Canadian Operation That Charges U.S. Consumers Without Authorization Challenged by the FTC

The Federal Trade Commission has asked a federal court to bring an end to the practices of a Canadian enterprise that charges consumers' credit cards and debits their bank accounts without authorization. According to the FTC, the defendants allegedly initially sold phony credit card loss protection and then moved into selling discount medical cards. The defendants are located in Canada, but all the victims are in the United States. Although the defendants allegedly used a variety of business names, the most common are National Credit Card Security (or NCCS), Med Plan, and Global Discount Healthcare Benefits. The FTC alleges that all of these operations have concentrated on obtaining consumers' credit card numbers or checking account numbers and then billing the consumers whether they wanted the services or not. In some cases, the FTC alleges the defendants charged consumers when they never dealt with the defendants at all. The complaint alleges that these practices violate both the FTC Act and the Telemarketing Sales Rule (TSR). The FTC has asked the court to temporarily halt the defendants' operation and to freeze their assets.

According to the FTC, several years ago the defendants allegedly sold worthless credit card loss protection services to consumers throughout the U.S. The defendants allegedly told consumers that they were calling from, or were affiliated with, legitimate credit card companies and that the consumer needed to purchase the defendants' credit card protection service in case their credit cards were stolen or used without authorization. The defendants charged consumers approximately $249 for their credit card protection service. The FTC alleges that the defendants had no connection to credit card issuers at all. According to the FTC, consumers do not need to purchase credit card protection because, under federal consumer law, a consumer cannot be held liable for more than $50 for any unauthorized charges on a credit card account and, in practice, the credit card companies do not impose any charges on consumers in these circumstances.

In 2001, according to FTC allegations, the defendants switched to promoting a healthcare discount plan that consisted of an annual membership and a "benefit card" that purportedly entitles purchasers to substantial discounts. The defendants allegedly sold the health plan to U.S. consumers, primarily the elderly, under the names Med Plan and, later, Global Discount. The defendants allegedly told consumers at the outset that their offer was only available to consumers with a valid checking account, and asked consumers to read back their account number from a check to prove that they had a checking account. In most instances, the FTC alleges that the defendants immediately charged consumers' accounts for $349 allegedly even when consumers told the defendants that they had no interest in making a purchase. The defendants allegedly told other consumers that they would have a "trial period" of up to 35 days before the defendants charged the card. The defendants also allegedly told consumers that they could receive refunds if they were not satisfied. The FTC alleges that the defendants immediately billed most or all consumers, and consumers obtained refunds only when they complained to a law enforcement agency or the Better Business Bureau.

In addition to contesting various false claims and unauthorized billing, the complaint alleges that the defendants violated the TSR by submitting checks drawn on consumers' checking accounts for payment without the consumers' express verifiable authorization.

The FTC's complaint names: STF Group Inc.; STF Group; STF Group (Burlington); STF Group (Newmarket); Start to Finish Consulting Group, Inc.; Start to Finish Consulting Group; Start to Finish Marketing, Inc.; 1363883 Ontario Limited, d/b/a STF Consolidated; Q-Prompt Inc.; 487948 Ontario Limited; 1363942 Ontario Limited, d/b/a National Credit Card Security Centre; Korn Land Corporation, d/b/a National Credit Card Security; Med Plan, Inc., d/b/a First Med, Inc.; Medical Discount Inc.; Medplan Burlington; Medplan Mississauga; Medplan Newmarket; Medplan North York; Medplan Scollard; Chembe Management, Inc., d/b/a Medplan Scarborough; Great Sailing Management Inc.; Thunderchild Consulting Inc.; SMAKK Consulting Inc.; GTCQ, Inc.; Global Discount Healthcare Benefits, d/b/a Global Discount Healthcare Benefits, Inc. and First Med, Inc.; 1108114 Ontario Inc.; 1349927 Ontario Inc.; Alex Korn; Allan Shiell; Sean Zaichick; Julian Shiell; Chris Quilliam; and Nicholas Bridges.

The FTC investigated this case in conjunction with the Toronto Strategic Partnership, a cross-border fraud law enforcement partnership which, in addition to the FTC, includes the Anti-Rackets Section of the Ontario Provincial Police; the Toronto Police Service Fraud Squad; the Ontario Ministry of Consumer and Business Services; Canada's Competition Bureau; and the United States Postal Inspection Service.

The FTC received invaluable assistance on this case from the New York Attorney General's Office, the Missouri Attorney General's Office, the Wisconsin Department of Agriculture, Trade and Consumer Protection, the Better Business Bureau, and other law enforcement and consumer protection offices around the country.

The Commission vote to authorize staff to file the complaint in federal district court was 5-0. The complaint was filed in the U.S. District Court for the Northern District of Illinois, Eastern Division, on February 10, 2003. The court issued a temporary restraining order with asset freeze and other equitable relief on February 12, 2003.

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.

(FTC File No. 022-3228)
(Civil Action No. 03 C 0977)