Washington, D.C. – A U.S. District Court has issued a temporary restraining order stopping two telemarketing companies from operating a massive telemarketing scheme that used random, pre-recorded phone calls to deceive consumers in the U.S. and Canada into thinking that their vehicle’s warranty was about to expire.
The U.S. Federal Trade Commission (FTC) asked the court court to shut down the campaign, which targets random numbers, including those on federal “do not call” registries.
In two related complaints, the FTC took action against both the promoter of the warranties, and the telemarketing company that it hired to carry out the campaign. The random calls use a pre-recorded message to warn consumers that their warranty is about to expire, and gives them the opportunity to speak to live telemarketers, who pressure them to purchase extended service contracts.
“This is one of the most aggressive telemarketing schemes the FTC has ever encountered,” said FTC chairman Jon Leibowitz. “I’m not sure which is worse, the abusive telemarketing tactics of these companies, or the way they try to deceive people once they get them on the phone. Either way, we intend to shut them down.”
Five telephone numbers associated with the defendants have generated a total of 30,000 do-not-call complaints. Consumers have received the calls at home, work and on their cell phones, sometimes several times in one day. The FTC said that businesses, government offices and even 911 dispatchers have been subjected to the calls.
The pre-recorded message tells consumers that their vehicle warranties are about to expire, and they should “extend coverage before it is too late.” Pressing a number passes them to a “warranty specialist” who, the FTC said, misleads them into believing that the company is affiliated with the dealer or manufacturer of the consumer’s vehicle. They then try to sell consumers a service contract for between US$2,000 and $3,000, which is falsely portrayed as an extension of the vehicle’s original warranty. The seller of extended auto warranties sued by the FTC allegedly took in more than $10 million on the sale of the contracts.
The complaints charge that the practices violate the FTC act, and that the defendants have also violated the FTC’s Telemarketing Sales Rule by calling consumers whose numbers were on the National Do Not Call Registry. The complaints further charge that the defendants violated the rule by calling consumers who had previously asked not to be called, by concealing their phone numbers from caller ID, by failing to identify themselves to consumers called, and by failing to disclose that the call was a sales pitch.
In addition to the temporary restraining orders, which halt the practices while the cases proceed, impose an asset freeze on all defendants, and put two of the corporate defendants under the control of court-appointed receivers, the FTC is also seeking a permanent injunction that would force the defendants to give up their gains, to be used for consumer redress. The temporary restraining orders are in effect until a preliminary injunction hearing set for May 29, at which time the judge will reassess what type of relief should remain in place until the case proceeds to trial.
“Today the FTC has disconnected the people responsible for so many of these annoying robo-calls,” Leibowitz said. “We expect to see a dramatic decrease in deceptive auto warranty calls, but we are still on high alert.”