GREGORY W. STAPLES
RAYMOND E. MCKOWN
JOHN D. JACOBS
JENNIFER LARABEE
Federal Trade Commission
10877 Wilshire Boulevard, Suite 700
Los Angeles, California 90024
(310) 824-4343
Attorneys for Plaintiff

FEDERAL TRADE COMMISSION

UNITED STATES DISTRICT COURT
FOR THE CENTRAL DISTRICT OF CALIFORNIA

FEDERAL TRADE COMMISSION

Plaintiff,

v.

BRIAN DALE PRATER, an individual doing business as PATHFINDER RESEARCH COMPANY and CHOICE CREDIT SYSTEMS,

Defendant.

CIVIL NO.

COMPLAINT FOR INJUNCTIVE AND OTHER EQUITABLE RELIEF

Plaintiff Federal Trade Commission, by and through its undersigned attorneys, alleges as follows:

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, and Section 410(b) of the Credit Repair Organizations Act ("CRO Act"), 15 U.S.C. 1679h(b), to obtain preliminary and permanent injunctive relief, restitution, rescission, disgorgement and other equitable relief for defendant’s deceptive acts or practices in connection with the sale and offering for sale of credit repair services in violation of Section 5(a) of the FTC Act, 15 U.S.C. 45(a), and the Credit Repair Organizations Act, 15 U.S.C. 1679 et seq.

JURISDICTION AND VENUE

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

3. Venue in this district is proper under 28 U.S.C. 1391(b) and (c), 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 is charged, inter alia, with enforcement of 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 Credit Repair Organizations Act. 15 U.S.C. 1679h(a). The Commission is authorized to initiate federal district court proceedings, by its own attorneys, to enjoin violations of the FTC Act and the Credit Repair Organizations Act in order to secure such equitable relief, including consumer redress, as may be appropriate in each case. 15 U.S.C. 53(b), 57b, and 1679h(b).

5. Defendant Brian Dale Prater ("Prater") conducts business in this district as Pathfinder Research Company ("Pathfinder") and holds himself out to the public as the owner of Pathfinder. Pathfinder’s principal place of business is 5150 Candlewood Street, Suite 18F, Lakewood, California. Defendant Prater also conducts business in this district as Choice Credit Systems ("Choice Credit"). 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 Pathfinder and Choice Credit, including the acts and practices set forth in this complaint. He transacts or has transacted business in this District.

COMMERCE

6. At all times relevant to this complaint, the defendant has maintained a substantial course of trade in selling credit repair services, in or affecting commerce, as “commerce” is defined in Section 4 of the FTC Act, 15 U.S.C. 44.

DEFENDANT’S BUSINESS PRACTICES

7. Since at least 1996, the defendant has marketed, advertised, promoted, offered for sale, and sold credit repair services to consumers throughout the United States. These services have been promoted by national advertisements on radio and over the internet. Defendant’s advertisements represent that Pathfinder can remove negative information from consumers’ credit reports without regard to the nature of the negative information. 8. Consumers encountering the advertisements are invited to call Pathfinder. Once the call is made salespersons represent that Pathfinder can remove accurate and non-obsolete information from the consumer’s credit reports in a relatively short period of time.

9. Pathfinder represents that it will legally and permanently remove the negative items, including bankruptcies, tax liens, late payments, collection accounts, and other negative information, even where the information is accurate and not obsolete, by causing dispute letters to be sent to credit reporting agencies. Numerous consumers have agreed to purchase defendant’s services based on Pathfinder’s representations.

10. Pathfinder typically requests at least one initial payment before work on the consumer’s credit profile will begin. The defendant typically charges up to $500 for these services. Pathfinder told at least one consumer to direct a Pathfinder payment to Choice Credit.

11. During the course of its solicitation Pathfinder typically fails to provide consumers with a cancellation clause in its contracts and a separate cancellation form, each of which is required by the CRO Act.

VIOLATIONS OF THE CREDIT REPAIR ORGANIZATIONS ACT

12. 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.

13. The defendant is a "credit repair organization" as that term is defined in the CRO Act, 15 U.S.C. 1679a(3).

14. The purposes of the CRO 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).

15. The CRO 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).

16. The CRO 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).

17. The CRO Act requires that any credit repair organization include a conspicuous statement in bold face type that discloses the consumer’s right to cancel the contract within three days in immediate proximity to the space reserved for the consumer’s signature in any contract presented to a consumer for signature by the credit repair organization. 15 U.S.C. 1679d(b)(4).

18. The CRO Act requires that any credit repair organization provide consumers with a "Notice of Cancellation" form that is separate from the contract presented for the consumer’s signature. 15 U.S.C. 1679e(b).

19. 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 ONE

20. 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 CRO Act, 15 U.S.C. 1679a(3), the defendant has made untrue or misleading statements to induce consumers to purchase its services, including, but not limited to, that the defendant can improve substantially most consumers’ credit reports or profiles by permanently removing bankruptcies, tax liens, late payments, collection accounts, and other negative information from consumers’ credit reports, even where that information is accurate and not obsolete.

21. In truth and in fact, in numerous instances, the defendant cannot improve substantially most consumers’ credit reports or profiles by permanently removing bankruptcies, tax liens, late payments, collection accounts, and other negative information from consumers’ credit reports, where that information is accurate and not obsolete.

22. Defendant has thereby violated Section 404(a)(3) of the CRO Act, 15 U.S.C. 1679b(a)(3).

COUNT TWO

23. 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 CRO Act, 15 U.S.C. 1679a(3), the defendant has 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. The Defendant has thereby violated Section 404(b) of the CRO Act, 15 U.S.C. 1679b(b).

COUNT THREE

24. 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), the Defendant has provided services to consumers without first having the consumers sign written contracts that:

(a) 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

(b) 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

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

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

COUNT FOUR

27. In numerous instances, in connection with the advertising, marketing, promotion, offering for sale, or sale of credit repair services, the defendant has made untrue or misleading statements to induce consumers to purchase their services, including, but not limited to, the representation that the defendant can improve substantially most consumers’ credit reports or profiles by permanently removing bankruptcies, tax liens, late payments, collection accounts, and other negative information from consumers' credit reports, even where such information is accurate and not obsolete.

28. In truth and fact, in numerous instances, defendant cannot improve substantially most consumers’ credit reports or profiles by permanently removing bankruptcies, tax liens, late payments, collection accounts, and other negative information from consumers' credit reports, where such information is accurate and not obsolete.

29. Therefore, the acts and practices set forth in paragraph 27 of this complaint constitutes a deceptive act or practice in or affecting commerce in violation of Section 5(a) of the FTC Act, 15 U.S.C. 45(a).

CONSUMER INJURY

30. Consumers have suffered substantial monetary loss as a result of defendant’s unlawful acts or practices. Absent injunctive relief by this Court, defendant is likely to continue to injure consumers and harm the public interest.

THIS COURT'S POWER TO GRANT RELIEF

31. Sections 13(b) and 19 of the FTC Act, 15 U.S.C. 53(b) and 57b, 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 defendant’s 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 a preliminary injunction, rescission, restitution, disgorgement of profits resulting from the defendant’s unlawful acts or practices, and other remedial measures.

PRAYER FOR RELIEF

WHEREFORE, plaintiff requests that this Court, as authorized by Section 410(b) of the CRO Act, 15 U.S.C. 1679h(b), and Sections 13(b)and 19 of the FTC Act, 15 U.S.C. 53(b) and 57b, and pursuant to its own equitable powers:

a. 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 preserve the possibility of effective final relief;

b. Permanently enjoin the defendant from violating the CRO Act and FTC Act, as alleged herein, in connection with the advertising, marketing, promotion, offering for sale, or sale of credit improvement services;

c. Award such relief as the Court finds necessary to redress injury to consumers resulting from the defendant’s violations of the CRO Act, and FTC Act, including but not limited to, rescission of contracts, refund of monies paid, and the disgorgement of unlawfully obtained monies; and

d. Award plaintiff the costs of bringing this action as well as such other additional relief as the Court may determine to be just and proper.

Respectfully submitted,

DEBRA A. VALENTINE
General Counsel

Dated:

Raymond E. McKown
John D. Jacobs
Jennifer Larabee

Attorneys for Plaintiff