From the FTC files, reasons to be wary


Published: Monday, January 23, 2006 at 6:01 a.m.
Last Modified: Sunday, January 22, 2006 at 9:17 p.m.
Before the New Year starts feeling old, let's take this opportunity for one of our periodic roundups of law enforcement actions by the Federal Trade Commission against the Dark Side of the American marketplace - scammers, con artists and thieves - and against some legitimate businesses that messed up, made bad decisions or tried to slip a fast one past the public.
The FTC rarely tackles individual consumer complaints - you know that. It received more than 635,000 consumer complaints in 2004 (latest figure available), so you can't really blame it for focusing on big-money cases and trying to identify trends in fraud and unfair practices affecting many consumers. But by reviewing its latest cases, such as these from late 2005 and the first days of 2006, consumers can get a clue about the kinds of deceptive ploys currently testing Americans.
  • Hello? DNC? Everybody knows that if you register your phone number with the National Do Not Call Registry, telemarketers (with a few exceptions) are forbidden from calling you with their annoying sales pitches, right? Well, not everybody, apparently.
    The Nevada bed company FMFG Inc. made 900,000 or more unlawful telemarketing calls over the past two years to consumers on the registry, according to the FTC. Early this month, the commission had the Justice Department file a complaint against FMFG, which also sells beds as American Adjustable Beds, Tranquility Adjustable Beds and California Sleep Research, for allegedly calling consumers under the guise of polling them about their sleeping habits. Before the calls ended, FMFG's telemarketers pulled out the old sales pitch. Genuine survey calls are exempt from the registry; fake surveys aren't.
    And this just three weeks after DirecTV agreed to pay $5,335,000 to settle charges that the satellite-TV company and telemarketers calling on its behalf had broken FTC rules over the past two years by cold-calling consumers listed on the registry.
  • Beware spyware: You know those online pop-ups, banner ads and e-mails promoting anti-spyware programs that scan your computer for free in search of spyware? The FTC recently charged that two companies, MaxTheater Inc., which sells Spyware Assassin, and Trustsoft Inc., which sells SpyKiller, alerted consumers that their computers were infected with spyware when there wasn't any or when the computer hadn't been scanned. Then, they allegedly sold consumers software or spyware-removal services that didn't work as promised. The companies are paying nearly $2 million to settle the charges.
  • A bitter pill: The FTC charged one of the largest U.S. direct-mail marketers of health-related products, A. Glenn Braswell, with making "false and unsubstantiated claims" for several dietary supplements. As advertised in the Journal of Longevity, a direct-mail ad posing as a health information magazine, and in other direct-mail promotions, Braswell targeted elderly consumers with misleading claims that Lung Support Formula, AntiBetic Pancreas Tonic, Gero Vita G.H.3, ChitoPlex and Testerex were scientific or medical "breakthroughs" that would cure, prevent or treat illnesses such as Alzheimer's disease, diabetes and emphysema. Braswell, whom the FTC nabbed in 1983 for marketing products to combat baldness and cellulite, is settling the latest charges: He is banned from most direct-response marketing and will pay $1 million and hand over $3.5 million in assets to the feds.
  • If the shoe fits.... DSW Inc., a shoe discounter based in Columbus, Ohio, with 190 stores in 34 states, is settling FTC charges that it failed to take reasonable security measures to protect sensitive customer data. The FTC said DSW's security lapses - including storing multiple files of sensitive information that was no longer needed, failing to limit access to its computer networks using available security technology, failing to encrypt files, and failing to use measures to detect unauthorized access - allowed hackers to access the sensitive credit card, debit card and checking-account data of more than 1.4 million customers in March. The settlement requires DSW to clean up its security program with new safeguards and submit to a security program audit every two years for the next 20 years.
  • Easy money: Internet companies Wealth Systems Inc. and Ecommerce Network.com LLC operated an illegal work-at-home scheme that enticed consumers to pay $300 to $1,400 or more for materials to learn how to become "Web brokers" and earn $20,000 to $50,000 "next year," according to the FTC. But once consumers bought the "Web Broker Package," the commission says, coaches from the two companies used high-pressure tactics to persuade them to buy advertising services for as much as tens of thousands of dollars - bilking consumers of $15 million. Few, if any, of the buyers made any money, and few received refunds. The settlement requires the companies to pay redress of $80,000, suspending the remainder of money that was scammed due to insufficient funds.
  • Going postal: FTC charges allege that Success Express Inc. (doing business under more than a dozen company names) ran official-looking classified ads nationwide in employment guides and newspapers promising U.S. Post Office jobs to consumers who paid $129 to $139 for its study course. The defendants, the FTC says, misled consumers to believe they were connected with or endorsed by the USPS and were hiring for postal positions paying $16.20 to $39 an hour, and made false promises that there were postal service jobs open in the consumer's geographical areas.
  • No account: A group of U.S. and Canadian telemarketers using fictitious business names, including "Royal Credit Solutions," "Imperial Consumer Services" and "Beneficial Client Care," is settling FTC charges that its solicitors scammed more $9 million by offering consumers with poor credit major credit cards with a $2,500 limit for an advance fee of $197 to $300. Implying in calls that they had the ability to issue credit cards, the telemarketers also said they were calling to verify the consumers' information and requested bank account numbers and the account holder's name, as well as personal ID information such as birth date, mother's maiden name and Social Security number. Consumers who paid the fees never received credit cards. To settle the charges, the defendants are banned from credit-related telemarketing and will pay $415,000 in consumer redress.
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