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The FTC Nails Marketing Scams Aimed at Hispanics
An industry analyst says this is a perfect example of marketers taking advantage of an ethnic group that 'wants to be marketed to.'
Posted Oct 27, 2005
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The Federal Trade Commission (FTC) revealed Tuesday that it caught and charged five telemarketers with financial penalties for scamming Hispanic consumers. The announcements were made yesterday at the Hispanic Law Enforcement and Outreach Forum in Los Angeles, which was formally introduced in April 2004 and is "aimed to detect, stop, and prevent consumer fraud against Hispanics," according to the FTC's Web site. The actions involved a range of products and services, including advance-fee credit cards, at-home English-language and auto-mechanic training programs, a medical-discount plan, weight-loss products, music CDs, and credit-repair services. The largest financial penalty of the five companies goes to Call Center Express/Pro Line. The defendants ran TV ads on national Spanish-language TV networks, misrepresenting their cards as major credit cards. Consumers were charged fees from $149 to $299 to get the credit cards, and later discovered they could use the cards only to purchase merchandise form the defendants' catalogs or Web sites. A federal district court judge issued an order permanently banning the defendants from marketing any credit products and requiring them to pay almost $14 million in consumer redress for falsely promising consumers major credit cards in exchange for advance fees. In another case, FGH International was charged for deceptively marketing its at-home instructional programs to Spanish-speaking consumers. The FTC alleges the defendants' telemarketers identified themselves as being affiliated with a government program that had selected the consumer to receive subsidized English-language or auto-mechanic training. According to the FTC, a package of videotapes, computer disks, and workbooks would arrive C.O.D., whether or not consumers accepted the offer. The package would cost between $150 and $300. Those consumers who refused the package would receive a call from a second telemarketer posing as an attorney who would then threaten legal action if the consumer did not pay. Defendants will pay $940,000 in consumer redress to settle FTC charges.
"As the cases show, we are getting results and will not let scammers hide behind Spanish-language ads," Tom Syta, assistant director of the FTC's Western Region, said in a statement. The FTC also slapped $294,000 in fines on Platinum Health Plus for running national ads on Spanish-language television stations that implied it was selling health insurance instead of just access to medical providers that offer discounted fees. The FTC charged that small "not health insurance" disclaimers flashing on-screen for eight seconds were inadequate to offset the strongly implied claims made in the ads. La Grana, marketers of a weight-loss product and a music collection, will pay $231,000 for making deceptive claims in infomercials shown on Spanish-language television stations. The defendants sold a weight-loss product for $179 under the brand names "Svelt Body Complete" and "Imagen Enlinea." The marketers claimed the product would cause substantial weight loss without diet or exercise. And the FTC alleges that Service Brokers Associates, a provider of credit-repair services, received payments from consumers before performing any services, not giving consumers a statement of their credit file rights and not supplying a cancellation rights notice on the contracts. In a recent study, "MONITOR Multicultural Marketing Study 2005," Yankelovich Research found that 53 percent of Hispanics said they are extremely concerned about the motives of advertisers. Sonya Suarez-Hammond, director of Yankelovich Research, says these are the types of scams that can undermine other marketers. "It [the Hispanic market] has been proclaimed by many marketers to be one of the largest ethnic groups in the country," says Suarez-Hammond. "Subsequently, there has been a lot of legitimate and warranted focus on this market by marketers, but there is always a few bad apples that try to take advantage of a situation." It is a situation, Suarez-Hammond says, that is only made worse by the Hispanic communities openness to marketers. "The Hispanic community wants to be marketed to, perhaps more so than other markets. But they want to be marketed to in a culturally relevant, personally relevant, and socially relevant way. They are more eager for marketers, because there are so few channels of communications out there." Related articles: Ethnic Consumers Require Sensitive Marketing On the Scene: Understanding Hispanic Culture
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