FTC Action Leads to Contempt Ruling Against Marketers Who Tried to Take Advantage of Financially Strapped Consumers

At the request of the Federal Trade Commission, a U.S. district court issued a contempt ruling against promoters of credit repair, debt relief, and food stamp services who violated a 2010 settlement with the FTC.

The court ordered the defendants to pay for refunds to consumers they harmed, in violation of the court order. The court also modified the original FTC settlement by permanently barring the marketers from promoting and selling credit repair, debt relief, or government benefits products or services.

As part of the FTC's continuing crackdown on scams that target consumers in financial distress, in April 2011 the FTC charged Sam Tarad Sky, Allrepco LLC, Credit Restoration Brokers LLC, and Debt Negotiations Associates LLC with violating a March 2010 court order resolving charges that they deceptively marketed credit repair and debt relief services and illegally charged an up-front fee for credit repair services. The FTC also alleged the defendants falsely told consumers that almost anyone can qualify for food stamps, and encouraged them to mislead the government about their finances so they could qualify for the food stamp program.

The 2010 settlement barred the defendants from deceptively marketing any good or service and from violating the Credit Repair Organizations Act. Nevertheless, in its recent civil contempt order, the court found that Sky and his companies used the Internet to promote a food stamp application guide that falsely promised it would show how "almost everybody" or "virtually everyone" can "legally apply for food stamps" or "legally get [food stamps] for free."

Under longstanding government restrictions, only low-income households can qualify for the federal food stamp program. In the guide, however, the defendants repeatedly told consumers to provide the government with misleading information in order to inflate their chances of being deemed eligible. The court found that following this advice could leave consumers open to civil or criminal charges by the government.

In the contempt order, the court also found that defendants charged up-front fees for credit repair services, failed to make required disclosures about their debt relief services, and failed to fully report Sky's business activities, all in violation of the 2010 settlement.

In issuing the contempt order, the court found that consumers paid the defendants more than $32,000 for food stamp, credit repair, and debt relief services while the settlement was in effect. The court found the defendants liable for this amount, and ordered that the money be used to pay back consumers who were injured from defendants' violations of the settlement.

At the FTC's request, the court also issued an order modifying the 2010 settlement that:

• bans the defendants from promoting, marketing, or selling credit repair, debt relief, and government benefit goods or services;
• prohibits them from making a range of misrepresentations to consumers regarding these services;
• stops them from collecting any money that consumers may still owe them;
• requires them to destroy all of their existing customer information; and
• requires them to submit reports to the FTC to prove they are in compliance with the terms of the order.

The orders were filed on February 10, 2012, in the U.S. District Court of the District of Florida, Fort Myers Division.

The FTC acknowledges assistance of the Florida Department of Children and Families, ACCESS Florida Program staff in this matter. Today's action represents the most recent example of the FTC's work to protect consumers adversely impacted by the economic downturn.

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 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC's website provides free information on a variety of consumer topics. Like the FTC on Facebook and follow us on Twitter.

(Credit Restoration Contempt)
(FTC File No. X100015; Civ. No. 2:10-cv-0030-FTM-36-SPC)