two officers, including Kaylor. In its complaint, the FTC charged the Triad companies with deceptively signing up buying club members through more than 100 telemarketers, deceptively obtaining consumers' credit card numbers through telemarketers without the consumers' knowledge or authorization, and placing unauthorized charges on those credit cards. According to the FTC, the defendants contracted with over 100 telemarketing firms selling their own products. After consumers called the telemarketers to order such products as kitchen gadgets or diet pills and provided their credit card information, the telemarketers pitched a 30 day "no obligation" free trial in Triad's buying club. The FTC alleged that if the consumers agreed to the free trial, and in some instances even if they did not agree, their names and credit card information were transferred to the Triad companies, which charged membership fees to the consumers' credit cards without their knowledge or authorization unless they had called to cancel. According to the FTC's complaint, Triad's scripts did not disclose or adequately disclose that the consumers' credit card numbers would be turned over to a third party, Triad, or that Triad would charge consumers if they did not cancel their membership within the 30 day period. The scripts also failed, according to the complaint, to disclose or to disclose adequately that in following years, consumers' credit cards would be charged annual renewal fees, unless consumers cancelled.

The settlement announced today resolves all charges against Richard Kaylor. The proposed settlement, which requires the court's approval, would prohibit Kaylor from engaging in the deceptive practices alleged in the original complaint. The proposed settlement would require Kaylor to provide adequate disclosure of material terms and obtain express, verifiable authorization for telemarketing and Internet sales, and would prohibit him from violating the FTC's Telemarketing Sales Rule. The proposed stipulated final judgment further would prohibit him from misrepresenting free offers of goods or services and failing to disclose any consumer obligations by accepting trial offers. In addition, Kaylor would be prohibited from sharing certain financial information about consumers with third parties unless he first obtains consumers' express authorization to do so. Further, the proposed settlement would require Kaylor to pay $137,500 to the FTC. Finally, the settlement contains various record keeping and reporting provisions to assist the FTC in monitoring Kaylor's compliance.

Ira Smolev and the Triad companies agreed to pay more than $9 million to settle charges brought by the FTC and the state Attorneys General. Under that agreement, approximately 275,000 consumers who filed complaints against the Triad companies nationwide may be eligible for partial membership refunds from a consumer restitution fund. Kaylor's payment will be added to the restitution fund.

The Commission vote to authorize staff to file the stipulated final judgment was 5-0. It was filed in the U.S. District Court for the Southern District of Florida, in Fort Lauderdale, on April 8, 2002.

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

Copies of the stipulated final judgment 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.