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 EASTERN DISTRICT OF NEW YORK

FEDERAL TRADE COMMISSION Plaintiff,

v.

PATRICK R. KELLY, individually and doing business as Patrick R. Kelly Enterprises and P. R. K. Enterprises, 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 Eastern 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 Patrick R. Kelly does business as Patrick R. Kelly Enterprises and P. R. K. Enterprises 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 Eastern 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 October 1997, 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 using the defendant's informational manual to assist them in establishing new credit profiles with credit bureaus by using an Employer Identification Number ("EIN") or alternate Social Security Number in place of their Social Security Number for banking and credit purposes. Defendant has further claimed that use of the EIN in this manner is legal.

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

a. The Secret Has Now Been Revealed!

Don't you believe that you deserve a Second Chance in life to have a perfect credit history in order to buy that car or house of your dreams?....

Now you can with Second Chance Credit!

Second Chance Credit is a systematic informational manual that teaches you step by step how to establish a Brand New Credit File with Second Chance Credit you will learn:

  • How to establish an immediate AAA-1 credit history in 30 days
  • How the Credit Bureau's computer systems identify us and how you can make them work to your advantage
  • How to receive a brand new Social Security Number
  • How to properly fill out a credit application that creditors will never deny

* * * *

b. Frequently Asked Questions

1. Is Second Chance Credit Legal? Yes, Second Chance Credit is perfectly Legal and uses the techniques of seasoned Attorneys and Professional Consultants.

2. Will my old credit file merge with my Brand New Credit File? No, Second Chance Credit will show you all the steps that you need to have complete file segregation from your old and Brand New Credit File.

3. I just filed for bankruptcy, can Second Chance Credit help me? Yes, Second Chance Credit will allow you to have a Brand New Credit File overnight and give you an established AAA-1 credit history in 30 days instead of having to suffer for 10 long years.

* * * *

10. Consumers who respond to defendant's advertisements receive a packet of materials that advise consumers to obtain an EIN from the Internal Revenue Service, or, as an alternative, to obtain a second Social Security Number. Using the new number, the consumer is directed to apply for a department store credit card, open a business checking account and savings account, open a "secured" Visa or MasterCard. After the consumer receives the secured credit card, he is instructed to purchase small items and pay the card off each month. Then the consumer is instructed to apply for credit at small stores.

11. Defendant has charged $21.00 or more for these products.

VIOLATIONS OF THE CREDIT REPAIR ORGANIZATIONS ACT

12. 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.

13. 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).

14. 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

15. 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.

16. 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

17. 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 alter their identifications to conceal adverse credit information from their credit records, credit histories, or credit ratings by obtaining EINs or alternate Social Security Numbers for consumers to use, instead of their Social Security Numbers, for credit purposes.

18. In truth and in fact, through the use of defendant's products, consumers cannot legally alter their identifications to conceal adverse credit information from their credit records, credit histories, or credit ratings by obtaining EINs or alternate Social Security Numbers for consumers to use, instead of their Social Security Numbers, for credit purposes.

19. Therefore, the representation set forth in paragraph 17 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

20. Consumers throughout the United States 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

21. 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 Credit Repair Organizations Act and 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 Credit Repair Organizations Act 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

(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