UNITED STATES DISTRICT COURT FEDERAL TRADE COMMISSION, Plaintiff, v. CREDITMART FINANCIAL STRATEGIES INC., and MAURICE VERRELLI, individually and as an officer of said corporation; Defendants. Civil No. COMPLAINT FOR PERMANENT INJUNCTION, CONSUMER REDRESS AND OTHER EQUITABLE RELIEF 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 obtain permanent injunctive relief, rescission or reformation of contracts, restitution, disgorgement, and other equitable relief for defendants' 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 ("TSR"), 16 C.F.R. Part 310. JURISDICTION AND VENUE 2. This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1331, 1337(a), and 1345, and 15 U.S.C. §§ 53(b), 57b, 6102(c), and 6105(b). 3. Venue in the Western District of Washington is proper under 28 U.S.C. §§ 1391(b) and (c), and 15 U.S.C. §§ 53(b), and 6103(e). PLAINTIFF 4. Plaintiff, FTC, is an independent agency of the United States Government created by statute. 15 U.S.C. § 41 et seq. The Commission is charged, inter alia, with enforcement of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), which prohibits unfair or deceptive acts or practices in or affecting commerce. The Commission is authorized to initiate federal district court proceedings by its own attorneys to enjoin violations of the FTC Act and the TSR to secure such equitable relief as may be appropriate in each case, and to obtain consumer redress. 15 U.S.C. §§ 53(b), 57b, 6102(c), and 6105(b). DEFENDANTS 5. Defendant Creditmart Financial Strategies, Inc. ("CFS"), was incorporated in Montreal, Quebec, Canada, in 1997. CFS transacts or has transacted business in the Western District of Washington. 6. Defendant Maurice Verrelli is president of CFS. Acting alone, or in concert with others, Verrelli has formulated, directed, controlled, or participated in the acts and practices of CFS, including the acts and practices complained of herein. Verrelli transacts or has transacted business in the Western District of Washington. COMMERCE 7. At all times relevant to this complaint, defendants have maintained a substantial course of trade in the offering for sale and sale, through telemarketing, of credit card protection services, in or affecting commerce, as "commerce" is defined in Section 4 of the FTC Act, 15 U.S.C. § 44. DEFENDANTS' BUSINESS PRACTICES 8. Since at least 1998, defendants have telemarketed credit card protection services to consumers throughout the United States. 9. To induce consumers to purchase credit card protection services, defendants have represented, either expressly or by implication, that defendants are calling from Visa International ("Visa"), MasterCard International ("MasterCard"), or the consumer's credit card issuer. 10. Defendants have told consumers that criminals are stealing consumers' credit card numbers via the Internet and other technology, and that purchase of defendants' credit card protection service will protect consumers against unauthorized use of their credit card accounts by such criminals. 11. Defendants have persuaded consumers to divulge their credit card numbers by claiming to be verifying the consumers' identification or to be changing the "security codes" on the consumers' credit cards. 12. Defendants have then caused charges to be posted on those accounts without consumers' authorization. 13. Defendants have charged consumers a fee of $239 for their credit card loss protection services. VIOLATIONS OF SECTION 5 OF THE FTC ACT COUNT I 14. In numerous instances, in connection with the telemarketing of credit card protection services to consumers, or in the course of billing, attempting to collect, and collecting money from consumers, defendants have represented, expressly or by implication, that:
15. In truth and in fact:
16. Therefore, defendants' representations, as set forth in paragraph 14, are false and misleading and constitute deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a). THE FTC'S TELEMARKETING SALES RULE 17. In the Telemarketing Act, 15 U.S.C. § 6101 et seq., Congress directed the Commission to prescribe rules prohibiting deceptive and abusive telemarketing acts or practices. On August 16, 1995, the Commission promulgated the TSR, 16 C.F.R. Part 310. The TSR became effective on December 31, 1995. 18. Defendants are "sellers" or "telemarketers" engaged in "telemarketing," as those terms are defined in the TSR, 16 C.F.R. §§ 310.2(r), (t), and (u). 19. The TSR prohibits telemarketers and sellers from "making a false or misleading statement to induce any person to pay for goods or services." 16 C.F.R. § 310.3(a)(4). 20. The TSR also requires telemarketers using outbound calls to disclose promptly in a clear and conspicuous manner to the person receiving the call that the purpose of the call is to sell goods or services. 16 C.F.R. § 310.4(d)(2). 21. 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 TSR constitute unfair or deceptive acts or practices in or affecting commerce, in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a). VIOLATIONS OF THE TELEMARKETING SALES RULE COUNT II 22. In numerous instances, in connection with the telemarketing of credit card protection services to consumers, or in the course of billing, attempting to collect, and collecting money from consumers, defendants have represented, expressly or by implication, that:
23. In truth and in fact:
24. Therefore, defendants' representations, as alleged in paragraph 22, constitute false or misleading statements to induce a person to pay for goods or services, and are deceptive telemarketing acts or practices in violation of Section 310.3(a)(4) of the TSR, 16 C.F.R. § 310.3(a)(4). COUNT III 25. In numerous instances, in connection with the telemarketing of credit card protection services, defendants have failed to disclose promptly and in a clear and conspicuous manner that the purpose of the telemarketing call is to sell goods or services, in violation of Section 310.4(d)(2) of the TSR, 16 C.F.R. § 310.4(d)(2). CONSUMER INJURY 26. Consumers in many areas of the United States have suffered substantial monetary loss as a result of defendants' unlawful acts or practices. Absent injunctive relief by this Court, defendants are likely to continue to injure consumers and harm the public interest. THIS COURT'S POWER TO GRANT RELIEF 27. 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. 28. 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 issue a permanent injunction and grant such relief as the Court finds appropriate to halt and redress injury resulting from defendants' violations of the Telemarketing Sales Rule, including the rescission and reformation of contracts, and the refund of money. 29. This Court, in the exercise of its equitable jurisdiction, may award other ancillary relief to remedy injury caused by defendants' law violations. PRAYER FOR RELIEF WHEREFORE, plaintiff requests this Court, pursuant to Sections 13(b) and 19 of the FTC Act, 15 U.S.C. §§ 53(b) and 57b, and Section 6(b) of the Telemarketing Act, 15 U.S.C. § 6105(b), and pursuant to its own equitable powers, to:
Respectfully Submitted, DEBRA A. VALENTINE CHARLES A. HARWOOD ___________________________ |