An operation marketing Visa- and MasterCard-branded prepaid debit cards to sub-prime consumers will pay more than $2.2 million to settle Federal Trade Commission charges that it allegedly made unauthorized debits from individuals’ bank accounts and engaged in deceptive marketing practices.
Named as defendants were: EdebitPay LLC; EDP Reporting LLC; EDP Technologies Corp.; Secure Deposit Card Inc.; Dale Paul Cleveland and William Richard Wilson, all from Los Angeles. Under the settlement, they are prohibited from debiting a consumer’s account or causing billing information to be submitted for payment without first obtaining the consumer’s express informed consent, according to the FTC.
The settlement requires the defendants to pay more than $2.2 million for consumer redress as well as the proceeds from the sale of an automobile.
In addition, Cleveland must pay taxing authorities an additional $667,288, according to the FTC.
According to the FTC’s complaint, filed in federal court in Los Angeles last July, the defendants marketed bank-issued prepaid debit cards under a variety of names through Web sites and pop-up and e-mail advertisements that directed consumers to sites for the individual cards (including Acclaim Visa, Impact Visa, Sterling Visa, VIP Advantage Visa, Vue Visa, Elite Plus MasterCard, Impact MasterCard, Secure Deposit MasterCard, VIP MasterCard and Vue MasterCard.
They also allegedly marketed unrelated short-term loans on Web sites such as www.SuperAutoSource.com and www.SuperCashSource.com. The complaint further alleged that, among other things, the defendants debited, without authorization, a $159.95 “application and processing” fee from consumers’ bank accounts, including from consumers who did not submit an online application for the prepaid cards or who had applied for an unrelated short-term loan, the complaint further alleged.
Under the proposed settlement, EdebitPay, EDP Reporting, EDP Technologies, Secure Deposit Card Inc., Cleveland and Wilson are prohibited from debiting a consumer’s account or causing billing information to be submitted for payment without first obtaining the consumer’s express informed consent, according to the FTC.
The defendents are also required to clearly and conspicuously disclose the costs to obtain and use any prepaid, debit, or credit card, and that they will use consumers’ personally identifiable information to impose such costs, in close proximity to any instruction to provide such information and to statements such as “No Annual Fees” or “No Security Deposit” that represent that a card can be obtained “free,” without obligation, or at a reduced cost, the FTC continued.
Furthermore, the order also prohibits the defendants from misrepresenting any fact material to a consumer’s decision to apply for or purchase any product or service. In addition, it requires the defendants to clearly and conspicuously disclose certain material information before a consumer applies for or purchases any product or service, such as any charge that will be assessed against his or her bank account; any method that will be used to debit the account; that the consumer’s personally identifiable information will be used to debit the account; that such information will be sold or transferred to third parties for marketing purposes; the material attributes of the product or service being offered and, if a representation is made about a refund or cancellation policy, a statement of all material terms and conditions of the policy, according to the FTC.
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