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FTC: Online Scammers Take $450 Million from Consumers

A Canadian-based online operation accused of scamming more than $450 million from consumers has been charged by the Federal Trade Commission, the agency reported on Tuesday.

Consumers in the U.S., Canada, Australia, and New Zealand were lured in by “free” offers, only to have recurring charges racked up on their credit or debit card, the FTC complaint states. The offers were for a wide variety of products and services, including acai berry weight-loss pills, teeth whiteners, and health supplements containing resveratrol (the supposedly healthful ingredient in red wine), as well as for a work-at-home scheme, access to government grants, free credit reports, and penny auctions.

The FTC is working closely with Canadian law enforcement in this case and seeks to make the defendant, Jesse Willms, repay the ill-gotten gains back to consumers who were allegedly ripped-off.

“Internet fraud is a global problem that requires an international enforcement response,” said Lisa Campbell, Deputy Commissioner of Competition for the Competition Bureau of Canada. “International cooperation ensures that fraudsters can’t hide behind borders.”

The FTC said that Willms and his ten companies obtained consumers’ account numbers by enticing them with bogus “free” or “risk-free” trial offers that supposedly required only small shipping and handling fees, and also promised phony “bonus” offers just for signing up.

Consumers had no reason to believe they would be charged for the trial product or the extra bonus products, but they were often charged for the “free” trial plus a monthly recurring fee. Consumers who attempted to utilize the defendants' money-back guarantee were faced with time-consuming phone calls and other steps that made the deals far from risk-free, the FTC said.

The defendants allegedly made false claims about the total cost of products, recurring charges, and the availability of refunds, burying important terms and conditions in fine print, the FTC alleged.

The FTC also accuses Willms of giving banks false or misleading information in order to acquire and maintain credit and debit card processing services from the banks in the face of mounting chargeback rates and consumer complaints.

Willms and his companies also allegedly violated the Electronic Fund Transfer Act and Regulation E (issued by the Federal Reserve System’s Board of Governors) by debiting consumers’ bank accounts without their signed written consent and without providing consumers with a copy of the written authorization.

“The defendants used the lure of a ‘free’ offer to open an illegal pipeline to consumers’ credit card and bank accounts,” said David C. Vladeck, Director of the FTC’s Bureau of Consumer Protection. “‘Free’ must really mean ‘free’ no matter where the offer is made.”

The FTC’s complaint defendant is not a finding or ruling that the defendant has broken the law - the case must be decided by the court.

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Thursday, 30 November 2023

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