Markets Wired

American consumers won’t be getting any more deceptive robocalls from the auto “warranty” company that bombarded them with millions of the prerecorded calls earlier this year, under a proposed settlement with the Federal Trade Commission.

The company, Transcontinental Warranty, Inc., and its owner will be permanently banned from making any prerecorded calls like the ones it used previously to trick consumers into buying vehicle service contracts under the guise that they were extensions of original vehicle warranties.

“The FTC has taken legal action to put an end to this company’s deceptive and harassing robocalls,” said Jon Leibowitz, Chairman of the FTC. “Starting today, the Commission will be going even further, enforcing a new rule adopted a year ago that makes these prerecorded commercial calls illegal.”

Transcontinental Warranty is one of several companies behind the auto warranty scam that the FTC sued in response to a flood of complaints about the robocalls, which used random, prerecorded voice messages to deceive consumers into thinking that their vehicle warranties were about to expire. The agency also has filed a complaint against the telemarketers who made the prerecorded calls, Voice Touch, Inc., Network Foundations, LLC, and Voice Foundations, LLC, as well as their three principals. That case is still pending in federal court. The court has barred the defendants from making any further deceptive robocalls until the litigation is resolved.

Under the proposed settlement announced today, Transcontinental and its owner, Christopher Cowart, will be barred from the deceptive tactics they used to sell its vehicle service contracts. The defendants also will be prohibited from selling Transcontinental’s customer lists or trying to collect money from people who were victimized by the scam. In addition, they will be required to cooperate in the FTC’s ongoing investigation of the related case. The proposed settlement includes a $24 million judgment against the defendants, which is suspended because of their inability to pay. If the defendants have lied about their assets, the order requires them to pay the full judgment.

In addition to the legal action the against robocallers, the FTC will begin enforcing a new rule restricting prerecorded calls. This rule, effective September 1, 2009, prohibits telemarketers from making robocalls to consumers unless those consumers have agreed in writing to receive the calls. The new requirement is part of amendments to the agency’s Telemarketing Sales Rule that were announced a year ago. Under the new rule, most sellers and telemarketers who transmit prerecorded messages to consumers without their prior written agreement will face penalties of up to $16,000 per call. There are some prerecorded calls that will not be subject to the new rule, such as those that deliver purely “informational” messages, and calls from politicians, banks, telephone carriers, and most charitable organizations.

The Commission vote approving the stipulated court order was 4-0. The order was filed in the U.S. District Court for the Northern District of Illinois.

NOTE: Stipulated final orders are for settlement purposes only and do not constitute an admission by the defendant of a law violation. Stipulated final orders require approval by the court and have the force of law when signed by the judge.

Copies of the complaint and the stipulated final order are available from the FTC’s Web site at http://www.ftc.gov and from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

(FTC File No. X090045)
(Civ. No. 09 C 2927)
(Transcontinental)