Default Judgment Against Pioneer First

WASHINGTON, April 8, 2003 -- The principals of Westcal Equipment, doing business as Pioneer First and PF Member Services, Inc., have agreed to settle federal charges that they engaged in fraudulent business practices.

A federal district court judge entered default judgments against the corporate defendants on December 12, 2002. The Federal Trade Commission alleged that the defendants advertised nationally on cable TV for their Pioneer First Platinum credit card, implying that the card was a major credit card.

According to the FTC, the defendants guaranteed a Pioneer First Platinum credit card with a $5,000 credit limit and 0 percent interest for 12 months to anyone who was a legal U.S. resident, at least 18 years old, and had a checking account. When consumers responded to the ads, the defendants allegedly told them they had to pay an advance fee of $189 to receive the card. According to the FTC, the Pioneer First Platinum credit card was not a major credit card, but a catalog card good only for buying merchandise through Pioneer First's Web site and catalog.

• misrepresenting that, after paying a fee, consumers will or are highly likely to receive an unsecured major credit card, such as a Visa or MasterCard;
• failing to disclose clearly and prominently in all promotional materials and on the Pioneer Web site that the Pioneer First Platinum card can only be used to purchase merchandise through Pioneer First and that a down payment is required in order to receive a credit card;
• requesting or receiving payment of a fee when the defendants have guaranteed or represented a high likelihood of success in obtaining a loan or other extension of credit; and
• failing to obtain express verifiable authorization to debit a consumer's bank account for any fee or other charge.

The order does not impose a money judgment against the defendants but does contain an "avalanche" clause requiring a $1 million judgment if it is found that they lied on their financial disclosure forms. Finally, the settlement contains various recordkeeping provisions to assist the FTC in monitoring the defendants' compliance.

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