Defendants in Credit Repair Scheme Agree to Settle FTC Charges

Two Bellevue, Washington companies, CRA Champion Credit, Inc. and CRA Financial Services, Inc., and the companies' two principals have agreed to settle Federal Trade Commission charges that they misrepresented the credit repair services they offered by promising to remove accurate negative information from consumers' credit reports, when, in fact, such information cannot be removed. The defendants also were charged with violating the Credit Repair Organization Act (CROA), a new federal law designed to help consumers combat fraudulent credit repair operations. The FTC alleged that the defendants violated the CROA by seeking advance payment for credit repair services and misrepresenting the credit repair services that the defendants claimed they would perform. Under the settlement with CRA Champion Credit, CRA Financial, and the companies' owner and president, Avshalom Hazan, these defendants would be permanently prohibited from advertising, marketing, selling or otherwise offering credit repair services. A separate settlement with Joel Younker, former vice-president of CRA Champion, would prohibit him from misrepresenting any material fact in connection with the advertising, marketing or selling of credit repair services. In addition, Younker would be required to obtain a performance bond in the amount of $50,000 before again entering the credit repair business.

This action was part of "Operation Eraser," a federal-state crackdown on fraudulent credit repair firms that promised consumers they could restore their creditworthiness for a fee. The FTC's complaint charged that CRA Champion, CRA Financial, Hazan, and Younker, falsely promised that they could remove truthful, adverse information, such as bankruptcies, late payment histories, and judgments, from a consumer's credit report. The FTC's complaint states that consumers who called to inquire about the defendants' services were told, among other things:

• "It makes absolutely no difference whether it [adverse information on a credit report] actually happened or didn't. I mean, if it's a late pay and there was a late pay and it's -- you know, it can still come off";

• "We'll work on it for 18 months. And a bankruptcy, depending upon how many accounts are under it that we have to take off first, usually runs eight to 12 months"; and

• "... I would say 95 percent of the information we work on comes off.... And that's -- that's fairly conservative."

Under federal law, however, credit bureaus, which compile consumers' credit history information, may report all truthful information, including negative information, for seven years (bankruptcies can be reported for 10 years). Consequently, credit repair operators cannot and do not get such information removed.

Additionally, the FTC alleged that the defendants -- who charged consumers as much as $1,000 for their services -- requested and obtained at least a partial payment for these services before they were performed, in violation of the CROA.

The proposed settlement with CRA Champion Credit, CRA Financial, and Avshalom Hazan would permanently prohibit these defendants from entering the credit repair business in the future. The settlement would require the defendants to refund approximately $7,900 to the consumers who entered into and paid for contracts for credit repair services with the defendants in 1997. In addition, the defendants would have to contact any consumers with outstanding balances on contracts for credit repair services made with them in 1997 and inform those consumers that their contracts are rescinded and to stop making payments.

The proposed settlement with Joel Younker would prohibit him from misrepresenting, in any way, any material fact in connection with the advertising, marketing, promoting or selling of credit repair services. In addition, the proposed settlement would require Younker to first obtain a performance bond in the amount of $50,000 before reentering the credit repair business.

Both settlements contain recordkeeping and reporting requirements designed to assist the FTC in monitoring the defendants compliance with the settlements.

In continuing its consumer education efforts, the FTC recently issued a new Consumer Alert: "Credit Repair: HelpYourself First," and put together, in one package, a number of consumer brochures on credit matters: "Getting Back in the Black."

The FTC filed the complaint and proposed settlements in the U.S. District Court for the Western District of Washington, in Seattle, today. The Commission vote to authorize its staff to file the complaint and proposed settlements was 5-0. The FTC's Seattle Regional Office handled this matter.

NOTE: The stipulated final orders are for settlement purposes only and do not constitute an admission by the defendants of a law violation. The stipulated orders are subject to approval by the court and have the force of law when signed by the judge.

Copies of the complaint, the stipulated final orders and the consumer brochures are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(Civil Action No. C-98-0585)
(FTC File No. 982 3070)