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FTC Charges Canadian Defendants
in Business Directory Scam
The Federal Trade Commission has charged a group of Canadian
defendants with scamming small businesses and charities in
the United States our of millions of dollars by billing them
for business directory services they did not order or authorize,
in violation of federal law. The FTC charges that the
defendants refuse consumers' requests to cancel the services,
and use an in-house collection service to harass consumers
whose accounts allegedly are past-due.
According
to the FTC's complaint, defendants Pinacle Publishing and
M.D.S.C Publishing have made telemarketing calls to small
businesses, charities, and other organizations across the
U.S. since at least 2000. The defendants allegedly claim
that they are calling to verify consumers' names, addresses,
and telephone numbers for listing in their business directory.
Consumers are updating information in connection with a renewal
of the listing. The FTC alleges that the defendants
record consumers verifying their information, and later use
the recordings to prevent them from canceling unauthorized
orders. Consumers often are not old that there is a
fee associated with being listed in the business directory.
The
FTC's complaint states that after speaking with consumers,
the defendants mail invoices, typically billing consumers
$389.99 for a "2 Year Silver Star Listing at www.allpinacle.com,"
$279.99 for a two year listing in M.D.S.C.'s "American
Business Directory," or $336.99 for the "M.D.S.C
American Corporate & Communications CD Directory."
The invoices allegedly claim that the consumer with whom the
defendants spoke authorized the order. The FTC charges
that the defendants mailed invoices even to those consumers
who expressly said they were not interested in the directory.
According to the
FTC, upon receiving the invoices, many consumers realize that
no one from their organization ordered a directory listing.
When they call to cancel the order, they allegedly are told
that the defendants have a tape recording of the order being
placed. The defendants allegedly claim that the recording
is a "binding oral contract," and they therefore
refuse to allow consumers to cancel orders. In numerous
instances, consumers refuse to pay the invoices and are then
referred to defendants' in-house collections department, which
allegedly harasses them with phone calls and repeated dunning
notices and threatens to initiate legal action and damage
consumers' credit ratings. In some cases, the in-house
collections department employees allegedly masquerade as lawyers
retained by the defendants to force consumers to pay their
invoices. The FTC contends that many consumers ultimately
pay the invoices because they believe it is the only way to
stop the harassment.
The
FTC alleges that the defendants also try to convince consumers
to pay the invoices by pledging that they will not contact
the consumers again after the invoices are paid. Once
the invoices have been paid in reliance on such a pledge,
however, the defendants allegedly proceed to send the consumer
additional invoices and to attempt to collect on those new
invoices.
The
FTC's complaint, which names 4049705 Canada Inc. (d/b/a Pinacle);
3782484 Canada Inc (d/b/a M.D.S.C. Publishing; and Terrence
Croteau as defendants, states that the defendants violated
the FTC Act by misrepresenting that they have a preexisting
business relationship with consumers; that consumers have
agreed to purchase a business directory or directory listing;
that they have retained lawyers to collect on consumers' accounts;
and that they will not contact consumers again if the consumers
will make full or partial payments. The FTC has asked
the court to issue a temporary restraining order that bars
the defendants' illegal business practices and freezes the
defendants' assets.
The
FTC received significant assistance in this case from the
Niagara Regional Police Service, Ontario, Canada, and the
Toronto Strategic Partnership, a cross-border fraud law enforcement
partnership which, in addition to the FTC, includes the Ontario
Provincial Police, Anti-Rackets Section; the Toronto Police
Service Fraud Squad; the Ontario Ministry of Consumer and
Business Services; Canada's Competition Bureau; the York Regional
Police Service Fraud Squad; the United States Postal Inspection
Service; and the Ohio Attorney General's Office.
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