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For
Release: August 23, 2000
FTC Acts to Protect Consumers Whose "Travel
Unraveled"
Commission, States File Complaints Against
Companies Nationwide for Travel-related Fraud
The Federal Trade Commission today announced that for
the third time in four years it has completed a law enforcement
sweep of the United States travel industry. The FTC has
been working together with state authorities to uncover
fraud and deception that are costing consumers hundreds
of thousands of dollars each year and often ruining what
are supposed to be relaxing and enjoyable vacations. Today's
announcement of "Operation Travel Unravel" caps
investigations by the FTC and 19 state law enforcement
agencies, resulting in 85 actions for alleged violations
ranging from failure to disclose the actual cost of travel
packages to misleading consumers by telling them they
have won a free trip and failing to tell travelers that
in purchasing a package they will be required to attend
one -- and possibly more -- timeshare presentations.
The FTC complaints resulting from this sweep come one
year after the Commission brought similar complaints in
"Operation Trip Trap" and three years after
those brought in "Operation Trip Up." The Commission
cases announced today were filed by the FTC's Southeast
Region and Midwest Region (with the Commonwealth of Virginia
a co-complainant) and the Commission's Division of Marketing
Practices.
The Commission today also announced the settlement of
one other travel fraud case brought as part of "Operation
Trip Trap." In this matter, the FTC approved a stipulated
final order settling a court action brought last year
against American International Travel Services, Inc. (AITS)
and its owners.
"This is the third travel fraud law enforcement
sweep the Commission has coordinated since 1997, illustrating
the FTC's continued commitment to working with the states
to take action against these bad actors," said Jodie
Bernstein, Director of the Commission's Bureau of Consumer
Protection. "We're working diligently to ensure that
consumers' plans for enjoyable travel do not unravel,
and we appreciate the help we have gotten nationwide in
focusing attention on the continuing problem of travel-related
fraud and misrepresentation."
Through "Operation Travel Unravel," the FTC
has filed three complaints in federal District Court seeking
to permanently enjoin the alleged law violations and award
consumer redress. The complaints were brought against
Leisure Time Marketing, Inc./Discovery
Rental, Inc. of Cocoa Beach, Florida; Med Resorts
International, Inc. of Clearwater, Florida; and Epic Resorts,
Inc. of King of Prussia, Pennsylvania. In each case, the
Commission is seeking an temporary restraining order with
asset freeze and appointment of a receiver to ensure that
no additional consumers are defrauded while the permanent
injunctions are being sought. The Commonwealth of Virginia
is a co-complainant with the FTC in the Med Resorts matter,
and is filing additional state-related charges.
"OPERATION TRAVEL UNRAVEL" LAW ENFORCEMENT:
The FTC filed its actions in "Operation Travel Unravel"
against:
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Leisure
Time Marketing, Inc./Discovery
Rental, Inc.; Marlin Swanson; Britt
Shenkman;
Edward Sebastian; and Fereidoun "Fred"
Khalilian (collectively "DRI"). According
to the Commission's complaint, DRI violated the FTC
Act by misrepresenting that they would provide free
round-trip airline tickets to Hawaii or Mexico to
consumers purchasing their vacation package, by misrepresenting
the total cost of the vacation travel package offered,
and by failing to disclose material restrictions on
the use of the package, such as requiring attendance
at timeshare sales presentations.
DRI primarily generated leads by sending unsolicited
faxes to consumers and receiving return calls. The
use of such unsolicited faxes has been increasing
as a means of conducting travel fraud. DRI
also faces allegations of violating the FTC's Telemarketing
Sales Rule (TSR) for failing to disclose material
costs and restrictions on their travel packages and
the supposedly "free" airline tickets. In
addition, they allegedly violated the TSR by failing
to disclose their refund policies.
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Med Resorts
International, Inc.; World Connections, Inc.;
Mediterranean Resorts, Inc.; Destinations Unlimited
of Delaware, Inc.; Bay Financial Services, Inc.; V-Pac,
Inc.; J. George Claveau; and Marianne Borden-Meyers
(collectively "Med Resorts"). According
to the joint complaint filed by the Commission and
Virginia, Med Resorts violated the FTC Act and Virginia
law by misrepresenting that consumers purchasing their
long-term vacation travel memberships could travel
worldwide any time they liked, the total cost of the
vacation travel membership, and that members could
obtain discount airfares.
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In addition, Med Resorts allegedly violated the Commission's
Holder in Due Course Rule by not including required disclosure
language in consumers' membership contracts, then reselling
those contracts to third-party finance companies.
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Epic
Resorts, LLC; Epic Travel; Thomas Flatley;
and Scott Egelkamp (collectively "Epic Resorts").
According to the Commission's complaint, Epic Resorts
violated the FTC Act by misrepresenting that consumers
had won or were specially selected to receive a vacation,
misrepresenting the total cost of the package and
failing to disclose material conditions and restrictions
on the use of the vacation package. In addition, the
company sent out unsolicited faxes and "cold-called"
consumers based on leads obtained at public events
where consumers registered to win a vacation. Accordingly,
the complaint cites violations of the TSR, because
in these solicitations Epic Resorts failed to disclose
material costs and restrictions concerning the vacation
packages. Finally, the company is charged with additional
TSR violations for not abiding by the Rule's "Do
Not Call" provision. This is the first time the
Commission has alleged a violation of the "Do
Not Call" provision of the Rule.
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The Commission vote to authorize the filing of the three
complaints was 5-0. The Discovery Rental and Epic Resorts
complaints were filed in the U.S. District Court for the
Middle District of Florida, in Orlando, on August 14,
2000. The Med Resorts complaint was filed in the U.S.
District Court for the Northern District of Illinois in
Chicago, on August 9, 2000. The FTC's Midwest Region would
like to thank the Pinellas County, Florida Department
of Consumer Protection for their significant assistance
in bringing the Med Resorts complaint. A table listing
all of the federal and state actions in "Operation
Travel Unravel" is also available.
In addition, the Commission today announced a stipulated
final order settling a complaint against the following:
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American
International Travel Services, Inc. (AITS);
Silver Lake Resort, Ltd. (SLR); Alfred H. Jugo; A.J.
Stanton, Jr.; and Lawrence S. Gilbert for violating
the FTC Act and the TSR by misrepresenting that consumers
had either won or been specially selected to receive
a vacation package, misrepresenting the contents of
the package and their cancellation policy, and failing
to disclose that consumers were expected - or would
be pressured - to view timeshare property. Under the
terms of the settlement, the defendants will pay the
Commission $1 million in consumer redress (in addition
to the $1.4 million already refunded or charged back),
will be enjoined from future violations of the FTC
Act and TSR, and will be required to post a $200,000
performance bond before engaging in the business of
telemarketing travel-related products or services
in the future.
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The Commission vote to approve the stipulated final order
settling the court case against AITS was 5-0.
The settlement will be filed in the U.S. District Court
for the Southern District of Florida, Miami.
"OPERATION TRAVEL UNRAVEL" CONSUMER
EDUCATION
The "Operation Travel Unravel" consumer education
program includes a variety of materials, including several
recently revised FTC products. The first, "Facts
for Consumers: Telemarketing Travel Fraud" contains
information on how telemarketers obtain consumers' names
and the techniques they employ to convince people to purchase
their products. It also explains how consumers can protect
themselves from travel-related telemarketing scams. The
second product, a Consumer Alert titled "Avoid a
School Break Bust," is designed to help students
and their parents identify and avoid travel scams when
planning vacations. It includes a variety of tips regarding
the companies that market these trips, as well as useful
contact information on organizations such as the American
Society of Travel Agents' Consumer Affairs Department
and the Department of Transportation's Public Charter
Licensing Division. Finally, it describes how individuals
can file a complaint with the FTC if they feel their school
break has been a "bust."
In addition, a Consumer Alert and two Facts for Consumers
publications remain available to the public. They are:
"Traveler's Advisory: Get What You Pay For,"
"Timeshare Resales," and "Timeshare Tips,"
respectively.
Tips provided in the Commission's consumer education
material include:
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Be wary of "great
deals" and low-priced offers. Few legitimate
businesses can afford to give away products and services
of real value or substantially undercut other companies'
prices;
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Don't be pressured
into buying. A good offer today will be a good offer
tomorrow. Legitimate businesses don't expect you to
make snap decisions;
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Ask detailed
questions. Find out exactly what the price covers
and what it doesn't. Be sure to ask about additional
charges, as well;
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If you do decide
to buy, get all information about the trip in writing.
Once you receive the written information, make sure
it reflects what you were told over the phone and
the terms you agreed to;
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Don't give your
credit card number or bank information over the phone
unless you know the company with whom you are working;
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Be aware that
when you place your business card or name into a drawing
for a free vacation, you may be added to a telemarketing
call-out list;
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Know that your
personal information also can be collected via the
Internet when you are visiting travel-related sites
seeking deals on trips or airfare;
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Don't send money
by messenger or overnight mail. Some "scam artists"
may ask you to send them money immediately. If you
pay with cash or check, as opposed to using a credit
card, you lose your right to dispute any potential
fraudulent charges under the Fair Credit Billing Act;
and
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When in doubt,
say "no." If you have any doubts about the
trustworthiness of a company, trust your instincts.
It's less risky to turn down the offer and hang up
the phone.
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All consumer education pieces can be found on the FTC's
Web site and from the FTC's Consumer Response Center (see
address below).
NOTE: The Commission files a
complaint when it has "reason to believe" that
the law has or is being violated, and it appears to the
Commission that a proceeding is in the public interest.
A complaint is not a finding or ruling that the defendants
have actually violated the law. The cases will be decided
by the courts in which they were filed.
NOTE: Stipulated final judgments
are for settlement purposes only and do not constitute
an admission by the defendants of a law violation. Consent
judgments have the force of law when signed by the judge.
Copies
of the Commission's complaints and related documents are
available from the FTC's Web site at http://www.ftc.gov and also from
the FTC's Consumer Response Center, Room 130, 600 Pennsylvania
Avenue, N.W., Washington, D.C. 20580; 877-FTC-HELP (877-382-4357);
TDD for the hearing impaired 202-326-2502. Consumers with
concerns about travel-related fraud or any other potentially
fraudulent business practices may also report them to
the FTC. To find out the latest news as it is announced,
call the FTC NewsPhone recording at 202-326-2710.
- MEDIA CONTACT:
- Mitch Katz,
Office of Public Affairs
202-326-2161
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- STAFF CONTACTS:
- Andrea L. Foster, Director
FTC Southeast Region, or
Valerie Verduce or Barbara Bolton (Discovery Rental,
AITS)
404-656-1390
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- C. Steven Baker, Director
FTC Midwest Region, or
Russell W. Damtoft (Med Resorts)
312-960-5634
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- Collot Guerard,
Bureau of Consumer Protection (Epic)
202-326-3779
(FTC File Nos.: Discovery Rental, Inc. - 002-3259;
Med Resorts - 002-3206; Epic Resorts - 002-3157; AITS
- X990074. Civil Action Nos.: Discovery Rental - 6:00-CV-1057-ORL-19B;
Med Resorts - 00C-4893; Epic Resorts - 6:00-CV-1051-ORL-19C.)
(http://www.ftc.gov/opa/2000/08/travelunravel.htm)
Attachments
(List of Enforcement Cases)
Consumer
Education Pieces
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