FTC settles prepaid card misrepresentation case
By Cara Henis | Published: August 30, 2009
A California debit card company that allegedly tricked thousands of customers into buying prepaid cards settled with the Federal Trade Commission on Aug. 20, according to an FTC press release.
Joshua Finer, owner of VirtualWorks -- also known as Virtual Works, EverPrivate Card and Secret Cash Card -- agreed to a $52,000 settlement for allegedly misrepresenting his product and its cost. Consumers, who thought they were either applying only for a payday loan or thought the prepaid card was free, were surprised when hit with a $54.95 prepaid card enrollment fee.
The cards were sold through payday loan marketer Swish Marketing Inc., which is also facing charges by the FTC. Customers seeking a loan filled out an online application and then pressed a "submit" button. At that time, advertisements for other products appeared. The customers could either select "yes," to buy the product or "no," to not purchase. All products were automatically set to "no," except for an ad for VirtualWorks prepaid cards. If the options went unnoticed and a customer quickly clicked "Finish matching me with a payday loan provider," then they were charged for the card.
In some cases, Swish and VirtualWorks were also accused of marketed the cards as a "bonus," implying that they were free for loan applicants. The enrollment fee was only revealed in fine print beneath the submit button, according to the FTC.
Both the marketing and the debit card company are believed to have worked together to create the offers. VirtualWorks supposedly paid Swish up to $15 per card "purchase."
The defendants are barred from misrepresenting their product and the products' costs in the future. All information on billing, amounts and methods of payment must be disclosed to consumers. The company and its principals are also obligated to monitor marketers to ensure that their product is fairly represented.
Swish Marketing, Mark Benning, the CEO, Matthew Patterson, the vice president of marketing, and Jason Strober, a partner, are also facing a suit for engaging in deceptive marketing practices.See related: FTC charges seven credit repair companies with deceit, 4 ways to opt out of credit card affiliate marketing, Prepaid card use rising as credit cards stutter
- Borrowing from friends and family: Your 6-step guide – If as a last resort you need to ask you family or friends for money there are way to make it more palatable for both of you ...
- Consumer protection bureau warns about pay-by-phone fees – The government's consumer watchdog issued a warning Monday that companies are charging pay-by-phone fees that can be unnecessary and misleading ...
- DIY credit card arbitration: You may be able to opt out – Consumers can preserve their right to go to court instead of private arbitration in many cases by going through and opt-out process ...