National Credit Management Group of Fort Lee and Edgewater, New Jersey, and its principals, Glen Buzzetti and Joseph Ferguson, have agreed to settle Federal Trade Commission charges brought against them as part of "Operation Eraser," a federal-state crackdown on fraudulent credit repair firms. 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 and get them credit cards and by charging advance fees for these services. The FTC also charged the defendants with violating the Telemarketing Sales Rule by making unauthorized bank account debits, obtaining advance fees for "guaranteed" credit cards, and failing to disclose the true costs of their services. The proposed settlement of the charges would permanently ban Buzzetti and Ferguson from most credit-related business in the future, would ban them from check debiting, and would require that they pay $350,000 in redress. A court-appointed receiver shut down National Credit Management Group's (NCMG) business in April.
"Operation Eraser," announced this past March, targeted 31 companies that promised that they could restore consumers' creditworthiness for a fee. Sometimes charging over $1,000, these firms purported to guarantee consumers that 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.
According to the complaint detailing the charges in this case, NCMG was a large company -- doing business as 1-800-YES-CREDIT -- advertising on television and radio, and soliciting consumers to call a toll-free number to receive an unsecured credit card. During the telephone sales pitch, the defendants allegedly offered consumers a "credit analysis," suggesting that they would help consumers improve their credit ratings, in return for an up-front fee of $95. The defendants also obtained the consumers' checking account numbers, the FTC said, and often withdrew additional funds from consumers' accounts without the express authorization required by the Telemarketing Sales Rule. In its complaint, the FTC charged that consumers typically failed to receive either the "guaranteed" credit cards or the improvement to their credit records. The complaint alleges the defendants violated the CROA by obtaining an advance fee for their credit repair services and failed to provide the required written pre-sale disclosures; and alleged that the defendants violated the Telemarketing Sales Rule by making unauthorized bank account debits, obtaining advance fees for "guaranteed" credit cards, and failing to disclose the true costs of their services.
On March 25, 1998, United States District Judge Alfred J. Lechner, Jr., of Newark, New Jersey, issued detailed findings of facts and conclusions of law in which he concluded that the FTC and State of New Jersey were likely to succeed in proving that NCMG, Buzzetti, and Ferguson had violated the law. He granted the request of the FTC and New Jersey for a preliminary injunction, froze the defendants' assets, and appointed a receiver to take over the company.
In addition to permanently banning Buzzetti and Ferguson from both the business of credit repair or advance fee loan services and requiring them to pay $350,000 in consumer redress, the proposed settlement would bar the defendants from obtaining, or submitting for payment, a demand draft, check, or other form of negotiable paper unless it contains the original signature of the consumer.
Further, the proposed settlement would prohibit the defendants from misrepresenting any fact material to a consumer's decision to purchase any product or service. The defendants would be prohibited from making the specific claims as alleged in the complaint, and would be prohibited from misrepresenting that their products or services have been approved or endorsed by any governmental authorities or consumer protection entities, and from misrepresenting the terms or conditions of any refund policy. Finally, the defendants are prohibited from violating any provisions of the CROA or the Telemarketing Sales Rule in the future.
The proposed settlement was filed in the U.S. District Court for the District of New Jersey, Newark Division, on October 22, 1998. The Commission vote to file the proposed settlement was 4-0. When the FTC filed its complaint, the New Jersey Attorney General simultaneously filed a similar action in the same court, and the court consolidated the FTC's and New Jersey's cases. The State of New Jersey is not a party to the settlement announced today.
NOTE: The stipulated final judgment is for settlement purposes only and does not constitute an admission by the defendants of a law violation. The judgment is subject to approval by the court and has the force of law when signed by the judge.
Copies of the settlement, 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 No. 98-936)
(FTC File No. X98 0047)