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FTC: FIRMS DECEPTIVELY MARKETED ADVANCE FEE GRANT AND LOAN PROGRAMS
Two financial services companies and their principal agreed to pay
roughly $350,000 to settle FTC charges that they deceptively marketed
two advance fee grant and loan programs: Free Cash Grants (FCG) and
Borrowing Made Easier (BME). According to FTC, Navestar D.M., Inc.,
Financial Services Network-USA, Inc. (FSN), and their president, Paul
Navestad, violated the FTC Act and the Telemarketing Sales Rule (TSR)
by misrepresenting that consumers who bought either of the programs
were likely to receive grants and loans. FTC also alleged that the
defendants violated the FTC Act and the TSR by misrepresenting their
refund policy for the FCG program, and alleged that they violated the
TSR by charging advance fees for the BME program. (Navestar D.M., Inc.,
et al., FTC Matter No. X000080, Civil Action No. 00-CV-6269(T), January
9, 2002.)
In addition to paying redress, defendants are permanently banned from
advertising, marketing or selling any credit- or grant-related goods or
services.
FTC filed charges against the defendants in June 2000 as part of
"Operation Advance Fee Loan 2000." Operation Advance Fee Loan 2000 is a
law enforcement sweep that targeted advance fee loan scams. According
to FTC's complaint, Navestar operated the FCG program, which guaranteed
free cash grants to consumers if they paid an advance fee of $47.
FSN operated the BME program, which promised bank loans to consumers
who paid an advance fee of $45 to $60. Defendants advertised through
direct mail solicitations, TV, radio, and newspapers across the U.S.
Defendants' ads for the FCG program claimed that consumers were
pre-approved to get free cash grants to use for various purposes such
as debt consolidation, or business start-ups, for a $47 advance fee.
The defendants urged consumers to call an "800" number with their
assigned grant reservation number and offered consumers a full,
money-back guarantee if they didn't get the grants. In fact, consumers
who bought the FCG program didn't get grants, and the defendants
misrepresented their refund policy, according to FTC.
In the BME program, FTC alleged that the defendants misrepresented that consumers purchasing the program were likely to get loans. Defendants claimed that BME would buy a certificate of deposit (CD) in a bank chosen by the consumer, which would then enable the consumer to get a loan from that same bank. Defendants required consumers to pay a fee to BME of 3%-6% of the CD amount, plus a contract fee between $100 and $1000, depending on the loan's amount. In fact, FTC alleged, when consumers went to their respective banks with the BME materials, loan officers told them that the certificate of deposit couldn't be used as collateral for a loan.
The settlement bans the defendants from advertising, marketing, promoting, offering for sale, or selling any credit- or grant-related goods or services, or assisting others engaged in the same activities. The stipulated final judgment and order also bars defendants from engaging in the practices alleged in FTC's complaint. The settlement also bars defendants from (1) using aliases in business dealings, and (2) selling their customer lists.
FTC was assisted in this matter by New York State Attorney General Eliot Spitzer, whose office also pursued the defendants for contempt of
a previous order settling an action for violations of the Telemarketing Sales Rule and New York state law. The New York case resulted in a
settlement banning the defendants from soliciting consumers for credit or grant related services in New York and calling for the payment of
$100,000 to New York for the costs of the case.
Under the terms of the settlements in the FTC and New York cases, the approximately $250,000 remaining will be used for consumer redress. The FTC will administer the consumer redress program.
NOTE: This stipulated final judgment is for settlement purposes only and does not constitute an admission by the defendant of a law
violation. Stipulated judgments have the force of law when signed by the judge.
(Navestar D.M., Inc., et al., FTC Matter No. X000080, Civil Action No.
00-CV-6269(T), January 9, 2002.)
IDENTITY THEFT HEADS FTC's TOP 10 CONSUMER FRAUD COMPLAINTS OF 2001
Identity theft headed the top 10 consumer fraud complaints of
2001, according to FTC. Identity theft accounted for 42% of the 204,000
complaints entered into FTC's Consumer Sentinel database last year. The
top 10 list of consumer fraud complaints includes:
Identity Theft (42%)
Internet Auctions (10%)
Internet Services and Computer Complaints (7%)
Shop-at-Home and Catalog Offers (6%)
Advance Fee Loans and Credit Protection (5%)
Prizes/Sweepstakes/Gifts (4%)
Business Opportunities and Work at Home Plans (4%)
Foreign Money Offers (4%)
Magazines and Buyers Clubs (3%)
Telephone Pay-Per-Call/Information Services (2%)
(FTC Release, January 23, 2002)
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