Consumer Credit Services, Inc. (CCS), based in Las Vegas, Nevada, has agreed to settle charges that it defrauded consumers nationwide through the deceptive telemarketing of credit cards and lines of credit for an up-front fee. The Federal Trade Commission, joined by the State of Nevada as co-plaintiff, charged CCS and its president, Eric A. Peterson, with violating the FTC Act, the Telemarketing Sales Rule (TSR), and the Nevada Deceptive Trade Practices Act, by falsely representing that consumers would receive a major credit card or a $2,500 unrestricted line of credit in return for paying CCS an up-front fee ranging from $149.95 to $179.95. The settlement prohibits the defendants from engaging in the alleged deceptive practices, and requires them to pay $5,000 to the State of Nevada to be used for consumer protection initiatives.
According to the complaint detailing the allegations, CCS first contacted consumers by mailing written advertisements that stated, among other things, "You have been APPROVED for a $2,500 unsecured credit line from the Financial Card Division of CCS based on the information we have on file regardless of past credit," and "... your Approved credit line of $2,500 for credit purchases and cash advances will be available once you receive your CashPlus Card just by calling now." The ads contained small pictures of VISA, MasterCard and a CashPlus card on the upper right hand portion.
Consumers responded to the ads by calling the telephone number listed, where they were referred to CCS salespeople. The salespeople continued to represent that the consumer had been approved to receive and would receive a credit card and a $2,500 line of credit regardless of past credit history. Consumers were also informed that they would receive a VISA or MasterCard. Once consumers agreed to purchase CCS’s credit products, they were asked to pay a $149.95 fee, either by having their checking account debited or by charging it to a pre-existing credit card account.
Contrary to defendants' representations, the complaint alleged, consumers only received a package of materials from CCS that disclosed, for the first time, severe limitations on their ability to use the credit products promised. First, the $2,500 line of credit applied only to the use of defendants' "CashPlus" credit card (which was not a general credit card, but could only be used to purchase items from CCS catalogues); second, the cash advance was limited to only $10; third, consumers did not receive a VISA or MasterCard, only a form to request an application for a VISA or MasterCard that they must send to a bank; and fourth, CCS’s CashPlus card could not be used in an ATM machine.
The complaint further alleged that the defendants violated the Telemarketing Sales Rule by:
- requesting or receiving an up-front fee to obtain an extension of credit; and
- failing to disclose the material fact that CCS' "CashPlus" credit card could not be used as a general credit card.
In addition, the complaint alleged that the defendants violated the Nevada Deceptive Trade Practices Act ("DTPA") by:
- failing to disclose a material fact in connection with the sale of services;
- failing to register as a "credit services organization" and post a bond;
- charging or receiving money before full and complete performance of the services have been completed; and
- making affirmative misrepresentations in connection with selling their lines of credit and/or credit card.
Under the settlement, the defendants are prohibited from misrepresenting that consumers would receive:
- an unsecured line of credit of any stated amount without restrictions;
- cash advances of any stated amount; or
- a credit card that is represented to be a general credit card to be used to buy goods or services from numerous merchants.
The settlement also prohibits the defendants from misrepresenting a consumer's ability to obtain an unsecured Visa or MasterCard credit card and from misrepresenting the ability to obtain or provide any credit instruments, such as credit cards, lines of credit and cash advances, regardless of a consumer’s credit history.
In addition, the order prohibits any violations of the TSR and the Nevada DTPA in connection with the telemarketing of any goods, or services, and requires the defendants to comply with Nevada registration and bonding requirements. Again, the settlement also requires the defendants to pay $5,000 to the State of Nevada to be used for consumer education purposes.
Finally the settlement contains recordkeeping provisions to assist the FTC in monitoring the defendants’ compliance.
The FTC and the Nevada Attorney General filed the complaint in the U.S. District Court for the District of Nevada, in Las Vegas, on May 7. The settlement, which required approval by the court, was filed and signed by the judge on June 3. The Commission vote to file the complaint and the settlement was 5-0.
NOTE: The stipulated final judgment is for settlement purposes only and does not constitute an admission by the defendant of a law violation. The settlement has the force of law when signed by the judge.
Copies of the complaint and the stipulated final judgment and order for permanent injunction are available from the FTC’s web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD 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.
Jeffrey Klurfeld or Jerry Steiner
San Francisco Regional Office
901 Market Street
San Francisco, California 94103
(Civil Action No.: CV-S-98-00741-DWH (RJJ))
(FTC File No.: 982 3004)
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