FTC Obtains Court Order Barring Credit Repair Operation from Making False Claims and Charging Up-Front Fees

A credit repair operation has agreed to stop making false claims and stop charging up-front fees under a settlement with the Federal Trade Commission. The settlement is part of an ongoing crackdown on scams that target financially strapped consumers, taking hundreds of dollars of fees to purportedly remove negative information from consumers’ credit reports even if the information is accurate and timely. The FTC filed the action in “Operation Clean Sweep” in October 2008.

According to the FTC’s complaint, James R. Dooley and his company, Nationwide Credit Services, Inc., falsely claimed that bankruptcies, judgments, slow pay history, repossessions, and collection accounts could be “legally erased” from consumers’ credit reports. The defendants allegedly charged up to $150 in advance and debited a monthly fee from some consumers’ bank accounts. The defendants rarely, if ever, delivered the promised results, and in many instances took consumers’ money without providing any services. Consumers often found their cancellation requests ignored, and their refund requests were almost always denied, the FTC complaint alleged.

The settlement order bars the defendants from making misrepresentations about any good or service, such as the ability to improve a consumer’s creditworthiness or remove negative information from their reports. It also prohibits them from charging money up-front for credit repair services, and from collecting payments from consumers who purchased their services before October 20, 2008, when the court froze the defendants’ assets. The order further bars the defendants from disclosing or benefitting from customer information, and from failing to properly dispose of customer information.

The settlement order imposes a judgment of more than $1.3 million that will be suspended once the defendants have surrendered funds frozen by the court. The full judgment will become due immediately if they are found to have misrepresented their financial condition.

The Commission vote to file the stipulated final order was 5-0. The order was filed in the U.S. District Court for the Middle District of Florida, Jacksonville Division.

NOTE: Stipulated court orders are for settlement purposes only and do not 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 consumers 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, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,800 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.