The Federal Trade Commission announced today it has shut down five companies involved in deceptive, illegal “robocalls” to credit card customers. The companies, based in Florida and Arizona, are responsible for millions of calls from “Rachel” or “Cardholder Services,” and allegedly conned consumers into paying hundreds or thousands of dollars in upfront fees by making fraudulent claims they could reduce credit card interest rates.
“At the FTC, Rachel from Cardholder Services is public enemy number one,” FTC Chairman Jon Leibowitz said. “We’re cracking down on illegal robocalls by bringing law enforcement actions and pursuing technical solutions to the problem.”
According to the FTC, it receives more than 200,000 complaints each month concerning telemarketing robocalls, including those from “Rachel,” or someone else from “Cardholder Services,” which offer consumers savings through reduced credit card interest rates. The calls advise the consumer to stand by or “press 1” for an “important message” regarding an opportunity to lower credit card interest rates. Consumers who do so are transferred to live telemarketers who pitch deceptive offers to substantially lower interest rates, promising the consumer thousands of dollars in interest savings. In some cases, according to the FTC, the telemarketers claim to be calling from the consumer’s credit card company, while others simply use the misnomer “Cardholder Services,” to imply a relationship with the consumer’s bank.
Once the telemarketer has hooked a customer with the misleading pitch, they generally ask for the consumer’s financial information in order to perform an “audit” and determine what offers are available. But, according to the FTC, the audit is generally nothing more than the telemarketer checking if the consumer has enough available credit to pay the company’s service fee.
Once the telemarketer has “approved” consumers, they usually—although not always—inform them of the up-front fee, which can range from a few hundred to almost $3,000. The caller often tells the consumer the interest savings will more than offset the service fee. The FTC alleges in some cases consumers were billed the fee even when they did not authorize the service. In other cases, the fee was never disclosed.
Once a consumer agrees to the telemarketer’s service, all the company generally does it conduct a three-way call with the consumer’s bank and verbally request a rate reduction, which is usually declined by the credit card company—an action the consumer could certainly have initiated without assistance. In other cases, the telemarketer takes the consumer’s information and applies for a new credit card with a low short-term interest rate. According to the FTC, in such cases the consumer often is unable to transfer balances to this new card which often has a low credit limit.
Today’s complaints were issued against the following companies: Treasure Your Success, Ambrosia Web Design, A+ Financial Center, LLC, The Green Savers and Key Once Solutions, LLC. The complaints assert the companies violated the FTC Act by misrepresenting consumers who bought their services would both have their credit card interest rates substantially reduced, as well as save thousands of dollars as a result of the reduced rates. Four of the five complaints also asserted the companies violated the FTC Act by making other misrepresentations, such as claiming consumers who purchased their services will be able to pay off their debts faster because of lower interest rates, as well as making false claims about refund policies.
The defendants are also charged with violating the Telemarketing Sales Rule by misrepresenting their services, and for calling numbers on the Do Not Call Registry, as well as collecting up-front fees. The defendants are also charged with violating the TSR by making illegal robocalls.
The FTC has pulled the plug on companies responsible for about 2.6 billion robocalls since they were outlawed in 2009, but the agency says that is only a drop in the bucket. Much of the “phone spam” cannot be traced because the calls are routed through a complex web of automatic dialers, falsified caller ID and voice-over Internet protocols.
In fact, at its October Robocall Summit, the FTC challenged the public to invent a solution to block the illegal robocalls. Any person who can create a method of blocking robocalls on landlines as well as mobile phones could win $50,000. The solution can be a proprietary or non-proprietary device or platform, and can be proposed as a technical solution or functional solution. Currently, the FTC says about 59 percent of robocalls cannot be blocked or traced.