FTC Settlements Halt Advanced Fee Credit Card Scam Aimed at Consumers with Poor Credit

A husband and wife operating out of Connecticut separately have agreed to settle Federal Trade Commission charges that they deceived customers by promising, for a fee, guaranteed approval of major credit cards regardless of credit history. Philip and Allyson Pestrichello, Credit Services of America, Inc. (CSA), and First Credit Alliance (FCA) promised consumers who responded to their ads that they were likely, for advance fees typically ranging from $45 to $105, to receive a MasterCard or Visa regardless of past credit history. The defendants also advertised that if consumers did not receive the promised credit card, they would get a refund. In fact, the FTC alleged, consumers received neither credit cards nor refunds as promised. Under two separate settlements announced today - the FCA Order (which includes Philip Pestrichello, First Credit Alliance and Credit Services of America) and the A. Pestrichello Order (covering Allyson Pestrichello) - the defendants are prohibited from misrepresenting, among other things, that consumers who paid advance fees were highly likely to obtain unsecured Visa or MasterCard credit cards without credit history review. In addition, the FCA Order permanently bans Philip Pestrichello from any involvement in credit-related goods or services. The A. Pestrichello Order requires Allyson Pestrichello to pay approximately $81,000 in consumer redress.

The Commission sued the defendants as part of "Operation Advance Fee Loan 2000," an aggressive law enforcement sweep targeting corporations and individuals that falsely promised consumers loans and credit cards for an advance fee.

According to the FTC's complaint filed in federal court in June 2000, CSA mailed brochures offering unsecured Visa and MasterCard credit cards to consumers who had bad or no credit. Consumers who received the brochures believed that by paying a processing fee, typically between $45 and $60, completing the application, and mailing it back to CSA, they would receive an unsecured credit card. The brochure also promised consumers guaranteed credit card approval or a refund of their processing fee. Instead, the FTC alleged, consumers who sent in the completed CSA application and the required fee received photocopies of Visa or MasterCard applications from various banks or credit card companies. Consumers then had to apply to these entities for the credit cards. Consumers did not receive promised unsecured Visa or MasterCard credit cards from the defendants nor did they receive the promised refunds, the FTC alleged.

In addition, the FTC charged, after CSA ceased operations, Philip Pestrichello started First Credit Alliance, a nearly identical business. FCA offered consumers unsecured Visa credit cards, with credit limits up to $5,000, regardless of past credit history, and for an up-front fee typically ranging between $45 and $60. FCA sent many consumers a follow-up letter stating that they were "accepted for FCA's VISA placement program" and qualified for a $10,000 credit limit, for an additional $45 fee. As with CSA, the Commission alleged, consumers who applied to FCA did not receive the promised credit cards.

Under the terms of two separate settlements, which required the court's approval, the defendants are prohibited from misrepresenting:

• That after paying a fee, consumers will receive a credit card or other extension of credit;
• That a consumer's processing fee will be refunded if they do not obtain the promised credit card;
• The nature or terms of their refund or cancellation policies;
• Any fact material to a consumer's decision to pay a fee for any loan or extension of credit; and
• Any other fact material to a consumer's decision to purchase any product or service.

Further, the settlements prohibit the defendants from using any aliases, pen names, or pseudonyms, or otherwise misrepresenting their true identities in the course of business dealings. The defendants also are prohibited from using or selling their customer lists.

In addition, the FCA settlement prohibits defendant Philip Pestrichello from engaging in any activities relating to the advertising, marketing, offering for sale, or sale of any credit-related goods or services, or assisting others in the same conduct. The settlement contains a $1,186,271 suspended judgment against defendants Philip Pestrichello, CSA, and FCA, based on sworn financial disclosures submitted to the FTC. The settlement with Allyson Pestrichello requires her to pay $80,888.58 from assets that were frozen by the court. Finally, both settlements contain various record keeping and reporting requirements designed to assist the FTC in monitoring the defendants' compliance.

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

The Commission vote to authorize staff to file the two stipulated final judgments and orders was 5-0. They were filed in the U.S. District Court for the District of Connecticut, in Hartford, on December 3, 2001 and approved by the court on December 5, 2001.

Copies of the two stipulated final judgments and 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. 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 at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

(FTC Matter No. 000077)
(Civil Action No. CV:3:00CV1049 (CFD))