Pharmacy card scam nets millions via electronic debiting

The FTC estimates that as many as 90,000 consumers were victims. At the request of the FTC, U.S. District Court Judge Robert Clive Jones has issued a temporary restraining order to halt the scam and freeze the defendants’ assets. The FTC will seek a permanent ban on the scheme and request that the frozen funds be preserved for consumer redress.

In papers filed with the court, the FTC charged that since January 2004, defendants using the name “Pharmacycards. com” electronically debited thousands of consumers’ accounts for $139, without consumers’ knowledge or consent.

Prior to the unauthorized debiting of their checking accounts, consumers had no contact with the defendants. According to the FTC, the defendants attempted to debit more than $10 million from consumers’ accounts in less than three months.

The FTC alleges the defendants gained access to the banking system via third-party payment processors by claiming that they were engaged in a legitimate business – selling pharmacy discount cards.

Their Web site touted the benefits of their cards and advertised retailers such as Target and Wal-Mart that participated in the discount program. The Web site also listed a toll-free customer service number and a mailing address in Canada.

According to the FTC, the major retailers’ logos were hijacked – they didn’t participate in the program. The mailing address was false and mail sent to the address was returned.

Some consumers received letters after money had been withdrawn from their account explaining the program and saying because the consumer had previously purchased a product from one of the defendants’ “marketing partners” using their checking account, the consumer did not need to provide the account number again.

The letter said that consumers who were not interested could call the toll-free customer service number to cancel within five days of receiving the letter. By this time, the money already had been debited from their accounts.

According to the complaint, the defendants provided consumers’ checking account numbers to the third-party payment processors with whom they had contracts.

One processor alone debited more than 72,000 checking accounts for the defendants, generating more than $10 million in attempted debits. While more than 50,000 of those transactions were cancelled or returned, many other consumers were unaware of the transaction or unable to have it reversed, and $139 was removed from their accounts without their authorization.

The FTC alleges that the scam violates federal law and will ask the court to order a permanent halt to the practices and order consumer redress.

The FTC advises all consumers to regularly review their bank statements and quickly dispute any unauthorized charges.

Defendants in the case are 3rd Union Card Services Inc., doing business as Pharmacycards.com, a Delaware Corporation; Helmcrest Ltd., a company incorporated under the laws of Cyprus, doing business as Pharmacycards.com; David Graham Turner; and Steve Pearson.

The complaint was filed in the U.S. District Court for the District of Nevada in Las Vegas on May 24, 2004.

The commission notes that it files a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the commission that a proceeding is in the public interest.

The complaint is not a finding or ruling that the defendant has actually violated the law. The case will be decided by the court.