FTC crackdown on telemarketing scams is a reminder that the phone is a potent weapon for fraudsters

EWEvelyn Wong – Public Policy Intern

The Federal Trade Commission this week announced that it has pulled the plug on a multi-million dollar cross-border telemarketing scam operation that can be traced back to 2009.

The FTC’s complaint against First Consumers, LLC, Standard American Marketing, Inc., and PowerPlay Industries LLC alleges that the companies used telemarketing boiler rooms in Canada to “cold call” tens and thousands of consumers claiming to sell fraud protection, legal protection, and pharmaceutical benefits services. These unsolicited services would often charge anywhere between $187 to $397. Between May 2011 and December 2013 the scheme brought in $20 million.

The defendants are said to have targeted senior citizens who were given false information and were compelled to reveal their bank account information. The scammers used scare tactics and sometimes even went so far as to impersonate bankers and government officials. The account information would then be used to create “remote checks” drawn on the consumers’ bank accounts. These remotely created checks were then deposited into a network of corporate accounts established in the United States. The U.S. based defendants then transferred money to the Canadian accounts.

The Internet has certainly become a haven for scam artists, but this case is a reminder that consumers need to be on guard for scammers contacting them via the “old-fashioned” telephone. In fact, according to Fraud.org’s 2013 Top Ten Scams report, the telephone was the most-frequent way that consumers reported being contacted by scammers in 2013.

Tips to avoid being a victim of telemarketing scams include:

  1. Never give out sensitive personal information such as Social Security Numbers, bank account numbers or credit/debit account numbers in response to an unsolicited telephone call.
  2. Telemarketing scammers will often try to pressure the person on the other end into making a quick decision. Remember, if it sounds like a good deal today, then you should be able to take the time to research it thoroughly.
  3. Be wary of any telemarketed who requests payment via wire transfer, cash or prepaid card.
  4. Information on spotting telemarketing scams targeting seniors is available at “They Can’t Hang Up,” a joint educational initiative between NCL and AARP.
  5. For more tips from Fraud.org on spotting telemarketing scams, click here.

Wireless cramming: The tip of a very large iceberg

By John Breyault, Vice President of Public Policy, Telecommunications and Fraud

Wireless cramming is at the top of the Federal Trade Commission’s agenda today, as government officials, advocates and industry representatives gather to discuss the issue and potential solutions at the FTC’s Mobile Cramming Roundtable. I am honored to present at the event, along with a number of other experts on the topic. For those loyal readers unable to watch the live webcast, I can sum up my comments thusly: Wireless cramming is a big problem and is only going to get worse without action by regulators to protect consumers.

Cramming fraud has been around for decades. Beginning in the late 1990s, enterprising scam artists learned that they could get small charges placed on consumers’ landline phone bills. With doctored “authentications” and poor policing by the phone companies and billing aggregators, scammers made millions of dollars. As consumers increasingly adopted wireless phones, the scam artists moved to those bills. Wireless cramming is proving to be just a lucrative for the fraudsters. In its first enforcement action against alleged wireless cramming outfit Wise Media, the FTC stated that the company made millions of dollars in less than two years of operation.

Wise Media is likely just the tip of a very large iceberg. While there is precious little data about the scope of the wireless third-party billing market generally and the cost of wireless cramming on consumers, we can make some educated estimates based on the data that is available.

Continue reading

FTC announces winners for Robocall Challenge

Sandra Latouff

By Sandra Latouff, NCL Fraud and Policy Intern

Last week, the FTC announced the winners of the Robocall Challenge. The winners, Serdar Danis and Aaron Foss will each be receiving $25,000 and a trip to Washington, DC for an opportunity to present their innovations. The Challenge asked innovators to create solutions that will block illegal robocalls for both landlines and mobile phones. A robocall is a term for a phone call that uses a computerized auto dialer to deliver a pre-recorded message.

In 2012, the FTC received about 200,000 complaints per month from consumers about robocalls! In an effort to fend off robocalls, some consumers have turned to the FTC’s Do Not Call Registry. Currently, 220 million consumers have registered their numbers on the Registry, but even with the Registry consumers nationwide are still being pestered by robocalls. In an effort to help the public fight against the creative methods robocalls are reaching consumers, the FTC created the Robocall Challenge to gather creative and efficient ideas from participants that could be successful. The hope of the FTC is that by hosting the Robocall Challenge a winning idea will catch the attention of private companies and eventually find its way to the marketplace for consumer protection.

Danis’s proposal, titled “Robocall Filtering System and Device with Autonomous Blacklisting, Whitelisting, GrayListing and Caller ID Spoof Detection”, would analyze and block robocalls using software that could be implemented as a mobile app, an electronic device in a user’s home, or a feature of a provider’s telephone service. Foss’s proposal, called Nomorobo, is a cloud-based solution that would use “simultaneous ringing,” which allows incoming calls to be routed to a second telephone line. In the Nomorobo solution, this second line would identify and hang up on illegal robocalls before they could ring through to the user. A third proposal from Google engineers Daniel Klein and Dean Jackson won the Technology Achievement Award. Klen and Jackson’s solution would involve using automated algorithms that identify “spam” callers.

As a result of the Robocall Challenge, the FTC created a video compiling submissions that focused on what consumers are doing right now to reduce illegal robocalls. Here are some of the tips:

  1. Ask you carrier what services they provide. Some service providers allow their customers to block off certain phone numbers. There may or may not be a charge for this service. Consumers may also be able to use VoIP hardware that allows them to tag any incoming number as unwanted which then plays a disconnected tone to the caller. After this, there is usually no second call.
  2. Check out devices for your landline. Search Internet shopping sites for “call blocker.” One consumer said that she uses a special phone that causes robocaller software to drop her number from their call list, which reduced and eventually stopped the number of calls she received.
  3. Experiment with “special information tones.” Some consumers placed the three note “non-working number” ringtone at the beginning of their voicemail or answering machine message which resulted in fewer robocalls.
  4. Investigate apps for your smart phone. Consumers are paying for apps that block robocalls. There are some free apps that, based on reviews, perform decently as well.
  5. Use a “virtual phone line” with call screening options. One consumer obtained a virtual phone line that forwarded the calls from that line to his actual phone. He gives his virtual number to everyone and keeps his other phone number to himself.

Consumers should also be sure to check the Terms of Service for any new program or offer when applying. An agreement to receive phone calls (i.e. robocalls) may be buried deep within the fine print.

If you have any tips or suggestions on how you prevent or stop robocalls, the FTC invites consumers to share their knowledge on their Facebook page. Click here for more information about the Robocall Challenge and its winners.

Reebok’s toning shoes: $25 million dollars worth of false benefits and injury

By Mimi Johnson, NCL Director of Health Policy

You’d be hard pressed to find someone who wouldn’t welcome a shortcut to better health and a trimmer physique.  For the past few years, several different companies have marketed shoes to help women, men, and even children, more quickly drop pounds and gain muscle.

You won’t see such claims any more, says the Federal Trade Commission (FTC).

Reebok has just settled – for $25 million dollars – with the FTC over what they claim were unsubstantiated claims of benefits.  Reebok made very specific product promises, claiming that their line of their toning sneakers would produce 28% more muscle tone in the glutes and 11% more muscle tone in the calf and hamstrings than regular sneakers (see the ad below).

Other brands who might soon follow suit include Sketchers and New Balance, both of which are currently under investigation or part of class-action lawsuits over false benefit claims and injuries. The Consumer Produce Safety Commission (CPSC) has more than 36 complaints in its database, ranging from reports of stress fractures to pain.  While a $25 million dollar settlement might seem like a big deal, the toning shoe industry raked in about $1 billion last year alone and Reebok spent more than $40 million advertising the shoes benefits since the beginning of 2010

If you bought Reebok toning shoes or EasyTone apparel on or after December 5, 2008, you are eligible for refunds.  For more information about the settlement and to submit your claim, visit http://www.reeboksettlement.com/ftc.

Advocates on board with ‘Do Not Track’

NCL supports the Federal Trade Commission’s (FTC) proposal to allow consumers to block advertisers from tracking them online. As David Vladeck, the Director of the FTC’s Bureau of Consumer Protection testified on December 2, industry self-regulation has to date failed to adequately protect consumers’ privacy. The FTC has proposed a “uniform and comprehensive consumer choice mechanism” for online behavioral advertising, likely as a feature of Internet browsers. Advocates at the National Consumers League support the FTC’s proposed rule for a simple reason: consumers want to control their environment easily and persistently. These days, the average consumer is barraged online with marketing offers from companies using tracking technology who think they know what their customers want — or are trying to predict it. We agree with the FTC’s position that such technology can and should be implemented in such a way that it does not undermine the advertiser-supported business model that has helped give consumers such a treasure trove of free and low-cost content on the Internet.

The beauty of this so-called “Do Not Track” technology is that doesn’t require maintenance of lists; it just lets online advertisers know not to track you. Experts say the technology for Do Not Track is easily adapted to smartphones, tablets, and other mobile devices. We agree with Beth Givens at the Privacy Rights Clearinghouse, who said: “online tracking is inherently offensive to people. The notion that there are electronic eyeballs following you as you surf the Web frankly bothers people.”

NCL will be following closely the debate over FTC’s proposal and the Do Not Track technology in particular.


Mary Gardiner Jones (1921-2010)

Last week, consumer advocates paid tribute to Mary Gardiner Jones, who served over many decades as a consummate consumer protection advocate and passed away at the age of 89. She was appointed as the first female commissioner of the Federal Trade Commission by President Johnson in 1964 and and served as president of the NCL Board of Directors in the 70s. NCL conferred on her the Florence Kelly award in 2003. NCL Board Secretary Sam Simon worked with her on the Alliance for Public Technology, and says that “her perspectives on technology were incredibly deep and accurate, way ahead of her time. She wrote and often said that no technology would work for people (we use the word ‘applications’ today) unless it made their daily life tasks better/simpler than other choices. I’m not sure ‘we’ get it even yet.  And on the other side of her, she was the type of person who made progress like a porcupine — poking things that got in her way.”

We owe a debt of gratitude for her pioneering leadership at the FTC and her distinguished career.

NCL Urges Senate to Rein in Deceptive Advertisers

By Barbara Shaibu, NCL Public Policy Intern

In an era of media saturation, advertisers are constantly on the prowl for the next best medium for reaching and attracting potential customers. Even in the face of grueling economic conditions and the resulting cutbacks in corporate advertising budgets, more than $141 billion was spent in 2008 on advertising in the United States, according to TNS Media Intelligence. In recognizing the critical role advertising plays in informing consumers about products and services and influencing their decision-making, NCL believes policymakers should take a proactive role in regulating the industry.

The explosion of cable television and the Internet has contributed to the growth of the industry. However, when flipping the channels or surfing the Internet, consumers are bombarded with advertisements with questionable guarantees of weight loss, baldness cures, and business opportunities. NCL believes that new media have fueled an increase in deceptive advertisements that prey on consumers and leave them less knowledgeable about their rights and responsibilities with regards to products and services.

In response to this issue, the Federal Trade Commission (FTC) has proposed revisions to its Guides Concerning Use of Endorsements and Testimonials in Advertising (“the Guides”). The proposed revisions require that advertisers who use testimonials be able to substantiate the claims made by consumers, experts, or celebrity endorsers in the ads. For example, when extreme results are promoted in advertisements (such as for weight-loss or baldness cures), advertisers would be required to clearly disclose the average results actual users of the product received.

Consumer advocates believe that the current disclaimers on such advertisements, such as “Results May Vary” or “Results Not Typical,” are insufficient. Another revision to the Guides would require that experts who testify on the effectiveness of a particular product must actually be qualified to make a claim. For example, an “expert doctor” whose PhD is in philosophy would not be qualified, under the proposed rules, to make a claim about the effectiveness of a diet pill. Lastly, the Commission has proposed significant revisions to section 255.1 (“General Consideration”) and 255.5 (“Disclosure of Material Connection”) of the Guides to address the growing problem of bloggers and other users of social media platforms failing to disclose compensatory relationships with advertisers in product and service reviews and endorsements.

Recently, appearing before a subcommittee of the U.S. Senate Commerce Committee, NCL Executive Director Sally Greenberg testified on this issue. In her testimony, she expressed NCL’s strong support of the proposed revisions to the Guides, indicating that such revisions were necessary and long overdue. (The Guides were last revised in 1980—when the primary means of disseminating advertisements were via traditional print, radio, and television outlets.)

Greenberg’s testimony addressed how enhanced blogger disclosure would bolster consumer confidence. NCL maintains that consumers should be informed when bloggers post information about a sponsor’s product or write opinions that aren’t necessarily their own. Without reasonable guidelines for disclosure, there is the threat that consumer distrust of the value of product reviews in the blogosphere and other social media platforms will grow substantially.

Greenberg also expressed NCL’s dismay at the undisclosed use of Video News Releases (VNRs) by media organizations and urged the FTC to investigate whether VNRs violate deceptive advertising regulations. “We believe that consumer trust in media has been compromised by the use of VNRs that purport to be news but are really paid advertising,” she noted in her testimony.

For more information on Greenberg’s Senate testimony, click here. To view a Webcast of the hearings, click here.