11/14/2002

"Miss Cleo" has seen the future ... and it does not include her. The operators of her psychic hot line have agreed to cancel $500 million in customer bills, return all uncashed checks to customers and pay a $5 million fine.

Although Miss Cleo will be fading from the airwaves and, perhaps, from public view, the popular soothsayer shouldn't go hungry anytime soon. In three years, it's estimated her service billed $1 billion through 900 numbers and credit cards and collected about half of it.

Many customers were satisfied with the service.

The landmark settlement eclipses previous Federal Trade Commission (FTC) settlements. Under the deal, Florida-based Access Resource Services, Inc. (ARS) and Psychic Readers Network, Inc. (PRN) agreed to stop all collection efforts and forgive an estimated $500 million in outstanding consumer charges. as part of a settlement with the Federal Trade Commission.

"The lesson in this case is that companies that make a promise in an ad need to deliver on it -- whether it's about availability, performance, or cost," said J. Howard Beales III, Director of the FTC's Bureau of Consumer Protection. "I'm no psychic, but I can foresee this: If you make deceptive claims, there is an FTC action in your future."

In infomercials that flooded the late-night airwaves, Miss Cleo -- portrayed by Youree Dell Harris -- promised to provide mystical insights into love, money and other mysteries. Ms. Harris claimed to be a Jamaican mystic. But a birth certificate introduced as evidence in a civil case in Florida shows she was born in Los Angeles to American parents. Ms. Harris invoked her Fifth Amendment right against self-incrimination in that case.

The FTC filed a complaint in federal district courtin February of this year against ARS, PRN, and their officers, Steven L. Feder and Peter Stolz. The FTC alleged that the defendants engaged in deceptive advertising, billing, and collection practices. Specifically, the complaint alleged that the defendants misrepresented that consumers:

would receive psychic reading at no charge;

did not incur costs when they remain on the telephone with the psychic readers; and

were obligated to pay charges for calls made to the defendants' audiotext numbers that consumers were not obligated to pay.

In addition, the complaint alleged that the defendants repeatedly called consumers without providing them a reasonable method for stopping the calls. The complaint also alleged that the defendants violated the Pay-Per-Call Rule by failing to disclose the cost of the calls in their ads for the psychic services and by threatening consumers with adverse credit reports before conducting reasonable investigations of the bill error notices from consumers.

The settlement prohibits the defendants from misrepresenting any material fact in connection with the sale of any pay-per-call or audiotext services; permanently bans them from calling consumers to solicit the use of any of the defendants' services without providing consumers with a reasonable method to cause the defendants to stop making such calls; and prohibits them from violating any part of the Pay-Per-Call Rule.

Besides the FTC action and a civil suit in Florida, Ms. Cleo and her handlers have settled charges in Arkansas, Illinois, Indiana, Kansas, Missouri, Oklahoma, Pennsylvania and Wisconsin.