FTC cracks down on 'robocall' scams
False promises of lowered credit card APRs empty consumers' wallets of millions
The walking dead are fictional, but getting calls from the nonliving is all too real. Zombie-like voices are coming over the phone in hoards -- and when they're offering to slash your credit card interest rate, there's reason to be afraid.
The Federal Trade Commission (FTC) on Thursday announced an escalated crackdown on a surge of illegal robocalling that is being used to make false pitches for financial help. For example, some of the pitches promise to cut your credit card's annual percentage rate to 6.9 percent or even to zero, but the companies charge high fees while doing little or nothing to help consumers.
"Companies offered to drastically reduce the interest rate you pay on credit card debt," said Charles Harwood, FTC deputy consumer protection director. "Such promised relief unfortunately came at a price - the companies charged up-front fees of several hundred dollars or as much as $3,000."
The agency announced it obtained court injunctions against five companies, two in Arizona and three in Florida, and is pursuing others. He estimated that these particular companies were able to collect about $30 million from some 30,000 victims over an approximately two-year period, but the overall size of the scam is more than $100 million.
Robocall complaints soar
Robocalls for other than information purposes -- such as saying that your airline flight has been canceled -- are generally illegal, yet complaints about them are on the rise. The FTC received 201,699 complaints in September, up from 149,363 nearly a year earlier in October 2011. According to the FTC's National Do Not Call Registry Data Book for 2012, robocall complaints also account for a growing share of total telemarketing complaints.
Ed Mierzwinski, consumer program director at U.S. PIRG, characterized the card rate reduction ploy as an example of a "last-dollar" scam, designed to drain resources from people who are already in a financial bind. The slow, post-recession economy has swelled the ranks of consumers seeking to dig out from debt, creating opportunities for such schemes. Although the FTC's court actions won't stop the practices, the crackdown should send a message to other rate-reduction companies and influence them to at least rein in their activity, he added.
|Steps to take to stop robocalls|
Recorded voice messages used in financial schemes often play on consumers' fears of problems with their account, and their hopes for a way out of debt problems. Here are steps to defend against becoming a victim:
"You're taking advantage of people who are already worried about their finances," he said. The widespread ploys have reached Mierzwinski's own phone line, he said, recounting a robocall he received that implied it came from his bank or card company. " 'There's nothing wrong with your account, but please press 1 now to lower your interest rate,' " the recorded voice told him.
Billions of calls made to consumers
According to the FTC, companies use similar or even identical telephone pitches provided by calling services to reach debt-burdened consumers. One robocall service provider called Asia Pacific, the subject of an earlier FTC court action, had placed 2.6 billion calls during an 18 month period.
During Thursday's press conference in Chicago, Harwood played a message from a recorded voice of "Rachel" from "Card Services" warning recipients that they need to take urgent action on their credit card account. The consumer is instructed to press "1" to speak to a live representative.
Alyce Weisbach of Skokie, Ill., who participated in the press conference, was one of those drawn in. The 84-year-old received a call back in October of 2011 from a company called The Green Savers, and she was enticed to speak to a live agent.
"He kept promising Green Savers would lower my credit card debt," Weisbach said. Wanting to reduce the bite that credit card payments took out of her budget, she eventually provided her financial details, including her Social Security number and her mother's maiden name. Later she saw that the company had charged her $1,890 for services on her credit card, but its promises of rate relief did not pan out.
Usually such robocall artists, if they do any work for the customer, make a request to the credit card company to reduce rates, or help file an application for a lower-rate card, steps that consumers could easily take themselves, Harwood said.
Although courts have granted injunctions against the five companies targeted by the FTC, Harwood said other companies are actively using similar pitches and tactics. So it falls to consumers to be their own first line of defense against robocall financial services pitches.
"In some cases, scammers may give money back if they they get enough pressure from authorities," Harwood said. Weisbach, for example, was able to obtain a refund by pressing her complaint against the company.
It would be a mistake to hope for recovery through a federal crackdown. Steven Baker, director of the FTC's Midwest region, was unwilling to estimate how much the agency will recover from the five companies announced Thursday. "The question is, how much money there is left," he said. "It's not unusual for people in these cases to spend money as fast as they can."
In addition to The Green Savers, the companies targeted by the FTC's court actions were Treasure Your Success, Ambrosia Web Design, A+ Financial Center and Key One Solutions. The FTC led the action with assistance from state authorities in Florida, Arizona and Arkansas.
On Dec. 12, the Federal Trade Commission announced a court action against another telemarketer, National Card Monitor. A federal court in Arizona shut the company's doors pending a trial, the FTC said. National Card Monitor promised clients that it would obtain zero-interest balance-transfer cards for fees typically ranging from $499 to $599, and offered a 100 percent guarantee. But after paying the fee, clients usually failed to get their cards, the FTC said in a news release, and found that their chances of getting their money back were closer to zero than 100 percent.
On Dec. 13, the FTC said it had shuttered a Florida company known as The Debt School and Financial Freedom Credit Counseling which posed as a credit counselor but collected illegal up-front fees of $250 to $400 then failed to provide services. The agency's temporary injunction named parent company Southeast Trust and principal Paul A. Wexler, and froze their assets. The operation took in at least $11.8 million since 2008, according to the FTC.
Since revisions to consumer protections in 2009, most telemarketing robocalls have been illegal. Under the Telemarketing Sales Rule, most businesses are supposed to obtain your permission -- in writing -- before bombarding you with robocalls, which are referred to as recorded message calls. The beginning of the call is supposed to include instructions on how to stop future calls using your keypad or by just saying specific words into the phone. Exemptions exist for informational messages, such as a warning from your airline saying your flight is delayed. Also permitted are calls from debt collectors, telephone companies and charities, among others.
UPDATE: The Federal Trade Commission announced July 12, 2013, that it has settled charges with A+ Financial Center LLC and its principals of running a robocall scam that promised to cut victims' credit card rates. The court order imposes a $9.2 million judgment on the defendants unless they hand over all their assets over $25,000, including a 2007 Mercedes Benz CL and two boats valued at a combined $62,000. The agency said the company charged as much as $1,595 in upfront fees for cutting consumers' credit card interest rates, then did little or nothing to deliver the promised savings. A+ and its leaders are barred from selling unsecured debt relief services, among other prohibitions. The court papers name Christopher and Dana Miano as well as A+ and affiliate Accelerated Accounting Services LLC.See related: Debt collectors seek right to 'robocall' cellphones, How to stop debt collection robocalls, I got one of those lower-your-credit-card-interest-rate robocalls
- 7 easy ways to protect your credit while holiday shopping – Fraudsters may be more likely to strike during the holiday season when consumer spending is high, so vigilance is especially important from November to January. ...
- Consumer protection chief resigns, Trump to pick successor – Richard Cordray, founding director of the Consumer Financial Protection Bureau, just announced his departure; will be replaced by President Trump ...
- CFPB sues country's largest debt settlement company – Federal consumer watchdog accuses Freedom Debt Relief of misleading customers, collecting unearned fees ...