Deceptive 'Credit Card' Marketers Settle FTC Charges; Cards Were Good Only for Buying 'Low Pay' Catalog Merchandise at High Prices

As part of its ongoing efforts to stop deceptive marketing, the Federal Trade Commission halted an operation that deceived consumers into paying for bogus credit cards and charged them illegal fees. The marketers behind this operation agreed to a settlement that will halt their illegal tactics and provide money for consumer redress.

The FTC reached a settlement with six defendants who marketed a credit card that could be used only to buy products from their Low Pay merchandise catalog. According to the FTC’s complaint, the defendants falsely claimed that the card could be used to fully finance purchases; that it would provide access to a no-fee, low cost, or guaranteed cash advance benefit or unsecured line of credit; and that consumers could improve their credit ratings by using it. The defendants failed to disclose clearly that they would debit from consumers’ bank accounts substantial advance fees, a non-refundable annual fee, and 30 percent of a catalog product’s price – which often exceeded the retail price from other sources – plus shipping. In addition, the defendants falsely claimed they would refund a $120 activation fee to consumers who returned the card and catalog in a timely fashion, and illegally charged an advance fee for a guaranteed line of credit. (See http://www.ftc.gov/opa/2009/11/lowpay.shtm)

Under the settlement, Mardan M. Afrasiabi, the Mardan Afrasiabi Living Trust, Low Pay, Inc., LP Capital Holdings, Inc., Ramin Rahimi, and Century Luxury, Inc. are permanently barred from misrepresenting that a credit card can be used to fully finance purchases or provides access to a no-fee, low-cost, or guaranteed cash advance benefit or that consumers will improve their credit ratings by using a credit card. They also cannot misrepresent any material fact in connection with the sale of any product or service, and must disclose all fees and costs, and the refund or cancellation policy, before consumers are asked to pay. The defendants are further barred from violating the Telemarketing Sales Rule, disclosing or benefitting from customer information and failing to dispose of it properly, and trying to collect money on any account established before the order was entered.

The settlement order against Afrasiabi, the Mardan Afrasiabi Living Trust, Low Pay, Inc., and LP Capital Holdings imposes a $28.5 million judgment that will be suspended when Afrasiabi and the Mardan Afrasiabi Living Trust have surrendered funds in a specific investment account and paid either $130,400 or the proceeds of the sale of Afrasiabi’s home, or turned the home over to a court-appointed receiver for sale. The settlement order against Ramin Rahimi and Century Luxury, Inc., also imposes a $28.5 million judgment that will be suspended against Rahimi when he has paid $460,000. The full judgments will become due immediately if the defendants have misrepresented their financial condition.

The Commission vote to authorize staff to file the settlement orders was 5-0. The documents were filed in the U.S. District Court for the District of Oregon, Portland Division.

NOTE: Settlement orders are for settlement purposes only and do not necessarily constitute an admission by the defendants of a law violation. Settlement orders have the full force of law when signed by the judge.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,800 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.