http://www.ftc.gov/opa/2006/12/globalmarketing.htm "For Release: December 20, 2006 FTC Stops Payment Processor Who Aided Cross-Border Telemarketing Fraud International Operation Tapped Bank Accounts for Advance-Fee Credit Card Schemes At the request of the Federal Trade Commission, a federal court has shut down a payment processing operation that allegedly helped fraudulent telemarketers take millions of dollars from consumersâ?? bank accounts. According to the FTCâ??s complaint, since at least January 2003 the operation has aided at least nine Canada-based, advance-fee credit card schemes that induce consumers to allow an electronic debit of several hundred dollars from their bank account in exchange for an unsecured credit card; but consumers never receive a credit card or, at best, they receive a â??benefits packageâ? containing relatively worthless items. The complaint alleges that the defendants debit funds from consumersâ?? bank accounts, deduct their processing fees from the gross proceeds, and forward the balance of the proceeds from the deceptive scheme to the telemarketers. According to the complaint, the defendants also provided customer service and complaint handling, order fulfillment, list brokering, and other services. The complaint alleges that the defendants process payments on behalf of clients whose sales scripts plainly indicate that they intend to violate the FTCâ??s Telemarketing Sales Rule (TSR) and industry rules that prohibit processing electronic banking transactions for outbound telemarketers; that they draft, edit, review, and approve sales scripts; and that they process transactions without first obtaining adequate information about the clients and their business practices, or when evidence demonstrates that illegal activity is contemplated or ongoing. According to the complaint, the defendants often receive complaints about their clients from consumers, law enforcement, and the Better Business Bureau concerning deceptive and abusive business practices, such as the failure to provide promised credit cards. They also receive such complaints while handling customer service for clients, including receiving and responding to consumer inquiries and refund requests. The complaint alleges that the defendants provide fulfillment services for telemarketers, such as sending consumers essentially worthless â??benefits packagesâ? instead of a promised credit card, and that they sell consumersâ?? personal and financial information, including names, addresses, and telephone numbers, to telemarketers who use this information to contact and defraud consumers. Alleging violations of the FTC Act and the TSR, the complaint names Ira Rubin of Tampa, Florida, and the businesses he controls: Global Marketing Group Inc., Global Business Solutions LLC, Globalpay Inc., Globalpay LLC, Globalpay BV, Synergy Consulting Services LLC, and First Processing Corporation. Rubinâ??s wife, Phoelicia Daniels, who allegedly has received funds and other property derived unlawfully from consumersâ?? payments, is a relief defendant. The court order, issued December 12, prohibits the defendants from processing payments for telemarketers and violating the TSR, either directly or indirectly, and from assisting anyone who falsely represents that consumers will, or are likely to receive, an unsecured credit card, and from assisting anyone who requests and/or receives advance payment for a loan, credit card, or extension of credit when the telemarketer has guaranteed or represented a likelihood of success in obtaining such results. The order also freezes the defendantsâ?? assets but allows the relief defendant up to $10,000 for personal expenses. The Commission voted 5-0 to authorize the filing of a complaint and an ex parte motion for a temporary restraining order with an asset freeze and appointment of a receiver, which were filed in the U.S. District Court for the Middle District of Florida, Tampa Division. ..."
Why does this matter, and what does it have to do with "debt collection"? Some "debts" that end up in the hands of debt collectors are not just "erroneous" but fundamentally fraudulent. Examples include advance fee loan scams, magazine subscription scams, phone bill "cramming", membership scams, office supply or directory scams, "free" no obligation offer scams, cancelled but "uncancelable" health club memberships, etc, where the "seller" intentionally misrepresented what they were selling or what a consumer had agreed to. Where the consumer can stop, block or reverse payment on discovering the fraudulent misrepresentation, the scammer requires a willing intermediary to assist them in obtaining payment. These schemes generally require the assistance of either a payment processor, a "lender" financing a yearly membership as monthly "loan payments", or a debt collector at some point in the process to extract payment or enforce the "contract" and collect. The companies that provide these services that are needed for these scams to continue often know what they are dealing with and that the underlying "debts" are often fraudulent. They none-the-less often take the position that since they are not the original seller, they are just collecting the amount the consumer "agreed" to, or they are collecting on the "loan", and have no responsibility for the fraudulent nature of the original bill. One of the "services" they are providing, on top of access to billing systems and a mechanism to transfer money from consumers, is a barrier to effective consumer disputes of the underlying fraudulent charges or bills, "laundering" the debt of the fraudulent acts that created it. In other words, regardless of what they call themselves, they are acting in the manner of "debt collectors". Examples include the phone billing consolidators who have a long history of cramming charges from shady clients. Many are under consent agreements to handle consumer disputes, yet still follow scripts intended to guide complaining consumers into agreeing to payment or partial payment even when they know a large number of bills from some of their clients are fraudulent. Those scripts are on their face violations of their consent agreements. The actual scamming companies often operate under many names, and play corporate shell games to limit regulatory visibility or legal prosecution. The billing and debt collection infrastructure willing to support such fraudulent activity is a necessary part of the profitable operation of such frauds. Both types of companies have shown that they are adept at finding financial system or regulatory loopholes (such as those created by cross-border jurisdictional issues, as above, or areas where regulatory responsibility is unclear) to exploit for fraudulent purposes. It is not effective to go after only the initial scammers, when the infrastructure that supports their activities remains intact. This is particularly so when the initial scammers, knowing their risk, take the usual actions to hide their identities and assets. Holding such support companies responsible, whether involved in the initial billing, or in the collection of an alleged debt based on fraud, when they knew or should have known from consumer complaints that the clients they front for are engaged in fraud, is essential to controlling the fraudulent activities of their clients, and the resulting losses to consumers. The willing actions of such companies are as criminal as the actions of their clients.
