National Credit Management Group (NCMG) offered credit monitoring and credit card services to consumers throughout the United States. NCMG used the 1-800-YES-CREDIT toll-free telephone number as the central marketing focus of its business. The company's advertisements on radio and cable television stated that persons with credit problems should call the toll-free number to receive a "confidential analysis" of their credit histories. Many of these advertisements also promised that NCMG would provide consumers with a complimentary application for a major credit card without a security deposit. In a number of the television advertisements, NCMG would flash the word "APPROVED" on the television screen or would otherwise highlight that word when the advertisement made reference to the credit card application. NCMG received approximately 6,500 "inbound" calls per week from consumers who were responding to the radio and television advertisements. NCMG did not engage in "cold-calling" of consumers. When consumers called 1-800-YES-CREDIT, an NCMG representative offered them an initial credit analysis for an up-front fee of $95. During this phone conversation, the NCMG representative asked consumers for information-name, address, Social Security number, checking account number, employment information, and income information-that the representative stated was necessary to enable the credit analyst to gather information concerning the particular consumer's credit history. The NCMG representative also stated that the $95 fee was the charge associated with the accumulation and monitoring of the information contained in the credit profile of the consumer, and that the credit analyst would be telephoning the consumer in approximately two weeks to discuss the consumer's credit history. Between 5 and 9 percent of consumers who called the toll-free number purchased either the $95 initial credit analysis offered or other services (described below) that NCMG offered. NCMG used the checking account information obtained by its representatives to set up an arrangement under which consumers' checking accounts would be debited in the amount of $95 if they accepted the initial credit analysis offer. Consumers who initially gave verbal authorization for the debiting arrangement later encountered great difficulty in attempting to cancel it. In the initial telephone conversation described above, the NCMG representatives did not tell consumers that when they used their "complimentary" application for a credit card (the application referred to in NCMG's advertisements), they could have to pay fees ranging from $50 to $100 to sponsoring banks. Neither were consumers informed that they were not guaranteed of receiving a credit card. Although sponsoring banks approved a high percentage of consumers who used the NCMG-provided application, not all applicants were approved for a credit card. NCMG did not actually perform a credit analysis for paying consumers, nor did NCMG check those consumers' credit reports. When the supposed credit analyst made the above-described follow up telephone call to a consumer, he or she did not discuss the consumer's credit history. Instead, the credit analyst attempted to sell the consumer NCMG's two-year program designed for persons who wished to establish or reestablish their credit. The two-year program, which consisted largely of NCMG's furnishing certain educational materials, ranged in cost from several hundred dollars to well over $1,000, with the NCMG caller having the discretion to set the price at what seemed an appropriate level under the circumstances. The credit analyst typically did not disclose that the earlier check-debiting arrangement would be used as the payment mechanism for persons who agreed to subscribe to the two-year program. The Federal Trade Commission (FTC) filed suit against NCMG. Among other things, the FTC alleged that NCMG violated § 5 of the FTC Act as well as the Telemarketing Sales Rule (TSR). Did NCMG violate § 5? Did NCMG violate the TSR?
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