FTC Takes ISP to Task Over Telemarketing

The complaint charged that SBA Online unfairly billed consumers without their express informed consent, in violation of the FTC Act and that the defendants charged some consumers who said they were not interested in the service and ended the sales call. In other instances, the defendants allegedly asked consumers to review a packet of written information and then contact them if they were interested in the offer. When consumers agreed simply to review the information, the defendants allegedly never sent it, but began billing consumers anyway. Finally, according to the FTC, consumers often had trouble contacting the defendants to cancel the services and obtain a refund and that in many cases the defendants agreed to cancel the services but refused to refund consumers’ money or agreed only to provide partial refunds.

Terms of the Final Order: The final order filed with the court prohibits the defendants from engaging in the deceptive practices alleged in the Commission’s complaint. Specifically, it bars them from making misrepresentations in the sale of ISP services, whether they are offered via telemarketing or any other means. It details specific disclosures the defendants must make to consumers during sales pitches, including who they are, that the call is a sales call, and what they are selling. It also bars the defendants from misrepresenting anything about the sales offer, including negative-option features and cancellation terms.

The order next prohibits the defendants from billing consumers, or receiving money from them, without their express informed consent, and requires them to record the consumers’ consent to be billed during the sales pitch. The defendants also are barred from selling or otherwise transferring their customer lists to anyone else.

Next, the order provides for continued consumer redress in the same way it has occurred since the court entered the preliminary injunction against the defendants. Under the redress program, consumers are eligible to receive a refund or credit directly from the defendants, from their local telephone carrier, or from the billing company. The order also provides for the use of an impartial “Referee” in cases where there is a conflict between what the consumers and the defendants claim is owed as a refund.

Finally, the order contains a clause that would allow the FTC to reopen the case if defendant William Douglas Rhodes – the companies’ principal – is found to have misrepresented his financial condition. In such a case, he would be immediately subject to a $33 million court judgement. The order also contains monitoring and record keeping terms to ensure the defendants’ compliance.