$144M settlement in Wachovia marketing case
WASHINGTON (AP) - April 25, 2008 The federal Office of the Comptroller of the Currency said
Friday that Charlotte, N.C.-based Wachovia didn't act quickly
enough to block telemarketers and payment processors who maintained
their accounts at the bank. The marketers obtained customers' bank
account numbers while selling products including vouchers for
discount travel and groceries and medical discount plans.
Wachovia did not admit any wrongdoing, but will pay up to $125
million in claims, $8.9 million toward consumer education programs
and a $10 million fine.
"This situation was unacceptable and we regret it happened,"
said Wachovia spokeswoman Christy Phillips-Brown. "We will work
diligently to provide restitution to consumers affected by the
situation and to educate consumers."
Phillips-Brown said the bank was not directly involved in the
telemarketing activity or soliciting of account information from
consumers, and said the settlement is not expected to impact the
company's financial condition.
The Wachovia case, the subject of an 18-month investigation by
bank regulators, involved the telemarketers' use of "remotely
created checks," which do not require a customer's signature.
Regulators said telemarketers would make sales calls, obtain
customers' bank account information, create a check and withdraw
cash from customers' accounts.
The government said a "large percentage" of the consumers
complained, saying they never authorized the payments, or didn't
receive the products or services offered. Those affected included
customers with accounts at numerous banks, including Wachovia.
Though the bank became aware of the situation, it "failed to
take quick action to terminate these account relationships or
otherwise correct the problem," the OCC said in a statement.
Federal and state officials have been pursuing cases against the
telemarketing firms involved in the case.
In 2006, federal prosecutors filed a civil case against Newtown,
Pa.-based Payment Processing Center LLC. A federal judge in
February 2007 appointed a receiver to return customers' money. That
receiver, Wayne Geisser, said Friday that 345,000 consumers were
affected.
The Federal Trade Commission in summer 2007 froze the assets of
Largo, Fla.-based FTN Promotions, also known as Suntasia Inc. or
Strategia Marketing LLC, after more than 5,000 people complained to
authorities that the telemarketing firm used deceptive sales
tactics to get consumers to reveal their bank account information.
The FTC said the company - operating under at least 15 different
company names, would call consumers, offer trial memberships to
travel clubs or discount programs and make it difficult to cancel.
Last December the FTC and officials in seven states filed
similar civil charges against Florida-based Your Money Access LLC,
which used several business names Netchex Corp., Universal Payment
Solutions, Check Recovery Systems, Nterglobal Payment Solutions
Subscription Services, Ltd. and YMA Company, LLC.
Under the terms of the settlement, approved Thursday, Wachovia
is required to return payments to consumers who have claims against
Your Money Access.
Wachovia also agreed to take a series of steps designed to
ensure the problem doesn't happen again.
Wachovia shares rose 85 cents, or 3 percent, to $28.23 in
afternoon trading.
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AP Business Writer Ieva M. Augstums in Charlotte, N.C.
contributed to this report.