THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Sunday, May 19, 1996 TAG: 9605190088
SECTION: FRONT PAGE: A1 EDITION: FINAL
SOURCE: BY STEPHANIE STOUGHTON, STAFF WRITER
LENGTH: Long : 403 lines
The telemarketer's pitch sounded golden: Larry and Dana Morgan could get subscriptions to Jet, Ebony and two other magazines for a big savings over newsstand prices.
Several days later, the Morgans received a letter saying they would get fewer magazines for the same rate. They balked, refusing to make the monthly $14 payments.
Then ``Rick'' called. He called them at home. He called Larry's place of work. He called at dinner. He called late at night. Then, Larry's first sergeant at Langley Air Force Base in Hampton was contacted - twice.
``Rick'' wanted his money.
The couple wound up in court, joining many other Hampton Roads residents who have been sued by National Service Corp., a Virginia Beach-based magazine telemarketer.
National Service has brought thousands of cases to Virginia Beach and Norfolk courts over the past nine years. The company said it ends up suing several hundred customers, about 1 percent of its customer base, each year.
It usually wins.
As National Service sees it, a growing number of people think they can sign a contract and then make any excuse to get out of it, said President William J. Stemple Sr.
``The number of people we have to go to the extreme with is in the extreme minority,'' Stemple said. ``Are they deadbeats? Not in every case. But in most cases, yes.''
At least 10 customers involved in litigation with National Service, however, claim the company took advantage of them.
In interviews and court papers, most of them have the same complaints: They are hounded through aggressive collection tactics even when they have legitimate beefs over sporadic service.
National Service acknowledges delivery problems, but says they are rare. As for the other complaints, it says, they are from a handful of disgruntled customers.
Most of the customers interviewed say they didn't know what they were getting into when they signed contracts for up to $900 worth of magazines, with three days to cancel.
Consumer affairs officials say National Service is doing nothing illegal. Customers who sign contracts are on their own, they say.
``We can't help someone who signs a binding contract,'' said Linda Candler, spokeswoman for the local Better Business Bureau. ``If you're blind, give it to someone to read.''
In Hampton Roads, National Service often works like this:
First, a telemarketer calls potential subscribers, telling customers they can get several magazines for a few dollars a week. If they like the idea, a sales representative visits their homes, bringing contracts.
Under the contracts, customers make payments for 30 months, which generally total between $400 and $900. They have three days to cancel, which state law requires for door-to-door and telephone sales.
National Service says the three-day grace period is clearly listed on the contract. It reviews all orders, and then calls customers to remind them of the fees.
The reminders go beyond what the law requires, Stemple said.
Problems arise when people begin thinking that their deal with National Service was not much of a deal - after the three days have passed.
``It sounded good, so I said OK,'' said Vicki Cutlip of Norfolk. ``A month later, we did the calculations, and I could have kicked myself.''
Cutlip and her husband bought eight magazine subscriptions totaling $810 from a National Service salesman. Cutlip says she could have spent less had she subscribed directly from the publishers, especially if she had taken advantage of special discounted prices.
While some customers don't think the three-day grace period for canceling is fair, lawsuits filed by their attorneys have focused on a bigger issue: whether the company violated consumer laws such as the Virginia Consumer Protection Act.
In Hampton Roads, there have been no rulings against National Service for violating consumer laws, according to court records and interviews with former and current customers. If customers who are being sued retain attorneys, the company generally settles out of court, said Frederic Firestone, an attorney with Tidewater Legal Aid in Virginia Beach. National Service's Stemple said he doesn't want to spend the money to fight Firestone and his organization.
When Albert L. Valery visited the Tidewater Legal Aid clinic, he already had lost his case. A judge in Norfolk General District Court had ruled that Valery owed about $540 plus interest and costs to National Service and ordered that it be deducted from his paycheck or taken from his bank account.
But Valery said he didn't know he was being sued - until it was too late. With his money about to be garnisheed, he told his attorney he wouldn't be able to make a payment on his Chesapeake house.
National Service said officials were unable to locate Valery to notify him of the court date. But attorney Firestone argued in court that the company had access to his client's work address.
In a counterclaim, Firestone said National Service violated the Virginia consumer law by attempting to collect money after Valery canceled for a legitimate gripe: not receiving merchandise.
In the same court filing, Firestone also accused the company of hiding finance charges.
National Service denied breaking any laws, but opted to settle the case. Valery got a check for $423, and National Service kept about $120. The judge did not rule on the consumer-law and finance-charge claims.
``He got a check that day that saved his house,'' Firestone said.
A federal regulation protects consumers from aggressive collection tactics by collection agencies. The Fair Debt Collection Act bans the ``use of harassing or abusive telephone calls or letters.'' It also says collection companies can't contact or threaten to contact employers.
The law doesn't apply to National Service because it's a magazine distributor and not a collection agency, attorneys and consumer advocates say.
Still, the company's persistent calls and letters are enough to push some customers to the boiling point.
Lawrence Westrick Jr. said he sued National Service because he wasn't getting his TV Guide magazines.
``National Service Corp. has not, after many attempts, corrected (the) service problem,'' the Navy man wrote to the court.
Then, Westrick wrote, he was harassed for payment. He said the company also sent a letter to his Navy command, which told Westrick to fix the problem.
He did. Westrick beat National Service to the punch. He went after the company, suing it for $372 in Virginia Beach General District Court.
What makes his court case different is that National Service backed down. National Service agreed to make amends and pay $16.50 to Westrick, who then dropped his case.
Where Westrick succeeded, Kevin and Jeanne Cattau of Chesapeake failed.
When he signed up, Kevin was 19 and recently married to his Nebraska sweetheart. He had wanted to get the magazines while he was at sea. They rarely arrived during his 1992-93 tour, he said. Then, the Cattaus moved. They said they informed National Service of their new address, but continued to have problems with deliveries, according to court papers.
Fed up, the Cattaus said they stopped paying. They were slapped with a late fee. The couple sued the company in Virginia Beach General District Court.
The judge sided with the Cattaus, saying National Service owed them $548 plus court costs. But National Service appealed and won in Circuit Court.
In Circuit Court, National Service said it was natural to expect delays after address changes. The judge agreed, ordering the Cattaus to continue making their monthly $25 payments.
While Westrick and the Cattaus handled their complaints in court, at least one customer took matters into her own hands.
In January, Cynthia Denise Gatling drove to an affiliated company, International Marketing Association Inc. of Virginia Beach. She wasn't getting her magazines, but a guy named ``Rick'' or ``Matt'' kept calling her for more money, she said in a police statement.
She was annoyed. She wanted him to stop calling her.
Gatling didn't find the caller at International Marketing, located off South Independence Boulevard, her statement to police shows. Police say she got in an argument with International employees. Soon after she left, she was arrested and charged with attempted malicious wounding for trying to run over the company's owner in the parking lot. She was indicted on May 6, and her case is expected to go to court next month.
In a statement to police, she denied trying to hurt anyone. But she admitted that she was irate and ``was only seeing red.''
Gatling, of Virginia Beach, could not be reached for comment.
National Service isn't the only magazine telemarketer operating in Hampton Roads. Another local company, Atlantic Service Corp. of Virginia Beach, has a similar operation. It said it has sued hundreds of customers in Virginia Beach courts.
Two local consumer agencies have received more than 100 complaints about National Service and its parent company, Budget Marketing of Virginia Inc., since 1989. There have been fewer gripes about Atlantic Service.
Size is probably a factor in the number of complaints, National Service owner Stemple said. He said his company has about 40,000 subscribers, while Atlantic said it has about 25,000 accounts.
But Thomas Johnson, Atlantic Service's owner, disagrees that company size is the only factor in complaints. He says that two years ago, Atlantic had the same types of service problems, lawsuits and irate customers.
Then, Johnson said, he got tired of it. He began by requiring that customers have credit cards, believing that people with credit were less likely to default. Then, if customers defaulted, the credit-card companies could chase after them.
Johnson also dropped the three-day cancellation provision, lowered the number of subscriptions sold to each customer and stopped suing people.
``We're pretty much out of that kind of business,'' he said. ``We'd rather have customers that want it.''
Now, if customers stop paying, Atlantic will call to remind them. But it no longer contacts a sailor's superior or an airman's first sergeant to complain.
``If they quit paying, we quit sending them magazines,'' said Johnson.
Customers who want to fight should also show up in court. In March, when Larry and Dana Morgan appeared in Virginia Beach court, there were about 80 National Service cases on the docket. The Morgans were the only defendants who showed up.
What happened to the others?
Sonya Edmond, a Navy worker from Norfolk who was sued in Norfolk General District Court, said she didn't show up for her court date because she figured she'd lose. National Service, she said, had already spurned her cancellation request and had contacted her boss to complain about her refusal to pay.
``I didn't even go,'' said Edmond. ``Because, what can you say? The judge is going to say, `Do you owe money?' I didn't have anything to stand up on.''
The Morgans, however, figured they had something.
Four days after they ordered their magazines, they received a letter in the mail. It said they would be getting 48 issues of Ebony magazine instead of 60.
The Morgans called immediately to cancel, but the company said they had missed the three-day cancellation period and couldn't cancel. The Portsmouth couple refused to pay and sent all magazines back.
After more than a month's worth of calls from ``Rick,'' the Morgans were in no mood to accept the company's amends. So, when they were sued, they showed up at the Virginia Beach courtroom at 9 a.m. - Larry in his Air Force Uniform and Dana in a conservative dress.
John Singleton, National Service's general manager, said he tried to give the couple 60 magazines after their complaints. But the Morgans argued that they shouldn't have to abide by the three-day cancellation provision when the company later amended the contract.
The Morgans won.
Consumer affairs officials urge all customers to carefully read contracts before signing.
A customer who wishes to cancel a contract should send a certified letter to the company.
Request a report on a company from the Better Business Bureau. The local BBB can be reached at 627-5651.
The telemarketer's pitch sounded golden: Larry and Dana Morgan could get subscriptions to Jet, Ebony and two other magazines for a big savings over newsstand prices.
Several days later, the Morgans received a letter saying they would get fewer magazines for the same rate. They balked, refusing to make the monthly $14 payments.
Then ``Rick'' called. He called them at home. He called Larry's place of work. He called at dinner. He called late at night. Then, Larry's first sergeant at Langley Air Force Base in Hampton was contacted - twice.
``Rick'' wanted his money.
The couple wound up in court, joining many other Hampton Roads residents who have been sued by National Service Corp., a Virginia Beach-based magazine telemarketer.
National Service has brought thousands of cases to Virginia Beach and Norfolk courts over the past nine years. The company said it ends up suing several hundred customers, about 1 percent of its customer base, each year.
It usually wins.
As National Service sees it, a growing number of people think they can sign a contract and then make any excuse to get out of it, said President William J. Stemple Sr.
``The number of people we have to go to the extreme with is in the extreme minority,'' Stemple said. ``Are they deadbeats? Not in every case. But in most cases, yes.''
At least 10 customers involved in litigation with National Service, however, claim the company took advantage of them. In interviews and court papers, most of them have the same complaints: They are hounded through aggressive collection tactics even when they have legitimate beefs over sporadic service.
National Service acknowledges delivery problems, but says they are rare. As for the other complaints, it says, they are from a handful of disgruntled customers.
Most of the customers interviewed say they didn't know what they were getting into when they signed contracts for up to $900 worth of magazines, with three days to cancel.
Consumer affairs officials say National Service is doing nothing illegal. Customers who sign contracts are on their own, they say.
``We can't help someone who signs a binding contract,'' said Linda Candler, spokeswoman for the local Better Business Bureau. ``If you're blind, give it to someone to read.''
In Hampton Roads, National Service often works like this:
First, a telemarketer calls potential subscribers, telling customers they can get several magazines for a few dollars a week. If they like the idea, a sales representative visits their homes, bringing contracts.
Under the contracts, customers make payments for 30 months, which generally total between $400 and $900. They have three days to cancel, which state law requires for door-to-door and telephone sales.
National Service says the three-day grace period is clearly listed on the contract. It reviews all orders, and then calls customers to remind them of the fees.
The reminders go beyond what the law requires, Stemple said.
Problems arise when people begin thinking that their deal with National Service was not much of a deal - after the three days have passed.
``It sounded good, so I said OK,'' said Vicki Cutlip of Norfolk. ``A month later, we did the calculations, and I could have kicked myself.''
Cutlip and her husband bought eight magazine subscriptions totaling $810 from a National Service salesman. Cutlip says she could have spent less had she subscribed directly from the publishers, especially if she had taken advantage of special discounted prices.
While some customers don't think the three-day grace period for canceling is fair, lawsuits filed by their attorneys have focused on a bigger issue: whether the company violated consumer laws such as the Virginia Consumer Protection Act.
In Hampton Roads, there have been no rulings against National Service for violating consumer laws, according to court records and interviews with former and current customers. If customers who are being sued retain attorneys, the company generally settles out of court, said Frederic Firestone, an attorney with Tidewater Legal Aid in Virginia Beach. National Service's Stemple said he doesn't want to spend the money to fight Firestone and his organization.
When Albert L. Valery visited the Tidewater Legal Aid clinic, he already had lost his case. A judge in Norfolk General District Court had ruled that Valery owed about $540 plus interest and costs to National Service and ordered that it be deducted from his paycheck or taken from his bank account.
But Valery said he didn't know he was being sued - until it was too late. With his money about to be garnisheed, he told his attorney he wouldn't be able to make a payment on his Chesapeake house.
National Service said officials were unable to locate Valery to notify him of the court date. But attorney Firestone argued in court that the company had access to his client's work address.
In a counterclaim, Firestone said National Service violated the Virginia consumer law by attempting to collect money after Valery canceled for a legitimate gripe: not receiving merchandise.
In the same court filing, Firestone also accused the company of hiding finance charges.
National Service denied breaking any laws, but opted to settle the case. Valery got a check for $423, and National Service kept about $120. The judge did not rule on the consumer-law and finance-charge claims.
``He got a check that day that saved his house,'' Firestone said.
A federal regulation protects consumers from aggressive collection tactics by collection agencies. The Fair Debt Collection Act bans the ``use of harassing or abusive telephone calls or letters.'' It also says collection companies can't contact or threaten to contact employers.
The law doesn't apply to National Service because it's a magazine distributor and not a collection agency, attorneys and consumer advocates say.
Still, the company's persistent calls and letters are enough to push some customers to the boiling point.
Lawrence Westrick Jr. said he sued National Service because he wasn't getting his TV Guide magazines.
``National Service Corp. has not, after many attempts, corrected (the) service problem,'' the Navy man wrote to the court.
Then, Westrick wrote, he was harassed for payment. He said the company also sent a letter to his Navy command, which told Westrick to fix the problem.
He did. Westrick beat National Service to the punch. He went after the company, suing it for $372 in Virginia Beach General District Court.
What makes his court case different is that National Service backed down. National Service agreed to make amends and pay $16.50 to Westrick, who then dropped his case.
Where Westrick succeeded, Kevin and Jeanne Cattau of Chesapeake failed.
When he signed up, Kevin was 19 and recently married to his Nebraska sweetheart. He had wanted to get the magazines while he was at sea. They rarely arrived during his 1992-93 tour, he said. Then, the Cattaus moved. They said they informed National Service of their new address, but continued to have problems with deliveries, according to court papers.
Fed up, the Cattaus said they stopped paying. They were slapped with a late fee. The couple sued the company in Virginia Beach General District Court.
The judge sided with the Cattaus, saying National Service owed them $548 plus court costs. But National Service appealed and won in Circuit Court.
In Circuit Court, National Service said it was natural to expect delays after address changes. The judge agreed, ordering the Cattaus to continue making their monthly $25 payments.
While Westrick and the Cattaus handled their complaints in court, at least one customer took matters into her own hands.
In January, Cynthia Denise Gatling drove to an affiliated company, International Marketing Association Inc. of Virginia Beach. She wasn't getting her magazines, but a guy named ``Rick'' or ``Matt'' kept calling her for more money, she said in a police statement.
She was annoyed. She wanted him to stop calling her.
Gatling didn't find the caller at International Marketing, located off South Independence Boulevard, her statement to police shows. Police say she got in an argument with International employees. Soon after she left, she was arrested and charged with attempted malicious wounding for trying to run over the company's owner in the parking lot. She was indicted on May 6, and her case is expected to go to court next month.
In a statement to police, she denied trying to hurt anyone. But she admitted that she was irate and ``was only seeing red.''
Gatling, of Virginia Beach, could not be reached for comment.
National Service isn't the only magazine telemarketer operating in Hampton Roads. Another local company, Atlantic Service Corp. of Virginia Beach, has a similar operation. It said it has sued hundreds of customers in Virginia Beach courts.
Two local consumer agencies have received more than 100 complaints about National Service and its parent company, Budget Marketing of Virginia Inc., since 1989. There have been fewer gripes about Atlantic Service.
Size is probably a factor in the number of complaints, National Service owner Stemple said. He said his company has about 40,000 subscribers, while Atlantic said it has about 25,000 accounts.
But Thomas Johnson, Atlantic Service's owner, disagrees that company size is the only factor in complaints. He says that two years ago, Atlantic had the same types of service problems, lawsuits and irate customers.
Then, Johnson said, he got tired of it. He began by requiring that customers have credit cards, believing that people with credit were less likely to default. Then, if customers defaulted, the credit-card companies could chase after them.
Johnson also dropped the three-day cancellation provision, lowered the number of subscriptions sold to each customer and stopped suing people.
``We're pretty much out of that kind of business,'' he said. ``We'd rather have customers that want it.''
Now, if customers stop paying, Atlantic will call to remind them. But it no longer contacts a sailor's superior or an airman's first sergeant to complain.
``If they quit paying, we quit sending them magazines,'' said Johnson.
Customers who want to fight should also show up in court. In March, when Larry and Dana Morgan appeared in Virginia Beach court, there were about 80 National Service cases on the docket. The Morgans were the only defendants who showed up.
What happened to the others?
Sonya Edmond, a Navy worker from Norfolk who was sued in Norfolk General District Court, said she didn't show up for her court date because she figured she'd lose. National Service, she said, had already spurned her cancellation request and had contacted her boss to complain about her refusal to pay.
``I didn't even go,'' said Edmond. ``Because, what can you say? The judge is going to say, `Do you owe money?' I didn't have anything to stand up on.''
The Morgans, however, figured they had something.
Four days after they ordered their magazines, they received a letter in the mail. It said they would be getting 48 issues of Ebony magazine instead of 60.
The Morgans called immediately to cancel, but the company said they had missed the three-day cancellation period and couldn't cancel. The Portsmouth couple refused to pay and sent all magazines back.
After more than a month's worth of calls from ``Rick,'' the Morgans were in no mood to accept the company's amends. So, when they were sued, they showed up at the Virginia Beach courtroom at 9 a.m. - Larry in his Air Force Uniform and Dana in a conservative dress.
John Singleton, National Service's general manager, said he tried to give the couple 60 magazines after their complaints. But the Morgans argued that they shouldn't have to abide by the three-day cancellation provision when the company later amended the contract.
The Morgans won. ILLUSTRATION: Graphic
FOR EXAMPLE
[For complete graphic, please see microfilm]
KEYWORDS: LAWSUITS TELEMARKETING by CNB