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Psychic Hotline Settles Fraud Charges

The two firms behind Miss Cleo's infomercials will forgive $500million in uncollected bills but do not admit guilt.

November 15, 2002|From Reuters

The largest psychic hotline operation in the United States has agreed to unplug its phones and pay $5 million to settle charges that it misled customers looking for a supposedly free glimpse into their future, the Federal Trade Commission said Thursday.

The two companies behind husky-voiced psychic Miss Cleo also agreed to forgive an estimated $500 million in uncollected bills and send back uncashed checks to customers who were charged an average of $60 for the supposedly free calls, the FTC said.

Miss Cleo's Caribbean-inflected television appeals faded from the airwaves shortly after the FTC filed fraud and unfair telemarketing charges in February against her two Florida backers, Access Resource Services Inc. and Psychic Readers Network Inc.

The companies already have paid $150,000 in fines and forgiven millions in outstanding bills to settle civil and criminal charges brought by several states, and they face an ongoing investigation in Florida.

In a series of widely broadcast infomercials, Miss Cleo -- born Youree Dell Harris in Los Angeles -- promised free insight on careers, love prospects and other personal matters through psychic readings or tarot cards.

But callers who dialed the toll-free number to speak to Miss Cleo were given another number to speak to a psychic. Only if they stayed on that first line would they be told that the first three minutes at the new number would be free, after which they would be charged $4.99 a minute, the FTC alleged.

Callers often used up their free time on the second call verifying their name, birth date and other personal information, and then racked up charges as calls stretched up to an hour.

Psychics were pressured to keep callers on the line for as long as possible or face termination by the companies, the FTC said.

The companies, run by cousins Steven Feder and Peter Stolz, took in about $1 billion over the years and triggered thousands of consumer complaints, Beales said.

The two companies, which share an office in Fort Lauderdale, Fla., did not admit guilt as part of the settlement but acknowledged that the FTC had a "good-faith basis" for its charges.

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