Iowa and the FTC Sue Company that took Consumers’ Money for Con Schemes

December 11, 2007. -- Iowa Attorney General Tom Miller teamed with six other states and the Federal Trade Commission in a federal court lawsuit Tuesday alleging that a “payment processor” illegally debited millions of dollars from consumers’ bank accounts on behalf of fraudulent telemarketing, direct mail and Internet-based schemes.

“We allege that ‘Your Money Access’ company, or YMA, played a critical role in assisting its clients’ fraudulent and deceptive schemes,” Miller said.

The suit alleged YMA is a “third-party payment processor” that contracted with “client merchants” to receive consumers’ bank account information, process debits to consumers’ bank accounts, and transfer the money to the client merchants. YMA processed more than $200 million in debits to consumers’ bank accounts for its client merchants from 2004 to 2006.

“The problem, we allege, is that many of these client merchants were con-schemes, and the charges to consumers’ accounts were unauthorized either because the sales pitch was deceptive or because there was no sales pitch at all,” Miller said.

YMA’s clients offered various questionable products such as “Government Grant Information Guides,” so-called “identity theft and telemarketing fraud protection services,” so-called “debt-reduction kits,” and so-called “discount prescription drug benefits plans.” Some YMA clients operated out of Canada. YMA companies have operations in FL and PA.

“We allege that YMA played a critical role in its clients’ fraudulent and deceptive schemes,” Miller said. “We also allege that YMA was aware that its clients were engaged in unauthorized debiting of consumers accounts to the tune of millions of dollars.” YMA was paid processing fees to debit consumers’ accounts.

“Those who provide key support to fraudulent telemarketers must be held to account for their actions,” Miller said. “Payment processors and other support operations are responsible for taking reasonable steps to understand what their clients are up to, and they must withdraw their services when there’s reason to believe consumers are being victimized.”

Background and details:

The FTC and the attorneys general of Illinois, Iowa, Nevada, North Carolina, North Dakota, Ohio, and Vermont filed their Complaint December 6th in the U.S. District Court for the Eastern District of Pennsylvania, in Philadelphia. (Go to Complaint and FTC news release.)

Defandants named in the Complaint are Your Money Access, LLC, d/b/a Netchex Corp., Universal Payment Solutions, Check Recovery Systems, Nterglobal Payment Solutions, Subscription Services, Ltd.; YMA Company, LLC, Derrelle Janey, and Tarzenea Dixon. The defendants have operations in Lake Mary, FL, and Bensalem, PA.

The Complaint asks the Court to prohibit further violations, and to order consumer redress, the disgorgement of ill-gotten gains, and civil penalties under applicable state claims.

The YMA Complaint charges the defendants with violating Section 5 of the FTC Act by unfairly processing debit transactions to consumers’ bank accounts, and violating Section 310.3(b) of the Telemarketing Sales Rule, by providing substantial assistance or support to sellers or telemarketers who they knew, or consciously avoided knowing, violated Sections 310.3(a)(4) and 310.4(a)(4) of the TSR. The complaint also alleges they violated the Iowa Consumer Fraud Act, and comparable consumer protection statutes in other participating states.

The suit alleged that, prior to processing debits for its clients, YMA had “information and documentation strongly indicating that their clients were engaged in unauthorized debiting practices.” The suit alleged that applications submitted to YMA by prospective merchants “contain numerous signs of deceptive activity,” including sales scripts with representations “that are facially false or highly likely to be false.” For example, sales scripts for “EZ Hangup Device,” supposedly an anti-telemarketing-fraud protection device, falsely promised consumers that their telephone numbers would be placed on the national Do Not Call list for ten years, and that they would never receive another telemarketing call again.

In many instances, the suit said, after the defendants debited accounts, the merchants failed to deliver the promised products or services, or sent consumers relatively worthless items.

The suit also alleged that YMA clients had very high “return rates,” an indicator that consumers had not authorized their account to be debited. (Some consumers noticed the unauthorized debit and sought cancellation or “returns,” but others did not.) Between June 2004 and March 2006, more than $69 million of the attempted $200 million in debits were returned or rejected by consumers or their banks for various reasons, evidencing the lack of consumer authorization. According to the complaint, YMA closely monitored its clients’ return rates -- from 20 percent to more than 80 percent in some cases -- and therefore was intimately aware of its clients’ high return rates.

The Iowa Attorney General’s Office, which has a long record fighting telemarketing fraud and other schemes, has taken legal action in the past against companies that facilitated or assisted illegal and deceptive schemes, such as third-party processors and list vendors.

Source: Iowa Attorney General

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