Telemarketing case settled

Wachovia to pay $144 million for not halting sellers' activities

From wire reports

April 26, 2008

WASHINGTON - Wachovia Corp. has agreed to pay an estimated $144 million to settle federal allegations that it failed to stop telemarketers charged with taking advantage of thousands of elderly consumers.

The federal Office of the Comptroller of the Currency said yesterday that Wachovia, based in Charlotte, N.C., 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, the nation's fourth-largest bank, did not admit 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."

She said the bank was not directly involved in the telemarketing activity or the soliciting of account information from consumers and that the settlement is not expected to affect the company's financial condition, she said.

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.

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 Office of the Comptroller said in a statement.

"The behavior of Wachovia was extraordinarily shameful," said Howard Langer, the Philadelphia attorney representing the customers. "It wasn't just the money that the telemarketers took, but also that Wachovia charged its own customers hundreds of thousands of dollars in overdraft fees."

Federal and state officials have been pursuing cases against the telemarketers involved.

Last summer, the Federal Trade Commission 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 telemarketer had used deceptive sales tactics to get consumers to reveal their bank account information.

In December, the FTC and officials in seven states filed civil charges against Florida-based Your Money Access LLC, which used several business names, including Netchex Corp., Universal Payment Solutions, Check Recovery Systems, Nterglobal Payment Solutions Subscription Services Ltd. and YMA Co. LLC.

Under the terms of the settlement, which was approved Thursday, Wachovia is required to return payments to consumers who have claims against Your Money Access.

The Associated Press and Bloomberg News contributed to this article.