Markets Wired

Two bogus credit repair companies and their principals settled Federal Trade Commission charges that they falsely claimed they could clean up consumers’ credit reports and collected up-front fees for their services, in violation of federal law. In one case, the FTC alleged that the defendants marketed their services via Web sites and real estate investment seminars and falsely claimed that their special relationships with creditors, collection companies, public records providers and credit bureaus enabled them to remove derogatory information from consumers’ credit reports. In the other case, a husband-wife team allegedly falsely claimed, through the Internet and newspaper classified ads, that their expertise enabled them to achieve the same results.

According to the FTC’s complaints, both filed in 2008, all of these defendants falsely promised to remove negative information from consumers’ credit reports, such as late payments, charge-offs, collections, tax liens, repossessions, bankruptcies, and judgments, even when the information was accurate and not obsolete, in violation of the FTC Act and the Credit Repair Organizations Act (CROA). The Commission also charged them with violating the CROA by charging and collecting payment for their services before doing any work.

The settlement orders bar the defendants from making false claims when marketing credit repair services or any other product or service, and specifically prohibit them from misrepresenting any material fact, including: 1) that they can substantially improve consumers’ credit reports by permanently removing negative information, even when it’s accurate and not obsolete; 2) that they can otherwise improve a consumer’s credit report or ability to obtain credit; 3) the full cost of their services and any restrictions; 4) material restrictions or limitations to purchase or receive goods or services; 5) any material aspect of their refund or cancellation policy; and 6) any aspect of how the goods or services will perform. The orders also bar them, when selling credit repair services, from violating the CROA in any way, such as by misrepresenting their services and charging for services in advance. The orders further prohibit the defendants from disclosing or benefitting from customers’ personally identifiable or financial information and require them to protect consumers’ personally identifiable information during
its disposal. The settlements also contain record-keeping and reporting provisions to allow the FTC to monitor compliance.

In the first case, Successful Credit Service Corporation, also doing business as Success Credit Services, and Tracy Ballard, also known as Tracy Ballard-Straughn, the settlement order prohibits them from collecting additional money from consumers who purchased their services before October 16, 2008, when the court halted their business practices.

The defendants in the second case are Rudolph Joseph Strobel, a/k/a Lee Harrison, and Leanna Ruth Harrison, both doing business as Lee Harrison Credit Restoration, Credit Restoration, and Lee Harrison Associates Credit Restoration. The order bars them from collecting money from consumers who purchased their services before August 28, 2008, when the court halted their business practices, and requires them to return any money orders or other negotiable instruments received after that date.

The orders impose judgments of $8.3 million (Successful Credit) and almost $2.5 million (Lee Harrison), which will be suspended due to the defendants’ inability to pay. The full judgments will become due immediately if they are found to have misrepresented their financial condition.

The Commission vote to authorize staff to file the stipulated final order against the Successful Credit defendants was 4-0. The case was filed in the U.S. District Court for the Central District of California, Western Division, and the order was entered by the court on September 17, 2009.

The Commission vote to authorize staff to file the stipulated final order against the Lee Harrison defendants was 4-0. The case was filed in the U.S. District Court for the Eastern District of Texas, Marshall Division, and the order was entered by the court on August 10, 2009.

NOTE: Stipulated court orders are for settlement purposes only and do not necessarily constitute an admission by the defendants of a law violation. Stipulated orders have the full force of law when signed by the judge.

The Federal Trade Commission works for the consumer to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, click http://www.ftccomplaintassistant.gov or call 1-877-382-4357. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to more than 1,700 civil and criminal law enforcement agencies in the U.S. and abroad. For free information on a variety of consumer topics, click http://www.ftc.gov/bcp/consumer.shtm.

(Successful Credit, Lee Harrison Settlements)
(FTC File Nos. X090010, X080058)