The Federal Trade Commission has charged two men and their companies with billing consumers without their consent, and not providing promised refunds, in violation of federal law.
Michael Bruce Moneymaker, Daniel De La Cruz, and their companies obtained consumers’ personal information from Web sites that claimed to match consumers with payday lenders, and then enrolled consumers, without their knowledge, in one or more of several worthless “continuity” programs, according to the FTC's complaint.
These programs included an upfront cost of up to $49.99 each, plus weekly or monthly recurring fees of up to $19.98. Continuity programs charge recurring fees until a consumer takes affirmative action to cancel.
At the FTC’s request, a federal court temporarily halted the defendants’ deceptive practices pending further proceedings, froze their assets and appointed a receiver to take control of the business.
The complaint names Moneymaker, Mike Smith, Michael Bruce Millerd, Fortress Secured, De La Cruz, Belfort Capital Ventures Inc., Dynamic Online Solutions LLC, HSC Labs Inc., Red Dust Studios Inc. and Seaside Ventures Trust.
The complaint alleges that after consumers submitted their personal information online, they encountered a pop-up box [titled “Terms and Conditions”] that appeared to be a part of their payday loan application. This pop-up box asked consumers to provide an authorization but made no mention of the defendants or their continuity programs.
In many cases, consumers believed the pop-up box was part of their payday loan application and provided the requested authorization.
The FTC alleges that the defendants used consumers’ bank account information, obtained through their payday loan applications, to create and deposit “remotely created checks” to pay for the continuity programs.
Consumers learned of their enrollment in the defendants’ continuity programs only when they checked their bank account, or when their bank accounts were overdrawn because of the defendants’ unauthorized debits.
Often, when consumers called the defendants’ customer service numbers to cancel or seek a refund, no one would answer the line, the line would go dead or the consumer would be put on hold for an extended period of time. If consumers reached someone in the defendants’ call center, the defendants’ employees attempted to dissuade them from demanding their money back.
The defendants’ call center employees allegedly told consumers they authorized the charges as part of a payday loan application and that they were being charged for a third-party offer with benefits including a free stored-value Visa card, free voicemail, free airline tickets and a $10,000 secured credit line.
Call center employees also promised consumers refunds that consumers never received. In some instances, consumers who had been enrolled in multiple programs were told they had to call separate numbers to discuss each one, even though the call center handled calls for all of the defendants’ programs.
The defendants allegedly told call center employees to limit the number of refunds offered and evaluated employees’ performance based on their ability to keep the refund rate as low as possible.
The defendants’ employees often refused refund requests, gave refunds only to the most persistent consumers, or falsely promised refunds until consumers stopped calling. Some consumers were told, falsely, that a manager would call them or their calls would be returned.
The FTC specifically charges that the defendants violated the FTC Act by:
* obtaining consumers’ bank account information and debiting their accounts without their express informed consent;
* falsely representing that consumers’ authorizations were part of their payday loan applications;
* failing to clearly and conspicuously disclose that consumers would be charged for third-party trial offers automatically extended to them;
* falsely telling consumers that they were not entitled to refunds because they agreed to enroll in the defendants’ programs and pay for them, and had agreed that they could get a refund only if they asked during the initial trial period; and
* falsely promising refunds to consumers and not providing the refunds.