"Operation Eraser" Defendants Settle Deceptive Credit Repair Charges

The Federal Trade Commission has announced the settlement of another four of the nineteen cases filed in March 1998 as part of "Operation Eraser" -- a federal-state crackdown on fraudulent credit repair companies -- as well as the entry by the court of a final order in a fifth. The FTC alleged that all of the defendants operated deceptive credit repair schemes by promising consumers that they could restore their creditworthiness for a fee. The settlements announced today are with the following entities:

• Nationwide Credit Information Service, Inc., and Neil Angelicola of Freehold, New Jersey;
• Credit Corporation of America, Inc., Credit Advisors, Inc., and Gregory J. Ruiz of New Orleans, Louisiana;
• Cornerstone Wealth Corp. and its president, John Atchley, operating out of Dallas, Texas; and
• Credit Report Counselors and its principal, Mark Reiber of Cincinnati, Ohio.

In addition, a final order was entered against Compass Northeast Credit Service; Nathaniel Harrell, Jr. and Valerie Harrell of Columbia, South Carolina, when the defendants failed to reply to the FTC’s allegations.

As part of "Operation Eraser," 31 companies were targeted by federal and state law enforcement agencies. Sometimes these companies, charging more than $1,000, purported to guarantee consumers they could remove accurate negative information from their credit reports. But, according to the FTC, these companies cannot remove negative information and, where there are actual errors in credit reports, consumers have a legal right to have those corrected for free most of the time. In some cases, these credit repair companies advised consumers to take fraudulent actions, such as using false Social Security numbers, which would constitute felonies. The FTC charged that the defendant companies and their principals violated the FTC Act by making deceptive claims about improving consumers’ credit records, and that the defendants violated the Credit Repair Organization Act (CROA), by requiring advance payment for credit repair services and misrepresenting the credit repair services that would be performed. "Operation Eraser" was the first combined effort to utilize the CROA -- a new federal law designed to help consumers combat fraudulent credit repair operations.

All of the settlements, which have been approved by the courts, and the final order in the Compass Northeast case, prohibit the defendants from:

• representing that anyone can improve consumer credit reports by removing truthful negative information;
• making any misrepresentation about their ability to improve any particular consumer’s credit report; and
• making any material misrepresentation about any product or service they sell.

The orders also prohibit the defendants from accepting money in advance of performing credit repair services and require them to otherwise comply with the CROA. The orders further require them to notify any credit bureau to which they have made a negative report about any of their customers that the negative item should be removed; and to notify any customers who may still owe money for credit repair services that they are no longer obligated to pay.

In addition, the settlement with the Credit Report Counselors defendants also required them to pay a $5,000 civil penalty -- payable in five monthly payments. The Compass Northeast Credit defendants are required to pay a $235,609.50 judgment to be used, if practical, for consumer redress. It is uncertain whether the Compass Northeast defendants have assets with which to pay the judgment.

Finally, all of the orders contain various other recordkeeping provisions designed to assist the FTC in monitoring the defendants’ compliance.

The Commission votes authorizing staff to file each of the individual settlements in the appropriate district court was 4-0. The consent orders in the Nationwide Credit Information Service, Cornerstone Wealth, Credit Corporation of America, and Credit Report Counselors matters were filed by the Department of Justice at the request of the FTC and were subject to court approval. The Compass Northeast matter was handled by the FTC’s Atlanta Regional Office.

NOTE: The consent orders in the Nationwide Credit Information Service, Cornerstone Wealth, Credit Corporation of America, and Credit Report Counselors are for settlement purposes only and do not constitute an admission by the defendant of a law violation. Consent orders have the force of law when signed by the judge.

Copies of the news release and the five 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; 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.

Nationwide Credit Information Service, Cornerstone Wealth, Credit Corporation of America, and Credit Report Counselors)

Chris Couillou
Atlanta Regional Office
Suite 5M35, Midrise Bldg.
60 Forsyth Street, S.W.
Atlanta, Georgia 30303
404-656-1390  

(Compass Northeast)

Nationwide Credit -- FTC Matter No. X980051; Civil Action No. 2:98 cv 00951;U.S.District Court for the District of New Jersey

Credit Corp. of America -- FTC Matter No. X980046; Civil Action No. 98-0658; U.S. District Court for the Eastern District of Louisiana Compass Northeast Credit -- FTC File No. 982-3025; Civil Action No. 3:98-542-17; U.S. District Court, DIstrict of South Carolina, Columbia Division

Cornerstone Wealth -- FTC Matter No. X980049; Civil Action No. 3:98-CV-0601-D; U.S. District Court for the Northern District of Texas, Dallas Division

Credit Report Counselors -- FTC Matter No. X980050; Civil Action No. C-1-98-171; U.S. District Court for the Southern District of Ohio, Western Division