ALEJANDRO N. MAYORKAS
United States Attorney

LEON W. WEIDMAN
Assistant U.S. Attorney
Chief, Civil Division

Assistant United States Attorney
California Bar Number:
Room , Federal Building
300 North Los Angeles Street
Los Angeles, CA 90012
Telephone: (213) 894-
Facsimile: (213) 894-

Attorney for Plaintiff
United States of America

UNITED STATES DISTRICT COURT
FOR THE CENTRAL DISTRICT OF CALIFORNIA
SOUTHERN DIVISION

UNITED STATES OF AMERICA
Plaintiff
v.
PERFORMANCE CAPITAL MANAGEMENT, INC., a California corporation,
Defendant.

CIVIL NO.
COMPLAINT

Plaintiff, the United States of America, acting upon notification and authorization to the Attorney General by the Federal Trade Commission ("Commission"), by its undersigned

attorneys, for its complaint alleges as follows:

JURISDICTION AND VENUE

1. This is an action arising under  5(a), 9, 13(b), and 16(a) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C.  45(a), 49, 53(b), and 56(a), and the Fair Credit Reporting Act ("FCRA"), 15 U.S.C. 1681-1681u, to secure permanent injunctive and other relief for violations of the FTC Act and the FCRA, to obtain monetary civil penalties for violations of the FCRA.

2. This Court has jurisdiction over this matter under 28 U.S.C.  1331, 1337, 1345, and 1355, and under 15 U.S.C.  45(a), 45(m)(1)(A), 53(b), 57b, and 1681s. This action arises under 15 U.S.C.  45(a)(1), and 15 U.S.C.  1681s.

3. Venue is proper in the United States District Court for the Central District of California under 28 U.S.C.  1391(b-c) and 1395(a), and 15 U.S.C.  53(b).

THE PARTIES

4. This action is brought by the United States on behalf of the Federal Trade Commission. The Commission is an independent agency of the United States Government given statutory authority and responsibility by the FTC Act, as amended, 15 U.S.C.  41-58. The Commission is charged, inter alia, with enforcing  5(a) of the FTC Act, 15 U.S.C.  45(a), which prohibits unfair or deceptive acts or practices in or affecting commerce, and the FCRA, 15 U.S.C.  1681-1681u, which imposes duties upon consumer reporting agencies and those who furnish information to a consumer reporting agency or use information obtained from a consumer reporting agency.

5. Defendant Performance Capital Management, Inc. ("Performance Capital") is a for-profit corporation organized, existing, and doing business under the laws of the State of California. Its principal place of business is located at 2811 Main St., Irvine, California 92614.

DEFINITIONS

As used in this Complaint:

1. the Fair Credit Reporting Act or FCRA refers to 15 U.S.C.  1681-1681u, as amended;
2. the term "consumer report" is defined as provided in Section 603(d) of the FCRA, 15 U.S.C. 1681a(d);
3. the term "consumer reporting agency" is defined as provided in Section 603(f) of the FCRA, 15 U.S.C.  1681a(f); and
4. the term "defendant" means Performance Capital Management, Inc.

DEFENDANT'S BUSINESS

6. Defendant maintains a course of trade in commerce, as "commerce" is defined in Section 4 of the FTC Act, 15 U.S.C.  44, by purchasing consumer debt from the owners of the debt and attempting to collect the debt from consumers.

7. As part of its collection activities, defendant reports to consumer reporting agencies information about the debts it is attempting to collect. As such, defendant is subject to Section 623 of the FCRA, 15 U.S.C.  1681s-2, which imposes a series of duties upon any entity that furnishes information to a consumer reporting agency.

VIOLATIONS OF THE FAIR CREDIT REPORTING ACT

FIRST COUNT

8. Section 623(a)(5) of the FCRA requires anyone furnishing information to a consumer reporting agency regarding a delinquent account placed for collection, charged to profit or loss, or subjected to any similar action, to provide to the consumer reporting agency, not later than 90 days after furnishing the information, the month and year of the commencement of the delinquency that immediately preceded the action.

9. In numerous instances, in the course and conduct of its business, defendant has reported information about debts to consumer reporting agencies using a date of delinquency other than the month and year of the delinquency that immediately preceded the action.

10. The acts and practices alleged in Paragraph 9 constitute violations of Section 623(a)(5) of the FCRA, 16 U.S.C.  1681s-2(a)(5). Pursuant to Section 621(a)(1) of the FCRA, 15 U.S.C.  1681s(a)(1), the acts and practices alleged in Paragraph 9 also constitute unfair or deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C.  45(a).

SECOND COUNT

11. Section 623(b)(1) of the FCRA requires furnishers of information to consumer reporting agencies to conduct an investigation when a consumer reporting agency forwards to the furnisher a notice of dispute in accordance with the provisions of Section 611(a)(2) of the FCRA, 15 U.S.C.  1681i.

12. At the present time, PCM receives notices of dispute from consumer reporting agencies in the form of written consumer dispute verification forms. When PCM receives consumer dispute verification notices, it is the practice of PCM to compare the name, address, and information in PCM's computer database with the information provided on each consumer dispute verification form. Where the two match, PCM reports that it has verified as accurate the information in its files. The actual records of the original creditor are not reviewed, nor is the matter referred to the original creditor for the original creditor to verify the accuracy of the information.

13. Because PCM collects accounts that are often old, information in its computer files may not be accurate for a variety of reasons, including incorrect updating of addresses, errors in recording names and information, and problems with the original creditor's records. Accordingly, verifying information in the computerized PCM file does not constitute an "investigation" for purposes of Section 623(b) of the FCRA when a consumer disputes the accuracy of the information.

14. The acts and practices alleged in Paragraphs 12 and 13 constitute violations of Section 623(b) of the FCRA, 16 U.S.C.  1681s(b). Pursuant to Section 621(a)(1) of the FCRA, 15 U.S.C.  1681s(a)(1), the acts and practices alleged in Paragraph 17 also constitute unfair or deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C.  45(a).

THIRD COUNT

15. Section 623(a)(3) of the FCRA provides that if the completeness or accuracy of any information furnished by any person to any consumer reporting agency is disputed by a consumer, the information must be noted as disputed. This provision does not require disputes to be in writing.

16. In numerous instances, consumers have informed defendant over the telephone that they dispute information furnished by the defendant to a consumer reporting agency. It is the practice of the defendant to inform consumers who report disputes orally that they must dispute the accounts in writing. The defendant does not report oral disputes to the consumer reporting agencies to which it furnishes information.

17. The acts and practices alleged in Paragraph 16 constitute violations of Section 623(a)(3) of the FCRA, 1681 U.S.C.  1681s-2(a)(3). Pursuant to Section 621(a) of the FCRA, 15 U.S.C.  1681s(a)(1), the acts and practices alleged in Paragraph 13 also constitute unfair or deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C.  45(a).

CIVIL PENALTIES AND INJUNCTION

VIOLATIONS OF THE FCRA

18. Each instance in which the defendant violated the FCRA since September 30, 1997, the date that the amended FCRA went into effect providing for civil penalties for violations of the law, constitutes a separate violation of the FCRA for which plaintiff seeks monetary civil penalties under Section 621 of the FCRA, 15 U.S.C.  1681s.

19. Section 621 of the FCRA authorizes the Court to award monetary civil penalties of not more than $2,500 per violation for violations occurring after September 30, 1997.

20. Under Section 13(b) of the FTC Act, 15 U.S.C.  53(b), this Court is authorized to issue a permanent injunction prohibiting the defendant from violating the FTC Act and the FCRA.

PRAYER FOR RELIEF

WHEREFORE, plaintiff requests that this Court, pursuant to 15 U.S.C.  45(a), 45(m)(1)(A), 49, and 53(b), and 15 U.S.C.  1681s, and pursuant to this Court's own equity powers:

1. Enter judgment against defendant and in favor of plaintiff for each violation alleged in this complaint;
2. Award plaintiff monetary civil penalties for each violation of the FCRA as alleged in this complaint;
3. Enjoin defendant from violating the FCRA and the FTC Act; and
4. Award plaintiff such additional relief as the Court may deem just and proper.

Respectfully submitted,

DATED:

FOR THE UNITED STATES OF AMERICA:
Of Counsel:

David Medine
Associate Director for Financial Practices
Federal Trade Commission
Washington, D.C. 20580

Peggy Twohig
Assistant Director for
Financial Practices
Federal Trade Commission

 

DAVID W. OGDEN
Acting Assistant Attorney General
Civil Division
for U.S. Department of Justice

ALEJANDRO N. MAYORKAS
United States Attorney

LEON W. WEIDMAN
Assistant United States Attorney
Chief, Civil Division

__________________________

Assistant United States Attorney

Attorneys for Plaintiff
United States of America