Photo (cc) by rejon
The Federal Trade Commission is mailing 10,387 checks averaging $92 each to consumers bilked of nearly $10 million in a telemarketing scam promising reductions in credit card interest rates.
The checks total less than $1 million.
The FTC sued Innovative Wealth Builders (IWB), a telemarketing operation that falsely promised consumers it could save them thousands of dollars on their debts. The FTC alleged that the telemarketer made false claims to consumers about their reduction services and refund policies and billed consumers without their consent.
IWB charged consumers $500 to $2,000 with the promise that all fees would be returned to consumers if IWB failed to meet its promises. They weren’t, the FTC said.
IWB’s business was halted in January 2013 by a federal court order.
For most of the time that IWB operated its scam, it relied on IRN Payment Systems as its credit card payment processor. The FTC last year also went after IRN, alleging the company knew, or consciously avoided knowing, about IWB’s illegal conduct and continued profiting from it. Among the many indicators of illegal conduct that IRN allegedly ignored were IWB’s “alarmingly high chargeback rates.”
A chargeback occurs when a consumer disputes a charge to a credit card and the charge is reversed. The average chargeback rate in the United States is well below 1 percent, meaning fewer than 1 in 100 credit card transactions is reversed as a result of a chargeback, the FTC said. IWB’s chargeback rate averaged above 20 percent for several years and exceeded 40 percent in multiple months, the FTC charged.
IRN agreed to pay the FTC $400,000, plus waive any claims to $700,000 in IWB’s merchant reserve account. Additionally, IRN said, it adopted industry-leading merchant screening and monitoring practices as well.
“From the outset, we have cooperated with the FTC’s investigation of IWB and we are very pleased to bring this matter to a close,” Amedeo Sgueglia, IRN’s president, said in announcing the settlement. “The lesson for us, and for all payment processors, is that there are unscrupulous merchants out there and we must be ever-vigilant to protect ourselves as well as the consuming public.”
What’s your opinion of the penalty imposed by the FTC? Does it fit the crime? Share with us in comments below or on our Facebook page.
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