| DEBRA A. VALENTINE General Counsel CHARLES A. HARWOOD MARY T. BENFIELD, WSBA # 18835 Federal Trade Commission UNITED STATES DISTRICT COURT
Plaintiff, the Federal Trade Commission (“FTC” or “Commission”), for its Complaint alleges: 1. The FTC brings this action under Sections 13(b) and 19 of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. §§ 53(b) and 57b, and the Telemarketing and Consumer Fraud and Abuse Prevention Act (“Telemarketing Act”), 15 U.S.C. § 6101 et seq., to secure a permanent injunction, rescission of contracts, restitution, disgorgement, and other equitable relief for defendant's deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a) and the FTC's "Telemarketing Sales Rule" ("the Rule"), 16 C.F.R. Part 310. JURISDICTION AND VENUE 2. This Court has jurisdiction over this matter pursuant to 15 U.S.C. §§ 45(a), 53(b), 57b, 6102(c), and 6105(b), and 28 U.S.C. §§ 1331, 1337(a), and 1345. 3. Venue in the United States District Court for the District of Arizona is proper under 15 U.S.C. § 53(b), and 28 U.S.C. § 1391(b) and (c). THE PARTIES 4. Plaintiff, the Federal Trade Commission, is an independent agency of the United States Government created by statute. 15 U.S.C. § 41 et seq. The Commission enforces the Telemarketing Sales Rule, 16 C.F.R. Part 310, which prohibits deceptive or abusive telemarketing acts or practices, including assisting and facilitating deceptive practices. The Commission may initiate federal district court proceedings to enjoin violations of the Telemarketing Sales Rule and to secure such equitable relief as is appropriate in each case, including restitution for injured consumers. 15 U.S.C. §§ 53(b), 57b, and 6105(b). 5. Defendant GARY WALTON ("WALTON") does business as Pinnacle Financial Services, a sole proprietorship whose mailing address is 915 Hinman Street, Prescott, Arizona. WALTON also does business at 1114-4 Willow Creek Road, Prescott, Arizona. He transacts business in this district. COMMERCE 6. At all times relevant to this complaint, defendant’s course of business, including the acts and practices alleged herein, has been and is in or affecting commerce, as "commerce" is defined in Section 4 of the FTC Act, 15 U.S.C. § 44. DEFENDANT'S BUSINESS PRACTICES 7. Defendant WALTON, d.b.a. Pinnacle Financial Services ("Pinnacle"), has provided "turndown" services for various telemarketing boiler rooms in Canada that deceptively market loans to United States residents. He also markets loans directly on the Internet and in the classified advertising sections of tabloids such as Star, Enquirer and Globe magazines and local newspapers. 8. Among the Canadian telemarketing clients for whom defendant has provided "turndown" services are Advance Financial Services, Allied Credit Referral Services, The Credit Exchange, Credit Source Financial, First American Credit, New Consolidated Consultants, and Western Credit Referral (collectively referred to as "Canadian loan dealers"). These Canadian loan dealers, operating in Alberta, British Columbia, Nova Scotia, and Ontario, Canada, target U.S. residents by placing classified advertisements in U.S. newspapers offering loans to people with bad credit. When a consumer responds to the ad by calling the listed toll-free telephone number, the Canadian loan dealer asks for credit history information over the phone, then tells the consumer that his or her loan application has been "approved." The Canadian loan dealer requires the consumer to submit certain identification and credit-related information in writing, along with an advance "processing" fee paid by money order or cashier’s check and delivered to the Canadian loan dealer’s address by an overnight courier service. Once the money is received, the Canadian loan dealer tells the consumer that his or her file has been forwarded to Pinnacle Financial Services, sometimes referring to Pinnacle as the "lender." 9. The Canadian loan dealer provides defendant with the consumer’s name and address, along with payment for the "turndown" service. Defendant subsequently notifies the consumer by mail that his or her loan application has been referred to Pinnacle. He requests from the consumer another $15 to obtain the consumer’s credit report. Subsequently, defendant sends the consumer a second notice stating that an unidentified "private lender" has denied the consumer’s loan request. Consumers have advised defendant about the Canadian loan dealers’ practice of guaranteeing loans and requiring an up-front fee, yet defendant continues to provide turndown services to these Canadian loan dealers. 10. Defendant, a registered advance fee loan broker, also advertises loans directly to consumers. His ad has appeared in Star, Enquirer, and Globe magazines, national publications, and on the World Wide Web. His ad in Star states:
When a consumer calls the number in the ad, defendant requests certain credit history and other information over the phone, then tells the caller that he or she has "qualified" for the loan, or that the caller’s bad credit is not a problem and that there is a high likelihood that Pinnacle will be successful in obtaining a loan for the applicant. Pinnacle sends the consumer a written request for a "processing" fee ranging from $65 to $89. Consumers who pay the fee ultimately receive a letter from Pinnacle advising that their loan applications have been denied. VIOLATIONS OF SECTION 5 OF THE FTC ACT COUNT ONE 11. Defendant represents, expressly or by implication, that consumers have a high likelihood of obtaining requested loans regardless of their credit histories. In truth and in fact, there is little likelihood that consumers will obtain the requested loans from defendant regardless of their credit histories. 12. Defendant represents, expressly or by implication, that he has a high rate of success in obtaining loans for applicants. In truth and in fact, defendant has obtained loans for few, if any, applicants. 13. Therefore, defendant’s representations as set forth in Paragraphs 11 and 12, above, are false and misleading, and constitute deceptive acts and practices in violation of the FTC Act, 15 U.S.C. § 45. VIOLATIONS OF THE TELEMARKETING SALES RULE 14. The Telemarketing Sales Rule ("Rule"), prohibits telemarketers and sellers from, inter alia, requesting or receiving payment of any fee or consideration in advance of obtaining or arranging a loan when the seller or telemarketer has guaranteed or represented a high likelihood of success in obtaining or arranging a loan. 16 C.F.R. § 310.4(a)(4). 15. The Rule additionally (1) prohibits telemarketers and sellers from misrepresenting material information regarding the goods or services that are the subject of a sales offer and (2) prohibits any person from providing substantial assistance or support to any seller or telemarketer when that person knows or consciously avoids knowing that the seller or telemarketer is engaged in any practice that violates § 310.3(a) or (c) or § 310.4 of the Rule. 16 C.F.R. § 310.3. 16. Defendant, as well as Advance Financial Services, Allied Credit Referral Services, The Credit Exchange, Credit Source Financial, First American Credit, New Consolidated Consultants, and Western Credit Referral are "telemarketers" or "sellers" engaged in "telemarketing" as those terms are defined in the Rule, 16 C.F.R. § 310.2(r), (t), and (u). 17. Pursuant to Section 3(c) of the Telemarketing Act, 15 U.S.C. § 6102 (c), and Section 18(d)(3) of the FTC Act, 15 U.S.C. § 57a(d)(3), violations of the Rule constitute deceptive acts or practices in or affecting commerce, in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a). COUNT TWO 18. In numerous instances, in connection with telemarketing offers to obtain or arrange loans, defendant has requested or received payment of a fee or consideration in advance of consumers obtaining a loan when defendant has guaranteed or represented a high likelihood of success in obtaining or arranging a loan for a person. Defendant has thereby violated Section 310.4(a)(4) of the Rule, 16 C.F.R. § 310.4(a)(4). COUNT THREE 19. In numerous instances, in connection with telemarketing offers to obtain or arrange loans, defendant has represented, directly or by implication, that:
20. In truth and in fact:
21. Defendant has thereby violated Sections 310.3(a)(2)(ii) and (iii) of the Rule, 16 C.F.R. §§ 310.3(a)(2)(ii)-(iii). COUNT FOUR 22. In numerous instances, in connection with telemarketing offers to obtain or arrange loans, defendant has provided substantial assistance and support to loan dealer telemarketers when defendant knows or consciously avoids knowing that these loan dealers are engaged in acts or practices that violate Sections 310.3(a) and 310.4 of the Rule, such as the acts and practices described in Paragraphs 7, 8, and 9, above. Defendant has thereby violated Section 310.3(b) of the Rule, 16 C.F.R. § 310.3(b). CONSUMER INJURY 23. Consumers throughout the United States have suffered and continue to suffer injury as a result of defendant's unlawful acts or practices. In addition, defendant has been unjustly enriched as a result of his unlawful practices. Absent injunctive relief by this Court, the defendant is likely to continue to injure consumers, reap unjust enrichment, and harm the public interest. THIS COURT'S POWER TO GRANT RELIEF 24. Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), empowers this Court to grant injunctive and other ancillary relief, including consumer redress, disgorgement, and restitution to prevent and remedy any violations of any provision of law enforced by the Commission. 25. Section 19 of the FTC Act, 15 U.S.C. § 57b, and Section 6(b) of the Telemarketing Act, 15 U.S.C. § 6105(b), authorize this Court to grant such relief as the Court finds necessary to redress injury to consumers or other persons resulting from defendant’s violations of the Telemarketing Sales Rule, including the rescission and reformation of contracts and the refund of monies. 26. This Court, in the exercise of its equitable jurisdiction, may award other ancillary relief to remedy injury caused by the defendant’s law violations. PRAYER FOR RELIEF WHEREFORE, plaintiff, the Federal Trade Commission, requests that this Court, as authorized by Sections 13(b) and 19 of the FTC Act, 15 U.S.C. §§ 53(b) and 57b, Section 6(b) of the Telemarketing Act, 15 U.S.C. § 6105(b), and pursuant to its own equitable powers:
Respectfully Submitted, DEBRA A. VALENTINE CHARLES A. HARWOOD __________________________________ |