schemes by negotiating settlements with two companies and their principals to resolve charges brought against them as part of "Operation Eraser," a federal-state crackdown on fraudulent credit repair firms. In each of these cases, the FTC charged the defendants with violating the FTC Act and the Credit Repair Organizations Act (CROA) by making deceptive claims about their ability to improve consumers' credit records by removing negative information from consumers' credit reports even when the information was accurate and not obsolete, and by charging advance fees for these services.
In addition to prohibiting future misrepresentations with regard to credit repair services, the proposed settlements with Quaite & Associates/The Credit Solver, and its principal Donald Quaite of Dallas, Texas, and Credit Services and its principal John Mancini of Conroe and Dallas, Texas, require them to cease collection from consumers on all credit repair contracts with outstanding balances and notify those customers that their contracts are rescinded and that no further payments are due. Also, Donald Quaite has agreed to pay $10,000, and John Mancini has agreed to pay $18,000 in monetary relief, to be used for consumer redress, where feasible. In addition, Mancini has agreed to return approximately $36,000 in uncashed, post-dated checks to consumers.
"Operation Eraser," announced this past March, targeted 31 companies that promised consumers that they could restore their creditworthiness for a fee. Sometimes charging more than $1,000, these firms purported to guarantee consumers they could remove negative information from their credit reports -- even if the negative information was accurate and timely. But, according to the FTC, these companies cannot remove legitimate negative information and, where there are actual errors in credit reports, consumers have the legal right to have those corrected for free most of the time.
"Operation Eraser" was the first combined effort to utilize the CROA, a new federal law specifically targeting credit repair scams. Effective April 1, 1997, the new statute is enforced by the FTC and state Attorneys General. This law also allows consumers to bring lawsuits on their own in federal court and obtain damages, attorneys fees, and punitive damages.
In addition to providing monetary relief, the settlements prohibit the defendants from misrepresenting any fact concerning their ability to perform or provide any credit-related services or products for consumers, including debt consolidation, obtaining or arranging loans, or arranging any extension of credit, and from misrepresenting any fact material to a consumer's decision to purchase any product or service. Further, the defendants are prohibited from violating any provisions of the CROA in the future.
The settlements with Quaite & Associates/The Credit Solver, and Credit Services were filed in the U.S. District Court for the Northern District of Texas, Dallas Division, on August 19, 1998. The court approved the settlement with Quaite on Aug.21, and approved the settlement with Credit Services on Aug. 26. The Commission votes to file the settlements were 4-0.
NOTE: The stipulated final judgments in these cases are for settlement purposes only and do not constitute an admission by the defendants of a law violation. The judgments are subject to approval by the court and have the force of law when signed by the judge.
Copies of the settlements, the news release announcing "Operation Eraser," and a number of publications about consumer credit issues 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); TDD 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 Nos.: Quaite: Civil Action No. 398CV0552-P; FTC File No. X980033
Credit Services: Civil Action No. 3-98CV0553-X; FTC File No. X980034