Scam Alert: Federal Trade Commission Accuses Low Pay Card of Deceptive Practice

The Federal Trade Commission filed a complaint in United States District Court on October 28, 2009 alleging that LPC, Inc used deceptive practices when selling their Pre-Approved Platinum-Level LPC card. Although the card could only be used to purchase merchandise from their catalog, the FTC alleges that Low Pay, Inc. duped customers into thinking that their LPC card would work like any other credit card. Direct mailers were used to target customers who had bad or poor credit, telling them the card would provide access to a line of credit Potential customers were told to call and activate their new credit card yet when they did so, customers would need to provide banking information in order to activate the card and then fees, which amounted to over $300 would be deducted from their checking accounts.

The FTC alleges that fees in conjunction with the Low Pay card were not adequately disclosed. Customers were charged a $120 activation fee and a nonrefundable annual fee of $198, which would be drafted from customers' bank accounts in two equal installments of $99. In addition, customers who did make a purchase would be charged 30% of the purchase price along with shipping charges, which was also deducted out of their bank accounts.

Since the merchandise was marked up 2 to 3 times its actual value, according to the Federal Trade Commission, once customers paid the fees and then 30% of the purchase price plus shipping charges, they had essentially already paid for the items they had ordered yet they would still have to pay the other 70% in installments. However, the legal hot water that Low Pay is in stems from the fact that they did not adequately disclose the fees, among other practices.

While the company promised customers a refund of the $120 activation fee as long as they returned the Low Pay card and the catalog within 30 days of the telephone activation, in many cases, Low Pay didn't actually mail out the card and catalog until the 30 day grace period had already passed. Then when customers called to cancel they were told that it was too late.

The Better Business Bureau has logged 350 complaints about Low Pay Card within the last 36 months. The BBB assigned the company the F rating due to the pending government action as well as unanswered complaints. Complaints against Low Pay Card from consumers ranged from unauthorized debits to bank accounts to additional undisclosed charges being debited. Some consumers received neither the merchandise nor a credit.

Amazingly, the Better Business Bureau of the Southland posted some customer complaints on their website along with rebuttals from the company. In one such rebuttal, a customer's name, address, phone number, routing number, and checking account number is posted. Would you expect this to happen if you wrote a complaint letter to the BBB?

The Federal Trade Commission also alleges that Low Pay Card promised customers they could get a cash advance if they signed up with the merchandise company. They led customers to believe they would receive a guaranteed, low cost, or no fee cash advance when in reality, all customers would receive was the opportunity to apply for a Payday Loan. While payday loans traditionally have a bad reputation because of the incredibly high interest charged, no one needs to join a catalog merchandise membership to be able to apply for one.

While Frank Abagnale, who inspired the movie "Catch Me If You Can" starring Leonardo DiCaprio and Tom Hanks, served his time and turned FBI agent, Low Pay Card has yet to see their day in court. When they do, however, they will also have to answer to Count Three of the FTC's complaint, which alleges that consumers were promised they could improve their credit ratings by using the Low Pay Card. Since the Low Pay Card isn't a traditional credit card and can only be used to purchase merchandise from Low Pay's catalog, this was a misleading statement as well. There are several counts to the complaint, including violating the Telemarketing Sales Rule, but you get the idea. Low Pay Card allegedly scammed consumers and the FTC busted them. While the company has voluntarily agreed to stop their deceptive practices, the FTC hopes to win the case and customers' money back. If you have been a victim of Low Pay Card, stay tuned. After the ruling is posted, I'll post an update here along with any information on how customers can get their money back from Low Pay.