FTC Sues to Halt Car-Warranty Phone Spam
MAY 14, 2009, 3:42 P.M. ET
BY JOHN KELL
online.wsj.com
The Federal Trade Commission is seeking to shut down a telemarketing campaign that has been making hundreds of millions of allegedly deceptive "robocalls" to sell vehicle warranty extensions.
In two related complaints filed in federal court on Thursday, the FTC said it was taking action against the promoter of the phony extended auto warranties, as well as the telemarketing company that it hired to carry out its allegedly illegal campaign.
The FTC filed complaints against four companies and a handful of individuals related to their operations.
"This is one of the most aggressive telemarketing schemes the FTC has ever encountered," said FTC Chairman Jon Leibowitz.
The agency, which helps prevent fraudulent and deceptive business practices, said the robocalls have prompted complaints from consumers who are either on the "Do Not Call" registry or asked not to be called. According to the agency, five telephone numbers associated with the defendants have generated 30,000 complaints.
The calls warn that a car warranty is about to expire. If consumers answer the call, a "warranty specialist" would mislead them into believing their company was affiliated with an auto dealer or manufacturer and try to sell a service contract between $2,000 and $3,000, according to the FTC. The seller of these false warranties allegedly took in more than $10 million as a result of the phony service contracts.
The FTC's complaint alleges violations under the FTC's Telemarketing Sales Rule by calling consumers who were listed on the national "Do Not Call" registry. It also claims other deceptive practices, including concealing their phone number, failing to identify themselves to consumers and failing to disclose the call was a sales pitch.
The complaint filed Thursday names Florida-based Voice Touch Inc. and two of its principals, James and Maureen Dunne. It also names Illinois-based Network Foundations LLC and a principal in that company, Damian Kohlfeld.
A second complaint names Florida-based Transcontinental Warranty Inc. and the company's president and chief executive, Christopher D. Cowart. The FTC was immediately unable to provide contact information for the defendants.
The FTC is also seeking temporary restraining orders to freeze assets and halt the companies operations while the cases proceed.
Write to By John Kell at john.kell@dowjones.com
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