Psychic Network Forfeits $500M Consumer Debt in SettlementThe Psychic Readers Network, famed for late-night DRTV ads featuring Miss Cleo, has agreed to forgive $500 million in outstanding bills and stop using toll-call numbers, the Federal Trade Commission said yesterday.
In a deal the FTC termed "landmark," Fort Lauderdale, FL-based Access Resource Services, which operated the network, also agreed to pay $5 million and cease collection efforts on any remaining outstanding accounts. The deal settles FTC charges filed in February that Access Resource Services misled consumers with promises of free psychic readings that actually cost them hundreds of dollars in some cases.
The FTC also charged Access Resource Services with conducting telemarketing to customers, sometimes 10 calls a day and 50 calls a week, without providing them a way to stop the calls. In the future, Access Resource Services must allow customers to opt out of telemarketing calls and avoid misrepresentations in its marketing and monitor compliance by employees and agents, or else be found in violation of the settlement.
The deal marked the second time in three months that the FTC broke its record for largest monetary settlement. The previous record was set in September, when Citigroup Inc. agreed to pay $215 million to settle charges of deceptive lending practices by one of its subsidiaries.
Access Resource Services' battle with the FTC came down to a disagreement over the agency's pay-per-call rule, which regulates toll-call services, said Sean Moynihan, the New York attorney representing the company and its two principals, Steven L. Feder and Peter Stolz. The FTC took the position that marketing material for toll-free informational services -- Psychic Readers Network customers called a toll-free number prior to being connected to a toll-call line -- had to include a price point, whereas the company contended it did not.
Access Resource Services did not admit wrongdoing, and the settlement included no finding of guilt, Moynihan said.
"Once you become a target of the FTC, there's little you can do about it," he said. "The company worked with the FTC and made an economic decision to get the matter resolved."
Access Resource Services has been winding down its toll-number business since January and stopped taking calls to its toll numbers in July, Moynihan said. The company made the decision in response to AT&T's announcement that it would stop billing for pay-for-service calls at the end of this year, which will make pay-per-call marketing largely impractical.
Access Resource Services will continue operating some of its other business lines, including club membership and credit card programs, for existing and repeat customers, Moynihan said. It has ceased soliciting new customers.
The $500 million in bills represents charges dating as far back as 1998, he said.
Youree Harris, who hosted the Psychic Readers Network DRTV ads as Miss Cleo, faces civil charges in Florida. That case remains pending.