Attorney General's News Release

December 20, 2001

Court order clears way for Missouri's share in $8.3 million for consumers in 48-state investigation led by Nixon

St. Louis, Mo. — A St. Louis circuit court judge today approved Missouri's portion of a nationwide settlement requiring a group of Florida-based buying clubs to pay more than $9 million to resolve allegations that they deceived consumers nationwide into signing up for "free" trial memberships and then placed unauthorized charges on the consumers' credit cards.

The 48-state effort was led by Missouri Attorney General Jay Nixon — who last year became the first state attorney general to sue Triad Discount Buying Service, the other clubs and operator Ira Smolev — and Florida Attorney General Bob Butterworth. The investigation resulted in 48 states entering into the agreement, each of which must be approved by courts in those states. Some $8.3 million will be earmarked for restitution to consumers and $750,000 will cover investigative costs by the states. Missouri's settlement was approved this morning by St. Louis City Circuit Judge David Mason.

"By going after a business that was one of the worst offenders in the practice of 'capturing' consumer credit card information in order to make unauthorized charges, we're serving notice on anyone else who does it that this new type of consumer fraud will be dealt with aggressively," Nixon said.

Nixon said consumers who called a toll-free number advertised on television to purchase various products with a credit card ended up with an unauthorized charge for a buying club membership for an entire year — at $96 — on their credit or debit cards. Even when the telephone operators described the buying club to the consumer, the consumer was never asked for permission to charge the card, Nixon said. In addition, charges were automatically reimposed annually, and consumers who called to cancel the memberships often were frustrated by busy signals.

"Consumers found themselves entangled in a web of unending credit or debit card charges, just because they called a toll-free number wanting to buy a cheap kitchen gadget late one night," Nixon said.

Nixon said many Missouri consumers who tried to obtain refunds for the memberships were unsuccessful. An estimated 5,200 Missourians were victims of the scheme; approximately 275,000 consumers nationwide who filed complaints against Triad companies may be eligible for partial membership refunds under the agreements.

The agreements specifically cover Smolev, in addition to the Triad companies he operates; several of the companies currently are in bankruptcy court. The defendants are required under the agreements to make substantial changes in their marketing practices in order to comply with the law and avoid future deceptions. The orders include prohibitions against misrepresenting "free" offers of goods or services and failing to disclose any consumer obligations by accepting trial offers.

The companies also are prohibited from obtaining through third parties consumers' personal billing information without authorization, from disseminating the information, and from signing up new members or renewing existing memberships without express, verifiable authorization from the consumer. Smolev must maintain a $1.5 million escrow account before he markets goods or services to the general public or assists others engaging in telemarketing.

Inquiries from consumers should be directed to consumer@ago.mo.gov or 1-800-392-8222 (from within Missouri) or 573-751-3321 (outside Missouri).

All media inquiries should be directed to the Communications Office.

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