Internet Marketers of Credit Repair Program to Pay $17,500 in Redress Under Settlement With FTC

Share This Page

For Release

The Federal Trade Commission today announced a settlement with the two closely-related New York City law firms behind a deceptive advertisement for credit repair services that was posted on about 3,000 Internet news groups. The settlement is with Consumer Credit Advocates, P.C., Consumer Credit and Legal Services, P.C., and two individuals affiliated with the firms. It would ban the defendants from engaging in fraudulent credit repair practices, and require them to provide a warning to their credit improvement services customers that consumers have no legal right to have accurate information removed from their credit reports. The order also would require the defendants to pay $17,500 in consumer redress, and prohibit them from instituting collection procedures against their current and former credit repair clients.

This is the tenth case involving Internet advertising brought by the FTC. The defendants in this case charged a minimum fee of $500 for their services, with fees ranging from $125 to $750 for each derogatory item challenged.

The Consumer Credit Advocates Internet advertisement generated news coverage because it included a return e-mail address to Cybersell, Inc. Cybersell is an Internet advertising company that had been the topic of earlier news stories, which reported that the firm's posting of ads for its immigration services on thousands of unrelated news groups had been roundly criticized by regular Internet users as a violation of unwritten rules or "Netiquette."

According to the FTC complaint detailing the charges in this case, Consumer Credit and Legal Services, its President and an attorney, John E. Petiton, and its Director of Credit Services, David B. Markowitz, have offered credit improvement and other services since about May 1993. In May 1994, they created Consumer Credit Advocates and, in February 1995, that firm hired a consultant which posted the challenged ad on the Internet. The ad stated, in part: "Our LAW FIRM offers direct guaranteed effective credit restoration services by experienced attorneys. . . . We have successfully facilitated the removal of Late Payments, Charge-offs, Foreclosures, Repossessions, Collection Accounts, Loan Defaults, Tax Liens, Judgments and Bankruptcies from our clients' credit reports. WE GUARANTEE THAT YOUR CREDIT CAN BE RESTORED! ! !"

In fact, the FTC charged, the defendants cannot remove derogatory information, such as bankruptcies and loan defaults, from clients' credit reports when that information is accurate and not obsolete. Nor have the defendants substantially improved thousands of clients' credit reports as they had represented, the FTC charged.

The proposed consent decree to settle the charges, which requires the court's approval to become binding, would prohibit the defendants, among other things, from misrepresenting their success rate for improving consumers' credit reports, and from misrepresenting that they can remove derogatory information from credit reports regardless of the accuracy or the age of the information. The decree also would require them to warn consumers:

  • that, in order to improve their credit, the consumers may have to pay some or all of their debts; and
  • in a specifically-worded notice that must be provided to all prospective clients before they sign any agreement or pay any money, that federal law requires credit reporting agencies to remove only inaccurate data or information that is older than seven years (bankruptcies can be reported for 10 years); even overdue debts which have been completely repaid can be shown as paid late; and there is no guarantee that the defendants can do anything to help consumers get credit.

The settlement also would prohibit the defendants from trying to collect payment from consumers based on contracts for services that predate court approval of this consent decree. In addition, the defendants would be required to pay $17,500 to the FTC for redress. The FTC will send any undistributed redress funds to the U.S. Treasury.

The settlement also contains reporting provisions that would assist the FTC in monitoring the defendants' compliance, and another provision that would permit the FTC to reopen the matter and seek more redress should the defendants be found to have misrepresented their financial conditions.

The Commission vote to approve the settlement for filing in court was 3-2, with Commissioners Mary L. Azcuenaga and Roscoe B. Starek, III, dissenting. In a joint statement, the two Commissioners said that, while they believe the defendants violated the law as alleged, the consumer redress provisions in the settlement have "serious weaknesses" because "only a small fraction of the defendants' victims will be notified of the Commission's action and there is no means for the Commission to verify that notice letters have been sent."

The complaint and proposed consent decree were filed in U.S. District Court for the Southern District of New York, in New York City, on March 19.

NOTE: This consent decree is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Consent decrees have the force of law when signed by the judge.

Copies of the complaint, proposed consent decree and the joint dissenting statement are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC's World Wide Web site at:


(FTC File No. 952 3236)

Contact Information