he Federal Trade Commission (FTC) filed a complaint in U.S. District Court for the Western District of Texas, Waco Division, charging Electronic Financial Group (EFG) and its principals with providing assistance to fraudulent telemarketers seeking to drain funds from consumers' checking accounts.

The allegations involve several violations of the Telemarketing Sales Rule (TSR), the FTC Act and charges of breach of contract.

Paul McClinton, Jerry Federico and Randy Balusek are named as defendants in the case as individuals and officers of Electronic Financial Group, Inc. and EFG Card Services, Inc.

The FTC's complaint, filed in July 2003, claims the defendants processed transactions through the Automated Clearing House Network (ACH) for numerous fraudulent telemarketers. It charged that, since April 2000, they also engaged in the deceptive marketing of their own advance-fee debit cards, called the First Freedom Financial Card and the AmeriOne Card. The cards are stored-value cards that consumers used to withdraw funds they had deposited with EFG.

The FTC said the company made unauthorized charges and debits to consumers' bank accounts. In May 2003, the complaint stated, EFG began marketing a new advance-fee card called the United USA Card and made many of the same misrepresentations it had made for the other ventures.

EFG also is in breach of contract with its bank for not adhering to the NACHA Operating Rules that govern the ACH Network, according to the FTC. These rules include provisions that prohibit processing ACH transactions for merchants who engage in outbound telemarketing to consumers with whom those merchants have no existing relationship.

The complaint alleged that EFG violated the TSR by providing substantial assistance and support to numerous client telemarketers even though it knew (or consciously avoided knowing, according to the FTC) those telemarketers were engaged in business practices that violated the rule.

Many of the outbound telemarketers for whom EFG processed transactions previously had been sued as scams by the FTC. EFG assisted and facilitated at least four client telemarketers who engaged in deceptively selling advance-fee cards and a fifth client engaged in deceptively selling a lottery scam, the complaint alleged.

According to the FTC, EFG targeted sales of its own advance-fee cards to consumers with poor credit; the First Freedom Card was pushed by telemarketers, the AmeriOne Card was promoted over the Internet.

The defendants charged consumers a one-time advance fee ranging from $80 to $100 and a $9.95 monthly service fee for the cards.

The FTC said that EFG misrepresented that the cards were credit cards affiliated with MasterCard by using the MasterCard logo and that it would report consumers' AmeriOne account activity to the three major credit bureaus to establish or improve credit.

EFG, located in Waco, Texas, provides processing services for electronic payment transactions for clients in the U.S and Canada. It has been in business for 10 years, according to the company Web site.

The FTC is seeking compensation for consumers and the repayment of fees EFG earned illegally by processing transactions for the fraudulent telemarketers. The U.S. District Court issued a temporary restraining order and appointed a temporary monitor to review the defendants' business practices and report to the court before the preliminary injunction hearing.

According to an FTC statement, it files a complaint when it has "reason to believe that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest." The complaints filed are not findings; cases must be decided by the court.