NEW YORK: Voice over Internet Protocol (VoIP) provider XCast Labs, Inc., agreed to settle Federal Trade Commission charges that it funneled hundreds of millions of illegal robocalls through its network, even after receiving multiple warnings about the unlawful conduct.

Under the proposed court order, XCast Labs will be required to implement a screening process and end its relationships with firms that are not complying with telemarketing-related laws. The Department of Justice litigated the case and filed the proposed order on the FTC’s behalf.

“XCast was warned several times that illegal robocalls were using its services and did nothing,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Companies that turn a blind eye to illegal robocalling should expect to hear from the FTC.”

“Today’s order is another example of the Justice Department’s efforts to protect American consumers from illegal robocalls and to stop telecommunications providers from enabling those calls,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “We will continue to work with the Federal Trade Commission to enforce the Telemarketing Sales Rule.”

XCast Labs, headquartered in Los Angeles, is a nationwide provider of VoIP technology, providing services that allow its customers to send and receive phone calls, including robocalls, over the internet. Telemarketers who blast illegal robocalls typically use VoIP service providers like XCast Labs to transmit their calls.

According to the May 2023 complaint, the FTC sent letters to several VoIP providers, including XCast Labs, in early 2020 warning them that assisting and facilitating illegal telemarketing or robocalling is against the law. XCast Labs received dozens of “traceback” inquiries from US Telecom’s Industry Traceback Group regarding suspected illegal calls that originated on XCast Labs’ network, as well as inquiries from law enforcement agencies about the transmission of suspected illegal traffic on the XCast Labs network.

Even after receiving these direct warnings, XCast Labs transmitted illegal robocalls to consumers. The FTC also discovered that many of these suspect robocalls were part of organized campaigns to generate telemarketing leads by impersonating officials from the Social Security Administration.

The proposed order, to which XCast Labs has agreed, prohibits the company from violating the Telemarketing Sales Rule in the future. It also bans XCast Labs from assisting and facilitating any high-risk customer, including those that are engaged in initiating, causing, or transmitting telemarketing robocalls or calling numbers on the DNC Registry and any telephone call using Caller ID spoofing to display a phone number that the calling party does not have the legal authority to use.

Next, the order permanently bars XCast Labs from providing VoIP services to any company with which it does not have an automated procedure to block calls that display invalid Caller ID phone numbers or that are not authenticated through the FCC’s STIR/SHAKEN Authentication Framework. Further, the order requires XCast Labs to screen current and prospective VoIP customers to ensure they are not violating telemarking-related laws and terminate relationships with any customer that does not pass the screening process.

Additionally, the order requires XCast Labs to pay a $10 million civil penalty, which will be suspended based on its inability to pay. If the company is later found to have misrepresented its financial condition, the full amount will immediately become due.

The Department of Justice filed the proposed order in the U.S. District Court for the Central District of California.

Thomas Biesty and Frances Kern of the Bureau of Consumer Protection were the primary FTC staff on this matter.

NOTE: Consent order the force of law when approved and signed by the District Court judge.

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NEW YORK: California-based lead generator Response Tree LLC and its president, Derek Thomas Doherty, will be banned from making or assisting anyone else in making robocalls or calls to phone numbers on the FTC’s Do Not Call (DNC) Registry under a proposed order settling Federal Trade Commission charges that they operated more than 50 websites designed to trick consumers into providing their personal information for supposed mortgage refinancing loans and other services.

The defendants allegedly sold the personal information of hundreds of thousands of consumers as leads to telemarketers who used them to make millions of illegal telemarketing calls, including robocalls, to consumers nationwide.

Telemarketing campaigns allegedly assisted and facilitated by the defendants’ illegal lead generation operations were used to sell a multitude of products and services, including solar panels, hearing aids, and extended auto warranties. These campaigns, which made robocalls and calls to numbers on the DNC Registry, were illegal, as the telemarketers did not have consumers’ consent to be called, according to a complaint filed by the Department of Justice on referral from the FTC.

“Response Tree fueled millions of illegal telemarketing calls by tricking consumers into turning over their personal information and selling that information to telemarketers,” said Samuel Levine, Director of the Bureau of Consumer Protection. “The FTC will continue to target every corner of the illegal telemarketing ecosystem to protect consumers and hold wrongdoers accountable.” 

The complaint alleges that the defendants’ websites—including PatriotRefi.com, AbodeDefense.com, and TheRetailRewards.com—were actually “consent farms” that used deceptive and manipulative “dark patterns” to induce consumers to provide their personal information, obscuring hard-to-find and inadequate disclosures about how the information would be used. The defendants claimed that, in providing this information, the consumers consented to receive telemarketing calls. Third parties then bought the defendants’ leads and used the personal information to conduct illegal telemarketing campaigns, according to the complaint.

Through their PatriotRefi.com website, for example, the defendants allegedly duped consumers into providing their personal information under the guise of requesting a quote for a home mortgage refinance loan. After consumers input their personal information and click a button labeled “GET YOUR FAST FREE QUOTE,” the defendants captured the information and stored it in a database to sell to telemarketers and others.

Many or all consumers who provided their personal information to PatriotRefi.com never received home refinance quotes, according to the complaint. Instead, PatriotRefi.com was designed to compile lead lists by harvesting and selling consumers’ personal information without consumers’ informed consent. The complaint further alleges the defendants sold the leads they obtained, knowing that they did not obtain the requisite consent to receive telemarketing calls, including robocalls.

According to the complaint, at their peak, the defendants’ consent farm operations offered an average of 10,000 “real-time” leads for sale every day, and on some days had up to 50,000 illegally farmed leads for sale. In all, between 2019 and 2022, Response Tree and Doherty sold millions of deceptively collected leads.

The proposed order settling the complaint, which must be approved by the court before it can go into effect, bans the defendants from initiating or helping anyone else initiate telemarketing robocalls. It also bans them from calling, or assisting anyone else in calling, phone numbers on the DNC Registry and from selling, transferring, or disclosing consumer information in connection with lead generation activities.

The order also imposes a $7 million judgment against the defendants, which will be suspended based on their inability to pay. If they are later found to have misrepresented their financial condition, however, the full amount will immediately become due.

The Commission vote approving the complaint and stipulated final order and referring it to the U.S. Department of Justice (DOJ) for filing was 3-0. The DOJ filed the complaint and proposed a final order in the U.S. District Court for the District of Central District of California.

The staff attorneys on this matter are Karina A. Layugan, Matthew H. Fine, and Jeffrey Tang of the FTC’s Western Region Los Angeles office.

The Federal Trade Commission works to promote competition and protect and educate consumers. Learn more about consumer topics at consumer.ftc.gov, or report fraud, scams, and bad business practices at ReportFraud.ftc.gov.

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