FTC accuses 'credit card' companies of defrauding consumers

 The Federal Trade Commission has filed an appeal in federal court concerning the credit card operations deceptive marketing. The complaint alleged that a catalog credit card operation deceptively marketed its card, failed to honor its refund policy, and charged up-front fees for a guaranteed line of credit. The accused, who charged consumers hundreds of dollars in fees for the card, voluntarily agreed to an order that prohibits the practices asserted in the complaint pending trial. The FTC insists on permanently stop of the unlawful practices and make the defendants provide refunds to consumers.

According to the accusation, in mailers sent to consumers with credit problems, the defendants offered the consumers to “build” their credit by using a “Pre-Approved” “Platinum-level” credit card with a “GUARANTEED” $7,500 credit line and a cash advance benefit. The fraud consisted in the fact that appearing as a regular credit card it could be used only to purchase products from the defendants’ catalog, and only for part of the product purchase price. The defendants charged from consumers’ bank accounts 30 percent of each purchase combined with shipping costs for products sold at greatly expanded prices. Consumers did not get a clear information that a 30 percent down payment would be required, that $397 in fees ($79 processing fee, $120 activation fee, $198 annual fee) also would be charged from their bank accounts, that the “cash advance” was really an opportunity to apply for a payday loan from a third-party lender, and that card users could not “build” their credit because their payment history was not reported to credit reporting agencies.

The complaint also says that the defendants were ready to refund the $120 fee to consumers who returned the card and catalog within 30 days, but the defendants often failed to deliver the catalog within the refund period. The details were often hidden by the defendants until consumers provided their bank account number, and then quite little information was given. 

The accused violated the FTC Act and the FTC’s Telemarketing Sales Rule (TSR) by falsely representing that the card could be used to fully finance purchases; that it would provide access to a no-fee, low cost, or guaranteed cash advance benefit; and that consumers could improve their credit ratings by using the card. They also did not inform that they would debit from consumers’ bank accounts the advance fees, a non-refundable annual fee, and 30 percent of a product’s price plus shipping costs. In the end, the defendants falsely promised to refund the $120 activation fee to consumers who returned the card and catalog in timely fashion. 

Among the accused there are Low Pay, Inc., lowpaycard.com, and mylpcard.com; LP Capital Holdings, Inc.; Century Luxury, Inc.; the Mardan Afrasiabi Living Trust; Mardan M. Afrasiabi; and Ramin Rahimi.