July 6, 2000
“New Credit Identity” Promotions Halted
Defendants targeted in a law enforcement crackdown on illegal credit repair services have agreed to settle federal charges that their “new credit identity” advice and products violated federal law. The cases were brought by the U.S. Department of Justice’s Office of Consumer Litigation at the Federal Trade Commission’s request. The settlements will bar future violations of the Credit Repair Organizations Act (CROA); bar deceptive claims about file segregation — including claims that it is legal — and require that the defendants notify their victims that using a false identification number to apply for credit is a felony. One defendant will pay an $11,000 civil penalty.
The defendants used bulk e-mail, or “spam,” to claim they could help consumers get new credit histories by obtaining new identification numbers through a practice known as file segregation. The firms sold instructions about how consumers could substitute federally issued, nine-digit employee identification numbers or taxpayer identification numbers for social security numbers and use them illegally to build new credit profiles that would allow them to get credit they may be denied based on their real credit histories. Many of their ads claimed the practice was legal.
Settlement of the FTC charges will bar the defendants from violating provisions of the CROA that prohibit charging or accepting payment for credit repair services before the services are provided. In addition, the settlements will bar them from representing that other government identification numbers can be lawfully used to conceal actual credit histories and from misrepresenting material facts concerning credit-related products or any other product or service. The defendants will be required to notify their victims of the illegal nature of their products and will be barred from selling their customer lists. One settlement provides for a $11,000 civil penalty. Financial declarations filed by the other defendant indicates an inability to provide redress for consumers or to pay a civil penalty. The settlement contains a provision to allow reopening of the issue if the defendant is found to have misrepresented his inability to pay.
The settlements contain record-keeping provisions to allow the FTC to monitor compliance.
The settlements of the “Operation New ID – Bad IDea” sweep are with A. James Black, d/b/a AJB Publishing, and David Story d/b/a Network Publications.