FTC Settles with Debit Card Web Marketers

As the subprime loan fiasco continues to wreak havoc on the economy, the Federal Trade Commission has settled a case against a group of defendants charged as deceptive marketers targeting “subprime consumers.” The settlement requires EDP Technologies Corporation and others to pay over $2.2 million for consumer restitution.

In a US District Court case filed in California, the FTC claimed the defendants promoted a variety of prepaid bank-issued Visa and Mastercard debit cards via Web sites, pop-up ads and e-mails. They also allegedly charged hefty fees without authorization to consumers’ bank accounts and marketed unrelated short-term loans on sites including SuperAutoSource.com and SuperCashSource.com.

According to the settlement, the defendants are barred from debiting a consumer’s account without authorization, and must clearly and conspicuously disclose fees associated with attaining the debit and credit cards. They also are required to notify consumers when using personally identifiable information to charge those fees, and must do so alongside statements suggesting the cards come with “No Annual Fees” or “No Security Deposit.”

The FTC said consumers’ accounts were billed $159.95 for fees associated with getting the cards.

Defendants EdebitPay, EDP Reporting, EDP Technologies Corporation, Secure Deposit Card, Dale Paul Cleveland, and William Richard Wilson operated in conjunction as a common enterprise, according to FTC spokesman Frank Dorman. The FTC halted card marketing operations of the same defendants in August; in addition to imposing the penalty, the new settlement is a permanent injunction against the defendants.

In addition to the $2.2 million penalty, the defendants have been asked to sell a car and cough up the net proceeds from the sale. “It’s not uncommon for us to seize assets including automobiles,” said Dorman, noting, “It’s an expensive car.”

Defendant Cleveland also is required to pay an additional $667,288 to taxing authorities according to the settlement.

The defendants in the debit card marketing settlement used affiliate marketing programs and other marketing techniques to produce consumer leads for financial services products. Industry watchers say the FTC has set its sights on several players in the lead generation sector. Lead gen firm Adteractive agreed to pay the commission $650,000 in civil penalties for alleged deceptive ad practices in November 2007, and some believe more lead gen industry-related settlements will follow.

Funds from the settlement will be used to pay associated fees, expenses, and liabilities, and to provide “equitable relief, including but not limited to restitution to consumers, and any attendant expenses for the administration of such equitable relief,” according to the court document.