Michigan Company and its President Agree to Settle Federal Charges of Misrepresenting Credit Repair Services

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A federal court has entered an order against Equity Funding & Associates, Inc., also known as Equity Funding Insurance Agency, Inc., and its president, John Cini of Bloomfield, Michigan. The order requires the company to pay a $25,000 civil penalty as part of a settlement of Federal Trade Commission charges brought against them as part of "Operation Eraser," a federal-state crackdown on fraudulent credit repair firms. Equity Funding was one of seven "Operation Eraser" cases that were referred to, and litigated by, the U.S. Department of Justice's Office of Consumer Litigation, on behalf of the FTC. The complaint charged the defendants with violating the FTC Act and the Credit Repair Organizations Act (CROA) by making deceptive claims about their ability to improve consumers' credit records by removing negative information from consumers' credit reports even when the information was accurate and not obsolete, and by charging advance fees for these services. In addition to prohibiting further misrepresentations with regard to credit repair services, the settlement also prohibits misrepresentations in connection with any goods or services sold by the defendants in the future.

"Operation Eraser," announced in March 1998, targeted a total of 31 companies that promised consumers that they could restore their creditworthiness for a fee. These firms told consumers they could remove negative information from their credit reports -- even if the negative information was accurate and timely. But, according to the FTC, these companies cannot remove legitimate negative information and, where there are actual errors in credit reports, consumers have the legal right to have those corrected for free most of the time. "Operation Eraser" was the first combined effort to utilize the CROA, a new federal law specifically targeting credit repair scams. Effective April 1, 1997, the new statute is enforced by the FTC, DOJ, and state Attorneys General. This law also allows consumers to bring lawsuits on their own in federal court and obtain damages, attorneys fees, and punitive damages.

According to the FTC's complaint against Equity Funding, the defendants claimed that they could "improve substantially most consumers´ credit reports or profiles by permanently removing bankruptcies, charge-offs, late payments, repossessions, and other negative information from consumers´ credit reports...even where such negative information was accurate and not obsolete." The complaint challenged the practice of obtaining advance payment and the claims of success in removing accurate information from credit reports.

The settlement of the charges, in addition to requiring the $25,000 civil penalty, prohibits the defendants from misrepresenting any fact concerning their ability to perform or provide any credit-related services or products for consumers, including debt consolidation, obtaining or arranging loans, or arranging any extension of credit, and from misrepresenting any fact material to a consumer's decision to purchase any product or service. The settlement also prohibits any future violations of the CROA and requires the defendants to cease collection on all credit repair contracts with outstanding balances and notify those customers that their contracts are rescinded and that no further payments are due.

The settlement also contains a number of recordkeeping and reporting requirements designed to assist in monitoring the defendants' compliance with the order.

The Department of Justice filed the proposed settlement in the U.S. District Court for the Eastern District of Michigan, on behalf of the FTC. The settlement is subject to approval by the court, and the judge signed the order on April 16. The Commission vote to accept the settlement and refer it DOJ for filing was 4-0.

NOTE: The stipulated consent decree and order for permanent injunction is for settlement purposes only and does not constitute an admission by the defendants of a law violation. The consent decree has the force of law when signed by the judge.

Copies of the settlement, the news release announcing "Operation Eraser," and a number of publications about consumer credit issues are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 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.


(Civil Action No. 98-70995)
(FTC Matter No. X980052)

Contact Information

Media Contact:
Howard Shapiro
Office of Public Affairs
Staff Contact:
C. Steven Baker or Russell W. Damtoft
Chicago Regional Office
55 E. Monroe Street, Suite 1860
Chicago, Illinois 60603-5701

Kenneth L. Jost
US DOJ Office of Consumer Litigation