The Federal Trade Commission said Wednesday that a federal judge had restrained the marketing activities and frozen the assets of several prepaid-card companies and individuals that the agency has accused of engaging in unauthorized bank account debiting, improper disclosures, and misrepresentation of terms.
The FTC has charged that, through their prepaid card programs, the defendants debited, without authorization, a $159.95 "application and processing" fee from customers' bank accounts.
Some of the account owners either had had no contact with the defendants or had applied for an unrelated short-term loan, the FTC said.
The agency said that at a hearing it will seek to permanently bar the defendants from marketing and selling their prepaid products and force them to forfeit their gains.
The FTC alleges that the defendants marketed Visa- and MasterCard-branded stored-value cards through Web sites and pop-up and e-mail advertisements that directed people to www.SuperAutoSource.com, www.SuperCashSource.com, and www.FastCashUSA.com to sign up for Acclaim Visa, Impact Visa, Sterling Visa, VIP Advantage Visa, Vue Visa, Elite Plus MasterCard, Impact MasterCard, Secure Deposit MasterCard, VIP MasterCard, and Vue MasterCard products.
People who visited the defendants' prepaid card Web sites were instructed to provide personal identity data — including their bank account information — in order to apply for a card, the FTC said.
It also alleged that the defendants made deceptive claims on their Web sites, such as "no annual fees" and "no security deposit," without disclosing clearly and prominently that they would use the consumers' personal information to debit the $159.95 fee.
Account holders usually discovered the unauthorized debits when they reviewed their bank account statements or when banks notified them of penalty fees or overdraft charges due to insufficient funds, the FTC said.
The defendants are California-based Edebit LLC, EDP Reporting LLC, EDP Technologies Corp., Secure Deposit Card Inc., Dale Paul Cleveland, and William Richard Wilson. Judge Otis D. Wright 2nd in U.S. District Court for the Central District of California issued the restraining order last month.
