"Miss Cleo" Promoters to Forgive Approximately $500 Million In Outstanding Consumer Charges and Pay an Additional $5 Million to Settle FTC Charges

In a landmark settlement, Access Resource Services, Inc. (ARS) and Psychic Readers Network, Inc. (PRN) have agreed to a stipulated court order stopping all collection efforts on accounts or claims from consumers who purchased or purportedly purchased their pay-per-call or audiotext services and forgiving an estimated $500 million in outstanding consumer charges as part of a settlement with the Federal Trade Commission. The Florida-based companies and their officers operated a massive 900 number scheme known to the public as the "Miss Cleo" psychic lines. The FTC alleged that the defendants engaged in deceptive advertising, billing, and collection practices. The settlement also requires the defendants to pay $5 million to the FTC.

"The lesson in this case is that companies that make a promise in an ad need to deliver on it - whether it's about availability, performance, or cost," said J. Howard Beales III, Director of the FTC's Bureau of Consumer Protection. "I'm no psychic, but I can foresee this: If you make deceptive claims, there is an FTC action in your future."

The FTC filed a complaint in federal district in February of this year against ARS, PRN, and their officers, Steven L. Feder and Peter Stolz. The FTC alleged that the defendants engaged in deceptive advertising, billing, and collection practices. Specifically, the complaint alleged that the defendants misrepresented that consumers:

• would receive psychic reading at no charge;
• did not incur costs when they remain on the telephone with the psychic readers; and
• were obligated to pay charges for calls made to the defendants' audiotext numbers that consumers were not obligated to pay.

In addition, the complaint alleged that the defendants repeatedly called consumers without providing them a reasonable method for stopping the calls. The complaint also alleged that the defendants violated the Pay-Per-Call Rule by failing to disclose the cost of the calls in their ads for the psychic services and by threatening consumers with adverse credit reports before conducting reasonable investigations of the bill error notices from consumers.

The settlement prohibits the defendants from misrepresenting any material fact in connection with the sale of any pay-per-call or audiotext services; permanently bans them from calling consumers to solicit the use of any of the defendants' services without providing consumers with a reasonable method to cause the defendants to stop making such calls; and prohibits them from violating any part of the Pay-Per-Call Rule.

The final order requires ARS and PRN to cease all pay-per-call activity; to monitor compliance with the Order by their employees, agents, and independent contractors; and to investigate and resolve promptly any consumer complaint they receive.

The order further requires the defendants to stop collection on and forgive an estimated $500 million in outstanding consumer charges. The order also requires, within 20 days of its entry by the court, that the defendants return to consumers all uncashed checks and include with each check a notice stating: (1) the defendants are returning checks as part of a settlement with the FTC, and (2) the defendants are rescinding all related contracts, agreements, and understandings with consumers.

The FTC brought this action with the valuable support of, and in coordination with, the offices of numerous State Attorneys General. States providing assistance to the FTC in this case were Arkansas, California, Connecticut, Florida, Illinois, Indiana, Kansas, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nevada, New Hampshire, New Jersey, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, Rhode Island, Tennessee, and Wisconsin.

The Commission vote authorizing staff to file a stipulated final judgment and order was 5-0. The Commission filed its action in the U.S. District Court for the Southern District of Florida, in Miami, on October 30, 2002. The Honorable Judge Alan Gold approved the order on November 4, 2002.

Copies of the stipulated final judgment and 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 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.