An office supplier and its owner will pay $7 million to settle Federal Trade Commission charges that they tricked child care centers, schools, and police and fire departments into paying for products they never ordered.
“Billing for unordered merchandise is against the law, and small businesses like those affected here are under no obligation to return or pay for items they did not order,” said FTC Acting Chairman Maureen K. Ohlhausen. “This enforcement action is yet another example of the FTC’s efforts to protect hard-working small businesses from scams.” In May, the chairman announced the launch of a new FTC website, FTC.gov/SmallBusiness, to help business owners avoid scams, protect their computers and networks, and keep their customers’ and employees’ data safe.
According to the FTC, Telestar Consulting Inc. and Karl Wesley Angel offered an initial shipment represented either as free or as a low-cost “good deal.” If people agreed to make a purchase, the defendants did not disclose the total cost, quantity, and terms of the sale. The FTC alleged that Telestar, doing business as United Business Supply and, later, as Kleritec, also sent additional shipments of merchandise without obtaining the consumer’s agreement, misrepresenting that consumers had agreed to the shipments. When consumers challenged the invoices they received or did not pay promptly, the defendants threatened to send them to “collections.” Those who paid, mistakenly believing they had to, often received even more unordered merchandise and bills for payment.
Under the settlement order, Telestar and Angel are banned from telemarketing nondurable office, cleaning, educational and art supplies to consumers. They are also banned from sending merchandise without the recipient’s prior consent, unless it is clearly marked as a free sample; sending a bill or requesting payment for products without prior consent; or violating the Unordered Merchandise Statute.
The order also prohibits the defendants from misrepresenting that consumers are obligated to pay, that goods are being shipped as part of a prior order, or that consumers have agreed to pay for multiple shipments. It also bars them from illegal debt collection practices, and, in connection with the selling of any good or service, requires the defendants to clearly disclose the total amount and quantity, and all material conditions to buy, receive or use the goods. In addition, the defendants are prohibited from profiting from consumers’ personal information they had obtained, and from attempts to collect on the accounts of prior customers.
The order imposes a $7 million judgment that must be paid to the FTC within one year, including $1.6 million that must be paid within seven days of the order. The agency intends to distribute these funds to victims. The Better Business Bureau serving Los Angeles and Silicon Valley provided valuable assistance in this matter.
The Commission vote authorizing the staff to file the stipulated final order was 2-0. The U.S. District Court for the Central District of California entered the order on August 30, 2017.
NOTE: Stipulated final orders have the force of law when approved and signed by the District Court judge.
To learn more, read the FTC’s Small Business Scams.
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