The Federal Trade Commission is requesting that a federal court shutter a two-year-old telemarketing campaign that has been sending hundreds of millions of allegedly deceptive “robocalls” to U.S. consumers.
In two related complaints, the FTC alleges that the defendants are running a vast telemarketing scheme that uses random, prerecorded phone calls to trick consumers into believing that their vehicle warranty is about to expire. Consumers who respond to the robocalls are pushed into buying vehicle service contracts that the telemarketers deceptively describe as an extension of the original manufacturer’s warranty.
According to the FTC, the campaign, which has allegedly generated more than $10 million in sales, has resulted in more than 30,000 complaints from people who are either on the Do Not Call Registry or who have requested not to receive further calls. In addition to consumers’ home and cell phones, businesses, government offices, and even 911 dispatchers have received the calls.
People who answer the phone get a message telling them that their vehicle warranty is about to expire and that they should “extend coverage before it is too late.” They are told to “press one” to speak to a “warranty specialist.” The “specialists” then mislead consumers into believing that their company is affiliated with the dealer or manufacturer of the consumer’s vehicle. They try to sell consumers a service contract for between $2,000 and $3,000, which they falsely portray as an extension of the vehicle’s original warranty.
The companies automatically dial every phone number within a particular area code and prefix in sequence, the FTC alleged. Consumers requesting that the calls be stopped often were met with “abusive behavior” or were simply hung up on, according to the agency. Some of the defendants used offshore shell corporations to try to avoid scrutiny, and a top official in the telemarketing company boasted to prospective clients that he could operate outside the law without being caught, the FTC’s court papers stated. This defendant also claimed that he makes 1.8 million dials per day and that he had done more than $40 million worth of dialing for extended warranty companies, including 1 billion dials on behalf of his largest client.
The FTC is charging the defendants with violations of the FTC Act and the agency’s Telemarketing Sales Rule by calling consumers whose numbers were on the National Do Not Call Registry, calling consumers who previously had asked not to be called, concealing their phone numbers so they would not show up on caller ID, failing to identify themselves, and failing to disclose that the call was a sales pitch.
The complaints, filed on May 14 in the Northern District of Illinois, name as defendants a Florida-based company called Voice Touch Inc., and two of its principals, James and Maureen Dunne. They also name an Illinois-based company affiliated with Voice Touch called Network Foundations, LLC, and a principal in that company, Damian Kohlfeld. The second complaint names a Florida-based company called Transcontinental Warranty Inc., which sells extended auto warranties, and the company’s president and CEO, Christopher D. Cowart.
Why it matters: If the FTC’s allegations are true, the robocall campaign violates a number of federal statutory provisions and agency regulations. Agency efforts to go after rogue telemarketers are a welcome development for legitimate marketers, who must contend with the bad press and consumer antipathy generated against all telemarketers as a result of such scams.