Suntasia Settles FTC Charges and Agrees to Pay More than $16 Million

Fourteen defendants involved in the telemarketing operation by Largo, Florida-based Suntasia Marketing, Inc. have agreed to pay a total of more than $16 million to settle Federal Trade Commission charges. The funds obtained under the four settlements are in addition to approximately $33 million that will be provided as part of a previously announced settlement between the Office of the Comptroller of the Currency (OCC) and Wachovia Bank, N.A., which allegedly processed thousands of unauthorized demand drafts on Suntasia's behalf.

The Complaint

The FTC alleged that between 1999 and July 2007, Suntasia deceptively marketed a series of negative option programs, including memberships in discount buyer's and travel clubs, to nearly one million consumers nationwide. With a negative option program, a company takes consumers' silence or failure to cancel the program as acceptance of the offer and permission to debit funds from their accounts. The FTC alleged that when Suntasia called consumers to offer supposedly "free" trial memberships in its programs, the company deceived consumers into divulging their bank account information and later charged consumers without authorization for a series of negative option programs.

According to the FTC's complaint, Suntasia telemarketers began their deceptive sales pitch by misrepresenting that Suntasia was affiliated with consumers' banks. The telemarketers then offered consumers a series of "free gifts" and quickly attempted to obtain their bank account numbers. Suntasia telemarketers indicated that they needed to "verify" this information to confirm consumers' eligibility to receive the purportedly free gifts." Having already pretended to be affiliated with consumers' banks, the telemarketers then purported to already possess consumers' bank account numbers, asking that consumers merely "confirm" their information. The FTC contends many consumers disclosed their account numbers believing that they were simply verifying information that the telemarketers already had. The FTC also alleged that consumers frequently thought their account number was being "verified" solely to confirm their eligibility to receive the free gifts, not to authorize any future charges to their accounts.

In addition, the FTC charged that the defendants misrepresented, or did not disclose, various aspects of their programs relating to if and when consumers would be charged, the operation of the alleged free trial period, and their cancellation policy. The complaint also alleged that the defendants had illegally purchased leads containing consumers' unencrypted bank account numbers for use in telemarketing.

Terms of the Consent Orders

The four stipulated orders contain provisions to ensure the defendants do not engage in similar illegal acts in the future. The orders bar the defendants, in connection with the advertising, promoting, offering for sale, or sale of any product or service, from misrepresenting any material fact, including, but not limited to: 1) an affiliation with a consumer's bank or other third party; 2) the purpose for which the consumer's billing information will be used; 3) whether they already have the consumer's billing information; 4) that a product or service is offered on a "free" or "no obligation" basis, when, in fact charges will be assessed if the consumer fails to take affirmative action; 5) the length of any free trial period; 6) that the trial period will not begin until the consumer has received informational material in the mail; 7) the amount a consumer will be charged or billed; 8) that a consumer will not be charged or billed; 9) that a consumer has agreed to purchase a product or has authorized a transaction; 10) that a consumer will not be charged or billed without their authorization; and 11) the material terms and conditions of any refund or cancellation policies.

In addition, the orders require the defendants to disclose clearly and conspicuously, before consumers are asked to reveal their billing information: 1) all fees and costs of a product or service; 2) all material conditions, limitations, restrictions applicable to the purchase (including any provisions associated with "free" products or services); 3) the dollar amount of the first payment and when it will be charged; 4) whether a charge will be submitted for payment at the end of a trial period unless the consumer cancels and the details of the trial period; 5) all material conditions, limitations, and restrictions on the consumer's ability to use any trial membership or related product; and 6) all material conditions, limitations, and restrictions on a consumer's ability to use any product or service offered as "free" or with "no obligation."

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