One of the country’s largest credit-repair operations has agreed to pay more than $1.15 million in consumer redress to settle Federal Trade Commission charges that it violated federal law. The settlement resolves charges leveled by the FTC against six Michigan-based defendants in a federal court complaint that was filed simultaneously with the settlement. The Commission’s complaint alleges that the defendants, who sell credit-repair services through a multilevel marketing organization, falsely claimed that they could remove derogatory information from consumers’ credit reports, even if that information was accurate and not obsolete. The defendants purported to do this through the use of a “one-of-a-kind” computer disk that they claimed could search and identify errors in the process used by the credit reporting agencies to enter negative items onto consumers’ credit reports. The Commission’s complaint alleges that the defendants’ representations about the computer disk are false and deceptive. As part of the settlement, the defendants agreed that they would no longer make any claims about a computer disk or software program in marketing their credit-repair service to consumers.
“The complaint and settlement in this case are evidence of the Commission’s continuing commitment to stamp out fraud in the credit-repair industry,” said Howard Beales, Director of the FTC’s Bureau of Consumer Protection. “Consumers who find themselves with less than perfect credit histories should be wary of anyone offering a quick fix to the problem. Mistakes can be corrected, but there is no substitute for time and self-discipline to improve your credit report if the information is accurate.”
The Commission’s Complaint
The Commission’s complaint is brought against six related defendants, all based in the Detroit, Michigan area. Those defendants include ICR Services, Inc.; a Livonia, Michigan-based company; and its three officers and directors, Bernadino J. Pavone, Jr., his mother Gloria Tactac, and Abood Samaan. The remaining defendants are National Credit Education and Review (NCER), based in Canton, Michigan, and its president Todd Renzi. The defendants currently sell their credit-repair service through NCER under the name “National Credit Repair.” Since 1996, the defendants have sold their credit-repair service to more than 183,000 consumers, taking in more than $53 million on those sales.
The Commission’s complaint alleges that in operating their credit repair business, the defendants engaged in a series of deceptive practices that violate both the FTC Act and the Credit Repair Organizations Act. According to the complaint, the defendants and their nationwide network of approximately 50,000 sales representatives regularly told consumers that the defendants were able to remove negative items such as bankruptcies, foreclosures, and late-payments from credit reports even if the items were accurate, verifiable, and not obsolete. To convince consumers that they actually could do this, the defendants allegedly represented that they had a one-of-a-kind computer disk, developed over several years by defendant Pavone, that was able to identify inaccuracies in the entry process employed by the credit reporting agencies. According to the FTC, the defendants told consumers that the computer disk was so unique and amazing that it had been valued at more than $200 million in an independent appraisal, and once had been insured by Lloyd’s of London for $15 million. They allegedly also told consumers that the credit reporting agencies themselves wanted the disk so badly that one of them offered $10 million for it. The Commission’s complaint alleges that all of these representations are false and deceptive. In particular, the Commission’s complaint alleges that the defendants do not have a computer disk or any type of software program that is able to do the things they represent to consumers. According to the Commission’s complaint, the defendants’ credit-repair service simply entails challenging in a dispute letter each negative item that appears on a consumer’s credit report. The complaint alleges that just like everyone else, these defendants are not able to remove negative items from credit reports that are accurate, verifiable, and not obsolete.
In addition to these core misrepresentations, the Commission’s complaint alleges that the defendants violated federal law by requiring consumers to pay in advance for the credit repair service, by misrepresenting the terms of their 110 percent money back guarantee, by making untrue and misleading statements about their customers’ credit standing to the credit reporting agencies, and by failing to provide their customers with a written notice as required by federal law.
Terms of the Stipulated Final Order
The stipulated final order settling these charges requires that the defendants pay more than $1.15 million in consumer redress. The order also enjoins any further violations of the FTC Act and the Credit Repair Organizations Act. Because the defendants’ marketing program focused so heavily on the alleged computer disk, those types of claims are given special treatment in the final order. The order prohibits the defendants and their sales representatives from making any claims whatsoever about any computer disk or software program.
The stipulated final order also requires that the defendants distribute a notice detailing the terms of the settlement to their defendants’ national network of sales representatives. The notice informs the defendants’ sales force that any further reference to the computer disk or software program is prohibited by a court order and that the sales representatives themselves may be held in contempt of court for violating the terms of the order. The order requires sales representatives to sign and return a form acknowledging receipt of the notice to continue selling the defendants’ credit-repair service.
For additional information on credit repair and other credit-related issues, please see the consumer education materials located at
The Commission vote to authorize staff to file the complaint and proposed consent order was 4-0, with Commissioner Sheila F. Anthony not participating. The documents were filed in the U.S. District Court for the Northern District of Illinois, Eastern Division, on August 8, 2003. The consent order was entered by the court on that date.
NOTE: This consent order is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Consent orders have the force of law when signed by the judge.
Copies of the complaint and consent order are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1 877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.
(FTC File No. 012-3199: Civil Action No. not available at press time) (National Credit Repair)