Feds and States Crack Down on Finance Scams

The cases included advance fee credit card, credit repair, pay day loan, debt adjustment, and debt negotiation schemes, as well as new credit identity scams. The FTC has filed a series of federal court complaints alleging violations of law in the following areas:

• Seven separate enterprises offer consumers "major credit cards," such as a MasterCard or Visa, or a loan, for a one-time advance fee, that never produce the promised credit cards or loans.
• A California firm calling itself a "debt negotiation" company promises financially strapped consumers that it could reduce their debt and restore their credit by negotiating with creditors. But the company does little other than charge exorbitant fees while consumers stop making required payments to their creditors and plunge deeper and deeper into financial ruin.
• An Oregon firm calling itself a "financial finder and matching service," offers to match consumers to charitable foundations that are most likely to give cash grants - which, unlike loans, never need to be repaid - to individuals who have "genuine reasons for needing the money," regardless of credit history or collateral. But what consumers receive is a useless list of foundations and general instructions on applying for a grant.

"In these uncertain economic times, finance-related scams are especially outrageous because they prey on the most vulnerable consumers - those out of work, those with poor credit ratings, or those who need money right away for emergencies," said J. Howard Beales, III, Director of the FTC's Bureau of Consumer Protection. "Working with our federal, state, and local partners, we are stopping scam artists who make false promises with no intention of delivering the goods. Our warning to these disreputable businesses is: we will track you down and stop your illegal practices."

Advance-fee credit schemes continue to be among the most commonly-reported complaints in the Consumer Sentinel database that the FTC maintains and that hundreds of law enforcement agencies use. In advance-fee credit card scams, the perpetrators tell consumers that for an advance fee - sometimes several hundred dollars - they will receive an unsecured credit card. Frequently, the consumers get nothing of value. Other times they only receive a list of banks or a booklet of tips on how to obtain a credit card. In no case did the defendants issue a major credit card to a consumer.

Among companies charged in the latest crackdown are:

• Jubilee Financial Services, Inc., of Downey, California; Jabez Financial Group, Inc., and company officers.
  
  These defendants allegedly lured consumers with false promises that consumers would be able to eliminate all of their unsecured debt by paying off only a fraction of what the consumers actually owed. According to the FTC, the defendants told consumers that if the consumers made monthly payments to the defendants' debt negotiation program, the consumers would eliminate their debt and improve their credit rating. The defendants also told consumers to allow the defendants to handle all aspects of the debt negotiation. The FTC alleges that the defendants rarely contacted consumers' creditors, causing consumers to damage their credit ratings and accrue additional late fees and finance charges.



• Grant Search, Inc., Grant Pac, Inc., of Ashland, Oregon; company officers.
  
  The defendants allegedly told consumers that they would match consumers with a suitable foundation "most likely to approve your grant," regardless of the purpose of the grant. The defendants offered the purported grants as substitutes for traditional credit to consumers who have bad credit histories.
  
  The FTC alleges that although consumers could buy the program at two different prices, they received the same outdated list of foundations regardless of which program they purchased. Consumers learned that individuals were not eligible for the vast majority of the grants. The defendants offered a 100 percent money-back guarantee of the application fee, but when consumers requested a refund, the defendants denied the refund based on certain conditions or restrictions that the defendants did not previously disclose.



• Bay Area Business Council, Inc.; Bay Area Business Council Customer Service Corp.; America Leisure Card Corp., of Largo, Florida; Peter J. Porcelli, II; Christopher Tomasulo; and Bonnie A. Harris.
  
  The defendants purportedly offered consumers guaranteed low-interest unsecured MasterCard credit cards. According to the FTC, although consumers paid as much as $499 to receive the credit card, most consumers did not receive the promised credit cards. A few received a "temporary" or "dummy" card with the MasterCard logo, the name "Bay Area Business Council," and a non-magnetic black stripe on the back. When consumers called to activate the card, the defendants told them for the first time that they had a debit card and not a credit card. The defendants also told consumers that they had to pay an additional fee and deposit money for any purchases made on the account. The FTC alleges that the defendants told consumers a specific amount during the sales call, but charged additional amounts.



• Credit Card Services and Destyni Enterprises, of Dallas, Texas, and the companies' owner.
  
  The defendants allegedly told consumers that for a $79 up-front fee, they would receive a Visa or MasterCard credit card. The FTC alleges that in many instances consumers received nothing from the company after they paid the fee. In a few instances, consumers received bank credit card applications that included additional fees or only offered secured credit cards. When consumers requested a refund, the defendants either ignored the request or informed the consumers that they must meet specific criteria that the defendants did not previously disclose.



• 1st Beneficial Credit Services LLC, doing business as First Beneficial Credit Services; First Beneficial Credit Services, Inc.; and American Capitol, of Toronto, Canada; and Viktor Golub, doing business as Platinum Express.
  
  The defendants' telemarketers, operating out of the Toronto area, called U.S. consumers and offered guaranteed Visa or MasterCard credit cards with substantial credit limits for a $199 advance fee. The FTC alleges that consumers never received the promised credit card.



• Premier Financial Services International, Inc., of Coral Springs, Florida; Premier Financial Services of Tennessee, Inc., of Nashville; First Financial Debt Consolidation Inc., of Oakland Park, Florida; and company officers.
  
  The defendants' telemarketers told consumers that they had been pre-approved for a major credit card, Visa or MasterCard, for a one-time fee ranging from $189 to $219. The defendants told consumers that the one-time charge was for the credit card and purported benefits packages. According to the FTC, the defendants assured the consumers that if the consumers paid the required fee, they would receive a credit card. In fact, the banks had not approved the consumer's request for a credit card. Consumers had to complete an additional bank application with the bank's own credit criteria, a fact not disclosed to consumers before the defendants debited the consumers' bank accounts.



• Westcal Equipment, Inc., doing business as Pioneer First; PF Member Services., Inc., of Buffdale, Utah; Robert Barr, Candace Rodriguez, Charles Schmidt, and Wayne Wrath.
  
  The defendants advertised their Pioneer First Platinum credit card in exchange for an advance fee of $189. The ads guaranteed consumers a Pioneer First Platinum card, with a $5000 credit limit and zero percent interest for 12 months, as long as the applicant is 18 years old, a legal U.S. resident, and has a checking account. The advertisements included the logo of a major credit card. In fact, the FTC alleges, the Pioneer First credit card is not a major credit card but a catalog card good only for purchasing merchandise through Pioneer First. The FTC alleges that the defendants debited consumers' checking accounts without authorization.



• Star Credit Services Inc. and company officers.
  
  The defendants guaranteed that the consumers who paid an advance fee would always obtain a loan for a desired amount regardless of past credit history, and further guaranteed refunds to any consumer who did not get a loan. Consumers typically did not receive the loans the defendants promised. Consumers also discovered, after they paid the advance fee, that they were required to submit a rejection letter from each and every lender before the defendants would issue refunds. According to the FTC, even those consumers who fulfilled the requirements to receive a refund were unsuccessful.



• Tyme Lock 2000, Inc., of Nevada, doing business as United Family Services and USA Membership Services; Total Resources, Inc.; and company officers.
  
  The defendants make unsolicited phone calls to consumers in some instances, telling them that for a fee of approximately $189, they will receive a major credit card, and either a personal computer, cell phone, or camera. Consumers paid by having the defendants debit their checking accounts. The FTC alleges that instead of receiving a credit card or other promised items, consumers received a packet of materials which included applications to banks for credit cards, and offers for computers or cell phones which required the consumers to contract with an internet service provider or a telephone company.

The FTC alleges that the defendants in all nine of the cases listed above engaged in deceptive practices in violation of the FTC Act and the Telemarketing Sales Rule (TSR). In each case, the FTC is seeking permanent orders prohibiting the defendants from engaging in similarly deceptive finance-related schemes, and is asking the courts to freeze the defendants' assets. Where appropriate, the FTC is also seeking the appointment a receiver.

The FTC also is launching an extensive consumer education campaign, including a Spanish language component, to help consumers avoid credit-related fraud. The FTC has several consumer publications: Advance-Fee Loan Scams Campaign, Knee Deep in Debt, Credit Repair: Getting Back in the Black Campaign; and Payday Loans. They are available on the Internet at http://www.ftc.gov/bcp/conline. Publications can also be obtained in Spanish at www.ftc.gov/spanish.

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