Dialing for Dollar$ A Report on How the Psychic Industry Misleads Callers, its Stay-at-Home “Psychics” and the General Public New York State Consumer Protection Board October, 2001 C. Adrienne Rhodes, Chairman & Executive Director STATE OF NEW YORK EXECUTIVE DEPARTMENT STATE CONSUMER PROTECTION BOARD George E. Pataki C. Adrienne Rhodes Governor Chairman & Executive Director October 31, 2001 Dear New Yorker: The following report details activities of the Psychic Readers Network and other companies that are part of the multi-million-dollar “psychic” phone industry. Many people want to believe that there exists some mystical power that can read their minds and predict the future. It can be a harmless amusement in the way that an Ouija Board entertains children. However, this industry causes the state concerns when its business practices mislead consumers. The Psychic Readers Network is the largest single psychic service in the world and, not surprisingly, it is also the cause of most of the complaints filed with the Consumer Protection Board regarding “psychic services.” It is also the single greatest source of complaints from consumers registered for protection under New York’s State’s new “Do Not Call” Telemarketing Law administered by the CPB. Based in Fort Lauderdale, Florida, the Psychic Readers Network has produced a business that generates more than $300 million a year. It has also produced a worldwide celebrity: “Miss Cleo.” The questionable tactics used to generate phone calls to one of dozens of toll-free phone lines is just one piece of an overall pattern of business practices that may mislead consumers. The New York State Consumer Protection Board has also found more than 100 apparent violations of the State’s “Do Not Call” Telemarketing Law. Behind the scenes there is another consumer story: the pitfalls faced by the people who work out of their homes, answering calls to these psychic phone lines. In many cases, these “stay-at-home psychic readers” are unprepared for the intricacies of the billing and other procedural demands made by “psychic” networks. This is in addition to the dubious practice involved in allowing anyone to call themselves a “psychic.” In many cases, consumers with very real problems are spending hundreds of dollars in phone charges to get their problems heard by these so- called “psychic readers.” Their main job is to keep callers on the phone for as long as possible. Finally, PRN has apparently violated New York’s “Do Not Call” law in an attempt to garner more business. We are issuing a Notice of Apparent Liability (NOAL) for a penalty of up to $224,000 for 112 apparent violations of the “Do Not Call” law. Although enforcement of the law for violations began on May 2, 2001, PRN did not even bother to purchase the “Do Not Call” Registry until August 6, 2001, according to our records. PRN will have 30 days to respond to the NOAL for these apparent violations. We expect this report, as well as the CPB’s enforcement of New York State’s “Do Not Call” Telemarketing Law, will have an appreciable impact on the business practices of PRN and other “psychic” services. C. Adrienne Rhodes Chairman and Executive Director New York State Consumer Protection Board “DIALING FOR DOLLARS”-- HIGHLIGHTS 1. “CALL ME NOW for your free reading!” … How callers seeking a “free reading” from Miss Cleo are directed to a 900 phone number -- and potentially hundreds of dollars in phone bills. Page 6 2. Deceptive Practices … Television commercials, e-mails and other marketing by “Miss Cleo” may mislead the public into calling toll-free numbers to learn “urgent” information. When they finally get to a so-called “psychic,” the experience may not be as dramatic as the “readings” demonstrated by “Miss Cleo” in her television ads. Pages 7 and 8 3. “Stay-at-home Psychics” … It’s not “Miss Cleo” answering all those phone calls. It’s hundreds of people working out of their homes, acting as “psychic readers.” These “stay-at-home psychics” must keep callers on the phone well past their “free minutes” or risk being fired. Pages 9 and 10 4. After Midnight … Late-night television is when “Miss Cleo” commercials flood the airwaves. Page 11 5. Reading from Scripts … Stay-at-home “psychics” may read from scripts to help them perform. The goal is to keep the caller on the line for as long as possible. Page 12 6. Promises, Promises … Callers are lured to psychic lines by promises of lottery and sweepstakes winnings. Page 13 7. Reading the Future (By the Book) … People receive “urgent messages,” some referring to life-threatening health concerns. They all urge an immediate call to “Miss Cleo” to learn more about their future. Page 14 Page 4 “DIALING FOR DOLLARS” -- HIGHLIGHTS 8. “Breaking the Three-Minute Barrier” … Advice from a “bookstore” manager to her psychic “reader” on how to stretch calls beyond the “free minutes” promised in “Miss Cleo” advertisements. Page 15 and 16 9. Billing Complaints … Consumers complain about hundreds of dollars in phone bills, sometimes because minor children called and stayed on a psychic line for 15 to 30 minutes or more. Page 17 10. Telemarketing complaints … Details of the CPB’s Notice of Apparent Liability (NOAL) against PRN for at least 112 apparent violations of the State’s “Do Not Call” Telemarketing Law. Page 18 11. Direct Marketing Machine … How callers to psychic lines -- and people who have never called -- are placed on marketing sales lists. These lists generate e-mails, telemarketing calls and other advertisements that may invade people’s privacy. Page 19, 20 and 21 12. So Who Really is “Miss Cleo” … The “world-renown master psychic” speaks to the Consumer Protection Board. Page 22 Page 5 CALL ME NOW for your free reading!” “Miss Cleo” urges viewers of her ubiquitous television ads. The chance Route to Your Free Psychic Reading to get a free "psychic reading" is a great enticement that has resulted in thousands of people calling this “world- renowned, master psychic” on a series of toll-free, Caller dials one of several 800 numbers. 800 numbers, looking for a “free reading from Miss People call these 800 numbers at all hours of the Cleo” day and night. But it doesn't matter when you call, because the result is always the same: there is no psychic or psychic reading at the other end. Instead, callers are connected to a bank of telephone operators at companies such as Real Communication Services in Fort Lauderdale Fla. 800 call is answered by an These operators ask for the caller's name and e-mail operator, not a “psychic” address. (This information will eventually be sold and not “Miss Cleo.” to other companies for their own marketing Operator tells callers to campaigns. It is also used by the Psychic Readers dial a 900 number for their Network to send letters, e-mails and telemarketing “free psychic reading” calls from PRN and "Cleo”.) To get their psychic reading, callers must hang up and dial a 900 number. Only then are callers connected to a so-called “psychic.” A spokesman After dialing 900 number, the call is routed for PRN said calls are directed to an 800 number, through a nationwide computer and instead of directly to a 900 number, in order for telephone network and sent to the home callers to have three opportunities to understand telephone of a “psychic.” The network the company’s pricing and other policies. The goal, usually selects a “psychic” based on how according to the PRN spokesman, is not to mislead much money that “psychic” has made for callers into thinking they will receive anything the company in previous 900 calls. other than what the company offers. These “psychics” at the other end of the line, generally work out of their homes. Their primary job is to keep callers on the 900 line for as long as possible. Subcontractors in this network may provide scripts and other suggestions to help One of hundreds -- if not “psychics” keep the calls going for an average of thousands -- of so-called 15 to 20 minutes -- sometimes even longer. The “psychics” wait by the phone longer the call, the more money pocketed by the to answer a 900 call. They are reader, their employer and ultimately the Psychic paid only if they keep the Reader Network (PRN). caller on the line beyond their “free minutes.” Page 6 DECEPTIVE PRACTICES “This Company had great success with (“Miss Cleo”) ads. People were The “Miss Cleo” ads usually do not mention that drawn to her personality and called in you must dial a 900 number in order to get your "free psychic reading." Only a toll-free 800 number is droves. So of course, (PRN owner) advertised. Focusing solely on this toll-free number, Steve (Feder) had her do more ads. encourages callers to think they will be getting something for free. “Now this Company will take things right to the edge, which I do not like. Although PRN makes some effort to block calls They put on the TV screen what is from minors, “Miss Cleo's” ads are placed on cable supposed to be her extension. Well, television shows frequently watched by minors who often do not understand the difference between an 800 I'll eat all the decks of my tarot cards, and a 900 call. one by one, if anyone ever answers that extension. That may have been That difference is made even more confusing by the her extension two years ago, but she operators who answer some of the 800 calls. During a call to 1-800-997-7748 on October 16, an operator hasn't logged on to take calls at 18 said a free reading was available but only if you dialed cents a minute in a very long time.