Blog Enforcement Watch February 03, 2021

FTC Reaches Settlement with Two Nevada Companies for Alleged Credit Card Scheme

On January 29, 2021, the FTC announced that it filed a proposed settlement in the District of Nevada with two Nevada-based consulting companies, resolving claims ​that the companies violated the FTC Act, Telemarketing and Consumer Fraud and Abuse Prevention Act, Telemarketing Sales Rule, Credit Repair Organizations Act, and Consumer Review Fairness Act.

The FTC alleged that, since 2013, the two companies charged consumers to obtain “funding” to pay for trainings offered by a number of third-party companies with whom the companies partnered.  The trainings consisted of seminar and coaching packages costing tens of thousands of dollars that purported to teach consumers how to make money by investing in real estate or operating an online business.  The FTC alleged that the third-party training companies referred consumers to the defendants, who in turn charged consumers fees of $3,000 or more to submit numerous applications for personal credit cards on their behalf.  This process is known as “credit stacking.”  The defendants allegedly tried to obtain at least $50,000 in total credit lines with introductory zero-percent interest rates for each consumer, across a half dozen or more credit cards.  To achieve this, the FTC alleges that the companies would inflate consumers’ income on credit card applications by up to $100,0000.  The companies also allegedly fraudulently told consumers they should expect to make that much money after participating in the training programs.  Finally, the FTC alleged that the companies then tricked consumers into maxing out the credit cards to pay for the training seminar tuition.

Under the proposed settlement, the two Nevada companies ​would pay the FTC $2.1 million in monetary relief.  The companies would also be banned from selling any consumer credit services and prohibited from ​engaging in specific practices, such as misrepresenting the financial status of any consumer.  The companies would also be prohibited from selling any consumer’s financial account information without consent.

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