Attorney General Hardy Myers today announced that a group of discount buying clubs, mostly headquartered in Florida, will pay restitution to approximately 3,700 Oregon victims as part of a $9 million settlement with more than 40 other states and the Federal Trade Commission. The clubs were charged with enticing consumers into free, trial club memberships, obtaining personal billing information and then charging fees to their credit cards without their authorization.
Named in an Assurance of Voluntary Compliance are Triad Discount Buying Service, Inc. of Boca Raton, Florida, its related companies and its president, Ira Smolev. The agreement admits no law violation. Similar agreements are being filed this week by other attorneys general in state courts throughout the United States and the Federal Trade Commission filed its order Tuesday in the U.S. District Court, Southern District of Florida, West Palm Beach Division.
Other parties named in the court order include: Member Service of America, L.L.C., Orchid Associates, L.L.C., Premier Membership Services, L.L.C., Inter*Act Travel, Inc., Inter*Act Communications, Inc., Consumer Data Depot, L.L.C., ERevenue Partners, L.L.C., Far Services, L.L.C., Linden Investments, L.L.C., Lynstrom Information Service, L.L.C., Premier Club Services, L.L.C., Premier Marketing Services of America, L.L.C., Residents Resource Network, L.L.C., Revenue Solutions, L.L.C., Spanish River Investors, L.L.C., The Backend Company of America, Inc., The Shoppers Edge, L.L.C., Triad Marketing Group, Inc., and Tritell of Nevada, L.L.C.
"Thousands of Oregonians were misled into accepting free, trial buying club memberships and gave their private billing information to telemarketers," Myers said. "The information was unlawfully shared, resulting in unauthorized credit card charges."
The multi-state and federal actions resulted in the respondents paying $8.3 million in consumer restitution and $750,000 to cover state investigative costs. Oregon's share, in addition to the restitution, includes $20,000 to be paid into the Consumer Protection and Education Fund and $3,500 for costs related to some of the companies' bankruptcy litigation.
"With a nationwide increase in complaints against buying clubs, this joint effort between state and federal law enforcement sends a strong message that deception of any kind will not be tolerated in an honest marketplace," Myers said.
Both federal and state law enforcement alleged that the Triad companies used more than 100 contract telemarketers to deceptively sign up buying club members. The telemarketers generally advertised products such as kitchen gadgets and diet pills to consumers via outbound calls and through media advertising, direct mail, or catalogs that result in inbound calls. After consumers provided their credit card numbers to pay for the products being sold, the caller pitched a 30-day "no obligation" free trial in Triad's buying club. Once consumers agreed and in some instances, even when they did not agree, their names and credit card numbers were given to Triad companies. Within 45 days, the unauthorized membership fees of up to $96 were charged to the consumers' credit cards.
In the settlements, Smolev, as well as the Triad companies, some of which are currently in bankruptcy court, are required to drastically revise their marketing practices such as disclosing any consumer obligations when accepting free, trial offers. The respondents also are prohibited from obtaining from third parties consumers' personal billing information without authorization. They also must receive consumer permission to disseminate that information or to sign up new members or renew existing memberships.
Under the agreements, the companies will make restitution to consumers who previously requested refunds from the Triad companies or filed complaints with Justice. The amount of restitution will depend on the number of consumers responding to restitution notices. The respondents also agree to not violate the FTC's Telemarketing Sales Rule, the individual states' consumer protection laws, and must retain a third party monitor to oversee their future business operations and report to the FTC. In addition, Smolev is required to maintain a $l.5 million escrow account before he markets goods or services to the general public or assists others engaging in telemarketing.
Shopper Rewards.Com, Inc. of Bridgeport, Connecticut and its president Kathleen Murphy of Trumbull, Connecticut are named in a separate Assurance of Voluntary Compliance filed today in Marion County Circuit Court. The company allegedly used deceptive business practices, identical to Triad, while coercing Oregonians into using their credit cards to purchase products out of a catalog or from a television advertisement. In addition to the products, consumers unknowingly were automatically enrolled in a $96 Shoppers Rewards membership.
Under the agreement, which admits no law violation, the company is prohibited from further business activity in Oregon and must provide restitution to consumers and pay $500 to the Department of Justice consumer protection and education fund.
Attorney General Myers urges consumers when contemplating free trial offers to ask the seller the following questions:
What company is calling and who is making the offer. Are there multiple companies involved
Is there a membership fee If so, is it refundable
Will the seller automatically charge your credit card or some other account if you don't cancel within a certain period of time
How do I cancel (e.g., by phone, email or regular mail)
How do I stop getting additional merchandise or services
If I participate, are you going to sell or share my name and information with other companies
Consumers wanting additional information on free trial offers may call the Attorney General's consumer hotline at (503) 378-4320 (Salem area only), (503) 229-5576 (Portland area only) or toll-free at 1-877-877-9392. Justice is online at www.doj.state.or.us. Copies of consumer education materials on free trial offers are available from the Attorney General's office and on the FTC's web site at www.ftc.gov.