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Video: Dialing for dollars: Consumers say robo-calls are overkill

By Herb Weisbaum ConsumerMan
msnbc.com contributor
updated 5/20/2009 5:19:43 PM ET 2009-05-20T21:19:43

We spend so much time worrying about Internet fraud. But it’s easy to forget that many con artists still make their living the old-fashioned way: dialing for dollars.

Last week, the Federal Trade Commission shut down one of the biggest and most flagrant telemarketing scams ever.

The automated calls (known as robocalls) pitched extended car warranties. They went to phones across the country, including cell phones and home phones on the national Do Not Call Registry. Federal law prohibits such calls.

The FTC sued both the promoter of the phony extended warranties, Transcontinental Warranties, and the company making the robocalls Voice Touch. Both firms are based in Florida.

The sheer volume of these robocalls – tens of millions a week – was staggering. “We think they were just dialing every phone number in the U.S. more or less in order,” says Steve Baker, an attorney for the FTC. They even called Secret Service offices and 911 dispatchers.

“This is the most widespread and blatant Do Not Call violation we’ve ever seen,” Baker says. More than 30,000 people filed complaints with the commission. Since most people never complain – they just hang up the phone – 30,000 complaints is an astounding number.

To some, the recorded message was alarming: Your vehicle warranty is about to expire and you should “extend coverage before it’s too late.”

Anita Topolinski of Seattle got one of the calls. She knew right away something was fishy, because her car was brand new and its warranty was not about to expire. "I feel this is really wrong,” she told me. “They're just trying to cheat me and steal my money.”

In its lawsuit, the FTC claims that's exactly what Transcontinental Warranty, was trying to do: trick people into buying an expensive service contract with lots of limitations and exclusions.

Technology works against you
Computer technology makes it possible for fraudulent telemarketers to cut their costs. Robocalls are incredibly cheap.

The FTC provided me with the transcript of a phone conversation between Jim Dunne, owner of Voice Touch, and a potential new client. Dunne compares the cost of mail to robocalls and says “For what you’re paying for one postcard, I mean, we can call somebody once a month for three years.”

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Phone bandits can also use readily available software or the Internet to fool your caller ID. They can make a bogus number appear instead of their true phone number. It’s called “spoofing” and it’s illegal for telemarketers to do. But phone swindlers don’t exactly follow the rules.

“Spoofing is a serious concern,” says Susan Grant, director of consumer protection at the Consumer Federation of America. “They do this to make it harder to cancel and harder for you to complain because you’re not really sure who you are complaining about.”

The FTC’s Barkertells me Voice Touch spoofed the phone numbers for the Transcontinental Warranty calls which made it tough for investigators to link the companies to the Do Not Call complaints.

According to federal investigators, here’s how the scam worked. Robocalls from Voice Touch blanketed the county for Transcontinental’s warranties. The message gave people a number to push if they wanted to be connected to a salesperson.

In preparing its case, FTC lawyers interviewed Mark Israel of Boca Raton, Fla. He worked the phones at Transcontinental for a few days in February. Israel says he left the company because he felt consumers were being “cheated out of their money.” His written declaration provides a fascinating look at the sales operation at the other end of the phone line.

There were two levels of sales people. The “opener” takes the incoming calls and works from a script to get the basic information about the consumer’s car. It’s the opener’s job to convince the caller to agree to buy a warranty. If he can do that, a more skilled salesperson known as a “closer” would take over.

Israel told investigators a closer could “say whatever was necessary” to get the consumer’s credit card number. That included making callers believe they had called a company that was somehow affiliated with the person’s car manufacturer or dealership. They were not.

Everyone was told their current warranty was about to expire even though the company did not have that information.

Israel said no one was disciplined or fired “for lying to consumers this way.”

Working as an opener, Israel handled about 100 calls an hour. He says 99 of them were from people who were extremely frustrated because “despite following the pre-recorded call’s instructions to be removed from the company’s calling list, they still continued to receive calls.”

Openers were not allowed to give callers the company’s name. If they did, they could be fired. “Instead I was told to make up a generic sounding name like ‘Warranty Services,’ or, in keeping with the company’s motto, to simply hang up on such consumers,” Israel explained.

Israel also told the FTC it was regular practice to give callers a fake telephone number so they could not call back.

The federal court in Chicago did more than shut down two of the biggest players in this extended warranty sales scam. The court froze their assets. So eventually people who feel they were cheated may get some money back. If you were fleeced, you should file a complaint with the FTC.

The bottom line
The FTC’s lawsuit should significantly reduce the volume of calls you get pitching extended car warranties. But I doubt this scheme is gone for good. A successful scam never goes away.

I’m already hearing from readers who’ve gotten robocalls offering them a discount on their credit card interest rates – something that sounds mighty appealing these days. These calls are bogus. One of the numbers showing up on caller ID is 407-000-1919 and it’s not a working number.

If you get one of these calls, don’t respond. If you are on the Do Not Call list or received this call on your cell phone – file a complaint. It only takes a few minutes.

The FTC wants to hear from you. This is how they find out who’s breaking the law and to go after them. Even if the complaint doesn’t help you, it could save others from being taken.

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