Two companies charged with operating work-at-home schemes agree to FTC settlement
June 24, 2014
The Tax Club and American Business Builders, two companies that the Federal Trade Commission charged with operating home-based business schemes, have agreed to settlements that will prohibit future misconduct. The two companies also agreed to surrender assets, with The Tax Club assets valued $15 million.
The Tax Club operators sold services they claimed would help consumers’ home-based businesses succeed, while American Business Builders sold a home-based business opportunity where consumers could earn income offering payment processing services, credit card terminals, and merchant cash advances to small businesses, the FTC alleged.
“Before you put money into a work-at-home business opportunity, ask questions to determine if it is legitimate,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection.
The Tax Club called consumers and falsely claimed to be affiliated with companies that consumers had already bought services or products from, according to a commission lawsuit. The defendants’ telemarketers pitched business development services such as business coaching services, corporate formation services, and credit development services, falsely claiming the services were essential to the success of consumers’ businesses.
The complaint also alleged that after the first sale, telemarketers called consumers many times to sell more “essential” services, typically for several thousand dollars per service, with a large fee and followed by smaller monthly “membership” payments. Many of the services offered by the defendants were neither essential nor provided as promised, according to the lawsuit.
Under settlement orders announced Tuesday, the defendants are required to surrender assets valued at more than $15 million, and they’re banned from selling business coaching services and work-at-home opportunities.
American Business Builders
American Business Builders defendants falsely claimed that, for a fee ranging from $295 to $495, consumers could make a large amount of money in several ways, including earning commissions on terminals sold or leased to businesses in consumers’ communities, according to the lawsuit. They also sold sales leads and promised to conduct telemarketing campaigns that would generate customers and income.
The defendants charged $10 per lead, with some consumers paying up to $40,000, but they failed to provide the promised customer leads for the consumers, and the consumers didn’t earn any income.
A court order halted the operation, froze its assets, and put the companies into receivership.
Under the settlements, the defendants are banned from selling business and work-at-home opportunities and are required to surrender bank accounts and real and personal property.
For more information, read the FTC’s Work-at-Home Businesses, Home-Based Businesses, Business Opportunity Scams, Bogus Business Opportunities, and 10 Ways To Avoid Fraud, visit the agency’s Phone Scams page, and read the consumer blog posts, “Home-based businesses: Do You Really Need These Services?” and “A ‘Work at Home’ Scheme That Didn’t Work.”
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