DEBRA A. VALENTINE
General Counsel

ANN F. WEINTRAUB (AW 3080)

MICHAEL J. BLOOM (MB 7732)

RHONDA J. MCLEAN (RM 9140)

Attorneys for Plaintiff
Federal Trade Commission
150 William Street, Suite 1300
New York, NY 10038
(212) 264-1226

UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NEW YORK

FEDERAL TRADE COMMISSION Plaintiff,

v.

MICHAEL LYONS, individually and doing business as Lyons Publishing, Defendant.

Civil Action No.

COMPLAINT FOR INJUNCTIVE 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, and Section 410(b) of the Credit Repair Organizations 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 products in violation of Section 5(a) of the FTC Act, 15 U.S.C.  45(a), and Section 404(a)(2) of the Credit Repair Organizations Act, 15 U.S.C. 1679b(a)(2).

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 the Western District of New York 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 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 Michael Lyons does business as Lyons Publishing and is a principal of these unincorporated business entities. 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 the unincorporated business entities, including the acts and practices set forth in the complaint. He has transacted business in the Western District of New York.

COMMERCE

6. At all times relevant to this complaint, defendant has maintained a substantial course of trade in the offering for sale and selling of credit repair products, 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 December 1998, defendant has advertised, promoted, offered for sale, and sold credit repair products to consumers through the use of a web-site.

8. Defendant has claimed that consumers can improve their credit histories, credit records, or credit ratings by assisting them in establishing new credit profiles with credit bureaus. Defendant has further claimed that consumers can create new credit files legally.

9. Typical and illustrative of defendant's claims about their credit repair products are the following:

Erase Bad Credit

* * * *

Anyone can have a new credit file INSTANTLY OVERNIGHT!

* * * *

It works with Bankruptcies, FBI (DUI) and Judgments!

It's 100% LEGAL and best of all, the process is FREE!

* * * *

Learn how to use the Credit Bureaus to get a TOTALLY NEW-CLEAN credit file.

ADD AAA CREDIT within WEEKS to your new or existing file that any Bank or Lender would drool over! (This secret alone is worth the price!)

* * * *

10. Defendant has charged $12.95 or more for these products.

VIOLATIONS OF THE CREDIT REPAIR ORGANIZATIONS ACT

11. The Credit Repair Organizations Act, 15 U.S.C. 1679a-j (1997), was enacted on September 30, 1996, and has been in full force and effect since April 1, 1997.

12. Section 404(a)(2) of the Credit Repair Organizations Act prohibits all persons from 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 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. 15 U.S.C.  1679b(a)(2).

13. 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

14. In numerous instances, defendant has counseled or advised consumers to make statements, the intended effect of which has been 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 to consumer reporting agencies, as that term is defined in 15 U.S.C.  1681(f), or to persons who have extended credit to those consumers or to whom those consumers have applied or are applying for extensions of credit.

15. Defendant has thereby violated Section 404(a)(2) of the Credit Repair Organizations Act, 15 U.S.C.  1679b(a)(2).

VIOLATIONS OF THE FEDERAL TRADE COMMISSION ACT

COUNT TWO

16. In connection with the advertising, marketing, promotion, offering for sale, or sale of credit repair products, to induce consumers to purchase his products defendant has, expressly or by implication, represented that through the use of his products, consumers can legally obtain a new credit file thereby enabling them to conceal adverse credit information from the consumers' credit records, credit histories, or credit ratings, for credit purposes.

17. In truth and in fact, through the use of defendant's products, consumers cannot legally obtain a new credit file in order to conceal adverse credit information from the consumers' credit records, credit histories, or credit ratings, for credit purposes.

18. Therefore, the representation set forth in paragraph 16 is false and misleading and 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

19. Consumers throughout the United States, including those in the State of New York, have suffered or are likely to suffer 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

20. 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 preliminary injunction, rescission, restitution, disgorgement of profits resulting from 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 Credit Repair Organizations Act, 15 U.S.C.  1679h(b), 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 to preserve the possibility of effective final relief;

(b) Permanently enjoin defendant from violating the FTC Act, as alleged herein, in connection with the advertising, promoting, offering for sale, and sale of credit repair products or services;

(c) Award such relief as the Court finds necessary to redress injury to consumers resulting from defendant's violations of the FTC Act, including, but not limited to, rescission of contracts, the refund of monies paid, and the disgorgement of ill-gotten monies; and

(d) 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 A. VALENTINE
General Counsel

Dated: , 1999

ANN F. WEINTRAUB(AW 3080)

MICHAEL J. BLOOM (MB 7732)

RHONDA J. MCLEAN (RM 9140)

Attorneys for Plaintiff
Federal Trade Commission
150 William Street, Suite 1300
New York, NY 10038
(212) 264-1226