The FTC accused EdebitPay last summer of bilking struggling subprime consumers by offering supposedly no-fee pre-paid credit cards and loans, but then surreptitiously debiting $159.95 from people who gave the company bank account information--even when they didn't complete the online application process.
Many consumers didn't realize their accounts had been debited until they received bank statements, according to the FTC. When people complained, they were given the run-around--placed on hold indefinitely, or informed they would have to file a fraud report with the police to get a refund, according to the complaint. Even when people went to the Better Business Bureau, the company only refunded money in rare circumstances, according to the FTC.
The FTC complaint said that EdebitPay had been luring consumers via e-mail ads, pop-ups and other online ads since at least 2002.
EdebitPay did not admit to any wrongdoing as part of the agreement. The settlement order, which also calls for company president Dale Paul Cleveland to pay around $667,000, was quietly entered earlier this month by the U.S. District Court for the Central District of California. The company did not respond to requests seeking comment.
While this settlement doesn't directly affect the unresolved case against ValueClick or other pending lead-generation matters, it addresses one of the same underlying issues: the use of the word "free" in online ads. Here, the agreement states that EdebitPay will "clearly and conspicuously" disclose the costs connected with the cards in close proximity to statements indicating the card is "free."
The settlement with performance marketing company Adteractive specifically provided that ads that describe merchandise as "free" must also state in the same color, font and size that purchases are required to obtain the item.