Jubilee Financial Services Defendants Banned from Providing Debt Negotiation Services

Defendants Part of FTCs Operation No Credit Sweep

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John E. Gustavsen, president of Jubilee Financial Services, a debt negotiation company, has been banned from advertising, marketing, or providing debt negotiation services, as part of a Federal Trade Commission settlement entered by the U.S. District Court for the Central District of Los Angeles. Gustavsen also turned over his personal residence, valued in excess of $500,000, in partial satisfaction of a suspended judgment of $2,628,535, and forfeited his interests in all bank accounts frozen pursuant to the original temporary restraining order and asset freeze. The permanent receiver, appointed by the court, has sold the residence and the proceeds were made part of the receivership estate. The FTC filed the original complaint on August 19, 2002, as part of the Federal Trade Commission’s “Operation No Credit,” a law enforcement sweep targeting a wide range of credit-related frauds.

The FTC’s original complaint alleged that Gustavsen and other defendants lured consumers with false promises that consumers who enrolled in their debt negotiation program would be able to pay off their debts at a substantially reduced rate and that consumers would stop receiving collection calls from creditors. The complaint also alleged that all of the defendants misled consumers about the effects of the program on their credit report and failed to tell consumers that, as a result of the defendants’ services, negative information would likely appear on the consumers’ credit reports and stay there for seven years. The FTC later amended the complaint to include the allegation that the defendants falsely told consumers that money sent to the defendants would be held in a trust account until the defendants made agreements with creditors to pay off the consumer’s debts at a reduced rate. According to the FTC, consumers who enrolled in the program and paid substantial fees to the defendants continued to receive

phone calls and collection letters from creditors. In addition, the FTC alleged that when the consumers followed the defendants’ directions to cease making payments on their debts, many consumers were sued by the creditors. Consumer’s credit ratings allegedly became worse and they lost the monies which had been placed in the so-called trust account because the defendants were regularly withdrawing the money to use it to pay the operating expenses of the various corporate defendants. Instead of finding themselves out of debt, the FTC alleged, many consumers were left with little alternative but to file bankruptcy.

The FTC amended its original complaint after determining that a trust account established to hold money of consumers was missing in excess of $2 million. In addition to the fourth count, the amended complaint added two additional corporate defendants, Gustavsen Learning Center (GLC) and Debt Relief Counselors of America (DRCOA), as well as two individual defendants, Jemuel Apelar, Gustavsen’s business partner throughout the time frame of the complaint and vice president of Jubilee, and John K. Mitchell, president of DRCOA.

Concurrent with the entry of the settlement with Gustavsen, a separate stipulated final order was entered against Curtis Cobb, president of Jabez Financial Services. Under the terms of both of the final orders, Gustavsen and Cobb are permanently banned from participating in debt negotiation services and are prohibited from misrepresenting any material fact in connection with the sale of any good or service. They also are required to cease any collection efforts arising from the activities alleged in the complaint and to return any uncashed checks to consumers. The Gustavsen settlement contains a $2,628,535.00 suspended judgment which is the amount of consumer injury stemming from Jubilee’s activities at Gustavsen’s direction. The suspended judgment against Cobb is $223,878, which is the amount calculated to have been lost by Jabez consumers. The suspended judgments were entered based on the defendants’ current inability to pay the money calculated to have been lost by consumers. If either defendant is found to have misrepresentations on sworn financial statements, the full suspended judgment will be entered against them. (The Commission’s litigation against the remaining defendants in this matter is pending.)

The Commission vote to authorize staff to file the proposed stipulated final judgments and orders were 5-0. They were entered by the U.S. District Court, Central District of California, Western Division on July 9, 2003.

NOTE: These stipulated final judgments and orders are for settlement purposes only and does not constitute an admission by either defendant of a law violation. Stipulated final judgments and orders have the force of law when signed by the judge.

Copies of the proposed stipulated final judgments and orders 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. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1 877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

(FTC Matter No.: X020105)
(Civil Action No. 02-6468 ABC (Ex))

Contact Information

Media Contact:
Brenda Mack
Office of Public Affairs
Staff Contact:

Jennifer Larabee
FTC Western Region - Los Angeles