National Credit Management Group of Fort Lee and Edgewater, New Jersey, and its principals, Glen Buzzetti and Joseph Ferguson, have agreed to settle charges brought against them by the Federal Trade Commission and the New Jersey Attorney General 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 also by charging advance fees for these services. The FTC further 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. 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.
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. The court-appointed receiver shut down National Credit Management Group's (NCMG) business in April, 1998.
In October 1998, after FTC staff and the defendants reached a proposed settlement of the charges, the FTC voted to accept the proposed settlement, filed it in court, and issued a news release announcing the settlement. (See FTC News Release dated October 27, 1998.) After the October, 1998, settlement was announced, the New Jersey Attorney General and the defendants also reached a proposed settlement. The Court directed that the FTC and New Jersey settlements be embodied in one document, and the settlement announced today reflects the Court's wishes.
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 revised settlement bars 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 settlement prohibits the defendants from misrepresenting any fact material to a consumer's decision to purchase any product or service. The defendants are prohibited from making the specific claims as alleged in the complaint, and 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. The defendants also are prohibited from violating any provisions of the CROA or the Telemarketing Sales Rule in the future.
The revised settlement also contains provisions that resolves alleged violations of the New Jersey Consumer Fraud Act that were brought against the defendants by the State of New Jersey -- and which are separate from the law violations alleged by the Commission. This portion of the order requires Buzzetti and Ferguson to pay an additional one million dollars out of their future income over the course of ten years. At the end of that time, a judgment for any unpaid balance will be entered against them. These provisions also require that the defendants provide adequate staffing of their customer service lines, and prohibits the defendants from establishing unconscionable refund and/or pricing policies.
The settlement, which was filed in the U.S. District Court for the District of New Jersey, Newark Division, was signed by the judge on May 4, 1999. The Commission vote to file the settlement was 4-0.
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 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, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD for the hearing impaired 1-866-653-4261. Copies of the settlement will be available from the FTC's web site soon. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.
(Civil Action No. 98-936 (AJL))
(FTC File No. X98 0047)