Credit Card Protection Company Settles TSR Complaint

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Liberty Direct has settled a Federal Trade Commission complaint stemming from a 1999 investigation into the telemarketing of fraudulent credit card protection services.


The Arizona-based company on Monday agreed to a ban on sales of credit card protection and will post a $1 million bond before engaging in any telemarketing. Liberty Direct also has repaid $2 million to consumers, including $1.5 million in credit card charge backs.


Liberty Direct used third-party telemarketing companies to market credit card loss protection services for $199 between January 1998 and February 1999, the FTC said. In telemarketing pitches, the company misrepresented to consumers that it was affiliated with consumers' credit card issuers and that they were liable for all unauthorized charges made against their accounts, according to the FTC complaint.


The company was charged in a 1999 sweep of credit card protection marketers. Liberty was one of three companies charged in the sweep, along with Source One Publications Inc., also of Arizona, and Credit Mart Financial Strategies Inc., Montreal. Credit Mart reached an agreement with the FTC in 1999.


In addition to the bond and consumer redress, Liberty Direct agreed to have consumers complete an authorization form -- with the word "warning" across the top -- before completing any sales of credit-related products. One FTC commissioner, Orson Swindle, objected to this provision on the grounds that it "effectively bars the defendants from engaging in any future telemarketing," which Swindle said should be clearly stated in the order.


Liberty Direct also agreed to a ban on distribution of its consumer lists without court authorization. In addition, the company agreed to monitor its sales practices and to open its company records to FTC inspection upon request.


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