Hunting the wily CROA-codile

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They’re dangerous, they strike fast, and they rely on camouflage to ambush their prey. We call them CROA-codiles – companies that lure cash-strapped consumers in with false promises of debt relief and credit repair, in violation of the FTC Act and the Credit Repair Organizations Act (CROA). According to a lawsuit just filed by the FTC, the defendants added to the injury by claiming a bogus affiliation with federal agencies – and the President.

Using .org URLs, the two outfits named in the complaint – American Bill Pay Organization and American Benefits Foundation – made a persuasive pitch.  “Eliminate up to $25,000 from your debt,” the website claimed.  A company video added, “This program awards $25,000 paid directly to creditors; apply three times and receive $75,000, guaranteed.”  And how about this for purported results?  “As of February 2013, American Bill Pay has successfully processed 9,815 registrations totaling a completed grant payout of $482,514,119.27.”  The defendants really drove the message home with heart-wrenching black-and-white photos of hungry kids and homeless families.

To seal the deal, they claimed to administer the “Bill Payment Government Assistance Program,” an initiative supposedly affiliated with federal agencies like the Recovery Accountability and Transparency Board.  According to the site, “You are guaranteed an increased credit score and the experience of financial stability, through the non-repayable government program funded under the American Recovery & Reinvestment Act of 2009.”

But don’t just take their word for it, the defendants urged. Along with the official seals of the Recovery Board and the Treasury Department’s Bureau of Fiscal Services, the defendants featured a picture of President Obama and a purported quote from the President touting American Bill Pay as “part of the new foundation for growth” for “Americans struggling to pay rising bills with shrinking wages.”

The defendants’ YouTube page featured videos claiming their program is funded by “the Financial Management Service, a subdivision of the United States Department of Treasury.”  One of the videos ended with the President’s signature and a sound-alike voice-over that said, “I am Barack Obama, and I approved this message.”

To enroll in the “program,” people were directed to pay an advance fee of around $1,000 via Western Union or Moneygram and to submit their bills via an online portal.

So did people get their debts paid and their credit rating improved by a government-backed program run by the Treasury Department under the auspices of federal law with the approval of the President?

No. No. No. No. No. And no.

The FTC alleges that the defendants’ pitch was rife with deception, in violation of the FTC Act and the Credit Repair Organizations Act, which bans misleading claims and upfront fees for services claiming to improve consumers’ “credit record, credit history, or credit rating.”  The case is pending in federal court, where a judge just entered a temporary restraining order.

What’s the initial message for business? First, shady tactics targeting people struggling to stay afloat are likely to attract law enforcement attention. In appropriate cases, the FTC will use “go-straight-to-court-do-not-pass-go” provisions to protect consumers. Second, touting a phony affiliation with the President or a government agency takes a heaping helping of gall – with a side order of chutzpah.


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