UPDATE - FTC Nixes Telemarketers Offering Y2K Credit Card Insurance

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FTC Nixes Telemarketers Offering Y2K Credit Card Insurance

By Brian Krebs, Newsbytes June 21, 2000

The Federal Trade Commission (FTC) Tuesday said it had shut down a pair of telemarketing companies accused of fraudulently peddling insurance that would guard against possible loss of credit card data caused by the Y2K bug.

With the help of attorneys general in Oklahoma and Toronto, the FTC obtained judgments against two companies accused of telling consumers that the Y2K bug could affect computers files at credit card companies and that "additional protection" was advisable. According to the FTC, most consumers contacted by the telemarketing companies did not order the "protection," but those that did were charged up to $199 and received little of value in return. The FTC also said some customers who declined coverage were billed anyway.

The FTC went after the companies as part of its Y2K Fraud Project, a task force that led to similar actions against a number of companies late last year.

Jodie Bernstein, director of the FTC's Bureau of Consumer Protection, said the commission has focused its attention on such credit card insurance scams of late, particularly because of consumer protection laws that make most credit card protection plans obsolete.

"Consumers are not liable for any unauthorized charges over $50, and with many card companies even waiving the $50, it's an idea whose time has come and gone," Bernstein said. "These scam artists used a Y2K spin to scare unsuspecting consumers, and now it's their turn to pay."

The FTC charged Oklahoma-based Universal Marketing Services, Inc., Brett Wimberley, and United Marketing Group, Ltd. and Louie Paulozza with violating the FTC Act and Telemarketing Sales Rule.

The commission said that between December 1997 and November 1999, the two companies told customers that their credit card numbers could be accessible through computer fraud, the defendants said that their service would cover losses from any unauthorized charges. In addition, they claimed that their protection plan would protect accounts from other Y2K-related problems.

As part of the settlement, the FTC obtained a consent decree that permanently bans the companies from all telemarketing operations. In addition, UMG and Paulozza agreed to pay $45,000 in fines.

For a copy of the FTC's consent decree, visit http://www.ftc.gov

Reported by Newsbytes, http://www.newsbytes


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