Federal Trade Commission v. Bay Area Business Council

Bay Area Business Council, Inc. (BABC) (defendant) contracted with a telemarketing company to have telemarketers call consumers who had recently applied but been denied for a credit card. Telemarketers read from a prepared script and told consumers that their records indicated the consumers had recently applied for a credit card and were now eligible to receive a MasterCard. Additionally, telemarketers told consumers that having a MasterCard would be good for their credit ratings. Telemarketers concluded by informing consumers that they would be charged a one-time processing fee to receive a MasterCard. In order to pay the fee, consumers provided telemarketers with their bank-account information. Telemarketers then played an automated disclosure that ended by asking consumers to acknowledge that they agreed with what had been discussed. Within days of the call, BABC debited funds from consumers’ accounts in excess of the agreed-upon processing fee. Soon after, consumers received a card from BABC containing the MasterCard logo. However, the card sent by BABC was not a credit card, but a stored-value card that could only be used by consumers if they preloaded their own funds onto it. Additionally, a $15 activation fee was required prior to using the card. The Federal Trade Commission (FTC) (plaintiff) sued BABC for deceptive trade practices in violation of section 5(a) of the Federal Trade Commission Act (FTCA), 15 U.S.C. § 45(a), and the Telemarketing Sales Rule (TSR), 16 C.F.R. §§ 310.1-.9. The district court granted summary judgment in favor of the FTC, and BABC appealed.