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FTC cracks down on
firms offering
unneeded credit card 'protection'
By Lucy
Lazarony • Bankrate.com
 Some
national companies are trying to trick consumers into buying credit
card protection that they don't need. And the Federal Trade Commission
is cracking down.
The FTC filed
complaints against three national companies on Tuesday. Six
state attorneys general in Illinois, Ohio, Arizona, Florida, West
Virginia and Wisconsin have also filed complaints against companies
allegedly involved in fraudulently telemarketing credit card protection
services.
Customers
told lies
According to the FTC, the companies misrepresented their identities
to consumers, misled consumers by telling them that they were not
protected against credit card fraud and claimed that if consumers
did not purchase their services they could be held fully liable
for all unauthorized charges made with their cards.
Under federal law, consumer liability for unauthorized
use of credit cards is capped at $50. Many major credit card companies
waive this fee, especially when consumers report the loss quickly.
"These companies took advantage of students,
seniors and others scared into thinking they were vulnerable," says
Jodie Berstein, director of the FTC's Bureau of Consumer Protection.
The FTC filed actions against three Arizona
companies -- Source One Publications Inc. and Liberty Direct Inc.,
and an associated company, The Ascendix Group Inc. -- and announced
a settlement with a Canadian company, Credit Mart Financial Strategies
Inc. Corporate officers of each company were also charged. The FTC
accused them of violating the Federal Trade Commission Act and the
FTC's Telemarketing Sales Rules Act.
The FTC is seeking preliminary injunctions and
permanent relief from the Arizona companies. The agency and Credit
Mart have reached a settlement that includes a $100,000 "consumer
redress" payment.
Hacker
and Y2K fears exploited
Tom Syta, assistant regional director of the western region
of the FTC, said many of the cons played on people's fears associated
with computer hackers on the Internet and the Y2K bug.
"Just scare tactics in general. Whatever people
fall for, they'll throw out there," Syta says. "Even if hackers
did get your number, even if a Y2K bug did make everyone's credit
card number accessible, unauthorized charges -- $50 limit."
Some telemarketers also used high-pressure sales
tactics, insisting if consumers didn't sign on for the protection
now, they wouldn't be able to later.
"'Make this decision right now or it's going
to go away forever' is almost a dead bang giveaway that it's a scam,"
Syta says.
In all, the FTC said, consumers spend millions
for "protection" they didn't need.
In addition to the crackdown on telemarketing
companies, the FTC has also launched a consumer education push.
Tips and brochures are available online
and by calling 1-877-FTC-HELP.
-- Posted: Sept. 14, 1999
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