Ftc Cracks Down On Phone Scams Investors Warned About Deals For 900-Number Phone Lines
The Federal Trade Commission wants small investors to be wary of scams that promise easy profits from 1-900 telephone numbers, calling them “the latest and hottest business opportunity fraud” going today.
The federal consumer protection agency has sued seven 900-number marketers, saying they enticed business investors with blatantly unrealistic earnings claims or failed to follow federal disclosure requirements for franchise business offerings. The lawsuits seek to halt allegedly deceptive sales practices and force companies with violations to issue refunds.
The cases are the latest in a recent series of FTC initiatives designed to alert consumers to growing fraud in telemarketing and franchise scams - particularly those that exploit the infatuation with high technology.
In the 900-number crackdown, dubbed Project Buylines, the FTC charged that scam artists are falsely promising that investors can reap “effortless” profits of up to $200,000 a year, by buying the right to operate a pay-per-call 900-number recorded information service. The info lines offer everything from horoscopes to sports scores to phone sex.
In many cases, the FTC said, investors are misled about the expense involved in advertising their 900-number service, are given unrealistic profit expectations, and often make little or nothing from the business.
Jodie Bernstein, director of the FTC’s Bureau of Consumer Protection, said Project Buylines grew out of an earlier FTC probe of similar false claims for franchise businesses that sell vending machines or display racks.
During a follow-up to the vending fraud investigation, the agency checked classified ads for business opportunities, where many scam artists offer their wares. “We found far fewer ads for vending opportunities,” Bernstein said, “but the number of ads for 900-number business opportunities is skyrocketing.”
The FTC warned consumers to be skeptical of opportunities offering big profits with little effort or investment. The agency said federal franchise law requires legitimate companies to provide detailed information about the business, its officers, its financial history, its other franchisees. The law requires substantiation for earnings claims.
“Consumers thinking of investing in a franchise-type business opportunity should view a company’s failure to provide the extensive prepurchase information required by the rule as a harbinger of fraud,” Bernstein said.
In January, the FTC and a group representing 20 state securities regulators unveiled a related initiative, filing lawsuits aimed at shutting down 85 high-pressure investment boiler rooms that pitched more than $250 million worth of largely worthless stakes in 900-number telephone partnerships federal paging licenses.