July 28, 2006 -- The telemarketing boiler rooms of Canadian telemarketers, cited for fraudulently marketing and selling credit card loss protection and healthcare discount plans to U.S. consumers, will be shut down, according to a consent judgment entered by the U.S. District Court for the Northern District of Illinois ( FTC v. STF Group Inc., N.D. Ill., No. 03 C 0977, 7/21/06).

The defendants are required to pay $200,000 to settle charges that they violated §5 of the Federal Trade Commission Act, the Telemarketing Act, and the Telemarketing Sales Rule

Credit Card Loss Protection

The FTC's complaint alleged that six individuals in Toronto, Ontario, and their companies targeted U.S. consumers, insinuating a connection with the consumers' credit card issuer or bank. The defendants told consumers that they needed to buy "credit card loss protection" to avoid being held liable for unauthorized charges on their credit cards

"It's Nigerian letter-type stuff," said London-based fraud expert Ray Porter.

In fact, under federal law, consumers cannot be held liable for more than $50 of unauthorized charges on their cards, and do not need to pay for this protection.

The defendants, operating as "National Credit Card Security," charged consumers $249--often without authorization--for their service. However, the FTC charged that the only things consumers received were useless "anti-fraud" stickers to put on their credit cards, and forms to fill out and return to the defendants, listing all of their account numbers.

Discount Drug Plans

The FTC also charged that, in a separate scheme, the defendants targeted elderly U.S. consumers with promises of large discounts on prescription drugs and medical services through their so-called healthcare discount plans.

Telemarketers for the defendants utilized a variety of tactics to get consumers' money: they persuaded consumers to divulge credit card or bank account numbers by stating that they already knew the numbers but needed verification; and they misrepresented that consumers would receive a free trial period before being charged a $349 enrollment fee.

The defendants, in many cases, charged consumers the fee without authorization and ignored most requests for refunds. This scheme was operated under several names, including "Med Plan," "Global Discount Healthcare," and "MDI."

Settlement

To settle the charges, the defendants have agreed to pay $200,000 for consumer redress.

A judgment of $14 million--suspended based on the defendants' inability to pay--will become due if the defendants are found to have misrepresented their financial status. Additionally, the defendants are barred by the decree from making any misrepresentations about goods or services in the future and from violating the Telemarketing Sales Rule.

The defendants covered by the order are: STF Group, Inc.; STF Group; STF Group, Burlington; STF Group, Newmarket; Start to Finish Consulting Group, Inc.; Start to Finish Consulting Group; Start to Finish Marketing, Inc.; 1363883 Ontario Ltd., d/b/a STF Consolidated; Q-Prompt, Inc.; 487948 Ontario Ltd.; 1363942 Ontario Ltd., d/b/a National Credit Card Security Centre; Korn Land Corporation, d/b/a National Credit Card Security; Med Plan, Inc., d/b/a First Med, Inc.; Medical Discount, Inc.; Medplan Burlington; Medplan Mississauga; Medplan Newmarket; Medplan North York; Medplan Scollard; Chembe Management, Inc., d/b/a Medplan Scarborough; Great Sailing Management, Inc.; Thunderchild Consulting, Inc.; SMAKK Consulting, Inc.; GTCQ, Inc.; Global Discount Healthcare Benefits, d/b/a Global Discount Healthcare Benefits, Inc. and First Med, Inc.; 1108114 Ontario Inc.; 1349927 Ontario Inc.; Alex Korn; Allan Shiell; Sean Zaichick; Julian Shiell; Chris Quilliam; and Nicholas Bridges.

The FTC acknowledged the assistance received from the attorneys general of Missouri and New York and from the Toronto Strategic Partnership. The Toronto Strategic Partnership is a cross-border fraud law enforcement partnership which, in addition to the FTC, includes: the Competition Bureau of Canada; the Toronto Police Service, Fraud Squad; the U.S. Postal Inspection Service; the Ontario Ministry of Government Services; the Ontario Provincial Police, Anti-Rackets; the Royal Canadian Mounted Police; and the UK's Office of Fair Trading.