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February 15, 2005

Electracash, Inc. Agrees to Stop Processing Withdrawals for Telemarketing Scams

Miller said: "We commend Electracash. Our goal is to deny access to a crucial tool of Canadian telemarketing schemes that target low-income and older Iowans - companies processing automatic withdrawals from victims' bank accounts for the con-artists."

DES MOINES.   Attorney General Tom Miller said today that a "third-party processor" that handled electronic withdrawals from the bank accounts of Iowa victims of Canadian telemarketing schemes has agreed to halt any processing of withdrawals for such schemes and to take strong, proactive measures to prevent facilitating fraudulent schemes.

"Many big, fraudulent telemarketing schemes now operate out of Canada," Miller said, "and many count on U.S. third-party processors to arrange withdrawals from victims' bank accounts. We aim to nullify that crucial tool," he said.

"In this instance, Electracash, Inc., a third-party ACH or Automated Clearing House processor, has stepped up to the plate and agreed to take many positive steps to avoid processing withdrawals for fraudulent schemes," Miller said. Electracash, Inc., is located in Signal Hill, California. The agreement is in the form of an "Assurance of Voluntary Compliance" between the company and Miller's Office.

"Our position is that the law requires ACH processors NOT to assist any telemarketer when the processor knows or should have known that the telemarketer is engaged in deception," Miller said. "That's why we are very pleased that Electracash has agreed to investigate and screen potential clients in advance, monitor their clients' practices, do audits when necessary, and cut off clients that appear to be fraudulent." [See below for chart showing how con-schemes sometimes use the ACH system.]

Miller said Electracash, Inc., also has paid a total of $15,774 that was mailed to 56 Iowans yesterday - victims of a telemarketing scam that hit Iowans last year. "Electracash did not perpetrate the scam," Miller emphasized, "but the con-artists used Electracash to access people's bank accounts through the ACH system. Now Electracash is taking steps to ensure that its facilities are not used by such schemes, and that is going to help."

Miller said the underlying scheme was perpetrated by Xtel Marketing, Inc., doing business as "Med Supply" and "Millenium [sic] Consulting."

"Med Supply" and the related businesses:

Miller said the U.S. Federal Trade Commission took action against the "Med Supply" companies in November 2004. According to an FTC press release dated November 22, Med Supply "cold-called consumer across the United States and, masquerading as Social Security or Medicare representatives, told consumers that they must provide bank account information or risk losing their Social Security payments." The FTC also said the companies sometimes told consumers they would enroll them in a new Medicare insurance program providing discounts on medications and eyeglasses. Click here for the FTC "Med Supply" news release, Nov. 22, 2004.

"Most Iowa consumers were debited $299 by Med Supply via Electracash, Inc.," Miller said. One Iowan is receiving a refund of $329, ten are receiving $199, and 45 are receiving $299, he said. Checks were mailed yesterday and likely will reach consumers today and tomorrow.

One couple joined Miller at the news conference, Helen and Harry Russell of Des Moines, and they received their check for $299. The Russells noticed the "Med Supply" billing, and disputed it vigorously. Miller said other victims might not even have realized they were being billed or noticed the debit from their bank account.

"In our experience, telemarketing con-artists sometimes deceive people into giving some type of authorization," Miller said. "In other cases, they may just charge consumers no matter what the consumers say. It's another very good reason to examine your bank account statements every month."

The Consumer Protection Division of Miller's office contacted Electracash and called attention to the fact that during fifteen months of ACH processing for "Med Supply" / "Millenium" there was a very high 44% "return rate" out of the 3,129 transactions processed nationwide.

The ACH or Automated Clearing House Network:

Electracash will investigate potential merchants before granting them access to the automated withdrawal network, they will monitor their clients, and they will cut off any who have a high rate of returns or complaints that suggest fraud.

Electracash also agreed not to do any processing for "restricted businesses" selling credit-related goods or services, supposed anti-telemarketing devices, or identity theft packages.

Miller said his office is continuing to focus on companies that facilitate telemarketing schemes or other scams. "In this instance, our goal is to deny access to a crucial tool of Canadian telemarketing schemes that target low-income and older Iowans - companies processing automatic withdrawals from victims' bank accounts for the con-artists. We also are looking at others who might facilitate scams, such as list brokers or other links in the financial chain," he said.

"We need to enlist the cooperation of legitimate businesses that are in a position to deny con-artists access to the tools they need to work their fraud," he said.

The Iowa Attorney General's Office has been a leader for many years in combating telemarketing fraud. "It can harm anyone, but it tends to hurt older Iowans most of all, and we don't look kindly on that," Miller said.

Tips to Avoid Telemarketing Fraud:

Miller offered several tips to avoid telemarketing fraud:

  • Keep your account information private. Don't give out bank or credit account numbers unless you made the call and you know who you are dealing with.
  • Examine your bank statement every month. Look for anything unauthorized or unwanted. Dispute any incorrect charges. If necessary, file a complaint with the Attorney General.
  • Put yourself on the FTC's "Do Not Call" list - that will help reduce unwanted calls (but some con-artists will of course ignore it and call you anyway.)
  • Resist high pressure to make a quick decision. Take your time - insist on written information in advance -- or just hang up. You don't need to be polite if you suspect a scam.
  • Be especially careful of "free trial offers" - some sellers charge credit cards automatically when the free trial period ends.

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