Small businesses and nonprofits should never be the recipient of another company’s deceptive practices. An action by the Federal Trade Commission has challenged the practice of companies that allegedly provide quotes for “risk-free” trade publications and then charge hefty fees for unauthorized orders. But it’s more than that. If businesses refuse to yield to demands for payment, the defendants turn the accounts over to debt collectors, the FTC said, and the FTC has also sued debt collectors. Notably, the defendant had received warnings about his behavior for several years.
Pitches begin when telemarketers place calls to businesses or nonprofits (including schools, fire departments, and even police stations) on behalf of America’s Future Systems, which uses names like Progressive Business Press or the Education and Employment Law Center. The caller claims to have a question or wishes to share information with the office leader on a specific topic – such as human resources, employment law, or environmental compliance. Even when the receptionist asks “do you sell anything?” their answer is “no.”
Once they get employees on the phone, telemarketers offer a sample of a newsletter or book “risk-free” so “you can see if it fits with what you’re already doing there.” Telemarketers may Mentioned the subscription fee, but said they would follow up to see if employees liked the sample. The telemarketer also asked for the employee’s date of birth “just to verify that I’ve talked to you.”
According to the FTC, employees were left with the impression that they were given free, no-obligation samples to review. So people are shocked when an invoice shows a balance of hundreds of dollars. The invoice did not include information on how to cancel and did not provide a phone number or email address, the complaint said. What’s more, the FTC said the defendants sent these invoices without asking employees whether they had the authority to incur financial obligations on behalf of their employer. Even when companies find ways to get defendants to stop, the requests are often ignored, the complaint alleges.
So more newsletters followed, and with them more invoices, some of which provided employees’ dates of birth as so-called proof of orders. If a business refuses to pay, they are eventually threatened and said the account will be turned over to a collection agency. According to the FTC, this was a promise that the defendants frequently kept, and that’s when defendant International Credit Recovery, also known as ICR, came into play. The FTC alleges that ICR made false representations to get people to pay, including that the debt was valid, that they were legally obligated to pay, and that failure to pay would result in legal action or have a negative impact on their credit ratings.
You’ll need to read the indictment to learn about the allegations of other illegal conduct, but the FTC says the Progressive Business Publications defendants misrepresented the trial offer, failed to clearly disclose negative option terms, and violated the Disorderly Goods Act. The lawsuit alleges that the ICR defendants used false representations to induce consumers to pay.
There is another reason to read the complaint in this case. According to the report, there has been a long history of consumer complaints against Progressive Business Publications, including a settlement with the U.S. Postal Service, two Better Business Bureau alerts on the company’s public BBB information, and a defamation lawsuit filed by the company against the BBB. The lawsuit resulted in a jury ruling in favor of BBB.
The FTC said ICR has also been the subject of serious consumer dissatisfaction, including the unenviable “honor” of being the region’s top generator of BBB complaints. Additionally, ICR was the subject of an alert from the USDA regarding its collection practices against publication businesses and other entities claiming they were not ordered.
The case is pending in Pennsylvania federal court. But you can always take the following steps to help protect your business.
Remind your employees. Take a moment to discuss with your staff how such an operation would work. The FTC has a pamphlet called “Scams and Your Small Business” to help you understand common B2B scams. Even if you don’t have a purchasing department, tell your team to have one person handle cold calls. We advise skeptics to insist on taking a close look at every possible gift.
Spread the word. Nonprofits have also been targeted, but educating volunteers who work different hours can be difficult. If you are active in organizing in your community, discuss B2B deception in a newsletter or email to volunteers and post a warning on every table where the phone rings. Too busy to draft something yourself? You are welcome to obtain relevant content from the FTC Handbook.
Report questionable practices to the Federal Trade Commission. When you discover a scam, please contact us and provide any information you have.
