State Contractor Pleads Guilty To Fraud And Failure To Pay Workers Approximately $300,000

Attorney General Spitzer today announced an agreement with a national direct marketer settling concerns that it duped consumers into purchasing credit card "protection plans" that provide little or no real value.

Metris Direct Services, Inc., which also does business as "Fraud Alert Services," settled charges of deceptive business practices and other violations of consumer protection laws and agreed to refund nearly $1 million to thousands of New Yorkers whose credit card accounts were illegally charged for the membership renewal of the protection plan.

"Many consumers have legitimate concerns about identity theft and the security of credit cards and ATM cards," Spitzer said. "This company capitalized on these fears by persuading people into paying good money to receive only marginal benefits of a credit card protection service."

Through direct mail, Internet ads, telemarketing calls and in credit card statements of its affiliate credit card issuer, Direct Merchants Credit Card Bank, N.A. - which has approximately 4.1 million credit accounts -- Metris convinced over 80,000 New Yorkers to purchase credit card registration and protection services.

It wasn't until after consumers had contracted with Metris that the company disclosed that federal laws already provide protection for unauthorized and fraudulent use of both credit cards and debt/automatic teller machine cards. Metris also automatically renewed membership contracts without giving consumers advance notice as required by State law.

The credit card protection services cost either $99.95 as a lifetime fee or $79.95 for three years of service.

In settling the case with Spitzer's office, the Minnesota-based company agreed to provide refunds of $79.95 each to over 13,500 consumers throughout New York State whose membership in the credit card protection service was automatically renewed in violation of state law.

Metris also agreed to pay $12,000 in costs to the state.

The settlement also requires Metris to fully explain to potential customers prior to contracting for its services the laws that protect consumers against credit card fraud.

Spitzer provided the following tips to consumers to better understand credit card protection services:

  • Federal law sets the maximum liability for unauthorized use of a credit card at the lesser of $50 or the amount fraudulently obtained;
  • Federal law limits the maximum liability for unauthorized use of debit cards and ATM cards to $50; however, the unauthorized use must be reported within two business days or the liability increases to $500;
  • Consumers are not required to purchase credit card protection services in order to retain or use credit, ATM or debit cards;
  • Consider carefully whether the expense of a credit card registration service is warranted; typically, these companies merely contact your credit issuer on your behalf in the event of a loss or fraud - something that you could easily do yourself;
  • Remember - you could still be held responsible for unauthorized charges even if you purchase credit card protection or registration services!
  • Some major credit card companies do not hold cardholders responsible for any liability due to unauthorized use - check with your credit card company;
  • If you purchase credit card registration and protection services, your membership cannot be automatically renewed unless you are notified within 15 to 60 days of the renewal and given the option of cancelling;
  • Credit card registration and protection services are prohibited by state law from releasing customer account information to third parties for marketing purposes without the written consent of the customer;
  • Consumers with questions or complaints about credit card registration and protection services are encouraged to contact the Attorney General's office at (800) 771-7755.

This case was handled by Assistant Attorney General Matthew Barbaro of the Consumer Frauds and Protection Bureau.

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