The Federal Trade Commission has filed a complaint naming five defendants in connection with their roles in the now-defunct Phoenix-based National Credit Foundation, Inc. ("National"), which the FTC alleges misrepresented its ability to improve consumers' credit histories by permanently removing bankruptcies, late payments, and other delinquencies from consumers' credit reports. In addition, two of the defendants were charged with misrepresenting the company's purpose in soliciting the checking account numbers of consumers and then debiting the accounts without authorization from the consumer. Further, three defendants were charged with producing and disseminating an infomercial about National’s services that misrepresented that the program was an independent television program and not a paid advertisement. Proposed settlements of the charges with three of the five defendants would prohibit the misrepresentations alleged in the complaint with regard to credit repair services, and would ban one of the defendants from engaging in any business or activity relating to credit repair services.
The FTC’s complaint detailing the charges in this case names Robert J. Maynard, Jr. (a stockholder and officer of National), Brian W. Cutright (an officer of National), Mark F. Guimond (director of customer services for National), NCF Corp. (producer of National's infomercial) and Hal Z. Lederman (owner of NCF Corp.) as defendants. NCF Corp., Lederman and Guimond have agreed to settle the FTC’s charges. The complaint seeks a permanent injunction and an order for consumer redress from the remaining defendants.
The complaint alleges that all of the defendants made misrepresentations about the ability of National to remove accurate, current information permanently from consumers' credit reports. The complaint charges that defendants Maynard, NCF Corp. and Lederman created and produced an infomercial designed to mislead consumers that the program was an independent television news or talk-show program and not a paid advertisement. The infomercial instructed consumers to call an 800 number to find out about National’s services. Consumers who called were frequently asked for their checking account numbers and told by National’s representatives that the account numbers were needed for "verification" purposes. In fact, according to the complaint, defendants Maynard and Cutright solicited consumers' checking account numbers for no other purpose than to debit consumers' accounts, without obtaining authorization from the consumers.
The proposed settlement to the charges against Lederman would permanently prohibit him from advertising, promoting, or selling any product or service relating to credit repair services. In addition, NCF Corp. and Lederman would be prohibited from misrepresenting that any commercial or advertisement for any such product or service is an independent program and not a paid advertisement. The proposed settlement would require that any commercial longer than 15 minutes in length make the following disclosure, within the first 30 seconds of the commercial and immediately before each presentation of ordering instructions:
"THE PROGRAM YOU ARE WATCHING IS A PAID ADVERTISEMENT
FOR [THE PRODUCT OR SERVICE]."
The proposed settlement with Mark Guimond would prohibit him from misrepresenting the ability of any credit improvement service to substantially improve a consumer’s credit report or to remove adverse information contained in a consumer’s credit report, and from misrepresenting any right or remedy under the Fair Credit Reporting Act. Further, the settlement would prohibit Guimond from misrepresenting any fact material to a consumer's decision to purchase or participate in a credit repair service. In addition, Guimond would be required to provide each prospective purchaser of credit improvement services with a notice advising consumers of their rights and a credit bureau’s reporting rights under the Fair Credit Reporting Act.
The proposed settlements with NFC Corp., Lederman and Guimond also contain a number of standard recordkeeping and reporting requirements to assist the FTC in monitoring the defendants’ compliance.
The action will go forward, in federal district court, seeking injunctive and other appropriate relief against Robert J. Maynard and Brian W. Cutright, the two defendants who did not settle the FTC’s charges.
The Commission vote to file the complaint and proposed settlements was 5-0. They were filed in the U.S. District Court for the District of Arizona, in Phoenix, on Oct. 17. The settlements are subject to approval by the court. The FTC's Los Angeles Regional Office handled this matter.
NOTE: The stipulated final judgments are for settlement purposes only and do not constitute an admission by the defendants of a law violation. The judgments have the force of law when signed by the judge.
Copies of the complaint and the proposed settlements are available from the FTC’s Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; 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. FTC news releases and other materials also are available on the Internet at the FTC’s World Wide Web site at: http://www.ftc.gov
John D. Jacobs or Linda Stock
Los Angeles Regional Office
11000 Wilshire Boulevard, Suite 13209
Los Angeles, California 90024
(Civil Action No.: 96-2374-(PHX)-ros)
(FTC File No. 932-3370)