FTC Stops Prepaid Stored-Value Card Sellers From Improper Debiting
FTC Stops Prepaid Stored-Value Card Sellers From Improper Debiting
At the request of the Federal Trade Commission, a federal judge has temporarily halted an operation marketing Visa- and MasterCard-branded stored-value cards from making unauthorized debits from consumers’ bank accounts.
According to a complaint filed by the FTC, the defendants market bank-issued, Visa- and MasterCard-branded stored-value (prepaid) cards under a variety of names through Web sites and pop-up and e-mail advertisements that direct consumers to Web sites for the individual cards. These include Acclaim Visa, Impact Visa, Sterling Visa, VIP Advantage Visa, Vue Visa, Elite Plus MasterCard, Impact MasterCard, Secure Deposit MasterCard, VIP MasterCard, and Vue MasterCard. The defendants also market unrelated short-term loans on Web sites such as www.SuperAutoSource.com, www.SuperCashSource.com, and www.FastCashUSA.com.
The complaint alleges that, through their prepaid card programs, the defendants debited, without authorization, a $159.95 “application and processing” fee from consumers’ bank accounts, including from consumers who either had no contact with the defendants or had applied for an unrelated short-term loan. Consumers who visited the defendants’ prepaid card Web sites were instructed to provide personally identifiable information, including their bank account information, to apply for a card. The defendants allegedly also made deceptive claims on their Web sites, such as “No Annual Fees” and “No Security Deposit,” without disclosing clearly and prominently that they would use the consumers’ personal information to debit the $159.95 fee. Consumers usually discovered the unauthorized debits when they reviewed their bank account statements or when banks notified them of penalty fees or overdraft charges due to insufficient funds.
The defendants are charged with violating federal law by engaging in unauthorized bank account debiting; failing to disclose clearly and conspicuously that consumers’ personal information will be used to debit a fee from their bank accounts, and that the fee will be debited once they apply for a prepaid card; and misrepresenting that consumers are obligated to pay the fee when they did not consent to pay a fee.
On July 30, the judge issued a temporary restraining order barring unauthorized debiting and freezing the assets of EdebitPay, LLC, EDP Reporting, LLC, EDP Technologies Corporation, Secure Deposit Card Inc., Dale Paul Cleveland, and William Richard Wilson, all based in California. The judge will hold a hearing to determine whether to extend the injunction pending a trial. The FTC will seek to permanently bar the defendants from further violations and make them forfeit their ill-gotten gains.
Comments
I have a prepaid Mastercard and I feel very ripped off. There is no risk to Mastercard and they are compensated with outrageous fees and holding policies. I had booked some hotel rooms for our trip, for "normal" MC holders a pending charge will drop off in 4-5 days... with the prepaid MC you have to contact the hotels and get them to zero out the holds and it takes up to another 45 days to use your money again.... Im so pissed right now, I will never encourage prepaid cards.....
Posted by: Teri Green | September 1, 2007 6:07 PM