DEBRA A. VALENTINE
General Counsel

CATHERINE R. FULLER
JOHN C. HALLERUD
Federal Trade Commission
55 East Monroe St., Suite 1860
Chicago, IL 60603
(312) 960-5634 (voice)
(312) 960-5600 (facsimile)
CF 7651; JH 7073

FAITH S. HOCHBERG
United States Attorney

By: KIMBERLY GUADAGNO
Assistant United States Attorney
United States Attorney’s Office
970 Broad St., 7th Floor
Newark, NJ 07102
(973) 645-2771 (voice)
(973) 297-2010 (facsimile)
KG 5323

Attorneys for the Plaintiff

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

FEDERAL TRADE COMMISSION,

Plaintiff,

v.

NATIONAL CREDIT MANAGEMENT GROUP, LLC, d/b/a YES-CREDIT; GLEN BUZZETTI, individually and as an officer of National Credit Management Group, LLC; and JOSEPH FERGUSON, individually and as an officer of National Credit Management Group, LLC,

Defendants.

CIVIL ACTION NO.

VERIFIED COMPLAINT FOR INJUNCTION
AND OTHER EQUITABLE RELIEF

Plaintiff, the Federal Trade Commission (“FTC” or “Commission”) for its Complaint alleges:

1. The Commission brings this action under Sections 13(b) and 19 of the Federal Trade Commission Act (“FTC Act”), 15 U.S.C. 53(b) and 57b; Section 410(b) of the Credit Repair Organizations Act, 15 U.S.C. 1679h(b); and the Telemarketing and Consumer Fraud and Abuse Prevention Act (“Telemarketing Act”), 15 U.S.C. 6101 et seq., to obtain preliminary and permanent injunctive relief, restitution, rescission, disgorgement and other equitable relief for Defendants’ deceptive acts or practices in connection with the sale and offering for sale of credit repair services and advance fee loans in violation of Section 5(a) of the FTC Act, 15 U.S.C. 45(a), the Credit Repair Organizations Act, 15 U.S.C. 1679 et seq., and the Federal Trade Commission's Telemarketing Sales Rule ("FTC Telemarketing Rule" or "Rule"), 16 C.F.R. Part 310.

JURISDICTION AND VENUE

2. This Court has jurisdiction of this matter pursuant to 28 U.S.C. 1331, 1337(a), 1345, and 1367, and 15 U.S.C. 53(b), 57b, 6102(c), 6105(b), and 1679h(b).

3. Venue in the District of New Jersey is proper under 28 U.S.C. 1391 and 15 U.S.C. 53(b).

THE PARTIES

4. Plaintiff, the Federal Trade Commission, is an independent agency of the United States Government created by statute. 15 U.S.C. 41 et seq. The Commission enforces Section 5(a) of the FTC Act, 15 U.S.C. 45(a), which prohibits unfair or deceptive acts or practices in or affecting commerce. The Commission also enforces the Telemarketing Rule, 16 C.F.R. Part 310, which prohibits deceptive or abusive telemarketing acts or practices. The Commission may initiate federal district court proceedings to enjoin violations of the FTC Act, the Credit Repair Organizations Act and the Telemarketing Rule and to secure such equitable relief as is appropriate in each case, including restitution for injured consumers. 15 U.S.C. 53(b), 57b, 1679h(b) and 6105(b).

5. Defendant National Credit Management Group, LLC, ("NCMG") does business as 1-800-YES-Credit. Defendant NCMG purports to have its principal place of business at 177 Main Street, Suite 230 in Fort Lee, New Jersey. Defendant NCMG transacts or has transacted business in the District of New Jersey and throughout the United States.

6. Glenn Buzzetti is one of the owners of NCMG. At all times material to this complaint, acting alone or in concert with others, he has formulated, directed, controlled or participated in the acts and practices of NCMG, including the acts and practices set forth in this complaint. He resides and transacts business in this District.

7. Joseph Ferguson is one of the owners of NCMG. At all times material to this complaint, acting alone or in concert with others, he has formulated, directed, controlled or participated in the acts and practices of NCMG, including the acts and practices set forth in this complaint. He resides and transacts business in this District.

COMMERCE

8. At all times material to this complaint, defendants’ course of business, including the acts and practices alleged herein, have been in or affecting commerce, as “commerce” is defined in Section 4 of the FTC Act. 15 U.S.C. 44.

DEFENDANTS’ BUSINESS PRACTICES

9. Since at least 1995, defendants have telemarketed, advertised, promoted, offered for sale, and sold credit repair services and advance fee credit services to consumers throughout the United States.

10. Defendants have placed advertisements on television and radio inducing consumers to telephone NCMG’s toll-free telephone number, 1-800-YES-CREDIT, to obtain information about NCMG’s credit repair program. Defendants’ radio and television advertisements instruct consumers to call NCMG’s toll-free telephone number if they have had credit problems in order to receive a "confidential analysis" regarding their credit history. Numerous of these advertisements have also promised that NCMG will provide consumers with a complimentary "approved" application for an unsecured major credit card with no security deposit.

11. When consumers respond to such advertisements by calling the advertised telephone number, they speak with an NCMG representative. The NCMG representative typically offers consumers a "credit analysis" in exchange for an up-front fee, typically $95.00, payable to defendant NCMG either by "phone checks" or "demand drafts" using the consumers’ bank account information. Defendant NCMG charges and/or receives payment of the $95.00 fee prior to conducting a "credit analysis" and/or performing any other services on behalf of a prospective customer and prior to obtaining or arranging the promised unsecured major credit card.

12. During the sales pitch for NCMG’s credit program, the sales representatives make representations such as:

a. "We’re a credit information company and our analysis program includes the resources on how you may correct your personal credit profile, obtain mortgages, car loans and settle collection matters."

b. "If qualified, you'll also receive a complimentary application for an unsecured major credit card with no security deposit required which may enable you to establish or re-establish credit. . . ."

c. "The first step is to provide you with a personal credit analysis. We assign a trained credit analyst to your case who will provide you with information with respect to your profile so that you may attempt to establish and/or re-establish your credit."

d. ". . . The credit analysis is only $95 and if we can't qualify you, the $95 is refundable within three business days. So, all we need to do is to get some general information from you and a credit analyst will review your case and get back to you within two weeks with your results."

13. In numerous instances, during the course of the conversation, consumers are persuaded to provide their checking account numbers to defendants’ representatives. Many of these consumers decline to purchase defendants’ "credit analysis." Other consumers agree to purchase the "credit analysis" but telephone NCMG later the same day and notify NCMG that they are withdrawing their authorization to issue a debit on their accounts. In numerous instances, these consumers later discover that defendants have processed a debit on their checking account for approximately $95.00.

14. Typically, shortly after the initial phone call, an NCMG "credit analyst" telephones the consumer and solicits the consumer to purchase NCMG’s "educational program." The promised "credit analysis" is not performed nor discussed with the consumer.

15. In numerous instances, whether the consumer has agreed to purchase the materials or not, defendant NCMG then sends the consumer a large package of materials. This package typically includes instructions on how to obtain credit, credit information and referrals, credit bureau form letters, a description of defendant NCMG’s services, a disclosure/agreement form bearing the "applicant’s" name pre-printed on the form and also bearing a line for signature by the "applicant", a notice regarding payment terms bearing a line for signature by the "applicant", a credit authorization sheet, and several applications for unsecured and secured credit cards which require application fees or deposits of $50 to $100. The notice regarding payment terms contains twelve paragraphs, the eleventh of which instructs consumers that they can exercise their "Right of Recision[sic]" in the following manner: "The Educational Information package must be received via certified U.S. mail, by midnight of the third business day, from the date you receive the Disclosure agreement, at our business address."

16. As part of its "educational program," defendant NCMG provides its customers with form letters and instructs them to mail handwritten copies of the letters to each of three credit bureaus in order to receive current credit reports. Defendant NCMG encourages its customers to call its customer service line telephone number, if they do not receive responses from the credit bureaus or if they have questions.

17. To provide an aura of legitimacy to the transaction, defendants also send consumers instructions encouraging consumers to call the National Business Reporting Bureau ("NBRB") to obtain a report or reference on defendant NCMG. Defendants imply that NBRB is an independent, third party reporting organization that provides objective and reliable reports that accurately describe its members’ business practices. The NBRB report states, among other things, that NCMG has received a "Triple AAA Rating" from NBRB.

18. The fee which defendant NCMG charges for its "educational program" ranges anywhere from $300 to $1,400, and is payable in monthly installments via "phone checks" or conventional checks mailed to defendant NCMG. Defendant NCMG charges and receives payment for its "educational program" prior to the program’s completion.

19. Many consumers who are fortunate enough to be home and to have the time to read through the large package of materials on the day that the package arrives return the package the following day. Nevertheless, NCMG has, in numerous instances, processed one or more debits on these consumers’ checking accounts.

VIOLATIONS OF THE FTC TELEMARKETING RULE

20. The FTC Telemarketing Rule was promulgated by the Commission pursuant to Section 6102(a) of the Telemarketing Act, 15 U.S.C. 6102(a), and became effective on December 31, 1995.

21. Defendants are "sellers" or "telemarketers" engaged in "telemarketing," as those terms are defined in the FTC Telemarketing Rule, 16 C.F.R. 310.2(r), (t), and (u).

22. The FTC Telemarketing Rule requires sellers and telemarketers to disclose, clearly and conspicuously, the total costs to purchase, receive, or use, and the quantity of, any goods or services that are the subject of a sales offer. 16 C.F.R. 310.3(a)(1)(i).

23. The FTC Telemarketing Rule further requires sellers and telemarketers to disclose, clearly and conspicuously, all material restrictions, limitations, or conditions to purchase, receive, or use the goods or services that are the subject of a sales offer. 16 C.F.R. 310.3(a)(1)(ii).

24. The FTC Telemarketing Rule further prohibits telemarketers and sellers from obtaining or submitting for payment any form of negotiable paper drawn on a person’s bank account without that person’s express verifiable authorization. 16 C.F.R. 310.3(a)(3).

25. The Telemarketing Rule prohibits telemarketers and sellers from requesting or receiving payment of any fee or consideration in advance of obtaining or arranging a loan or other extension of credit when the seller or telemarketer has guaranteed or represented a high likelihood of success in obtaining or arranging a loan or other extension of credit for a person. 16 C.F.R. 310.4(a)(4).

COUNT ONE--UNAUTHORIZED CHECK DEBITING

26. In numerous instances, in connection with telemarketing offers of credit repair services and advance fee loan services, defendants have obtained or submitted for payment a check, draft or other form of negotiable paper drawn on a consumer’s checking or savings account without that person’s express verifiable authorization.

27. Defendants have thereby violated Section 310.3(a)(3) of the Telemarketing Sales Rule, 16 C.F.R. 310.3(a)(3).

COUNT TWO--FAILURE TO DISCLOSE
MATERIAL INFORMATION

28. In numerous instances, in connection with telemarketing offers of credit repair services, defendants have failed to disclose in a clear and conspicuous manner, before consumers paid for their services:

a. that the initial fee paid by consumers of $95 is merely an application fee and that the actual fee for defendants’ product and/or services can range from $300 to $1,400, thereby failing to disclose the total costs to purchase, receive, or use, the goods and/or services that are the subject of defendants’ sale offer in violation of Section 310.3(a)(1)(i) of the FTC Telemarketing Rule, 16 C.F.R. 310.3(a)(1)(i);

b. that in addition to the initial $95 fee paid by consumers, the credit card applications which defendants provide to consumers require additional application fees of $50 to $100, thereby failing to disclose a material restriction on the purchase of defendants' product in violation of Section 310.3(a)(1)(ii) of the FTC Telemarketing Rule, 16 C.F.R. 310.3(a)(1)(ii); and

c. that consumers would be required to meet a lender’s minimum credit- granting criteria to receive any offered credit card, thereby failing to disclose a material restriction on the purchase of defendants' product in violation of Section 310.3(a)(1)(ii) of the FTC Telemarketing Rule, 16 C.F.R. 310.3(a)(1)(ii).

COUNT THREE--ADVANCE FEE LOAN

29. In numerous instances, in connection with telemarketing offers of advance fee loan services, defendants have requested and have received payment of a fee or consideration in advance of obtaining an extension of credit when they have represented a high likelihood of success in obtaining or arranging the extension of credit for a person. Defendants have thereby violated Section 310.4(a)(4) of the Telemarketing Rule, 16 C.F.R. 310.4(a)(4).

VIOLATIONS OF THE CREDIT REPAIR ORGANIZATIONS ACT

30. The Credit Repair Organizations Act, signed by the President on September 30, 1996, took effect on April 1, 1997, and has since that date remained in full force and effect.

31. Defendants are "credit repair organizations" as that term is defined in the Credit Repair Organizations Act, 15 U.S.C. 1679a(3).

32. The purposes of the Credit Repair Organizations Act, according to Congress, are:

(1) to ensure that prospective buyers of the services of credit repair organizations are provided with the information necessary to make an informed decision regarding the purchase of such services; and (2) to protect the public from unfair or deceptive advertising and business practices by credit repair organizations. 15 U.S.C. 1679(b).

33. Section 404(b) of the Credit Repair Organizations Act prohibits credit repair organizations from charging or receiving any money or other valuable consideration for services which the credit repair organization has agreed to perform before such service is fully performed. 15 U.S.C. 1679b(b).

34. Section 405(a) of the Credit Repair Organizations Act further requires credit repair organizations to provide consumers with a written statement containing prescribed language concerning consumer credit file rights under state and federal law before any contract or agreement between the consumer and the credit repair organization is executed. 15 U.S.C. 1679c(a).

35. Section 406(a) of the Credit Repair Organizations Act requires that no services be provided by any credit repair organization unless a written and dated contract containing specific information is signed. 15 U.S.C. 1679d.

36. Section 407 of the Credit Repair Organizations Act further provides that consumers may cancel any contract with a credit repair organization without penalty or obligation by notifying the credit repair organization within three days after the date of the contract or agreement. 15 U.S.C. 1679e.

37. The Credit Repair Organizations Act prohibits all persons from making or using any untrue or misleading representation of the services of the credit repair organization. 15 U.S.C. 1679b(a)(3).

38. Pursuant to Section 410(b)(1) of the Credit Repair Organizations Act, 15 U.S.C. 1679h(b)(1), any violation of any requirement or prohibition of the Credit Repair Organizations Act constitutes an unfair and deceptive act or practice in commerce in violation of Section 5(a) of the FTC Act, 15 U.S.C. 45(a).

COUNT FOUR--ADVANCE FEE CREDIT REPAIR SERVICES

39. In numerous instances, in connection with the performance of services for consumers by a credit repair organization, as that term is defined in Section 403(3) of the Credit Repair Organizations Act, 15 U.S.C. 1679a(3), defendants have charged or received money or other valuable consideration for the performance of services that the credit repair organization has agreed to perform before such service was fully performed. Defendants have thereby violated Section 404(b) of the Credit Repair Organizations Act, 15 U.S.C. 1679b(b).

COUNT FIVE--FAILURE TO OBTAIN SIGNED CONTRACT

40. In numerous instances, in connection with the performance of services for consumers by a credit repair organization, as that term is defined in Section 403(3) of the Credit Repair Organizations Act, 15 U.S.C. 1679a(3), Defendants have provided services to consumers without first having the consumers sign written contracts that:

a. provide a full and detailed description of the terms and conditions of payment and the services to be performed, thereby violating Sections 406(a), (b)(1) and (b)(2) of the Credit Repair Organizations Act, 15 U.S.C. 1679d(a), (b)(1) and (b)(2);

b. include a prescribed statement of the consumers’ right to cancel the transaction within three business days, thereby violating Sections 406(a) and (b)(4) of the Credit Repair Organizations Act, 15 U.S.C. 1679d(a) and (b)(4); and

c. are accompanied by a notice of cancellation form in duplicate, thereby violating Sections 407(b) of the Credit Repair Organizations Act, 15 U.S.C. 1679e(b).

VIOLATIONS OF SECTION 5 OF THE FTC ACT

41. Section 5(a) of the FTC Act, 15 U.S.C. 45(a), prohibits unfair or deceptive acts or practices in or affecting commerce.

42. Misrepresentations of material fact constitute deceptive acts or practices prohibited by Section 5(a) of the FTC Act.

COUNT SIX--MISREPRESENTATIONS

43. In numerous instances, in connection with telemarketing offers of credit repair services and advance fee loan services, defendants have made false or misleading statements to induce consumers to purchase defendants’ credit repair services and advance fee loan services, including but not limited to statements:

a. that defendants will provide a service that will assist consumers in establishing or reestablishing credit;

b. that the credit card applications which NCMG offers to consumers have been pre-approved; and

c. that NBRB is an independent consumer protection agency which will provide objective and reliable reports that accurately describe NCMG’s business practices.

44. In truth and in fact,

a. defendants do not provide a service that will assist consumers in establishing or reestablishing credit; rather, NCMG merely sells a package of educational materials and rarely, if ever, provides actual assistance to consumers seeking to establish or reestablish credit;

b. the credit card applications which NCMG offers to consumers have not been pre-approved; rather, each applicant must meet the selection criteria of each credit card issuer; and

c. the NBRB is not an independent consumer protection agency which will provide objective and reliable reports that accurately describe NCMG’s business practices; rather, it is a commercial enterprise designed to provide good references to consumers on behalf of companies who pay a fee to the NBRB.

45. Therefore, the representations set forth in Paragraph 43 are false and misleading and constitute deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. 45(a).

CONSUMER INJURY

46. Consumers throughout the United States have suffered and continue to suffer substantial monetary loss as a result of defendants’ unlawful acts or practices. In addition, defendants have been unjustly enriched as a result of their unlawful practices. Absent injunctive relief by this Court, defendants are likely to continue to injure consumers, reap unjust enrichment, and harm the public interest.

THIS COURT'S POWER TO GRANT RELIEF

47. Sections 13(b) and 19 of the FTC Act, 15 U.S.C. 53(b) and 57b; Section 6(b) of the Telemarketing Act, 15 U.S.C. 6105(b); and Section 410(b) of the Credit Repair Organizations Act, 15 U.S.C. 1679h(b), empower this Court to issue a permanent injunction against Defendants’ violations of the Credit Repair Organizations Act and the FTC Act and, in the exercise of its equitable jurisdiction, to order such ancillary relief as preliminary injunction, rescission, restitution, disgorgement of profits resulting from Defendants’ unlawful acts or practices, and other remedial measures.

PRAYER FOR RELIEF

WHEREFORE, Plaintiff, the Federal Trade Commission requests that this Court, as authorized by Sections 13(b) and 19 of the FTC Act, 15 U.S.C. 53(b) and 57b, by Section 410(b) of the Credit Repair Organizations Act, 15 U.S.C. 1679h(b), and by Sections 4(a) of the Telemarketing Act, 15 U.S.C. 6103(a), and Section 6(b) of the Telemarketing Act, 15 U.S.C. 6105(b), and pursuant to its own equitable powers:

  1. Award Plaintiff such preliminary injunctive and ancillary relief as may be necessary to avert the likelihood of consumer injury during the pendency of this action and to preserve the possibility of effective final relief;
  2. Permanently enjoin defendants from violating the Credit Repair Organizations Act, the FTC Telemarketing Rule, and the FTC Act, as alleged herein;
  3. Award such relief as the Court finds necessary to redress injury to consumers resulting from defendants’ violations of the Credit Repair Organizations Act, the FTC Telemarketing Rule, and the FTC Act, including but not limited to, rescission of contracts, the refund of monies paid, and the disgorgement of ill-gotten monies; and
  4. Award Plaintiff the costs of bringing this action, as well as such other and additional relief as the Court may determine to be just and proper.

Respectfully Submitted,

DEBRA VALENTINE
General Counsel

CATHERINE R. FULLER
JOHN C. HALLERUD
Attorney for Plaintiff
55 East Monroe, Suite 1860
Chicago, IL 60603
(312)960-5634