October 24, 2001

OCTOBER 24, 2001

Carlos Diaz, Assistant Attorney General 207-822-0498

Attorney General Steven Rowe announced today that his office has agreed to join a multi-state settlement with Triad Discount Buying Service, Inc., a Florida-based buying club, along with its owner, Ira Smolev, and several related companies, over claims that Triad used telemarketing and credit card fraud to deceive consumers into purchasing club memberships.

Approximately 40 states joined the settlement, which is similar to a separate agreement between Triad and the Federal Trade Commission. The settlement involves payment of $8.3 million in restitution to approximately 276,000 consumers nationwide, and payment of $750,000 to the participating states for investigative costs. Approximately 1,100 of those consumers are from Maine. Maine will receive $2,500 in investigative costs.

The states' lawsuits charged the Triad companies with deceptively signing up buying club members through third-party telemarketers. A number of Maine telemarketing firms are known to have sold Triad memberships. Consumers who called to order a product advertised on television or radio were told that they could also receive a free 30-day membership in a buying club and enjoy big savings on other items. The consumer's credit card number, having already been "captured" from the purchase of the original product, was then charged for buying club membership fees, without the consumer's knowledge or authorization. The fee ranged from $49.00 to $96.00 per year, and renewal fees were charged annually. An inconspicuous notification of the charge was mailed to the consumer in a packet of promotional materials, indicating that the consumer would be charged unless the consumer cancelled the membership within thirty days.

The settlement also involves injunctive relief, requiring Smolev and the Triad companies, which are currently in bankruptcy court, to drastically revise their marketing practices to avoid future deceptions. The injunction prohibits the Triad companies from misrepresenting "free" offers of goods or services and failing to disclose any obligations of consumers in accepting trial offers. The companies are also prohibited from signing up new members or renewing existing memberships without express, verifiable authorization from the consumer, and from obtaining or disseminating the consumer's personal billing information, including credit and unique identifying information, without authorization.

"By joining this settlement we have gained the ability to enforce the injunction in Maine courts, rather than relying on other states or the FTC to protect Maine consumers," Attorney General Rowe said. The Attorney General expressed his appreciation to the states of Florida and Missouri, which acted as the lead states in the multi-state investigation and settlement.

Partially in response to the telemarketing done by Triad, the Maine Legislature last spring passed a new consumer protection law to regulate "negative option sales," so-called because the sale is completed when the consumer fails to act to prevent it. Telemarketers may no longer charge a consumer for a good or service after a trial period unless they send the consumer, at least 15 days prior to any charge, a clearly written description of the good or service being purchased, the amount to be charged, and the calendar date the consumer will be charged for the good or service if the consumer does not cancel the sale. This notice also must provide the specific steps by which the consumer can cancel the agreement by both mail and telephone. Failure to provide the required notices constitutes a violation of the Unfair Trade Practices Act, which can be enforced by the Attorney General or by private parties.

The new law does not apply to sales under $25 or to sales of credit, insurance, or securities.