This week, the Federal Trade Commission announced that it had charged a group of marketers with debiting more than $40 million from consumer bank accounts. The consumers were unknowingly enrolled in memberships to three online discount clubs. The FTC alleges that the defendants targeted consumers utilizing websites and telemarketing calls that pretended to offer cash advance and payday loans.

The consumers thought they were applying for loans when providing the accused with their bank account information. Then, the defendants used the information to enroll the victims in an online coupon service with monthly fees. The FTC accuses the group of using electronic remotely created checks to withdraw various amounts from the victim’s accounts.

An initial fee ranging from $49.89 to $99.49 was withdrawn. Then, the consumer’s account would be charged $14 to $19.95 each month. According to the FTC, hundreds of thousands of consumers called the defendants to cancel their memberships and attempt to acquire refunds. Others notified their banks of the unauthorized debits. During the operation, more than three-quarters of the transactions were rejected by banks. More than 99.5% of those that enrolled never accessed any of the clubs’ coupons.

The alleged scheme was initiated in 2010 when EDebitPay LLC (EDP), William R. Wilson, and Dale Paul Cleveland created and launched the Savings Pays Club. The couple was already facing contempt charges for violating a 2008 settlement order with the FTC. In 2012, EDP launched a new edition of the discount club called Money Plus Save.

EDP sold its assets in 2013 to Hornbeam, which launched a third version of the discount club called Saving Makes Money. Hornbeam continued charging customers that had enrolled in the two prior versions. iStream Financial Services Inc. was responsible for processing all of the payments from November 2010 to April 2016.

The company is accused by disregarding the high return rates and other fraud indicators, while also allowing Hornbeam to manipulate its high return rate by giving the company the ability to send thousands of remotely created checks to itself. The following defendants are named in the case.

  • EDebitPay
  • Dale Paul Cleveland, William Wilson, Keith Merrill
  • clickXchange Media LLC
  • Platinum Online Group LLC doing business as Premier Membership Clubs
  • Hornbeam
  • Cardinal Points Holding LLC doing business as Clear Compass Digital Group
  • Gyroscope Management Holdings LLC
  • Jerry L. Robinson, Early G. Robinson, James McCarter, Mark Ward
  • Richard Joachim, Chet Andrews, Kris Axberg
  • iStream Financial Services Inc.

All defendants have been charged with violating the FTC Act. Simultaneously, EDP and Hornbeam faces charges of violating the Restore Online Shoppers’ Confidence Act. Mark Ward has been charged with violating the Telemarketing Sales Rule. The case is ongoing and will be decided by a court of law.

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