UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION

THE FEDERAL TRADE COMMISSION,

Plaintiff,

v.

JOHN MANCINI, an individual, doing business as CREDIT SERVICES,

Defendant.

CIVIL ACTION NO. 3-98CV0553-X

STIPULATED FINAL JUDGMENT AND ORDER OF PERMANENT INJUNCTION

Plaintiff, the Federal Trade Commission ("FTC” or “Commission"), commenced this action by filing a Complaint pursuant to 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, 15 U.S.C. 1679h(b), charging the Defendant in this action with violations of Section 5 of the FTC Act, 15 U.S.C. 45(a) and the Credit Repair Organizations Act, 15 U.S.C. 1679 et seq.

The Commission and Defendant John Mancini, doing business as Credit Services, have agreed to the entry of this Stipulated Final Judgment and Order for Permanent Injunction ("Order") by this Court in order to resolve all matters of dispute between them in this action. The Commission and Defendant have consented to entry of this Final Order without trial or adjudication of any issue of law or fact herein.

Upon the consent of the parties hereto, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED as follows:

FINDINGS

1. This Court has jurisdiction of the subject matter of this case and of the parties consenting hereto. Venue in this District is proper.

2. On March 2, 1998, the Commission filed its complaint for a permanent injunction and other equitable relief in this matter, and moved for an ex parte Temporary Restraining Order (“TRO”) pursuant to Rule 65 of the Federal Rules of Civil Procedure, Fed. R. Civ. P. 65. An ex parte Temporary Restraining Order was entered on March 2, 1998, and a Stipulated Preliminary Injunction was entered on March 9, 1998.

3. The Complaint states a claim upon which relief may be granted against Defendant under Sections 5, 13(b) and 19 of the FTC Act, 15 U.S.C. 45, 53(b) and 57b, and the Credit Repair Organizations Act, 15 U.S.C. 1679 et seq.

4. Entry of this Order is in the public interest.

5. Defendant has waived all rights to seek appellate review of, or otherwise challenge or contest the validity of this Final Order or the temporary or preliminary orders entered in this proceeding.

7. This Final Order does not constitute, and shall not be interpreted to constitute, either an admission by Defendant or a finding by the Court that Defendant has engaged in violations of the FTC Act or the Credit Repair Organizations Act.

8. The Defendant enters into this Order freely and without coercion. The Defendant further acknowledges that he has read the provisions of this Order and is prepared to abide by them.

9. Defendant has waived all claims under the Equal Access to Justice Act, 28 U.S.C. 2412, amended by Pub. L. 104-121, 110 Stat. 847, 863-64 (1996).

DEFINITIONS

A. “Credit repair organization” (A) means any person who uses any instrumentality of interstate commerce or the mails to sell, provide, or perform (or represent that such person can or will sell, provide, or perform) any service, in return for the payment of money or other valuable consideration, for the express or implied purpose of -- (i) improving any consumer’s credit record, credit history, or credit rating; or (ii) providing advice or assistance to any consumer with regard to any activity or service described in clause (i); and (B) does not include -- (i) any nonprofit organization which is exempt from taxation under section 501(c)(3) of Title 26; (ii) any creditor (as defined in section 1602 of this title), with respect to any consumer, to the extent the creditor is assisting the consumer to restructure any debt owed by the consumer to the creditor; or (iii) any depository institution (as that term is defined in section 1813 of Title 12) or any Federal or State credit union (as those terms are defined in section 1752 of Title 12), or any affiliate or subsidiary of such a depository institution or credit union.
 
B. “Credit repair service” means any service, in return for the payment of money or other valuable consideration, for the express or implied, purpose of (a) improving any consumer’s credit record, credit history, or credit rating; or (b) providing advice or assistance to any consumer with regard to any activity or service the purpose of which is to improve any consumer’s credit record, credit history, or credit rating;
 
C. “Material” means likely to affect a person’s choice of, or conduct regarding, goods or services;
 
D. “Plaintiff” means the Federal Trade Commission;
 
E. “Assets” means any legal or equitable interest in, right to, or claim to, any real and personal property, including but not limited to chattels, goods, instruments, equipment, fixtures, general intangibles, effects, shares of stock, contracts, leaseholds, mail or other deliveries, inventory, checks, notes, accounts, credits, receivables, and all cash, wherever located; and
 
F. "Document" is synonymous in meaning and equal in scope to the usage of the term in Federal Rule of Civil Procedure 34(a), and includes writings, drawings, graphs, charts, photographs, audio and video recordings, computer records, and other data compilations from which information can be obtained and translated, if necessary, through detection devices into reasonably usable form. A draft or non-identical copy is a separate document within the meaning of the term.
 
G. “Assists others engaged in credit repair” means knowingly provides any of the following goods or services to any person or entity engaged in credit repair: (1) performs customer service functions for an entity engaged in credit repair, including, but not limited to, receiving or responding to consumer complaints; (2) formulates or provides, or arranges for the formulation or provision of, any telephone sales script or any other marketing material for an entity engaged in credit repair; (3) provides names of, or assists in the generation of, potential customers or an entity engaged in credit repair; or (4) performs marketing services of any kind for an entity engaged in credit repair.

I. PROHIBITED MISREPRESENTATIONS

IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that Defendant, his successors, assigns, officers, agents, servants, employees, attorneys, and all persons or entities directly or indirectly under their control or under common control with them, and all other persons or entities in active concert or participation with them who receive actual notice of this Order by personal service or otherwise, whether acting directly or through any business entity, corporation, subsidiary, division or other device, are hereby permanently restrained and enjoined from:

A. Misrepresenting, expressly or by implication, that anyone can improve substantially an appreciable number of consumers’ credit reports or profiles by permanently removing bankruptcies, liens, judgments, charge-offs, late payments, foreclosures, repossessions, and other negative information from consumers' credit reports, even where such information is accurate and not obsolete;
 
B. Misrepresenting, expressly or by implication, that any consumer’s credit reports or profiles can be substantially improved by permanently removing bankruptcies, liens, judgments, charge-offs, late payments, foreclosures, repossessions, and other negative information from the consumer's credit reports;
 
C. Misrepresenting, expressly or by implication, or failing to disclose any fact material to a consumer’s decision to purchase credit repair services from Defendant;
 
D. Misrepresenting, expressly or by implication, or failing to disclose any fact material to a consumer’s decision to pay money to obtain or arrange a loan or extension of credit or to consolidate a debt; and
 
E. Misrepresenting, expressly or by implication, or failing to disclose any fact material to a consumer’s decision to purchase Defendant’s services or products.

II. PROHIBITED PAYMENTS

IT IS FURTHER ORDERED that Defendant, his successors, assigns, officers, agents, servants, employees, attorneys, and all persons or entities directly or indirectly under their control or under common control with them, and all other persons or entities in active concert or participation with them who receive actual notice of this Order by personal service or otherwise, whether acting directly or through any business entity, corporation, subsidiary, division or other device, are hereby permanently restrained and enjoined from charging or receiving any money or other valuable consideration for services which Defendant has agreed to perform for the purpose of improving any consumer’s credit record, credit history, or credit report before all such services have been fully performed.

III. CREDIT REPAIR ORGANIZATIONS ACT

IT IS FURTHER ORDERED that Defendant, his successors, assigns, officers, agents, servants, employees, attorneys, and all persons or entities directly or indirectly under their control or under common control with them, and all other persons or entities in active concert or participation with them who receive actual notice of this Order by personal service or otherwise, whether acting directly or through any business entity, corporation, subsidiary, division or other device, are hereby permanently restrained and enjoined from violating any provision of the Credit Repair Organizations Act, ("CROA"), 15 U.S.C. 1679 et seq., as presently enacted or as it may hereinafter be amended, including, but not limited to:

A. Violating 15 U.S.C. 1679c(a) by failing to provide consumers with a written statement of consumer credit file rights under state and federal law at the time and in the manner prescribed therein;
 
B. Violating 15 U.S.C. 1679b(a)(1) by making any untrue or misleading statement, or counseling or advising any consumer to make any untrue or misleading statement, with respect to any consumer’s credit worthiness, credit standing, or credit capacity to any consumer reporting agency as defined in 15 U.S.C. 1681(f) or to any person who has extended credit to the consumer or to whom the consumer has applied or is applying for an extension of credit;
 
C. Violating 15 U.S.C. 1679b(a)(2) by making any statement, or counseling or advising any consumer to make any statement, the intended effect of which is to alter the consumer’s identification to prevent the display of the consumer’s credit record, history, or rating for the purpose of concealing adverse information that is accurate and non-obsolete from any consumer reporting agency as defined in 15 U.S.C. 1681(f) or from any person who has extended credit to the consumer or to whom the consumer has applied or is applying for an extension of credit;
 
D. Violating 15 U.S.C. 1679b(a)(3) by making or using any untrue or misleading representation of the services of a credit repair organization; or
 
E. Violating 15 U.S.C. 1679d(a), 1679d(b)(4), or 1679e(b), by providing services to consumers without first having the consumers sign written contracts that:

(1) include a prescribed statement of the consumer’s right to cancel the transaction within three business days; and

(2) are accompanied by a notice of cancellation in the form and manner prescribed.

IV. CLIENT LISTS

IT IS FURTHER ORDERED that Defendant, and his officers, agents, servants, employees, attorneys, and all persons or entities directly or indirectly under their control or under common control with them, and all other persons or entities in active concert or participation with them, are hereby permanently restrained and enjoined from selling, renting, leasing, transferring, or otherwise disclosing the name, address, telephone number, social security number, or other identifying information of any person who paid any money to Defendant, at any time prior to the date this Order is entered, in connection with the provision of credit repair services. Provided, however, that Defendant may disclose such identifying information to a law enforcement agency or as required by any law, regulation, or court order.

V. CONSUMER REDRESS AND DAMAGES

IT IS FURTHER ORDERED that Defendant shall pay to the Commission the sum of $18,000 no later than (10) ten business days after entry of this Order.

In the event of any default on any obligation to make payment under this Part, interest, computed pursuant to 28 U.S.C. 1961(a), shall accrue from the date of default to the date of payment.

The funds paid by Defendant pursuant to this Order shall be deposited into a redress fund, administered by the Commission, to be used for equitable relief including but not limited to consumer redress and any attendant expenses for the administration of any redress fund. If the Commission determines, in its sole discretion, that redress to purchasers is wholly or partially impracticable, any funds not so used shall be paid to the United States Treasury as an equitable disgorgement remedy. Defendant shall be notified as to how the funds are disbursed but shall have no right to contest the manner of distribution chosen by the Commission. The Commission in its sole discretion may use a designated agent to administer consumer redress.

IT IS FURTHER ORDERED that, in accordance with 31 U.S.C. 7701, Defendant shall furnish to the Federal Trade Commission his respective taxpayer identifying numbers (social security number or employer identification number), which shall be used for purposes of collecting and reporting on any delinquent amount arising out of such person’s relationship with the government.

VI. RIGHT TO REOPEN

IT IS FURTHER ORDERED that the Commission’s agreement to this Order is expressly premised upon the financial condition of Defendant as represented in the "Financial Statement of Individual Defendant" provided by Defendant to the Commission on April 8, 1998, which contained material information upon which the Commission relied in negotiating and agreeing upon this Order. If, upon motion by the Commission, this court finds that Defendant filed a financial statement that failed to disclose any material asset, or materially misrepresented the value of any asset, or made any other material misrepresentation in or omission from the financial statement, the Commission may request that the judgment herein be reopened for the purpose of requiring monetary redress or obtaining other equitable relief; provided, however, that in all other respects this judgment shall remain in full force and effect, unless otherwise ordered by this Court.

VII. CEASE COLLECTIONS, NOTICES TO CONSUMERS

IT IS FURTHER ORDERED that Defendant his officers, agents, servants, employees, attorneys, and all persons or entities directly or indirectly under his control or under common control with them, and all other persons or entities in active concert or participation with them, shall:

A. Cease all collection efforts on accounts arising from contracts signed between Defendant and his credit repair clients prior to the date the Temporary Restraining Order in this matter was served on Defendant;
 
B. Within twenty (20) days after the date this Order is entered, return to credit repair clients all uncashed checks or other negotiable instruments, including checks totalling over $36,000 in defendant’s possession at the time the Temporary Restraining Order was served on Defendant, that have been received by Defendant, directly or indirectly, on accounts arising from contracts signed between Defendant and the clients prior to the date the Temporary Restraining Order in this matter was served on Defendant, and within twenty (20) days after the date this Order is entered, or within twenty (20) days of receiving payment, return to credit repair clients all payments that have been or may be received by Defendant, directly or indirectly, on accounts arising from contracts signed between Defendant and the clients prior to the date the Temporary Restraining Order in this matter was served on Defendant. Include with each such returned check, other negotiable instrument, or payment a notice to the client stating that as a result of an agreement between Defendant and the Federal Trade Commission settling allegations regarding Defendant’s ability to repair credit reports, those clients’ contracts are rescinded and no further payments are due;
 
C. Within twenty (20) days after the date this Order is entered, mail notices to all credit
repair clients who have payments which are due or may become due on contracts signed prior to the date the Temporary Restraining Order in this matter was served on Defendant. Such notices shall state that as a result of an agreement between Defendant and the Federal Trade Commission settling allegations regarding Defendant’s ability to repair credit reports, those clients’ contracts are rescinded and no further payments are due;
 
D. Within sixty (60) days after the date this Order is entered, provide (1) the names and addresses of those clients to whom checks, other negotiable instruments, or payments were returned and/or notices were sent pursuant to Subparagraphs B and C above to: Regional Director, Dallas Regional Office, Federal Trade Commission, Suite 2150, 1999 Bryan Street, Dallas, Texas 75201.

VIII. ACKNOWLEDGMENT OF RECEIPT OF ORDER BY DEFENDANT

IT IS FURTHER ORDERED that, within five (5) business days after receipt by Defendant of this Order as entered by the Court, Defendant shall submit to the Commission a truthful sworn statement, in the form shown on Appendix A, that shall acknowledge receipt of this Final Order.

IX. DISTRIBUTION OF ORDER BY DEFENDANT

IT IS FURTHER ORDERED that, for a period of five (5) years from the date of entry of this Order, Defendant shall:

A. Provide a copy of this Order to, and obtain a signed and dated acknowledgment of receipt of same from, each officer or director, each individual serving in a management capacity, all personnel involved in responding to consumer complaints or inquiries, and all sales personnel, whether designated as employees, consultants, independent contractors or otherwise, immediately upon employing or retaining any such persons, for any business where (i) Defendant is the majority owner of the business or directly or indirectly manages or controls the business, and where (ii) the business is engaged in or assists others engaged in credit repair services; and
 
B. Maintain for a period of three (3) years after creation, and upon reasonable notice, make available to representatives of the Commission the original signed and dated acknowledgments of the receipt of copies of this Order, as required in Subsection A of this Paragraph.

X. RECORD KEEPING PROVISIONS

IT IS FURTHER ORDERED that, for a period of five (5) years from the date of entry of this Order, Defendant, and Defendant’s agents, employees, officers, and servants, corporations, successors, and assigns, and those persons in active concert or participation with them who receive actual notice of this Order by personal service or otherwise, in connection with any business where (i) Defendant is the majority owner of the business or directly or indirectly manages or controls the business, and where (ii) the business engages in or assists others engaged in credit repair services, are hereby restrained and enjoined from failing to create, and from failing to retain for a period of three (3) years following the date of such creation, unless otherwise specified:

A. Books, records and accounts that, in reasonable detail, accurately and fairly reflect the cost of goods or services sold, revenues generated, and the disbursement of such revenues;
 
B. Records accurately reflecting: the name, address, and telephone number of each person employed in any capacity by such business, including as an independent contractor; that person’s job title or position; the date upon which the person commenced work; and the date and reason for the person’s termination, if applicable. The businesses subject to this Paragraph shall retain such records for any terminated employee for a period of two (2) years following the date of termination;
 
C. Records containing the names, addresses, phone numbers, dollar amounts paid, quantity of items or services purchased, and description of items or services purchased, for all consumers to whom such business has sold, invoiced or shipped any goods or services, or from whom such business accepted money or other items of value;
 
D. Records that reflect, for every consumer complaint or refund request, whether received directly or indirectly or through any third party:

(1) the consumer’s name, address, telephone number and the dollar amount paid by the consumer;

(2) the written complaint or refund request, if any, and the date of the complaint or refund request;

(3) the basis of the complaint, including the name of any salesperson complained against, and the nature and result of any investigation conducted concerning any complaint;

(4) each response and the date of the response;

(5) any final resolution and the date of the resolution; and

(6) in the event of a denial of a refund request, the reason for the denial; and

E. Copies of all sales scripts, training materials, advertisements, or other marketing materials utilized; provided that copies of all sales scripts, training materials, advertisements, or other marketing materials utilized shall be retained for (3) years after the last date of dissemination of any such materials.

XI. COMPLIANCE REPORTING BY DEFENDANT

IT IS FURTHER ORDERED that, in order that compliance with the provisions of this Order may be monitored:

A. For a period of five (5) years from the date of entry of this Order, Defendant shall notify the Commission of the following:

(1) Any changes in Defendant’s residence, mailing addresses, and telephone numbers, within thirty (30) days of the date of such change;

(2) Any changes in Defendant’s employment status (including self- employment) within thirty (30) days of such change. Such notice shall include the name and address of each business that Defendant is affiliated with or employed by, a statement of the nature of the business, and a statement of Defendant’s duties and responsibilities in connection with the business or employment; and

(3) Any proposed change in the structure of any business entity owned or controlled by Defendant, such as creation, incorporation, dissolution, assignment, sale, merger, creation, dissolution of subsidiaries, proposed filing of a bankruptcy petition, or change in the corporate name or address, or any other change that may affect compliance obligations arising out of this Order, thirty (30) days prior to the effective date of any proposed change; provided, however, that, with respect to any proposed change in the corporation about which Defendant learns less than thirty (30) days prior to the date such action is to take place, Defendant shall notify the Commission as soon as is practicable after learning of such proposed change;

B. One hundred eighty (180) days after the date of entry of this Order, Defendant shall provide a written report to the Commission, sworn to under penalty of perjury, setting forth in detail the manner and form in which Defendant has complied and is complying with this Order. This report shall include but not be limited to:

(1) Defendant’s then current residence address and telephone number;

(2) Defendant’s then current employment, business addresses and telephone numbers, a description of the business activities of each such employer, and Defendant’s title and responsibilities for each employer;

(3) A copy of each acknowledgment of receipt of this Order obtained by Defendant pursuant to Paragraph IX; and

(4) A statement describing the manner in which Defendant has complied and is complying with

(a) the injunctive and other conduct-related provisions of this Order contained in Paragraphs I, II, III, IV and VII, and

(b) the terms of the monetary relief provisions of this Order contained in Paragraphs V and VII;

C. Upon written request by a representative of the Commission, Defendant shall submit additional written reports (under oath, if requested) and produce documents on fifteen (15) days’ notice with respect to any conduct subject to this Order;
 
D. For the purposes of this Order, Defendant shall, unless otherwise directed by the Commission’s authorized representatives, mail all written notifications to the Commission to:
 
Regional Director
Dallas Regional Office
Federal Trade Commission
1999 Bryan Street, Suite 2150
Dallas, Texas 75201
 
Re: FTC v. John Mancini
 
E. For the purposes of this Paragraph, "employment" includes the performance of services as an employee, consultant, or independent contractor; and "employers" include any individual or entity for whom Defendant performs services as an employee, consultant, or independent contractor; and
 
F. For purposes of the compliance reporting required by this Paragraph, the Commission is authorized to communicate directly with Defendant.

XII. COMMISSION’S AUTHORITY TO MONITOR COMPLIANCE

IT IS FURTHER ORDERED that the Commission is authorized to monitor Defendant’s compliance with this Order by all lawful means, including but not limited to the following means:

A. The Commission is authorized, without further leave of court, to obtain discovery from any person in the manner provided by Chapter V of the Federal Rules of Civil Procedure, Fed. R. Civ. P. 26 - 37, including the use of compulsory process pursuant to Fed. R. Civ. P. 45, for the purpose of monitoring and investigating Defendant’s compliance with any provision of this Order;
 
B. The Commission is authorized to use representatives posing as consumers and suppliers to Defendant, Defendant’s employees, or any other entity managed or controlled in whole or in part by Defendant, without the necessity of identification or prior notice; and
 
C. Nothing in this Order shall limit the Commission’s lawful use of compulsory process, pursuant to Sections 9 and 20 of the FTC Act, 15 U.S.C. 49, 57b-1, to investigate whether Defendant has violated any provision of this Order or Section 5 of the FTC Act, 15 U.S.C. 45.

XIII. ACCESS TO BUSINESS PREMISES

IT IS FURTHER ORDERED that, for a period of five (5) years from the date of entry of this Order, for the purpose of further determining compliance with this Order, Defendant shall permit representatives of the Commission, within three (3) business days of receipt of written notice from the Commission:

A. Access during normal business hours to any office, or facility storing documents, of any business where (i) Defendant is the majority owner of the business or directly or indirectly manages or controls the business, and where (ii) the business is engaged in or assists others engaged in credit repair services. In providing such access, Defendant shall permit representatives of the Commission to inspect and copy all documents relevant to any matter contained in this Order; and shall permit Commission representatives to remove documents relevant to any matter contained in this Order for a period not to exceed five (5) business days so that the documents may be inspected, inventoried, and copied; and
 
B. To interview the officers, directors, and employees, including all personnel involved in responding to consumer complaints or inquiries, and all sales personnel, whether designated as employees, consultants, independent contractors or otherwise, of any business to which Subsection (A) of this Paragraph applies, concerning matters relating to compliance with the terms of this Order. The person interviewed may have counsel present.

Provided that, upon application of the Commission and for good cause shown, the Court may enter an ex parte order granting immediate access to Defendant’s business premises for the purposes of inspecting and copying all documents relevant to any matter contained in this Order.

XIV. RETENTION OF JURISDICTION

IT IS FURTHER ORDERED that this Court shall retain jurisdiction of this matter for the purpose of enabling the parties to apply to the Court at any time for such further orders and directions as may be necessary or appropriate for the interpretation, modification or enforcement of this Order, or for the punishment of violations thereof.

XV. ATTORNEY FEES

Each party to this Order agrees to bear its own costs and attorney fees incurred in connection with this action.

Dated: ___________________

W. DAVID GRIGGS,
Texas Bar No. 08491100
JOHN R. HOAGLAND
District of Columbia Bar No. 183699
JAMES R. GOLDER
Texas Bar No. 08089520

Federal Trade Commission
1999 Bryan Street, Suite 2150
Dallas, Texas 75201-6848
(214) 979-9378 (Griggs)
(214) 979-9395 (Hoagland)
(214) 979-9376 (Golder)
(214) 953-3079 (Facsimile)
ATTORNEYS FOR PLAINTIFF

Dated: ___________________

JOHN MANCINI,
an individual, doing business as
Credit Services,

DEFENDANT

IT IS SO ORDERED, this _____ day of __________________, 1998, at _______.m.

__________________________________
United States District Court Judge

APPENDIX A

UNITED STATES DISTRICT COURT
_______________ DISTRICT OF ______________

FEDERAL TRADE COMMISSION,

Plaintiff,

v.

DEFENDANT, et al.

Defendants.

CIVIL ACTION NO.

AFFIDAVIT OF DEFENDANT --------

[Name of Defendant], being duly sworn, hereby states and affirms as follows:

  1. My name is_______________________. My current residence address is ______________________________________________________. I am a citizen of the United States and am over the age of eighteen. I have personal knowledge of the facts set forth in this Affidavit.
  2. I am a Defendant in FTC v. Defendant, et al. (United States District Court for the _____________ District of _____________).
  3. On [date], I received a copy of the [state full name of the Final Order as it appears on the Order itself], which was signed by the Honorable [name of U.S. District Judge] and entered by the Court on [date of entry of Order]. A true and correct copy of the Order I received is appended to this Affidavit.

I declare under penalty of perjury under the laws of the United States that the foregoing is true and correct. Executed on [date], at [city and state].

___________________________________
[Full name of Defendant]

State of ____________________, City of ____________________

Subscribed and sworn to before me this _____ day of _________, 1998.

_____________________________
Notary Public
My Commission Expires:

_____________________________