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Mass. sues ICS over its calls
By STEVE HUETTEL, Times Staff Writer
LARGO -- A Tampa Bay area telemarketing company lured thousands of Massachusetts residents into paying exorbitant fees for consumer credit counseling, that state's attorney general said in a federal lawsuit filed Thursday. Attorney General Tom Reilly charged that Integrated Credit Solutions Inc. of Largo blanketed his state with illegal, prerecorded phone calls and misled debt-ridden consumers about how much they would save by enrolling with a nonprofit credit counseling company. The suit asks a judge to order the company to return more than $1-million in upfront fees it was paid by about 3,000 Massachusetts customers. "This telemarketer is preying on consumers who are trying to get hold of their personal finances and free themselves from debt," Reilly said. Massachusetts isn't the only state complaining about ICS's tactics. Florida authorities said they are investigating the company in response to complaints from five states. The Massachusetts suit said ICS was making sales calls for Lighthouse Credit Foundation, a nonprofit credit counselor that operates from the same Largo office complex. But sales representatives didn't tell customers that enrollment fees of $99 to $499 went to for-profit ICS, as did about 70 percent of the $38 monthly "administrative fees" for the credit program, the suit alleges. Although the company's telemarketers pledge to reduce customers' payments by thousands of dollars, the suit said, many clients realize little, if any, savings because the fees offset reductions in interest rates and other savings. ICS will fight the allegations, said William Budd, vice president and general counsel. "We're doing a public service by lowering the cost of credit and debt to people," he said. "It's a way to get people out of debt." But in Tampa, assistant state attorney general Travis Berry said his office is investigating whether ICS uses unfair and deceptive trade practices. The company said it doesn't make calls in Florida, Berry said. Most of the complaints involve reported violations of state no-call laws, which prohibit telemarketers from contacting consumers who register not to receive telephone solicitations, he said. At least two states levied fines on ICS for violations this year. The company agreed to pay New York state $41,000 and Indiana $2,000 for alleged violations. Budd said the payments were part of settlements in which the company did not admit guilt. ICS chief executive Steven McWhorter previously ran Republic Bank of St. Petersburg's home equity unit, which was shut down in late 1998 after huge losses. The unit, Flagship Mortgage Services, marketed home equity loans nationwide as a way for high-risk borrowers to escape credit card debt. When investors stopped buying the packaged home equity loans, Republic was forced to exit the business. It laid off 340 employees and took $7.5-million in charges to restructure its mortgage business to focus on selling first-lien mortgages out of its branches. The federal lawsuit said ISC began sending waves of prerecorded phone calls to Massachusetts and other states around April 2001. Calls promised interest rates as low as 1.5 percent and other significant savings through a "certified nonprofit agency." People who called back got an ICS telemarketer who didn't initially disclose the company was for-profit or what it was selling, the suit said. The company referred customers to Lighthouse only if they agreed to buy "educational materials" -- four booklets and a financial planning CD -- for $99 to $499, the suit said. ICS has sold the same materials to credit counselors for $15, according to the suit. Besides using deceptive sales practices, the suit alleges, ICS violated the state's Telephone Consumer Protection Act, which prohibits sending prerecorded commercial messages without receiving prior consent. ICS has made at least 1-million unsolicited calls in Massachusetts and as many as 120,000 in one day, the suit said. Because its tactic is to leave messages on answering machines, ICS's calling system hangs up when a live person answers its call. As a result, the company has clogged recording machines and hung up "countless times" on residents, the suit said. Budd, ICS general counsel, said federal law permits such calls on behalf of nonprofits and trumps state laws. -- Researcher John Martin contributed to this report. Steve Huettel can be reached at huettel@sptimes.com or (813) 226-3384.
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From the Times Business report
From the AP
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