Blog Enforcement Watch January 17, 2020

FTC Settles with Several Individual and Corporate Defendants Involved in Credit Repair Scheme

On January 17, 2020, the Federal Trade Commission (FTC) settled with several operators of a credit repair scheme for alleged violations of sections 13(b) and 19 of the FTC Act, 15 U.S.C. §§ 53(b) and 57b, Section 410(b) of the Credit Repair Organizations Act (CROA), 15 U.S.C. § 1679h(b), Section 6(b) of the Telemarketing and Consumer Fraud and Abuse Prevention Act, 15 U.S.C. § 6105(b), the Consumer Review Fairness Act (CRFA), 15 U.S.C. § 45b, Section 108(c) of the Truth in Lending Act (TILA), 15 U.S.C. § 1607(c), and Section 918(c) of the Electronic Fund Transfers Act (EFTA), 15 U.S.C. § 1693o(c).  The settlement bans the credit repair operators from operating or promoting any credit repair service.  The operators include individuals and corporate defendants based in Wyoming, Colorado, New Jersey, and Florida.

According to the complaint,​ the defendants operated an unlawful credit repair scam by claiming to be able to improve consumers’ credit scores by removing all negative items and hard inquiries from credit reports through internet websites, telemarketing, and unsolicited emails and text messages.  According to the FTC, Defendants took advance fees for these services without making required disclosures for the services, and offered consumers the option to finance the fees without making requisite disclosures.  When processing fees, the defendants allegedly engaged in electronic fund transfers from consumers’ bank accounts without obtaining authorization, and used remotely created checks to pay for services offered through their telemarketing campaign.  When consumers complained about the lack of results, the defendants purportedly threatened them with legal action.

Under the terms of the settlements, the defendants are banned from operating or promoting any credit repair service and prohibited from misleading consumers about financial services.

The settlement with the individual defendants and several corporate defendants includes a $9,641,982 monetary judgment, which is partially suspended due to an inability to pay.  These defendants must also give the FTC the contents of several bank, investment, merchant, and cryptocurrency accounts.

The settlement with the Colorado-based company includes a $3,256,850 monetary judgment, which is also partially suspended due to an inability to pay.  The company must also give the FTC the contents of several of its bank and merchant accounts​.

The settlement with the New Jersey-based company includes a $929,054 monetary judgment, which is suspended in its entirety due to an inability to pay.

The defendants could be required to pay the full amount of the judgments if it is determined that they misled the FTC about their financial condition.  The FTC filed proposed stipulated final orders in the United States District Court for the District of Connecticut.