Office of the Attorney General
Attorney General Greg Stumbo Announces Settlement with Internet Advertiser Defrauding Consumers who Cash Check
Attorney General Greg Stumbo today announced a settlement with YP.Corp., doing business as YP.Com and its wholly-owned subsidiary Telcom Billing, Inc., both Nevada corporations. The Attorney General alleged that the defendants had violated Kentucky law involving “live check” solicitations sent to Kentucky consumers.
The scam involved sending checks for small amounts, usually about $3.50, to consumers, organizations and small businesses. When the checks were cashed, YP.Com charged hundreds of dollars in fees to the Kentucky consumers. The defendants claimed that cashing the check obligated the business or consumer to pay a fee for Internet directory services. The settlement is the result of an investigation by 34 states regarding YP.Com’s use of activation check for the solicitation of new business.
“Non-profit groups, churches and small business people are challenged every day to meet their operating costs,” said Attorney General Stumbo. “They should not be burdened by misleading sales practices which seem to give a gift but actually place a hidden bill on a utility account. My Office of Consumer Protection protects the public from such deceptive business practices.”
The checks at issue were sent by mail. On the back of the check, in very small print, was language stating that depositing the check formed a contract for advertising on the Internet for a monthly fee. Sometimes the monthly fee was placed on a telephone bill or other utility bill where it could be overlooked. Other times it was placed directly on a bank account or credit card.
Kentucky has a specific law, KRS 372.160, for such check solicitations for new business, including mandatory disclosures. Some of the checks sent by YP.Com into Kentucky complied with this state law but some did not.
By the terms of the settlement agreement to be filed with the Franklin Circuit Court, YP Corp. has agreed to stop using activation checks as the sole device with which to obligate businesses to purchase its products and services. YP Corp. also has agreed to cancel current customers in Kentucky who were illegally solicited and to contact its current activation check customers to inform them of their right to cancel their agreement with YP.Com, and of the customer’s potential eligibility for at least a partial refund of monies paid to YP.Com. The defendants further agreed to pay $2,000,000 collectively to the 34 states to be used for restitution to former YP.Com customers and to reimburse the states for their investigation costs.
Current YP.Com customers who are being billed through their telephone bill or bank account for a listing as a result of depositing an activation check should receive a letter from YP.Com within the next two weeks. Any customers with questions can call the Office of the Attorney General’s Consumer Protection hotline at 1-888-432-9257.
Any Kentucky business or entity that deposited an activation check from YP.Com since January 1, 2003, was billed for an online yellow page listing and did not understand this was a consequence of depositing the check, should contact the Attorney General’s Office of Consumer Protection no later than February 28, 2007 for refund information.
To date, approximately 11 Kentucky consumers, businesses or organizations will receive letters of cancellation from YP.com, along with a refund check for the total amount paid by the organization.