Three Advance Fee Credit Card Defendants Settle FTC Charges

The Federal Trade Commission today announced individual settlements with Victor Stanley Wilcox, Belinda Sweeney, and Lee Sumner Churchill, defendants named in a June 2000 lawsuit for allegedly operating a fraudulent advance fee credit card scam. The FTC alleged that the defendants, operating under the name Credit Approval Service, deceptively marketed "credit cards" for an up-front fee. Under the terms of their settlements, Wilcox and Sweeney are permanently banned from future involvement in the promotion or sale of any credit-related goods or services, and from engaging in or assisting others in telemarketing activities. Churchill is permanently banned from engaging, or assisting others engaged in the marketing and sale of any credit-related goods or services. All of the defendants are prohibited from future violations of the Telemarketing Sales Rule.

In June 2000, the FTC filed charges in federal district court in Galveston, Texas, against Lee Sumner Churchill and Troy Timothy Kisling, and later amended the complaint to include Wilcox and Sweeney. The complaint alleged that the defendants promised consumers that, for a $99 "processing" fee they were guaranteed to receive a Visa card, or for $129 they were guaranteed to receive both a Visa and a MasterCard credit card. Instead, consumers received a packet or kit of information which included a list of banks to which consumers could apply for the cards. The defendants failed to inform consumers that they had to apply on their own for a credit card with these banks. According to the FTC complaint, these practices violate the FTC Act and the Telemarketing Sales Rule (TSR). The court ordered a halt to the business practices of Credit Approval Service and froze the defendants' assets. Subsequently, the court entered stipulated preliminary injunctions against Wilcox, Sweeney, and Churchill.

In November 2000, a federal district court judge jailed the three defendants, finding them in contempt for violating the June 2000 injunctions. The court found that the defendants, who were operating from an office in St. Paul, Minnesota, had continued to conduct credit card businesses under the names National Research Service, in Sioux Falls, South Dakota; and Consumer Information Service, in Mason City, Iowa, in violation of the preliminary injunctions. The court also found that Churchill had transferred large sums of money, in violation of the preliminary injunction's asset freeze provision.

Under the terms of the settlements, which required the court's approval, all of the individual defendants are prohibited from future violations of the TSR. Each settlement contains a $2.8 million monetary judgment against the individual defendants. However, the monetary judgment against Sweeney is suspended based on her sworn financial statement. Defendant Churchill has agreed to pay $125,000 in consumer redress. Upon full payment of the $125,000, the balance of the $2.8 million judgment against him will be suspended.

Finally, the proposed settlements contain various recordkeeping and reporting requirements designed to assist the FTC in monitoring the defendants' compliance.

On April 19, 2001, the complaint was dismissed without prejudice to be filed again as to Troy Timothy Kisling after he avoided service, and his whereabouts became unknown.

The Commission vote to file the three settlements was 5-0, with Commissioner Orson Swindle concurring in part and dissenting in part. In a separate statement, Commissioner Swindle stated that "[f]or the most part, the relief in these settlements is entirely appropriate to address the egregious law violations alleged in the Commission's complaint." He dissented to a provision in the settlement that would ban the defendants from soliciting charitable donations. Commissioner Swindle explained that "[s]eeking charitable donations is not sufficiently related to the alleged false claims in this case to justify a permanent ban on the solicitation of charitable contributions. In addition, even if such fencing-in relief were reasonably related to the violations alleged, I believe the public interest would be better served if the Commission imposed less restrictive forms of relief than a ban burdening non-misleading, fully protected speech."

The individual stipulated final judgments and orders were filed in the U.S. District Court, Southern District of Texas, Galveston Division, on April 18, 2001 and approved by the court on April 20, 2001.

These settlements conclude an investigation conducted with the cooperation of the United States Attorney's Office in Minnesota, the United States Postal Service in Minnesota, the St. Paul Police Department, the Texas and Minnesota Attorneys General's office, the Texas Department of Public Service, and the Houston Better Business Bureau.

NOTE: These stipulated final judgments are for settlement purposes only and do not constitute an admission by the defendants of a law violation. Consent judgments have the force of law when signed by the judge.

Copies of the stipulated final judgments and the statement by Commissioner Orson Swindle 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. The FTC enters Internet, telemarketing and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies worldwide.

Brenda Mack

Office of Public Affairs

202-326-2182

Jim Elliott or James R. Golder

FTC Southwest Region - Dallas

214-979-9350

(FTC File No. X000076; Civil Action No. G-000-324)