FTC sues firms over 'robo-dialing' Companies ignored 'do not call' list, used other tactics to sell extended auto-service contracts, suit alleges.

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FTC sues firms over 'robo-dialing' Companies ignored 'do not call' list, used other tactics to sell extended auto-service contracts, suit alleges.
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The Federal Trade Commission filed two lawsuits Thursday against companies accused of using so-called "robo-dialers" to place several million unsolicited phone calls to consumers in order to sell them extended auto-service contracts.

The suits, filed in federal court in Chicago, target Transcontinental Warranty Inc., a service contract broker based in Fort Lauderdale, Fla.; and Voice Touch Inc., a Daytona Beach, Fla., company that had previously worked for Wentzville-based broker US Fidelis.

Voice Touch was sued for its work on behalf of Transcontinental Warranty. The suits allege the companies cold-called cell phones, called consumers whose numbers are listed on the federal Do-Not-Call Registry and used "spoofing" technology to conceal the origin of the calls from Caller ID systems.

The FTC seeks a restraining order that would prevent the companies from making such calls.

Industry sources say the arrangement between Transcontinental Warranty and Voice Touch isn't unusual. Generally, they say, consumers reached by telephone are screened by an automated system operated by a telemarketing firm. Only after consumers indicate an interest in buying a service contract are they connected to brokers' call centers in the St. Louis area and elsewhere.

Federal Trade Commission Chairman Jon Leibowitz said in a conference call with reporters that the FTC had received "tens of thousands" of consumer complaints about the service-contract industry, including about 10,000 that were filed this week after the FTC solicited complaints on its website.

Although the suits don't directly address the practices of any businesses in the St. Louis area, where much of the service-contract industry is based, the lawsuits could prove troubling for area firms.

In addition to allegedly violating telemarketing laws, the FTC alleges that Transcontinental Warranty and Voice Touch broke the law by marketing service contracts as "extended warranties" and by pretending to know whether consumers' factory warranties had expired or were about to expire. Those marketing tactics are, in fact, standard practice throughout the industry, according to former employees from several area service-contract brokerages.

The suits also could draw attention to telemarketing tactics previously used by US Fidelis, which says it hasn't made unsolicited sales calls since last summer.

From April 2007 to February 2008, US Fidelis - then known as National Auto Warranty Services - had an exclusive contract with Voice Touch. During that time, Voice Touch made about 1 billion sales calls on behalf of US Fidelis, said James Dunne, the owner of Voice Touch.

Even though US Fidelis says it no longer cold-calls potential customers, consumers continue to complain on websites such as ripoffreport.com about the company's telemarketing. The company says that it is a victim and that other brokers are pretending to be US Fidelis over the phone.

On April 7, US Fidelis sued up to 10 as-yet unidentified companies or individuals for allegedly using "deceptive and abusive telemarketing practices" and misleading people into believing US Fidelis was behind unsolicited sales calls.

This week, the FTC has been under pressure from U.S. Sens. Charles Schumer, D-N.Y., and Mark Warner, D-Va., to do something about the unsolicited sales calls. Schumer and Warner say they've received robo-calls on their cell phones about auto service contracts.

Although the Better Business Bureau welcomes enforcement of telemarketing laws, that watchdog group is more concerned about what happens "when these calls turn into sales," said Michelle Coury, president and chief executive of the BBB in St. Louis, which has waged a campaign against the service-contract industry in recent months.

The BBB says service-contract brokers mislead consumers about coverage offered by service contracts and use deceptive, high-pressure tactics to close sales. Consumers have complained that claims that should be covered by the contracts are rejected, and that - after cancelling coverage - companies don't give full refunds.

Eileen Harrington, the acting director of the FTC's Bureau of Consumer Protection, said regulators would investigate other consumer complaints about the service-contract industry.

Dunne, Voice Touch's owner, said he was unaware of the lawsuits. He said that he merely sold long-distance service to service-contract brokers and that his company went out of business about two months ago. The Federal Trade Commission is "going after the smallest guy in the food chain," he said.

Dunne says his company placed about 1 billion sales calls on behalf of US Fidelis.

Copyright 2012 stltoday.com. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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