On January 4 the Federal Trade Commission (FTC) launched a consumer hotline to assist alleged victims of a Web cramming scam operated by Miami-based Epixtar Corporation and several of its subsidiaries, including one formerly known as “SBA Online.” To date the FTC hotline has received about two-dozen inquiries from small businesses owners.
Cramming refers to the practice of billing businesses for services that were never authorized and have little value. The bogus charges usually appear on businesses’ telephone bills.
The FTC hotline was established as a result of a lawsuit the federal agency filed against Epixtar and its subsidiaries. Epixtar allegedly violated federal law by deceptively marketing a free trial of its Internet services, only to bill their customers’ telephone accounts without their expressed informed consent and without their knowledge.
The FTC investigation was prompted in part by the U.S. Small Business Administration’s objections to the unauthorized use of its trademark name. Complaints were coming into the SBA from small businesses, but the federal agency had no association with Epixtar and its associates online services or Web hosting programs.
The SBA had warned small businesses across the country in March 2003 about a company calling itself “SBA Online.” The SBA cautioned small businesses to be wary of telephone callers who implied that they are connected with the agency. The SBA advised that any requests for privileged financial and personal data or solicitations for membership fees should be reported to local authorities.
The agency received a number of complaints from small businesses stating that representatives of a private entity identifying itself as “SBA” or “SBA Online” and “Small Business Advantage” had contacted their businesses seeking to interest them in purchasing certain commercial services allegedly offered by their organization, or in paying to become members of “SBA.”
In some instances, the callers attempted to obtain specific financial or employee data relating to the contacted business, sometimes asking the business to confirm information the caller already had. In some cases, callers requested specific personal data, such as a social security number or mother’s maiden name.
The U.S. Small Business Administration neither solicits membership fees nor contacts businesses to obtain sensitive information about the businesses or individuals unless it is part of a particular matter pending before the agency — such as a loan application.
After receiving a number of complaints from small businesses, the SBA pressed the matter with the Federal Trade Commission. Last November, the FTC and the defendants agreed to an injunction that prohibited the companies from continuing the practice of “cramming.” The FTC required that the defendants notify customers that they are being billed for Web services, and also to permit customers to cancel any unauthorized services.
The FTC’s complaint alleged that the defendants “crammed” a charge of $29.95 per month on to the telephone bills of unsuspecting businesses that did not cancel the service during the so-called free trial period.
The FTC is advising small businesses who believe they have been victims of the scam to call the hotline for advice on how to proceed. The hotline number is (202) 326-2998. Representatives are available to advise small businesses about how to obtain a refund from Epixtar and its associated companies.
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