A pair of serial scammers have been cited for contempt and fined more than $3 million by a federal judge for defying a 2008 court order settling a Federal Trade Commission lawsuit.
The contempt order was filed at the request of the FTC after the agency accused the defendants of targeting unemployed and non-creditworthy consumers with a phony "$10,000 credit line" that was actually an online shopping club membership and a "no cost" prepaid debit card loaded with hidden fees.In 2008, Dale Paul Cleveland, William Richard Wilson, EDebitPay LLC, and three now-defunct companies (EDP Reporting LLC, EDP Technologies Corp. and Secure Deposit Card Inc.) paid more than $2.2 million to settle FTC charges that they illegally debited consumers' bank accounts and deceitfully marketed prepaid debit cards and short-term loans.
According to the FTC's 2007 complaint, the defendants marketed bank-issued prepaid debit cards under a variety of names through web sites, pop-up ads and e-mail, directing consumers to sites for individual cards including Acclaim Visa, Impact Visa, Sterling Visa, VIP Advantage Visa, Vue Visa, Elite Plus MasterCard, Impact MasterCard, Secure Deposit MasterCard, VIP MasterCard and Vue MasterCard. They also peddled short-term loans on such sites as SuperAutoSource.com, SuperCashSource.com and FastCashUSA.com.
Victims who visited the prepaid card sites were asked to provide personally identifiable information, including their bank account information, in order to apply. Despite claims on their sites such as "No Annual Fees" and "No Security Deposit," the fraudsters debited a $159.95 "application and processing" fee from consumers' bank accounts without their permission.
Besides fleecing consumers who applied for their debit cards, the fraudsters also illegally debited the accounts of consumers who applied for the bogus, short-term loans. Consumers typically discovered the unauthorized debits when they reviewed their bank account statements or when banks notified them of penalty fees or overdraft charges due to insufficient funds
In addition to the $2.2 million fine, the 2008 settlement permanently barred Cleveland and Wilson from deceptive marketing or from debiting consumer's bank accounts without their consent. Cleveland was also required to pay $667,288 in back taxes.
But in marketing a "$10,000 credit line," the FTC accused the defendants of violating the 2008 order by supposedly offering a general line of credit, when they were actually peddling a shopping club membership with a credit line that was only valid for club purchases.
The defendants, the FTC said, failed to clearly disclose the true nature of their offer, burying it in heaps of fine print they knew no one would ever bother reading. They were also charged with pitching a "no cost" prepaid debt card full of undisclosed fees.
The court found Cleveland and Wilson in contempt of the 2008 order and ordered them to pay a $3.7 million fine. The contempt order was filed the U.S. District Court for the Central District of California. The defendants intend to appeal the order.
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