Judge Orders Telemarketer to Pay Record $39 Million

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A federal judge has ordered telemarketing firm Diversified Marketing Service Corp. and its affiliated businesses to pay $39 million on charges that they violated a 1996 settlement with the Federal Trade Commission over a magazine subscription campaign.


The order represents the largest judgment the FTC has obtained against a telemarketer since the Telemarketing Sales Rule went into effect in 1995, an official with the FTC's Bureau of Consumer of Protection said.


Judge Vicki Miles-LaGrange of the U.S. District Court for the Western District of Oklahoma ruled earlier this month that the telemarketing group broke a condition of the 1996 settlement against deceptive practices in its outbound calling campaigns, the FTC announced yesterday.


Diversified Marketing, Oklahoma City, paid $1.5 million in 1996 to settle FTC charges that the company made misrepresentations in its telephone pitches to consumers, who were charged between $500 and $800 for magazine subscriptions, according to the FTC. Consumers were told that some of the subscriptions were free or for longer time periods than they actually were, the FTC said.


The company misled consumers into divulging their checking account numbers, which were used to bill them for subscriptions, the FTC said. Diversified Marketing later refused to cancel subscriptions despite assurances to consumers that they could change their minds.


On Jan. 28, the FTC asked the court to cite the company for contempt due to evidence that Diversified Marketing had continued using deceptive claims in its telemarketing pitches. The FTC's evidence "clearly and convincingly" showed that Diversified Marketing had broken its promises that it would cease making misrepresentations, the judge wrote in her ruling.


A call placed to a number listed in Oklahoma City for Diversified Marketing did not go through yesterday. The company has 30 days from the date of the judge's ruling, signed March 4, to pay the FTC.


The FTC said it would use the money to repay consumers who were improperly billed by Diversified Marketing.


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