DEBRA VALENTINE
General Counsel

JEROME M. STEINER, JR.
Attorney
Federal Trade Commission
901 Market St., Suite 570
San Francisco, CA 94103
(415) 356-5270 (voice)
(415) 356-5284 (facsimile)

FRANKIE SUE DEL PAPA
Attorney General

JANE D. FEMIANO
Deputy Attorney General
State of Nevada
555 East Washington Ave, Suite 3900
Las Vegas, NV 89101
(702) 486-3872

UNITED STATES DISTRICT COURT
DISTRICT OF NEVADA

FEDERAL TRADE COMMISSION, and STATE OF NEVADA ex rel. FRANKIE SUE DEL PAPA, Attorney General,

Plaintiffs,

v.

CONSUMER CREDIT SERVICES, INC., a Nevada corporation; and ERIC PETERSEN, individually and as an officer of Consumer Credit Services, Inc.

Defendants.

CIVIL ACTION NO.

COMPLAINT FOR PERMANENT INJUNCTION
AND OTHER EQUITABLE RELIEF

Plaintiffs, the Federal Trade Commission ("FTC" or "the Commission"), and the State of Nevada, for their complaint allege:

1. The FTC 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 the Telemarketing and Consumer Fraud and Abuse Prevention Act ("Telemarketing Act"), 15 U.S.C. 6101 et seq., to secure preliminary and permanent injunctive relief, rescission or reformation of contracts, restitution, disgorgement, and other equitable relief for defendants' unfair or deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. 45(a), and the FTC’s Telemarketing Sales Rule, 16 C.F.R. Part 310.

2. Plaintiff, the State of Nevada, brings this action under Section 4(a) of the Telemarketing Act, 15 U.S.C. 6103(a) and under Sections 598.282(4) and 598.0923 of the Nevada Deceptive Trade Practices Act, Nev. Rev. Statutes, 598.282(4) and 598.0923 (“DPA”), to secure similar injunctive and equitable relief for defendants’ violations of the DPA.

JURISDICTION AND VENUE

3. This Court has jurisdiction over this matter pursuant to 28 U.S.C. 1331, 1337(a), and 1345, and 15 U.S.C. 53(b), 57b, 6102(c), 6105(b) and 6103(a).

4. Venue in the United States District Court for the District of Nevada is proper under 28 U.S.C. 1391(b) and (c), and 15 U.S.C. 53(b) and 6103(a).

PLAINTIFFS

5. 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 Telemarketing Sales Rule, 16 C.F.R. Part 310, which prohibits deceptive and abusive telemarketing acts or practices. The Commission is authorized to initiate federal district court proceedings, by its own attorneys, to enjoin violations of the FTC Act and violations of the Telemarketing Sales Rule, in order to secure such equitable relief as may be appropriate in each case, and to obtain consumer redress. 15 U.S.C. 53(b), 57b, 6102(c) and 6105(b).

6. Plaintiff, the State of Nevada, is one of the fifty sovereign states of the United States. Frankie Sue Del Papa is the Attorney General for Plaintiff State of Nevada, and brings this action in her official capacity as such. The State of Nevada is authorized to initiate federal district court proceedings to enjoin telemarketing that violates the Commission’s Telemarketing Sales Rule, and, in each such case, to obtain damages, restitution, and other compensation on behalf of residents of the State of Nevada, and to obtain such further and other relief as the court may deem appropriate, 15 U.S.C. 6103(a). The State of Nevada is also authorized to enjoin violations of the Nevada Deceptive Trade Practices Act, NRS 598.0903 et seq. and to obtain such damages, restitution and other compensation and relief as the court may deem appropriate.

DEFENDANTS

7. Defendant Consumer Credit Services, Inc., ("CCS") is a Nevada corporation with its office and principal place of business located at 1504 S. Commerce St., Las Vegas, Nevada. CCS transacts or has transacted business in the District of Nevada.

8. Defendant Eric Petersen ("Petersen") is an officer, director or principal owner of the corporate defendant. 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 set forth in this complaint. Defendant Petersen resides and has transacted business in the District of Nevada.

COMMERCE

9. At all times relevant to this complaint, the defendants have maintained a substantial course of trade in telemarketing lines of credit and credit cards, in or affecting commerce, as "commerce" is defined in Section 4 of the FTC Act, 15 U.S.C. 44.

DEFENDANTS' COURSE OF CONDUCT

10. Since at least early 1997, the defendants have engaged in a scheme to defraud consumers throughout the United States through the telemarketing of credit cards and/or lines of credit. Defendants mail out advertisements to consumers throughout the United States. Through said advertisements, defendants represent that consumers can obtain from defendants a line of credit, cash advances, a “CashPlus credit card,” and a Visa or MasterCard, regardless of their credit history. In response to the advertisements, consumers throughout the United States call the telephone number listed on the advertisements, and speak to defendants' salespersons.

11. During the course of subsequent telephone sales presentations, defendants’ salespersons represent to consumers that, for a fee of approximately $150, CCS will provide the consumer with an unsecured $2,500 line of credit, the ability to obtain a cash advance of $2,500, a CashPlus Card (sometimes described as “a general credit card”), and a Visa or MasterCard. In response to these representations, consumers pay to defendants fees ranging from $149.95 to $169.95. These fees are usually paid to CCS from the consumers’ checking accounts on unsigned bank drafts and thereafter deposited by CCS into its bank account.

12. What the consumers receive from defendants varies significantly from what defendants promise. The $2,500 line of credit and the CashPlus “credit card,” are limited to purchases of goods from defendants’ catalogues. The $2,500 cash advance is limited to an initial cash advance of $10. Finally, consumers do not receive a Visa or MasterCard credit card, but only a form to use to send for an application for one of those credit cards.

VIOLATIONS OF SECTION 5 OF THE FTC ACT

COUNT ONE

(By Plaintiff Federal Trade Commission)

13. In numerous instances, in connection with offers to provide lines of credit, cash advances, and credit cards to consumers for a fee, defendants have made a material representation, expressly or by implication, that consumers will receive an unsecured $2,500 line of credit, without any restrictions, and the ability to obtain a cash advance of $2,500.

14. In truth and in fact, in numerous instances, after paying a fee, consumers do not receive an unsecured $2,500 line of credit, without any restrictions. Nor do they receive the ability to obtain a cash advance of $2,500. Instead, consumers receive a line of credit that may be used only to purchase items from defendants’ catalogue. Moreover, consumers allegedly receive the ability to obtain a cash advance of only $10.

15. Therefore, the representation set forth in Paragraph 13 is false and misleading and constitutes a deceptive act or practice in violation of Section 5(a) of the FTC Act, 15 U.S.C. 45(a).

COUNT TWO

(By Plaintiff Federal Trade Commission)

16. In numerous instances, in connection with offers to provide credit cards to consumers for a fee, defendants have made a material representation, expressly or by implication, that consumers will receive an unsecured Visa or MasterCard credit card.

17. In truth and in fact, in numerous instances, after paying a fee, consumers do not receive a Visa or MasterCard credit card. Instead, consumers receive only a form by which they can request an application for a Visa or MasterCard credit card from a bank which issues them.

18. Therefore, the representation set forth in Paragraph 16 is false and misleading and constitutes a deceptive act or practice in violation of Section 5(a) of the FTC Act, 15 U.S.C. 45(a).

VIOLATIONS OF THE TELEMARKETING SALES RULE

19. In the Telemarketing Act, 15 U.S.C. 6101 et seq., Congress directed the FTC to prescribe rules prohibiting abusive and deceptive telemarketing acts or practices. On August 16, 1995, the Commission promulgated the Telemarketing Sales Rule, 16 C.F.R. Part 310. The Rule became effective on December 31, 1995.

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

21. The Telemarketing Sales Rule prohibits telemarketers and sellers from, inter alia, requesting or receiving payment of any fee or consideration in advance of obtaining or arranging an extension of credit when the seller or telemarketer has guaranteed or represented a high likelihood of success in obtaining or arranging an extension of credit. 16 C.F.R. 310.4(a)(4).

22. The Telemarketing Sales Rule also prohibits telemarketers and sellers from, inter alia, failing to disclose any material restriction, limitation, or condition to purchase, receive or use goods or services that are the subject of a sales offer. 16 C.F.R. 310.3(a)(1)(ii).

23. Pursuant to Section 3(c) of the Telemarketing Act, 15 U.S.C. 6102(c), and Section 18(d)(3) of the FTC Act, 15 U.S.C. 57a(d)(3), violations of the Telemarketing Sales Rule constitute unfair or deceptive acts or practices in or affecting commerce, in violation of Section 5(a) of the FTC Act, 15 U.S.C. 45(a).

COUNT THREE

(By Plaintiffs Federal Trade Commission and State of Nevada)

24. In numerous instances, in connection with telemarketing offers to obtain extensions of credit for consumers, including but not limited to the obtaining of lines of credit, cash advances and credit cards, defendants have requested or received payment of fees in advance of obtaining such extensions of credit when defendants have guaranteed or represented a high likelihood of success in obtaining the extensions of credit for such consumers.

25. Therefore, defendants have violated Section 310.4(a)(4) of the Telemarketing Sales Rule, 16 C.F.R. 310.4(a)(4).

COUNT FOUR

(By Plaintiffs Federal Trade Commission and State of Nevada)

26. In numerous instances, in connection with telemarketing offers to obtain extensions of credit, defendants have represented that the CashPlus card can be used as a general credit card to purchase goods and services from a wide variety of merchants. In truth and in fact, the CashPlus card can be used only to purchase items from defendants’ catalogues. Accordingly, defendants have failed to disclose, in a clear and conspicuous manner, before a customer pays for the goods or services offered, that the CashPlus card may be used only to purchase items from defendants' catalogues.

27. Therefore, defendants have violated Section 310.3(a)(1)(ii) of the Telemarketing Sales Rule, 16 C.F.R. 310.3(a)(1)(ii).

VIOLATIONS OF NEVADA STATE LAW STATUTES

COUNT FIVE

(By Plaintiff State of Nevada)

(Deceptive Trade Practices Act: Failure to Disclose)

(NRS 598.0923 (2)

28. Plaintiff, State of Nevada, hereby incorporates paragraphs 1 through 27 of the complaint as though fully set forth herein.

29. By engaging in the acts and practices described above, the defendants violated NRS 598.0923(2) and engaged in deceptive practices when they:

“ in the course of [their] business or occupation [they] knowingly:

(2) Failed to disclose a material fact in connection with the sale of goods or services.”

COUNT SIX

(By Plaintiff State of Nevada)

(Deceptive Trade Practices Act: Failure to Register as a Credit Services Organization)

(NRS 598.2825)

30. Plaintiff, State of Nevada, hereby incorporates paragraphs 1 through 29 of the complaint as though fully set forth herein.

31. Since at least early 1997, defendants have made numerous representations to consumers, with respect to the extension of credit by others, that the defendants, in return for the $149.95 payment from the consumer, would sell, provide or perform any of the following services:

a. improve the buyer’s credit record, history or rating.

b. obtain an extension of credit for the buyer.

c. provide advice or assistance to the buyer with regard to either (a) or (b).

As such, defendant is a credit service “organization” as that term is defined in NRS 598.281(5).

32. Defendant has failed to register and post a bond or other security as a credit service organization with the Nevada Consumer Affairs Division in violation of NRS 598.2825 and, therefore, has committed a deceptive trade practice pursuant to NRS 598.289.

COUNT SEVEN

(By Plaintiff State of Nevada)

(Deceptive Trade Practices Act: Credit Services Organization, Advance Fee)

(NRS 598.282)

33. Plaintiff, State of Nevada, hereby incorporates paragraphs 1 through 32 of the complaint as though fully set forth herein.

34. Since early 1997, defendants have charged or received a payment of $149.95, which was debited from the consumers’ checking account prior to the consumer receiving either the extension of credit or the Visa/ MasterCard credit cards.

35. In violation of NRS 598.282, Defendants have engaged in deceptive trade practices when they, their agents, employees and representatives charged or received money or other valuable consideration before full and complete performance of the services of CCS has agreed to perform for or on behalf of the buyer.

COUNT EIGHT

(By Plaintiff State of Nevada)

(Deceptive Trade Practices Act: Credit Services Organization, Misleading Representations)

(NRS 598.282) (4)

36. Plaintiff, State of Nevada, hereby incorporates paragraphs 1 through 35 of the complaint as though fully set forth herein.

37. Since at least early 1997, defendant, its agents, employees and representatives who sold or attempted to sell the services of CCS made the following misleading representations:

a. that consumers will receive and be able to draw cash advances on an unsecured $2,500 line of credit, in return for the payment of $149.95, and/or

b. that consumers will receive an unsecured Visa or MasterCard credit card in return for the payment of a fee of $149.95.

38. In truth and in fact, in numerous instances, after paying the fee, consumers do not receive and are not able to draw cash advances on an unsecured $2,500 line of credit, and do not receive a Visa or MasterCard credit card.

39. In violation of NRS 598.202(4), Defendants engaged in deceptive trade practices when they made or used any misleading representation in the offer or sale of their services that CCS would be able to obtain an extension of credit for the buyer regardless of the buyer’s existing credit record, history or rating.

CONSUMER INJURY

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

THIS COURT'S POWER TO GRANT RELIEF

41. Section 13(b) of the FTC Act, 15 U.S.C. 53(b), empowers this Court to grant injunctive and other ancillary relief, including consumer redress, disgorgement, and restitution, to prevent and remedy any violations of any provision of law enforced by the Commission.

42. Section 19 of the FTC Act, 15 U.S.C. 57b, authorizes this Court to grant such relief as the Court finds necessary to redress injury to consumers or other persons resulting from defendants' violations of the Telemarketing Sales Rule, including the rescission or reformation of contracts, and the refund of money.

43. Section 4(a) of the Telemarketing Act., 15 U.S.C. 6103(a), authorizes the Court to grant to the State of Nevada, on behalf of its residents, injunctive and other relief, including damages, restitution, other compensation, and such further and other relief the Court deems appropriate.

44. This Court, in the exercise of its equitable jurisdiction, may award other ancillary relief to remedy injury caused by the defendants’ law violations.

PRAYER FOR RELIEF

WHEREFORE, plaintiff Federal Trade Commission, pursuant to 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 the Court’s own equitable powers, and plaintiff State of Nevada pursuant to Section 4(a) of the Telemarketing Act, 15 U.S.C. 6103(a), and the Court’s own equitable powers request that the Court:

  1. Award plaintiffs such preliminary injunctive and ancillary equitable 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 the defendants from violating the FTC Act,. the Telemarketing Sales Rule, and the Nevada Deceptive Trade Practices Act, alleged herein;
  3. Award such relief as the Court finds necessary to redress injury to consumers resulting from the defendants' violations of the FTC Act, the Telemarketing Sales Rule, and the Nevada Deceptive Practices Act, including, but not limited to, rescission or reformation of contracts, restitution, the refund of monies paid, and the disgorgement of ill-gotten monies; and
  4. Award plaintiffs the costs of bringing this action and reasonable attorneys fees, as well as such other and additional equitable relief as the Court may determine to be just and proper.
  5. Order that defendants’ privilege of conducting business in the State of Nevada be suspended subject to meeting all registration and bonding requirements under state law.

Respectfully submitted,

Dated:

JEROME M. STEINER, JR
Attorney for Plaintiff
FEDERAL TRADE COMMISSION

Dated:

FRANKIE SUE DEL PAPA
Attorney General

By:

JANE D. FEMIANO
Deputy Attorney General
Attorneys for Plaintiff
STATE OF NEVADA