FTC Cracks Down on Senders of Spam Text Messages Promoting "Free" Gift Cards

The Federal Trade Commission is cracking down on affiliate marketers that allegedly bombarded consumers with hundreds of millions of unwanted spam text messages in an effort to steer them towards deceptive websites falsely promising “free” gift cards.

In eight different complaints filed in courts around the United States, the FTC charged 29 defendants with collectively sending more than 180 million unwanted text messages to consumers, many of whom had to pay for receiving the texts. The messages promised consumers free gifts or prizes, including gift cards worth $1,000 to major retailers such as Best Buy, Walmart and Target. Consumers who clicked on the links in the messages found themselves caught in a confusing and elaborate process that required them to provide sensitive personal information, apply for credit or pay to subscribe to services to get the supposedly “free” cards.

"Today's announcement says ‘game over’ to the major league scam artists behind millions of spam texts," said Charles A. Harwood, Acting Director of the FTC’s Bureau of Consumer Protection.  "The FTC is committed to rooting out this deception and stopping it.  For consumers who find spam texts on their phones, delete them, immediately. The offers are, in a word, garbage."

The FTC complaints targeted defendants who sent the unwanted text messages, as well as those who operated the deceptive websites. In addition, the FTC is pursuing a contempt action against a serial text message spammer, Phil Flora, who was barred in 2011 from sending spam text messages and who is accused of being part of this spam texting scheme as well.

According to the FTC complaints, the defendants sent text messages to random phone numbers, including to consumers who do not have a text message subscription plan. As many as 12 percent of mobile phone users fall into this category.

When consumers followed the links included in the unwanted messages, they were directed to sites that collected a substantial amount of personal information, including in some instances health information, before being allowed to continue toward receiving the supposed gift cards.  In many cases, the information was requested under the guise of being shipping information for the supposed gift cards.  The Commission alleged the information collected was then sold to third parties for marketing purposes, meaning consumers were deceived as to the real use of the information.

Once consumers entered their personal information, they were directed to another site and told they would have to participate in a number of “offers” to be eligible for their gift card.  In some cases, consumers were obligated to sign up for as many as 13 of the offers. These offers frequently included recurring subscriptions for which consumers were required to provide credit card information.  In other cases, they required consumers to submit applications for credit that would be reflected in their credit reports and possibly affect their credit score. If a consumer completed all of the “offers,” they were then notified that to get the promised gift card, they had to find three others who also would complete the offers.

According to the FTC, the defendants who sent the text messages were paid by the operators of the “free” gift websites based on how many consumers eventually entered their information. The operators of the free gift websites were in turn paid by those businesses who gained customers or subscribers through the “offer” process.

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