FTC Settlements with Credit Repair Operators Net $5,000 for Redress, Strong Injunctions, Disclosures for Future Customers

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The Federal Trade Commission has negotiated settlements to end its litigation against two southern California men, Walter D. Channels and James Martin Coose, in connection with the allegedly fraudulent credit repair telemarketing operation they ran in 1995 and 1996. The settlements would bar each defendant from attempting to enforce or collect on contracts entered into with consumers prior to the settlements, require each to pay $2,500 for consumer redress, and bar them from lying to consumers or otherwise misrepresenting their ability to improve consumers’ credit reports and from charging up front for any credit improvement services they offer in the future. The settlements also would require the defendants, who did business out of Covina, California, as The Law Center and The Consumer Law Center, to give all prospective credit improvement clients a notice worded by the FTC that states, in part: "You have no legal right to have accurate information removed from your credit bureau file. Under the Fair Credit Reporting Act, the credit bureau generally removes negative information from your report only if it is over seven years old. Bankruptcy generally can be reported for 10 years."

The settlements stem from charges the FTC filed in federal district court in Los Angeles against the defendants in April 1996 as part of "Operation Payback," a joint federal-state crackdown on fraudulent credit repair telemarketers. The FTC and 10 state Attorneys General brought 15 cases in the crackdown, many of which enforced the credit repair provision of the FTC’s Telemarketing Sales Rule. That rule makes it illegal for credit repair telemarketers to ask for any money until six months after they deliver their services. In the Channels and Coose case, the FTC alleged that the defendants charged consumers $1,000 or more, requested at least partial payment up front, and touted their services as a law firm that will go to "all three of the main credit bureaus and force them by law to remove negative or bad credit information."

At the time it announced Operation Payback, the FTC made available a free FTC brochure for consumers titled "Credit Repair: Self-Help May Be Best" on its web site at http://www.ftc.gov and also through its Public Reference Branch (see address below). This brochure contains information about the Fair Credit Reporting Act and consumers’ credit reports, and offers tips on avoiding credit repair fraud.

The settlements announced today, which are proposed consent judgments that require the court’s approval to become binding, would bar Channels and Coose from attempting to enforce any credit repair services contract entered into prior to the effective date of this order. They also would prohibit the defendants, when offering any credit improvement services in the future, from falsely representing:

  • that they can substantially improve consumers’ credit reports;
  • that they can permanently remove bankruptcies, late payments or other negative information even where that information is complete, accurate and non-obsolete;
  • any remedy available to consumers under the Fair Credit Reporting Act;
  • any fact material to a consumer’s decision to purchase their services.

The orders also would require the defendants to give prospective clients the warning notice referenced above, and to monitor salespersons and other employees to check that they are complying with the FTC’s orders, terminate those who violate the orders, and investigate and respond to any consumer complaint promptly. The settlements also would bar the defendants from violating any provision of the FTC’s Telemarketing Sales Rule.

The $5,000 in redress payments would be deposited in the U.S. Treasury. The settlements also contain various reporting and record keeping requirements designed to assist the FTC in monitoring the defendants’ compliance. The Commission vote to file the consent judgments was 5-0. They were filed in U.S. District Court for the Central District of California, in Los Angeles, on Dec. 9, 1996.

NOTE: These consent judgments are for settlement purposes only and do not constitute admissions by the defendants of law violations. Consent judgments have the force of law when signed by the judge.

Copies of the consent judgments and other documents associated with this case and other Operation Payback cases 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, many related documents, and other materials also are available on the Internet at the FTC’s World Wide Web site at: http://www.ftc.gov


(FTC File No. X960069)
(Civil Action No. 96-2572-RMT (RNBx))


Contact Information

Media Contact:
Bonnie Jansen
Office of Public Affairs
202-326-2161 or 202-326-2180
Staff Contact:
Ray McKown
Los Angeles Regional Office
11000 Wilshire Boulevard, Suite 13209
Los Angeles, California 90024