The scheme was ugly, according to papers filed today in federal court by the Federal Trade Commission.
Targeting tens of thousands of consumers who had gone online seeking a short-term payday loan, telemarketers in at least three Philadelphia-area "boiler rooms" got the keys to their bank accounts, pitched bogus credit cards and generated close to $5 million in revenue over the last three years for the people and company behind the scheme, the FTC says.
Some people targeted by the scheme were unwitting victims, but others declined the pitches "and they charged them anyway," according to C. Steven Baker, director of the FTC's Midwest regional office, which led the investigation leading to the civil action.
The FTC, which obtained a court order seizing the defendants' assets and putting their operation into receivership, said the scheme had generated more than 10,000 sales in a recent two-month period. Citing court papers, it said of the defendants:
Doing business as Platinum Trust Card and Express Platinum Card, they operate in the Philadelphia area, but they engage in a variety of ruses to create the false appearance that they are based in Utah and Nevada. The defendants call consumers who recently applied online for a payday loan and offer them a purported general-purpose credit card with a credit limit of up to $9,500, in exchange for an advance fee of up to $99 and a monthly $19 fee. They falsely claim their cards can be used anywhere that accepts Visa, MasterCard, or American Express, and that the cards will help rebuild consumers' credit ratings because the defendants report to the major credit bureaus. But according to the FTC, the defendants do not report to credit bureaus, and their "credit cards" only access an online store the defendants operate, which offers a variety of off-brand, outrageously overpriced products, most of which can be purchased only in bulk quantities. Examples of items for sale in the defendants' store include a case of 3,240 "dolphin shaped craft embellishments" for $356.40, a case of 432 shower caps for $430.56, and a case of 144 "play flutes" for $573.12.
As alleged in the complaint, before the defendants contact consumers, in many instances they already have personal and bank account information about them, obtained from online payday loan applications. Using this information, the defendants often withdraw fees from the accounts of consumers who reject the "credit card" offer. Consumers who call the defendants to try to cancel their accounts or obtain a refund are subjected to an exhausting series of constant busy signals, endless hold times, and other tactics that limit refunds.
The FTC charged the defendants with making false claims in violation of the FTC Act and the FTC's Telemarketing Sales Rule, and withdrawing money from consumers' bank accounts without their consent in violation of the FTC Act. The defendants also are charged with submitting billing information for payment without consumers' express informed consent, and promising to deliver a credit card in exchange for an up-front fee, all in violation of the Rule.
The defendants are Blake Rubin, also doing business as Platinum Trust Card, Express Platinum Card, CR Ventures LLC, and Maxim Management Group LLC; Chase Rubin, also doing business under those names and as Oakmont Management Services; Apogee One Enterprises LLC, also doing business as Apogee Enterprises LLC, Platinum Trust Card and Express Platinum Card; Marquee Marketing LLC, also doing business as Express Platinum Card; Jules Shore; and Justin Diaczuk.