The operator of two computer privacy services has agreed to pay up to US$1 million in refunds to customers to settle charges of using deceptive marketing techniques and selling the customer's personal information.
Consumer Digital Services LLC, which sold the Privasafe and SurfSafe software and services, has agreed to pay $300,000 in fines and legal fees and offer refunds to Washington state consumers who were billed for their products, according to Katherine Tassi, assistant attorney general for Washington.
Terms of the settlement were outlined in a consent decree filed Thursday in King County Superior Court in Seattle.
Consumer Digital Services is controlled by Gary Salmirs, of Fort Lee, New Jersey, who is also named in the settlement. The state alleges that the company violated state consumer protection laws, but neither Salmirs or the company admit to any wrongdoing in the settlement, Tassi said.
According to her, the company lured customers with offers of free gift cards, flat-screen monitors and free software, promoted through pop-up ads and e-mail. Customers handed over personal information like addresses, telephone numbers and dates of birth thinking that they were getting a free product.
"What they actually were doing was signing up for a paid service," Tassi said.
Thousands of consumers received unexpected $14.95 per month charges for the company's software and services and almost nobody got a free gift card or flat-screen monitor. "Our investigation showed that only one of the over 13,000 Washington consumers ever actually got this free item," Tassi said.
Consumers didn't have to hand over credit card information in order to be billed because the charges were tacked on to regular monthly telephone bills, she added.
Last year, the Florida attorney general investigated a company called Email Discount Network for engaging in similar billing practices, Tassi said.
Consumer Digital Services took its Web sites offline sometime during the past month, Tassi said. But according to cachedcopies of these sites, the company said that its products would remove spyware, protect consumers against "unscrupulous marketers," make Internet surfers anonymous and even boost connection speeds.
In fact, the "exact opposite" occurred, Tassi said. "They actually were compiling a huge database of consumer information that could be used for marketing purposes," she said. This data was eventually sold to marketing companies, she added.
Washington state residents who were billed for Privasafe or SurfSafe products since Jan. 1, 2004, can get their money refunded, and will be contacted by Consumer Digital Services.
The company could not be reached immediately for comment.