No, says the FTC, these two defendants started up again almost immediately with a company called Membership Services, LLC. This time, authorities say the pair targeted recent loan applicants with deceptive phone and Internet solicitations that misled consumers to believe Membership Services would provide these consumers with cash advances or loans, or general lines of credit.
“The defendants do not offer cash loans or a general line of credit,” writes the FTC. “Instead, they debit consumers for membership in a continuity program.”
According to documents [PDF] filed in a U.S. District Court in Tampa, the Membership Services folks would buy leads containing information on consumers who were awaiting loan approval. The company would then contact these people while they were still in the approval process.
“Over the phone and the Internet, the defendants tell consumers that their recent loan applications have been approved,” claims the FTC. “For example, the defendants’ telemarketers have told consumers, ‘[w]e received your accepted loan application and… you’ve been approved for a $2,500 line of credit,’ or ‘Mongo [one of the names for the defendant's continuity plans] was able to accept your loan application, and they were able to approve you for a $2,500 lin
e of credit.’”
The telemarketer would then give the consumer an “approval code,” and direct the person to the defendants’ websites, where the code could be entered.
After entering the code, the website would display personal information regarding their “recent cash advance application.” The telemarketer would ask the person to verify this info and submit it online.
But the telemarketers aren’t actually giving consumers loans or lines of credit. Instead, consumers are given $2,500 in credit that can only be used on the company’s “rewards mall” website. Which even then doesn’t sound too horrible, until you see fine print that shows the only way to use this restricted credit, members must make an immediate 25% down payment on every purchase, pay all shipping fees and taxes upfront, and then make minimum monthly payments of 15% or $50 of their outstanding balance, whichever is greater. All membership fees, down-payments, shipping fees, taxes and minimum monthly payments must come out of the member’s pocket, as this “credit” can’t be used to pay down any of those costs.
In addition to going to great lengths to hide all these restrictions from consumers, the FTC alleges that the telemarketers also went ahead and debited customers who did not accept the offer.
“For example, a consumer attests that he was looking for a loan online and typed his personal information into a form on a payday loan website, but did not
agree to the terms of the defendants’ program or agree to a debit,” cites the agency. “Still, MS LLC debited his account for $99.95.”
Besides “Mongo,” the continuity programs sold by Membership Services included “Monster Rewards” and “Money on the Go.”
The FTC believes that the company has raked in more than $9 million using these deceptive practices. It recently filed a civil contempt action against the operators who were involved in the earlier case, alleging that these defendants have violated permanent bans against deceptive and misleading marketing. The agency is asking the court to hold the pair in civil contempt and order them “to redress consumers for the millions of dollars of harm they have inflicted through their scheme.”