FTC Moves to Shut Down Miss Cleo
FTC consumer protection bureau director Howard Beales accused the Psychic Readers Network and its operator, Access Resource Services, of practicing deceptive advertising in its infomercials, which promise consumers three free minutes when they call a 900 toll number. The FTC charged that so-called "psychic readers" would put the consumers on hold or collect personal information for three minutes, after which the toll charges would begin.
Furthermore, psychic readers would deceive consumers by telling them that time spent on hold would not count against their free time, or tell them their free time had not expired when in fact charges had already begun, Beales said.
Beales also charged that the company's telemarketing campaigns were so aggressive that they violated rules against unfair trading practices. The campaigns targeted previous Miss Cleo callers, who would sometimes receive as many as 10 calls per day and up to 50 per week.
Telemarketers would call consumers claiming that Miss Cleo had had a dream about them and that they should call a 900 number immediately.
"That's not a dream, that's a nightmare," Beales said. "The practices are so extreme, so abusive, that we believe it constitutes an unfair trade practice."
FTC attorneys filed charges in a federal court in Florida on Wednesday, Beales said. The FTC is requesting that a judge issue a temporary restraining order against Access Resource Services and the Psychic Readers Network to halt their operations.
Beales said the FTC also would seek to freeze the assets of the companies and place them in receivership to ensure money would be available to pay compensation to victims. The agency will seek redress for all consumers taken in by the scheme, Beales said.
The FTC has received approximately 2,000 complaints about Miss Cleo over the last year and a half, Beales said. The agency believes approximately 6 million people have responded to Miss Cleo DRTV ads and telemarketing offers.
Consumers received charges against their phone bills as high as $300, Beales said. The average bill was $60.
Occassionally, Access Resource Services would bill consumers who had never called the toll number, Beales said. The problems occurred because the company tried to track down outstanding bills but used out-of-date directories, leading it to issue bills against phone numbers that had since been disconnected and reassigned.
In a statement responding to the FTC's charges, Sean Moynihan, an attorney representing Access Resource Services, said the company complies with laws governing toll-call services and in fact exceeds the government's requirements for providing consumer safeguards.
Moynihan also took aim at the FTC's case, saying that two of its witnesses were former employees of a independent contractor who were fired and have been pursuing a vendetta against the company.
An emergency injunction is unnecessary because some the complaints the FTC is citing are years old, Moynihan said. He criticized the FTC for failing to contact Access Resource Services prior to issuing charges.
"Access offered to provide the commission with conclusive prood that its allegations were false, but the FTC refused this offer," Moynihan said. "The only fair and irresponsible practices involved in the lawsuit are those of the FTC."
"It's a mystery to us why Miss Cleo and her employers didn't see this coming," Beales said.
The Psychic Reader's Network has been under investigation in several states on charges of deceptive or abusive practices. In November, the New York State Consumer Protection Board issued a report accusing the company of do-not-call list violations and deceptive marketing claims.
The release of that report led Walter Karl, a business unit of infoUSA, the nation's largest list company, to cease acting as broker for the Miss Cleo mailing list.
Miss Cleo's true identity is Youree Cleomili Harris of Miami. While she claims to still take calls, most consumers reach one of her psychic readers, according to the board's report.