Continuity Billing Scams

Dec 19, 2011 by

The term “continuity billing” covers swindles focused on 1) inducing consumers to provide a credit card number, and then 2) through deceptive if not outright illegal means, obtaining the appearance of the consumer’s agreement to a hefty monthly fee. The recurring charges—typically $40-$60 per month—are made automatically to the consumer’s credit card account, without further notice or authorization.

 

Mrs. Nevada 2006 -- The Queen of Credit Card Scams?

Beauty Is a Beast

In one case and according to the Federal Trade Commission, former Mrs. Nevada and aspiring entrepreneur Juliette M. Kimoto, along with her business associates, scammed half a million people for a total of $33.4 million through two continuity billing rackets.

Through an operation called Grant Connect, Mrs. Kimoto and her fellow scammers advertised access to federal grants, claiming among other things “$15 Billion of Free Money Available.” Many unwitting consumers authorized credit card charges of $0.99 or $2.78 to obtain the “free grant program.” The modest fees charged for the grant access program were merely an inviting ruse to obtain credit card numbers. In the offer’s fine print, takers were told that a recurring monthly charge of $39.95 would be made to their credit cards if they did not cancel the program within a limited time period.

A second scam—which raked in $29.1 million over 18 months—induced consumers to pay fees for what the scammers called “First Plus Platinum Cards.” Enrollees were actually signing up for a $7,500 credit line—not a credit card—that could be used only to buy merchandise offered by the company! Once again, those duped by the solicitation were hit with high monthly fees.

In October the FTC won a $29.8 million judgment against Mrs. Nevada’s gang. The mother of six and Latter Day Saint was compelled to turn over more than $90,000 and personal assets including a 1967 Camaro. Entrepreneurial creativity appears to run in Mrs. Kimoto’s family: Her husband Kyle is serving a 29-year prison sentence for engineering a $43 million scam of his own.

Protect Yourself

An FTC Consumer Alert cautions consumers about “free trials,” often the tool used to initiate a continuity billing or similar scam. From the Alert:

Whether it’s for a teeth whitener, vitamin or kitchen gadget, all free trials eventually end. And typically, if you don’t want to buy what you’ve tried, you need to cancel or take some other action before the trial is up. If you don’t, you may be agreeing to buy more products.

But some dishonest businesses make it tough to cancel, hiding the terms and conditions of their offers in teensy type, using pre-checked sign-up boxes as the default setting online, and putting conditions on returns and cancellations that are so strict it could be next to impossible to stop the deliveries and the billing.

Or, the “free trial” might come with a small shipping and handling fee. You think you’re only paying a couple of dollars, but you’re really giving over your credit card information, resulting in much higher charges after the trial.

If you’ve been victimized by a scam, tell the FTC. It does act against companies and individuals when consumer complaints reveal a pattern of deception. Just ask Mrs. Nevada 2006.

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