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FTC cuts off credit card processing to phone spam operators after MasterCard cites fraud

By , CardRatings contributor
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Federal investigators widened the hunt for companies suspected of scamming consumers with promises of credit card rate reduction services. According to officials at the Federal Trade Commission, eight more defendants have joined the original list of seven alleged fraudsters accused of using robocalls to sign up new members for a program called "Treasure Your Success."

In a statement to reporters, FTC officials described "Treasure Your Success" as a robocall operation it halted in November 2012. Consumers who answered their phones heard a recorded voice claiming that "Rachel from Cardholder Services" had an "important message" for them. Participants in the program paid advance fees as high as $1,593.93, with the expectation that they would receive zero APR balance transfer offers or other deals that would significantly reduce their credit card finance charges.

The FTC's amended complaint targets the company that processed credit card payments from "Treasure Your Success" participants. Investigators allege that Newtek Merchant Solutions opened merchant accounts for TYS' operators despite the companies' high chargeback rates, fraud alerts and other potential signs of consumer abuse. FTC officials noted that Newtek processed as much as $2.8 million in transactions even after MasterCard listed TYS on its fraud monitoring program.

Cooperating with state attorneys general in Arizona and Arkansas and state enforcement agencies in Florida, the FTC accuses the companies behind "Treasure Your Success" of violating the Telemarketing Sales Rule and the Do Not Call Rule. Investigators say that Newtek's merchant systems billed consumers without their authorization, even though TYS sales agents promised not to charge fees until participants saw savings appear on their credit card statements.

Although the Better Business Bureau and U.S. Senator Charles E. Schumer have warned consumers about "phone spam" operations since at least 2009, FTC officials say that new technology makes it easier for fraudsters to spoof legitimate numbers on caller ID systems. Offshore robocall operations have become harder to detect and can reach more consumers by randomly guessing phone numbers. The FTC's complaint notes the organization's desire to discourage future fraud operations by disabling their ability to process consumer payments.

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