Federal Trade Commission Protecting America's Consumers

COMPLAINT FOR INJUNCTIVE AND OTHER RELIEF

Plaintiff, the Federal Trade Commission (“Commission”), for its complaint alleges that:

INTRODUCTION

1. Plaintiff brings this action under Sections 5(a) and 13(b) of the Federal Trade Commission Act (“FTC Act”), 15 U.S.C. §§ 45(a)(1) and 53(b), Section 108(c) of the Truth in Lending Act (“TILA”), 15 U.S.C. § 1607(c), and Section 621(a) of the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681s(a), for injunctive relief, consumer redress, and other equitable relief against defendants for engaging in unfair or deceptive acts or practices in violation of Section 5(a)(1) of the FTC Act, 15 U.S.C. § 45(a)(1), acts and practices in violation of the Commission’s Trade Regulation Rule Concerning Credit Practices (“Credit Practices Rule”), 16 C.F.R Part 444, acts or practices in violation of the TILA, 15 U.S.C. §§ 1601-1666j, as amended, and the TILA’s implementing Regulation Z, 12 C.F.R. § 226, as amended, and acts or practices in violation of the FCRA, 15 U.S.C. § 1681-1681u, as amended.

JURISDICTION AND VENUE

2. The court has jurisdiction over this matter under 28 U.S.C. §§ 1331, 1337(a), and 1345, and 15 U.S.C. §§ 53(b).

3. Venue is proper in the United States District Court for the Northern District of Georgia under 28 U.S.C. §§ 1391(b-c) and 15 U.S.C. § 53(b).

PARTIES

4. The Commission is an independent agency of the United States Government created and 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 Section 5 of the FTC Act, 15 U.S.C. § 45(a), which prohibits unfair or deceptive acts or practices in or affecting commerce; the TILA, 15 U.S.C. §§ 1601 to 1666j, which grants to consumers certain substantive rights in credit transactions; and the FCRA, 15 U.S.C. § 1681, which grants consumers certain substantive rights with respect to consumer reports and other third-party information. The Commission is authorized by Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), Section 108(c) of the TILA, 15 U.S.C. § 1607(c), and Section 621(a) of the FCRA, 15 U.S.C. § 1681s(a), to initiate federal district court proceedings to enjoin violations of the FTC Act, the Credit Practices Rule, the TILA and its implementing Regulation Z, and the FCRA, and to secure such equitable relief as may be appropriate in each case.

5. Defendant, Stewart Finance Company Holdings, Inc. (“SFC Holdings”) is a Georgia corporation with its office and principal place of business at 610 Sibley Avenue, Union Point, Georgia 30669. At all times relevant to this Complaint, defendant SFC Holdings has transacted business in this District.

6. Defendant Stewart Finance Company, Inc. (“SFC”) is a Georgia corporation with its office and principal place of business at 610 Sibley Avenue, Union Point, Georgia 30669. SFC operates branch offices that extend loans to consumers. On information and belief, SFC is a wholly-owned subsidiary of SFC Holdings. At all times relevant to this Complaint, defendant SFC has transacted business in this District.

7. Defendant Stewart National Finance Company, Inc. (“SNFC”) is a Georgia corporation with its office and principal place of business at 610 Sibley Avenue, Union Point, Georgia 30669. On information and belief, SNFC is a wholly-owned subsidiary of SFC Holdings. At all times relevant to this Complaint, defendant SNFC has resided in Georgia.

8. Defendant, Stewart Finance Company of Louisiana, Inc. (“SFC LA”) is a Georgia corporation with its office and principal place of business at 610 Sibley Avenue, Union Point, Georgia 30669. At all times relevant to this Complaint, defendant SFC LA has resided in Georgia.

9. Defendant, Stewart Finance Company of Missouri, Inc. (“SFC MO”) is a Georgia corporation with its office and principal place of business at 610 Sibley Avenue, Union Point, Georgia 30669. At all times relevant to this Complaint, defendant SFC MO has resided in Georgia.

10. Defendant, Stewart Finance Company of Illinois, Inc. (“SFC IL”) is a Georgia corporation with its office and principal place of business at 610 Sibley Avenue, Union Point, Georgia 30669. At all times relevant to this Complaint, defendant SFC IL has resided in Georgia.

11. Defendant, Stewart Finance Company of Tennessee, Inc. (“SFC TN”) is a Georgia corporation with its office and principal place of business at 610 Sibley Avenue, Union Point, Georgia 30669. At all times relevant to this Complaint, defendant SFC TN has resided in Georgia.

12. Defendant John Ben Stewart, Jr. (“Ben Stewart”) is an individual who resides in Georgia and who transacts business in this District. Ben Stewart is the sole owner or beneficial owner of defendants SFC Holdings, SFC, SNFC, SFC LA, SFC MO, SFC IL, and SFC TN. Individually or in concert with others, he directs, supervises, controls, formulates, and participates in the acts or practices of these corporate defendants, including those acts or practices complained of herein. His principal place of business is at 610 Sibley Ave., Union Point, Georgia.

13. Defendant D & E Acquisitions, Inc. (“D & E”) is a Georgia corporation that maintains its principal place of business at 610 Sibley Ave, Union Point, Georgia 30669 or 3525 Piedmont Road, Atlanta, Georgia 30305. D & E purports to own approximately eleven SFC branch offices and does business as Stewart Finance Company. On information and belief, D & E is a shell company opened only for the purpose of holding certain investor debentures transferred from Stewart Finance Company. All loan company branch offices owned by D & E are staffed, operated, and controlled by SFC employees. From the inception of this company to the present, defendant D & E has transacted business in this District.

14. Defendant Preferred Choice Auto Club, Inc. (“Preferred Choice Auto Club”) is a Georgia corporation with its office and principal place of business at 610 Sibley Avenue, Union Point, Georgia 30669. Ben Stewart is the sole owner and director of Preferred Choice Auto Club. At all times relevant to this complaint, Preferred Choice Auto Club has engaged in the business of selling automobile club memberships to consumers of SFC and related entities, and has received funds and other property that were obtained unlawfully from consumers as a consequence of the acts and practices complained of herein. At all times relevant to this Complaint, defendant Preferred Choice Auto Club has transacted business in this District.

15. Defendant Stewart Insurance Ltd. (“Stewart Insurance”) is a corporation under the laws of Turks and Caicos Islands with its office and principal place of business at 610 Sibley Avenue, Union Point, Georgia 30669. Stewart Insurance is an affiliate of SFC. On information and belief, Ben Stewart is the sole owner of Stewart Insurance, which is a company engaged in the business of reinsurance, including the reinsurance of insurance products sold to Stewart Finance customers. Stewart Insurance has received funds and other property that were obtained unlawfully from consumers as a consequence of the acts and practices complained of herein. At all times relevant to this Complaint, defendant Stewart Insurance has resided in Georgia.

16. Defendant J & J Insurance, Ltd. (“J & J Insurance”) is a corporation under the laws of Turks and Caicos Islands with its office and principal place of business at 610 Sibley Avenue, Union Point, Georgia 30669. J & J is an affiliate of SFC and is owned in substantial part by Ben Stewart. On information and belief, J & J Insurance is a company engaged in the business of reinsurance, including the reinsurance of insurance products sold to Stewart Finance customers, and has received funds and other property that were obtained unlawfully from consumers as a consequence of the acts and practices complained of herein. At all times relevant to this Complaint, defendant J & J Insurance has resided in Georgia.

17. At all times relevant to this Complaint, defendants Ben Stewart, SFC Holdings, SFC, SNFC, together with affiliates and subsidiaries doing business as “Stewart Finance Company,” including D & E, SFC LA, SFC MO, SFC IL, and SFC TN, (collectively referred to as “Stewart Finance” or “the Stewart Finance defendants”) have operated approximately sixty branch offices offering personal loans to consumers in Georgia, Louisiana, Missouri, Illinois and Tennessee. Ancillary to its loans, Stewart Finance sells a variety of credit-related insurance products and other products to borrowers. At all times relevant to this complaint, the Stewart Finance defendants, together with affiliated defendants, Preferred Choice Auto Club, Stewart Insurance, and J & J Insurance, have operated as a common enterprise.

18. On February 10, 2003, SFC and SNFC filed voluntary petitions for relief under the reorganization provisions of Chapter 11 of the Bankruptcy Code, in the United States Bankruptcy Court, Middle District of Georgia, Case Nos. 03-30277 (RFH) and 03-30278 (RFH), respectively. On February 27, 2003, D & E filed a voluntary petition for relief under the reorganization provisions of Chapter 11 of the Bankruptcy Code, in the same court, Case No. 03-30398 (RFH). The Commission’s action against SFC, SNFC, and D & E, including the enforcement of a judgment other than a money judgment, is not stayed by 11 U.S.C. § 362(a)(1), (2), (3) or (6) because it is an exercise of the Commission’s police or regulatory power as a governmental unit pursuant to 11 U.S.C. § 362(b)(4) and thus falls within an exemption to the automatic stay.

19. At all times relevant to this complaint, the Stewart Finance defendants were “creditors” as that term is defined in Section 103(f) of the TILA, 15 U.S.C. § 1602(f) and Section 226.2(a)(17) of Regulation Z, 12 C.F.R. § 226.2(a)(17), and were therefore required to comply with the applicable provisions of the TILA and Regulation Z.

DEFENDANTS’ BUSINESS

20. Stewart Finance provides small personal loans to consumers in the subprime market, typically amounts lower than $1000 to be repaid in less than one year. Stewart Finance makes loans to borrowers with greater credit risk or perceived greater credit risk, including persons from lower income or minority neighborhoods. A substantial percentage of Stewart Finance’s customers are recipients of Social Security or other government benefits. Many such borrowers have difficulty obtaining financing from prime lenders.

21. In the course and conduct of extending such loans, Stewart Finance has engaged in numerous deceptive practices and other violations of law to induce consumers to purchase costly products ancillary to the loan, to participate in a “direct deposit” program, and to repeatedly refinance their loans.

22. In its Georgia and Louisiana branch offices, Stewart Finance sells insurance and other ancillary products with the loans it makes. These products include, among others, accidental death and dismemberment insurance (“A D & D”) and Car Club memberships. AD & D is an insurance policy that pays cash benefits directly to the policy holder or his beneficiary if the policy holder dies or is dismembered in an accident. Car Club memberships provide reimbursement for roadside service to an automobile.
23. The premiums for AD & D and Car Club are an additional charge on the consumer’s loan, and the entire premium for these products is due up-front and financed into the principal loan amount of the loan. As a result, consumers who purchase these products pay additional interest and other finance charges on the loan.

24. Although Stewart Finance nominally deems the purchase of AD & D and Car Club to be optional to consumers, Stewart Finance sells one or both of these products to nearly all of its customers by deceptive means. Stewart Finance sets a goal of imposing about 40% gross charges on consumer loans, meaning that about 40% of the total amount the customer repays to Stewart Finance is comprised of charges added to the loan. Stewart Finance employees cannot reach this goal without selling AD & D or Car Club on the loan.

25. Stewart Finance employees typically take a consumer’s application for a loan over the telephone. After determining that a loan application has been approved, Stewart Finance employees call the consumer to inform him of the approval decision. In this conversation, Stewart Finance employees typically tell the consumer what the monthly payment on the loan will be, and they instruct the consumer to bring in a list of references, identification, and other information needed for closing the loan. The monthly payment amount that SFC employees have quoted to consumers typically includes premiums for either AD & D or Car Club. However, in quoting the monthly payment amount, Stewart Finance employees do not even mention the existence of these ancillary products, much less that the consumer has the option to decline them.

26. At the loan closing, documents presented by defendants typically contain written disclosures of the numerous ancillary products and fees charged on the loan. The disclosures on the Truth in Lending form are not made in a prominent manner, however, and such disclosures are not adequate to overcome the effect of defendants’ prior and contemporaneous conduct. At closing, Stewart Finance employees briskly run through several complex and technical documents, directing customers where to sign. Some Stewart Finance employees say nothing at all about AD & D or Car Club at closing, and others briefly mention them as they list the myriad products and fees included in the loan, such as credit life insurance, accident and health insurance, property or automobile insurance, filing fees or non-recording fees, and maintenance fees. Stewart Finance employees are trained to focus the customers’ attention on the monthly payment amount and the date on which the monthly payments are due, but are not trained to and do not explain to customers that AD & D and /or Car Club are not required to obtain the loan, that the cost of these products is added to the loan amount the customer requested, or that the premium for these products is financed along with the principal loan amount, and the customer will pay additional interest and other fees as a result. As a result, Stewart Finance employees obtain the signatures of consumers through deceptive or fraudulent means. The loan documents do not include the cost of AD & D or Car Club in the finance charge or the annual percentage rate disclosed to the consumer.

27. Stewart Finance does not present to customers at closing a comparative cost of a loan with and without the ancillary products. In fact, its managers sometimes reconsider an “approved” loan when a customer notices that either AD & D or Car Club has been added to the loan and refuses to purchase it. In some instances, when a customer has requested that the products be removed from the loan, Stewart Finance employees have represented that the products are mandatory.

28. On numerous occasions, Stewart Finance has sold Car Club to borrowers who do not own cars or do not have driver’s licenses and thus, would not benefit from the product, and has sold AD & D to borrowers who are not eligible for the product due to age restrictions.

29. Stewart Finance frequently and aggressively solicits refinancing of its loans by contacting existing borrowers and stating that they have “cash available.” The amount of “cash available” to a Stewart Finance borrower is the difference between the consumer’s credit limit and the remaining principal balance on the consumer’s existing loan. For example, Stewart Finance employees typically solicit a borrower by saying: “you have $___ cash available. When would you like to come pick it up?” or words to that effect. A typical solicitation reads: “Don’t get caught this season without stuffing in your wallet! Because of your good payment record we have IMMEDIATE CASH available for you. HAPPY THANK$GIVING.” Directly below is printed a mock check, filled out with the customer’s name, in the amount of his “cash available.” (Representative samples attached as Exhibit A.)

30. In fact, consumers who respond to Stewart Finance’s “cash available” offers are not offered a new loan in the amount of their “cash available,” rather, in many instances, Stewart Finance provides only a refinancing (“renewal”) of their existing loan. The renewal loan pays off the balance of the existing loan plus provides cash to the consumer in the amount of the “cash available” solicitation. For example, a borrower who has a $300 loan with a balance of $150 would receive a “cash available” solicitation for a $150 loan. Instead of providing a new loan, however, Stewart Finance would renew the $300 loan, paying off the remaining $150 balance on the existing loan and tendering the other $150 in cash to the customer. Because charges on the loan are calculated as a percentage of the total loan amount ($300), renewing or refinancing the existing loan is more costly than taking out a new loan in the amount of the “cash available” offer ($150).

31. Stewart Finance employees fail to disclose to customers who respond to “cash available” offers that a renewal loan is more costly than a new loan in the amount of the “cash available” offer. In some instances, Stewart Finance employees have told consumers falsely that the renewal loan is less expensive than a new loan in the amount of the “cash available” offer. While the consumer’s monthly payments will remain level temporarily if the existing loan is renewed, the ultimate cost of the renewal loan will generally be higher than the cost of a new loan plus repayment of the existing loan.

32. Stewart Finance employees frequently sell the customer another Car Club or AD & D policy when she refinances her loan. However, Stewart Finance does not cancel any pre-existing Car Club memberships or AD & D policies, or offer any refunds on the premiums paid for these products.

33. In many instances, Stewart Finance has sold overlapping Car Club memberships and overlapping AD & D policies to borrowers. Having more than one Car Club membership in effect at the same time renders no additional benefit to the consumer. To the extent overlapping AD & D insurance policies exceed the maximum indemnity payable by the insurance company, the excess in coverage is useless to the borrower for the period of overlap. For example, if the maximum indemnity payable by the insurance company is $50,000 regardless of how many policies the borrower purchases, it is useless to the customer to purchase a second $50,000 policy for an overlapping time period of coverage.

34. Stewart Finance is paid a commission for its sale of all ancillary products, including AD & D and Car Club. The remainder of Car Club premiums sold in Georgia go directly to Preferred Choice Auto Club. The reinsurance companies, Stewart Insurance and / or J & J Insurance, keep a portion of the premiums on the sale of credit insurance products.

35. Stewart Finance actively solicits Social Security recipients by offering loans of $150 if they sign up for Stewart Finance’s direct deposit program. (See Exhibit B.) Consumers who participate in this program agree to have their Social Security or other government benefits automatically deposited into bank accounts with financial institutions that Stewart Finance designates. Once they have done so, Stewart Finance, directly or indirectly, deducts the customer’s monthly loan payment from the customer’s account.

36. Stewart Finance trains employees to tell customers that direct deposit is a “free service” that “will not cost you any extra money.” In fact, Stewart Finance deducts monthly fees of $4 to $6 from the customer’s account. In addition, if the consumer wishes to withdraw money from his account, he must do so using an automated teller machine and often incur a fee. 37. Stewart Finance typically requires borrowers to provide personal property as security for defendants’ loans. Defendants routinely take telephones, microwave ovens, sewing machines, and other household goods as collateral on the loan, and they sometimes threaten to take possession of the secured property when consumers are delinquent in their loan payments.

38. When Stewart Finance rejects a consumer’s loan application based in whole or part on information in the consumer’s credit report, it sends an adverse action notice to the consumer. The notice does not tell the consumer that the consumer reporting agency did not take the adverse action and is unable to tell the consumer the specific reason why the adverse action was taken.

FEDERAL TRADE COMMISSION ACT VIOLATIONS

39. Section 5(a)(1) of the FTC Act, 15 U.S.C. § 45(a)(1), provides that “unfair or deceptive acts or practices in or affecting commerce are hereby declared unlawful.”

40. The Stewart Finance defendants extend credit to consumers and market ancillary products, in or affecting commerce, as “commerce” is defined in Section 4 of the FTC Act, 15 U.S.C. § 44.

COUNT I: FAILURE TO DISCLOSE COST AND TERMS OF ANCILLARY PRODUCTS

41. Plaintiff incorporates by reference all of the preceding paragraphs.

42. Since at least 1998, in the course of offering or extending credit, the Stewart Finance defendants have represented to consumers, expressly or by implication, that the quoted monthly payment is the cost of obtaining a loan from defendants.

43. In numerous instances, the Stewart Finance defendants have failed to disclose or to disclose adequately additional terms pertaining to the credit offer, such as:

A. that the quoted monthly payment amount includes premiums for AD & D and/or Car Club at a cost that is added to the loan amount, and the amount of those costs;

B. that the entire cost of the premiums for AD & D and Car Club is to be paid up front and financed with the loan, and the consumer will pay additional interest charges as a result; and

C. that the purchase of AD & D and Car Club is optional on the part of the consumer and not required to obtain the loan.
This additional information would have been material to consumers in deciding whether to obtain a loan with Stewart Finance and whether to obtain a loan with AD & D and Car Club. The failure to disclose, or disclose adequately, this information in light of the representations made, was a deceptive practice.

44. Defendants’ practices constitute unfair or deceptive acts or practices in or affecting commerce in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).

COUNT II: FAILURE TO DISCLOSE INABILITY TO BENEFIT FROM ANCILLARY PRODUCTS

45. Plaintiff incorporates by reference all of the preceding paragraphs.

46. Since at least 1998, in numerous instances, the Stewart Finance defendants have sold Car Club and AD & D to borrowers, including borrowers who already are Car Club members, are ineligible for AD & D benefits, or already have an AD & D policy with the maximum coverage. In selling these products, the Stewart Finance defendants have represented, expressly or by implication, that Car Club provides a benefit to the consumer in the form of roadside assistance for automobile emergencies, and that AD & D provides a benefit to the consumer (or his beneficiary) if the consumer dies or is dismembered.

47. In numerous instances, the Stewart Finance defendants have failed to disclose or to disclose adequately that

A. A new Car Club membership would provide no additional benefit to consumers who had already purchased a Car Club membership from defendants that was in effect at the same time as the new Car Club membership;

B. AD & D would provide no benefit to consumers who are ineligible for the product because of age restrictions under the terms of the applicable insurance policy; and

C. A new AD & D policy would provide no additional benefit to consumers who have already purchased from defendants the maximum amount of coverage allowable under the terms of the applicable insurance policy.
This additional information would have been material to consumers in deciding whether to purchase AD & D and Car Club. The failure to disclose, or disclose adequately, this information, in light of the representations made, was a deceptive practice.

48. Defendants’ practices constitute unfair or deceptive acts or practices in or affecting commerce in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).

COUNT III: MISREPRESENTATION OF “CASH AVAILABLE” LOAN

49. Plaintiff incorporates by reference all of the preceding paragraphs.

50. Since at least 1998, on numerous occasions, the Stewart Finance defendants have represented to existing borrowers, either expressly or by implication, that they could take out a new loan in the amount of certain “cash available” solicitations.

51. In truth and in fact, in numerous instances, defendants do not provide new loans to existing borrowers in the amount of the “cash available” solicitations. Instead, the defendants provide renewal loans to existing borrowers who respond to defendants’ “cash available” solicitations. These renewal loans pay off the balance on the borrower’s existing loan and advance cash to the borrower in the amount of the “cash available” solicitation. However, the renewal loans are more expensive than a new loan in the amount of the “cash available” offer would be, a fact that the defendants, in many instances, fail to disclose to consumers. Therefore, the Stewart Finance defendants’ representations, as alleged in Paragraph 50, were and are false or misleading.

52. Defendants’ practices constitute unfair or deceptive acts or practices in or affecting commerce in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).

COUNT IV: MISREPRESENTATION OF THE COST OF DIRECT DEPOSIT

53. Plaintiff incorporates by reference all of the preceding paragraphs.

54. Since at least 1998, on numerous occasions, the Stewart Finance defendants have represented to consumers, in connection with extensions of credit, expressly or by implication, that the direct deposit program is a free service.

55. In truth and in fact, the direct deposit program is not a free service, as consumers who participate in Stewart Finance’s direct deposit program must pay a monthly fee and often must pay the cost of using an ATM to withdraw funds from the account into which their income payments have been deposited. Therefore, the Stewart Finance defendants’ representations, as alleged in Paragraph 54, were and are false or misleading.

56. Defendants’ practices constitute unfair or deceptive acts or practices in or affecting commerce in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).

COUNT V: VIOLATIONS OF THE TILA AND REGULATION Z

57. Plaintiff incorporates by reference all of the preceding paragraphs.

58. Sections 106, 107, and 128 of the TILA, 15 U.S.C. §§ 1605, 1606, and 1638, and Sections 226.4, 226.18(b),(d), and(e), and 226.22 of Regulation Z, 12 C.F.R. §§ 226.4, 226.18(b),(d), and (e), and 226.22, require inter alia that a creditor disclose to a consumer the amount financed (the amount of credit provided to the consumer or on the consumer’s behalf), the annual percentage rate (the cost of consumer credit expressed as a yearly rate) and the finance charge (the cost of consumer credit expressed as a dollar amount) applicable to any extension of closed-end consumer credit. The cost of consumer credit to be disclosed includes any charge payable directly or indirectly by the consumer and imposed directly or indirectly by the creditor as an incident to or a condition of the extension of credit (unless otherwise specifically excluded under the TILA or Regulation Z).

59. Since at least 1998, the Stewart Finance defendants in the course and conduct of their business, have, on numerous occasions, required consumers to purchase AD & D and/or Car Club in connection with an extension of credit, have failed to include the cost of such ancillary products in the finance charge and annual percentage rate disclosed to those consumers, and have wrongfully included the cost of such ancillary products in the amount financed disclosed to those consumers.

60. The aforesaid acts and practices by the Stewart Finance defendants violate Sections 106, 107, and 128 of the TILA, 15 U.S.C. §§ 1605, 1606, and 1638, and Sections 226.4, 226.18(b),(d), and(e), and 226.22 of Regulation Z, 12 C.F.R. §§ 226.4, 226.18(b),(d), and (e), and 226.22, and constitute unfair and deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).

COUNT VI: VIOLATIONS OF THE CREDIT PRACTICES RULE

61. Plaintiff incorporates by reference all of the preceding paragraphs.

62. The Credit Practices Rule promulgated by the Commission under Section 18 of the FTC Act, 15 U.S.C. § 57a, became effective on March 1, 1985, and has since that date remained in full force and effect.

63. The Credit Practices Rule, inter alia, prohibits a lender from taking or receiving from a consumer an obligation that constitutes or contains a non-possessory security interest in household goods other than a purchase money security interest. 16 C.F.R. § 444.2(a)(4).

64. Since at least 1998, in numerous instances, in connection with the extension of credit to consumers in or affecting commerce, the Stewart Finance defendants have taken obligations from consumers that constitute or contain a non-possessory security interest in household goods (other than a purchase money security interest) in violation of the Credit Practices Rule, 16 C.F.R. § 444.2(a)(4).
65. Pursuant to Section 18(d)(3) of the FTC Act, 15 U.S.C. § 57a(d)(3), a violation of the Credit Practices Rule constitutes an unfair or deceptive act or practice in violation of Section 5(a)(1) of the FTC Act, 15 U.S.C. § 45(a)(1).

COUNT VII: VIOLATIONS OF THE FCRA

66. Plaintiff incorporates by reference all of the preceding paragraphs.

67. Section 615(a) of the FCRA, 15 U.S.C. § 1681m(a), requires any person who takes “adverse action,” as that term is defined in Section 603(k) of the FCRA, 15 U.S.C. § 1681a(k), with respect to any consumer that is based in whole or in part on any information contained in a consumer report, to provide to the consumer, inter alia, (1) notice of the adverse action taken; and (2) a statement that the consumer reporting agency did not make the decision to take the adverse action and is unable to provide the consumer the specific reasons why the adverse action was taken.

68. Since 1998 and in numerous instances, Stewart Finance has taken “adverse action” as that term is defined in Section 603(k) of the FCRA, 15 U.S.C. § 1681a(k), and Section 202.2(c) of Regulation B, 12 C.F.R. § 202.2(c), by denying a consumer credit, either in whole or in part because of information contained in a consumer report from a consumer reporting agency. In such instances Stewart Finance has given consumers notices, in violation of Section 615(a) of the FCRA, 15 U.S.C. § 1681m(a), that fail to disclose that the consumer reporting agency did not take the adverse action and is unable to provide the consumer the specific reason reasons why the adverse action was taken.

69. Pursuant to Section 621(a)(1) of the FCRA, 15 U.S.C. § 1681s(a)(1), the Stewart Finance defendants’ violations of the FCRA constitute unfair or deceptive acts or practices in commerce, in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).

CONSUMER REDRESS AND INJUNCTION

70. Under Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), this court is authorized to issue a permanent injunction prohibiting defendants from violating the FTC Act, the Credit Practices Rule, the TILA, Regulation Z, and the FCRA, as well as to provide ancillary equitable relief.

CONSUMER INJURY

71. Consumers have suffered, and will continue to suffer, substantial injury as a result of defendants’ violations of the FTC Act, the Credit Practices Rule, the TILA, Regulation Z, and the FCRA, as set forth above.

THIS COURT’S POWER TO GRANT RELIEF

72. This Court has the authority pursuant to § 13(b) of the FTC Act, 15 U.S.C. § 53(b), and its own inherent equitable powers, to grant injunctive relief and other ancillary equitable relief to prevent and remedy violations of any provision of law enforced by the FTC. The Stewart Finance defendants’ violations of § 5 of the FTC Act, the Credit Practices Rule, the TILA, and the FCRA have, in fact injured consumers and, absent injunctive and other relief by this Court, are likely to continue to injure consumers and harm the public interest.

PRAYER FOR RELIEF

WHEREFORE, plaintiff requests that this Court, as authorized by §§ 5(a) and 13(b) of the FTC Act, 15 U.S.C. §§ 45(a) and 53(b), and pursuant to the Court’s own equitable powers:

1. Award Plaintiff all temporary and 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;

2. Enter judgment against defendants and in favor of plaintiff for each violation alleged in this complaint;

3. Permanently enjoin defendants from violating the FTC Act, the Credit Practices Rule, the TILA, Regulation Z, and the FCRA;

4. Find the defendants jointly and severally liable for redress to all borrowers who were injured as a result of defendants’ violations of § 5(a) of the FTC Act, the Credit Practices Rule, the TILA, and Regulation Z, and the FCRA;

5. Award such relief as the Court deems necessary to prevent unjust enrichment and to redress borrower injury resulting from defendants’ violations of § 5(a) of the FTC Act, the Credit Practices Rule, the TILA and Regulation Z, and the FCRA, including but not limited to, rescission or reformation of contracts, the refund of monies paid, and disgorgement of ill-gotten gains; and

6. Award plaintiff such additional relief as the Court may deem just and proper.

DATED:

Respectfully submitted,
FEDERAL TRADE COMMISSION
WILLIAM E. KOVACIC
General Counsel

_______________________
MONICA E. VACA, Attorney
SANDRA M. WILMORE, Attorney
KAREN S. HOBBS, Attorney
ANNE M. McCORMICK, Attorney
Federal Trade Commission
600 Pennsylvania Avenue, N.W.
NJ-3158
Washington, D.C. 20580
(202) 326-2245 (phone)
(202) 326-3768 (facsimile)

________________________
Local Counsel
CINDY A. LIEBES, Attorney
Georgia Bar No. 451976
Federal Trade Commission
255 Peachtree Street, N.E.
Suite 1500
Atlanta, GA 30303
(404) 656-1359 (phone)
(404) 656-1379 (facsimile)