A discount-club membership marketer agreed to change its business practices to settle a Federal Trade Commission complaint alleging violations of disclosure and negative-option offer rules, the FTC said last week.
Nine corporate defendants operating collectively as Promenade Communications LLC, Los Angeles, charged consumers $96 to $249 for discount club memberships, according to the FTC. Promenade has used outbound telemarketing and upsells on inbound sales calls since 1999 to market the clubs under the names “Promenade Discount Buying and Travel Club,” “HealthSound” and “TravelDeals.”
Third-party telemarketers working for Promenade frequently failed to identify themselves, the FTC said, and represented themselves as calling on behalf of the consumer's credit card company. They offered a free trial without disclosing that charges would begin at the end of the period and be renewed yearly unless the consumer canceled.
Promenade failed to obtain consumers' billing information directly and failed to disclose they already had gotten it from a third party, the FTC said. Promenade billed consumer accounts on a recurring basis without written authorization, a violation of the Electronic Funds Transfer Act, the FTC said.
In the settlement, Promenade agreed to adhere to marketing rules governing telemarketing, negative-option offers and electronic funds transfers. The company also agreed to pay the FTC $2.4 million, which will be suspended if it pays $113,000 within five days of the judgment.