UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION

THE FEDERAL TRADE COMMISSION, Plaintiff,

v.

ERIC VOLKERT, an individual, doing business as FRESH START PUBLICATION, and CYNTHIA VOLKERT, an individual, doing business as FRESH START PUBLICATION, Defendants.

CIVIL ACTION NO.

COMPLAINT FOR INJUNCTIVE AND OTHER 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 Defendants' 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), 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 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. Defendants Eric Volkert and Cynthia Volkert are individuals doing business as Fresh Start Publication, with their office and principal place of business located at 6061 Beverly Hill Dr., Suite 330, Houston, Texas 77057. Defendants transact or have transacted business in this District. At all times material to this complaint, acting alone or in concert with others, they have formulated, directed, controlled or participated in the acts and practices of Fresh Start Publication, including the acts and practices set forth in this complaint.

COMMERCE

6. At all times relevant to this complaint, defendants have 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.

DEFENDANTS' BUSINESS PRACTICES

7. Since at least 1998, defendants have advertised, promoted, offered for sale, and sold credit file segregation kits to consumers through the use of the Internet.

8. Defendants have claimed that they can improve consumers' credit histories, credit records, or credit ratings by assisting them in establishing new credit profiles with credit reporting agencies by using an Employer Identification Number ("EIN") or Taxpayer Identification Number ("TIN") in place of their Social Security Number for banking and credit purposes. Defendants have further claimed that use of the EIN or TIN in this manner is legal.

9. Defendants' claims about their credit file segregation products include the following advertisement:

NEW CREDIT FILE IN 30 DAYS!

This complete and comprehensive guide will take you step by step through the creation and development of your new credit file. Written by legal professionals for Bankruptcy clients, this system known to only a handful of attorneys will give you the second chance you deserve. . . . Fully Legal.

Only $49.99 + $5.00 S&H

Send to FRESH START PUBLICATION

6061 BEVERLY HILL DR. SUITE 330

HOUSTON, TEXAS 77057. . . .

10. Consumers who respond to defendants' advertisements by paying $49.99, plus $5.00 shipping and handling, receive a packet of materials that advise consumers on how to obtain a TIN from the Internal Revenue Service. Using the new number, the consumer is directed to open bank and credit union accounts, to obtain a small loan from the bank or credit union, using the accounts as collateral, and to use the proceeds to repeat the process by applying for another loan. The consumer is told to repeat the process several times, which will result in the consumer obtaining a new credit rating, allowing him or her to obtain various types of credit cards.

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, defendants have 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 not 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. Defendants have 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 their products, defendants have, expressly or by implication, represented that through the use of their products, consumers can legally alter their identifications to conceal adverse credit information from consumers' credit records, credit histories, or credit ratings by obtaining TINs to use, instead of their Social Security Numbers, for credit purposes.

17. In truth and in fact, through the use of defendants' products, consumers cannot legally alter their identifications to conceal adverse credit information from their credit records, credit histories, or credit ratings by obtaining TINs to use, instead of their Social Security Numbers, 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 have suffered or are likely to suffer substantial monetary loss as a result of defendants' unlawful acts or practices. Absent injunctive relief by this Court, defendants are 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 defendants' 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 defendants' 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 defendants 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 defendants' 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.

Dated:_____________, 1999 Respectfully Submitted,

DEBRA A. VALENTINE
General Counsel

THOMAS B. CARTER
Director, Dallas Regional Office

W. DAVID GRIGGS,
Texas Bar No. 08491100

JOHN R. HOAGLAND
District of Columbia Bar No. 183699
Federal Trade Commission
1999 Bryan Street, Suite 2150
Dallas, Texas 75201-6848
(214) 979-9378 (Griggs)
(214) 979-9395 (Hoagland)
(214) 953-3079 (Facsimile)
Attorneys for Plaintiff