Miller said: "I commend First PREMIER Bank. The Bank's cooperation will help deprive fraudulent telemarketers of a technique they use in targeting low-income and older Iowans, namely, reaching straight into a fraud victim's bank account through automatic withdrawals."
DES MOINES. Attorney General Tom Miller said today that a South Dakota bank that processed electronic withdrawals from the bank accounts of Iowa victims of telemarketing schemes has agreed to adopt a set of proactive measures designed to screen out such operations and prevent facilitating fraudulent schemes.
"We are very pleased that First PREMIER Bank of Sioux Falls, SD, has agreed to take many positive steps to avoid processing withdrawals for fraudulent schemes -- scams such as illegal and deceptive telemarketing of credit cards for advance fees," Miller said.
"First PREMIER has agreed to screen potential clients in advance, monitor their practices, investigate warning signs, and stop processing for clients that appear to be deceiving consumers," he said. "We appreciate the Bank's leadership." The agreement is in the form of an "Assurance of Voluntary Compliance" between the Bank and Miller's office.
"In recent years telemarketing boiler-rooms operating out of the U.S. and Canada have increasingly used automatic withdrawals to get victims' money. Many schemes count on U.S. banks to gain entry to the system for making these withdrawals. Active monitoring by banks makes it harder for telemarketing con-artists, and that's an important development," Miller said.
"In our view, the law requires banks NOT to assist any telemarketer when the bank knows or should have known that the telemarketer is engaged in fraudulent conduct," he said.
Miller said his Consumer Protection Division worked jointly with the offices of the Minnesota and South Dakota Attorneys General in reaching the accord with First PREMIER. All three offices entered the same agreement with First PREMIER Bank. The Iowa and Minnesota Attorneys General initially contacted the bank in 2002 in connection with efforts to investigate the complaints of telemarketing fraud victims who had money extracted from their bank accounts. The agreement announced Wednesday also involved a total payment of $200,000 by the bank to be divided among the three states. The funds will be used to help cover costs of the investigation and consumer and industry education.
"Services provided by the bank to fraudulent operators created problems for consumers," Miller said, "but now the bank is part of the solution. We hope other banks and other participants in the ACH system - the network designed to allow for electronic withdrawals from bank accounts - will follow First PREMIER's lead in cracking down on schemes that victimize consumers."
Under the agreement, First PREMIER will investigate would-be clients before granting them access to the automated withdrawal network. Once a pre-screened business is granted access, First PREMIER will monitor the business's activities and cut off ACH processing services if the business develops a high rate of returned transactions or generates complaints that suggest fraud.
First PREMIER also agreed not to provide services to operations selling credit cards or offering loans for an advance fee.
Miller said the telemarketers involved in the underlying schemes that drew the attention of investigators included Rockwell Holdings, Inc., Hartford Auto Club, Premium Mega Saver, and Capital First Benefits. Miller said that many of the fraudulent telemarketers worked through an intermediary called a "third party processor," namely, Global eTelecom, Inc. ("GETI").
First PREMIER Bank was not directly involved with any telemarketing misconduct and assisted the Federal Trade Commission in connection with its investigation and prosecution of the telemarketers. Through the controls in place at the time, First PREMIER Bank identified the problem companies and ultimately stopped processing ACH transactions for them. The Bank responded to inquiries from the Attorneys General offices regarding the Bank's processing of the ACH transactions for the telemarketers in question.
Legal proceedings against the underlying telemarketing schemes:
Miller said federal authorities have taken action against various companies that channeled electronic withdrawals through First PREMIER. (Partial restitution to consumers from the underlying schemes resulted from these federal actions.) Rockwell Holdings, Inc., a Schaumberg, IL, telemarketing operation, was raided by the FBI in September 2001, about a month after First PREMIER stopped processing for Rockwell because of a sustained high rate of returned ACH transactions and a large volume of consumer complaints. Rockwell Holdings marketed credit cards for an advance fee, a practice that violates Iowa and federal law. The FBI's action was followed by civil enforcement actions by the Federal Trade Commission and the Illinois Attorney General.
In March 2004, the FTC announced settlement of a lawsuit against several other telemarketers for which First PREMIER performed ACH processing services, including Capital Choice Consumer Credit, Inc.; Millenium Communications and Fulfillment, Inc.; Ecommex Corporation; Hartford Auto Club, Inc.; and E-Credit Solutions, Inc. All of these operations were alleged to be part of a scheme centered on the unlawful marketing of credit cards for an advance fee of $199. Consumers who received anything at all for their money found that the credit cards were low-value secured cards, rather than the unsecured major credit cards they had been promised. In addition, consumers were subjected to unauthorized charges for various "up-sell" products, such as club memberships and telephone cards. The FTC's settlement included a judgment for consumer restitution of $36.7 million, but only a fraction of that is expected to be collectible.
In January 2005, the FTC announced settlement of a suit against the Assail Telemarketing Network, a group of telemarketing operations at least some of which received ACH processing services from First PREMIER Bank. Assail defendants also engaged in advance-fee credit card scams.
The ACH or Automated Clearing House Network:
Miller said his office is continuing to focus both on the fraudulent telemarketers themselves, and on legitimate businesses that facilitate telemarketing schemes or other scams. "Our ultimate objective is to protect consumers from telemarketing fraud. This obviously involves attacking the con-artists, but it also involves denying them access to the tools they use to work their frauds."
"Businesses that provide vital services to schemes that are manifestly fraudulent need to withdraw that support," Miller said. "For example, we also are examining the roles of those involved in creating and marketing lists of consumers who are then targeted by con-artists, as well as other links in the financial chain."
The Iowa Attorney General's Office has been a leader for many years in combating telemarketing fraud. "The elderly have long been targets of telemarketing fraud," Miller said," and that sad trend continues. Many recent scams also target low-income people desperate to obtain credit or improve their credit records. Everyone is a potential target, and has to be on guard."
Tips to Avoid Telemarketing Fraud:
Miller offered several tips for consumers 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 any unauthorized or unwanted charges, and dispute them. 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 of course will ignore it and call you anyway.) Go to www.donotcall.gov
- 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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Click here for a copy of the "Assurance of Voluntary Compliance" entered between First PREMIER Bank of South Dakota, and the Attorneys General of Iowa, Minnesota, and South Dakota.