UNITED STATES DISTRICT COURT
CIVIL ACTION NO. COMPLAINT FOR PERMANENT INJUNCTION Plaintiffs, the Federal Trade Commission ("FTC" or "the Commission"), and the State of Arkansas, for their complaint allege: 1. The FTC brings this action under Sections 13(b) and 19 of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. §§ 53(b) and 57b, and the Telemarketing and Consumer Fraud and Abuse Prevention Act ("Telemarketing Act"), 15 U.S.C. §§ 6101 et seq., to secure preliminary and permanent injunctive relief, rescission or reformation of contracts, restitution, disgorgement, and other equitable relief for defendants' unfair or deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), and the FTC’s Telemarketing Sales Rule, 16 C.F.R. Part 310. 2. Plaintiff, the State of Arkansas, brings this action under Section 4(a) of the Telemarketing Act, 15 U.S.C. § 6103(a), to secure similar injunctive and equitable relief. JURISDICTION AND VENUE 3. This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1331, 1337(a), and 1345, and 15 U.S.C. §§ 53(b), 57b, 6102(c), 6105(b) and 6103(a). 4. Venue in the United States District Court for the Northern District of Georgia is proper under 28 U.S.C. §§ 1391(b) and (c), and 15 U.S.C. § 53(b) and 6103(a). PLAINTIFFS 5. Plaintiff, the Federal Trade Commission, is an independent agency of the United States Government created by statute. 15 U.S.C. §§ 41 et seq. The Commission is charged, inter alia, with enforcement of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), which prohibits unfair or deceptive acts or practices in or affecting commerce. The Commission also enforces the Telemarketing Sales Rule, 16 C.F.R. Part 310, which prohibits deceptive and abusive telemarketing acts or practices. The Commission is authorized to initiate federal district court proceedings, by its own attorneys, to enjoin violations of the FTC Act and violations of the Telemarketing Sales Rule, in order to secure such equitable relief as may be appropriate in each case, and to obtain consumer redress. 15 U.S.C. §§ 53(b), 57b, 6102(c) and 6105(b). 6. Plaintiff, the State of Arkansas, is one of the fifty sovereign states of the United States. Winston Bryant is the duly elected Attorney General acting for Plaintiff, and brings this action in his official capacity. The State of Arkansas is authorized to initiate federal district court proceedings to enjoin telemarketing that violates the Commission’s Telemarketing Sales Rule, and, in each such case, to obtain damages, restitution, and other compensation on behalf of residents of the State of Arkansas, and to obtain such further and other relief as the court may deem appropriate. 15 U.S.C. § 6103(a). DEFENDANTS 7. Defendant SureCheK Systems, Inc., is a Georgia corporation with its office and principal place of business located at 5430 Jimmy Carter Blvd., Norcross, GA 30093. SureCheK transacts or has transacted business in the Northern District of Georgia. SureCheK is doing or has done business using the fictitious names "Consumer Credit Corporation" and "Consumer Credit Development Corporation" (hereinafter collectively referred to as "CCC"). 8. Defendant Douglas S. Derickson ("Derickson") is an officer, director or principal owner of the corporate defendant. At all times material to this complaint, acting alone or in concert with others, he has formulated, directed, controlled or participated in the acts and practices set forth in this complaint. Defendant Derickson resides and transacts or has transacted business in the Northern District of Georgia. 9. Defendant Steve Lovern ("Lovern") is an officer, director or principal owner of the corporate defendant. At all times material to this complaint, acting alone or in concert with others, he has formulated, directed, controlled or participated in the acts and practices set forth in this complaint. Defendant Lovern resides and transacts or has transacted business in the Northern District of Georgia. COMMERCE 10. At all times relevant to this complaint, the defendants have maintained a substantial course of trade in telemarketing advance fee credit cards, in or affecting commerce, as "commerce" is defined in Section 4 of the FTC Act, 15 U.S.C. § 44. DEFENDANTS' COURSE OF CONDUCT 11. Since at least early 1996, the defendants have engaged in a scheme to defraud consumers throughout the United States through the telemarketing of advance fee credit cards. To secure payment of this fee for the credit cards, the defendants utilize demand drafts whereby funds are obtained from consumers’ checking accounts without consumers’ signatures on the negotiable instruments. 12. Defendants contact consumers through telephone calls and have made, or caused to be made, the following representations, at various times:
13. CCC not only does its own telemarketing, but it also contracts with, and provides substantial assistance or support to, numerous other third-party telemarketing operations who solicit consumers in the name of, and on behalf of, CCC. 14. In connection with taking applications over the telephone, the defendants persuade consumers to divulge their checking account information, including their name as it appears on the account and the account number. 15. The fee, ranging from $79.95 to $130.00, is withdrawn by CCC from the consumers’ checking accounts on unsigned bank drafts and thereafter deposited into a bank account belonging to SureCheK/Consumer Credit Corporation. 16. In some instances, the withdrawals are made without consumers’ express authorization. 17. After paying the fee, consumers do not receive a major credit card. 18. In fact, in some instances, in order to obtain a credit card, consumers would have to pay additional fees or submit additional applications which would still have to be approved by a card issuing bank based upon the card issuing banks’ own credit criteria. VIOLATIONS OF SECTION 5 OF THE FTC ACT COUNT ONE 19. In numerous instances, in connection with telemarketing offers to provide credit cards to consumers for a fee, defendants have made a material representation, expressly or by implication, that consumers will receive a credit card, such as a Visa or MasterCard, in return for the payment of a fee. 20. In truth and in fact, in numerous instances, after paying a fee, consumers do not receive a credit card in return for payment of a fee. 21. Therefore, the representation set forth in Paragraph 19 is false and misleading and constitutes a deceptive act or practice in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a). THE TELEMARKETING SALES RULE 22. In the Telemarketing Act, 15 U.S.C. § 6101 et seq., Congress directed the FTC to prescribe rules prohibiting abusive and deceptive telemarketing acts or practices. On August 16, 1995, the Commission promulgated the Telemarketing Sales Rule, 16 C.F.R. Part 310. The Rule became effective on December 31, 1995. 23. Defendants are "sellers" or "telemarketers" engaged in "telemarketing," as those terms are defined in the Telemarketing Sales Rule, 16 C.F.R. §§ 310.2(r), (t) and (u). 24. The Telemarketing Sales Rule prohibits telemarketers and sellers from, inter alia, requesting or receiving payment of any fee or consideration in advance of obtaining or arranging an extension of credit when the seller or telemarketer has guaranteed or represented a high likelihood of success in obtaining or arranging an extension of credit. 16 C.F.R. § 310.4(a)(4). 25. The Telemarketing Sales Rule also prohibits telemarketers and sellers from misrepresenting the total costs to purchase, receive, or use any goods or services that are the subject of a sales offer. 16 C.F.R. § 310.3(a)(2)(i). 26. The Telemarketing Sales Rule also requires telemarketers and sellers to disclose, in a clear and conspicuous manner, the total costs to purchase, receive, or use, any goods or services that are the subject of the sales offer, and all material restrictions, limitations or conditions regarding the goods or services that are the subject of a sales offer. 16 C.F.R. § 310.3(a)(1)(i) and (ii). 27. The Telemarketing Sales Rule’s Statement of Basis and Purpose explains that, "[t]he Commission intends that the disclosures be made before the consumer sends funds to a seller or telemarketer or divulges to a telemarketer or seller credit card or bank account information. Thus, a telemarketer or seller who fails to provide the disclosures until the consumer’s payment information is in hand violates the Rule." 60 Fed. Reg. 43842, 43852 (Aug. 23, 1995). 28. The Telemarketing Sales Rule also prohibits any seller or telemarketer from obtaining or submitting for payment a check, draft, or other form of negotiable paper drawn on a person’s checking, savings, share, or similar account, without that person’s “express verifiable authorization.” 16 C.F.R. § 310.3(a)(3). 29. The Telemarketing Sales Rule also prohibits any person from providing substantial assistance or support to any seller or telemarketer when that person knows or consciously avoids knowing that the seller or telemarketer is engaged in any act or practice in violation of the Telemarketing Sales Rule. 16 C.F.R. § 310.3(b). 30. Pursuant to Section 3(c) of the Telemarketing Act, 15 U.S.C. § 6102(c), and Section 18(d)(3) of the FTC Act, 15 U.S.C. § 57a(d)(3), violations of the Telemarketing Sales Rule constitute unfair or deceptive acts or practices in or affecting commerce, in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a). COUNT TWO 31. In numerous instances, in connection with telemarketing offers to obtain extensions of credit for consumers (i.e., the obtaining of major credit cards), the defendants have requested or received payments of fees in advance of obtaining such extensions of credit when defendants have guaranteed or represented a high likelihood of success in obtaining the extensions of credit for such consumers. 32. The defendants have thereby violated Section 310.4(a)(4) of the Telemarketing Sales Rule, 16 C.F.R. § 310.4(a)(4). COUNT THREE 33. In numerous instances, in connection with telemarketing offers to obtain extensions of credit for consumers, the defendants have represented, directly or by implication, that defendants will provide consumers with, or arrange for consumers to receive, a major credit card, such as a Visa or MasterCard, for a one-time fee ranging from $79.95 to $130.00. 34. In truth and in fact, in numerous instances, defendants do not provide consumers with, or arrange for consumers to receive, major credit cards such as Visa or MasterCard for a one-time fee ranging from $79.95 to $130.00. 35. The defendants have thereby violated Section 310.3(a)(2)(i) of the Telemarketing Sales Rule, 16 C.F.R. § 310.3(a)(2)(i). COUNT FOUR 36. In numerous instances, in connection with telemarketing offers to obtain extensions of credit, the defendants have failed to disclose, in a clear and conspicuous manner, before a customer pays for the goods or services offered, the total cost to receive, or the material restrictions, limitations or conditions to receive an extension of credit, including but not limited to the following, that:
37. The defendants have thereby violated Section 310.3(a)(1)(i) and (ii) of the Telemarketing Sales Rule, 16 C.F.R. § 310.3(a)(1)(i) and (ii). COUNT FIVE 38. In numerous instances, in connection with telemarketing offers to obtain extensions of credit, the defendants obtained or submitted for payment, a check, draft or other form of negotiable paper drawn on consumers’ checking accounts without the consumers’ express verifiable authorization. 39. The defendants have thereby violated Section 310.3(a)(3) of the Telemarketing Sales Rule, 16 C.F.R. § 310.3(a)(3). COUNT SIX 40. In connection with telemarketing offers to obtain extensions of credit for consumers, in numerous instances, third-party telemarketers who solicit consumers in the name of, and on behalf of, CCC have: (1) requested or received payments of fees in advance of obtaining such extensions of credit, when said third-party telemarketers have guaranteed or represented a high likelihood of success in obtaining the extensions of credit for such consumers; (2) represented, directly or by implication, that defendants will provide consumers with, or arrange for consumers to receive, a major credit card, such as a Visa or MasterCard, for a one- time fee ranging from $79.95 to $130.00; and (3) failed to disclose, in a clear and conspicuous manner before the customer pays, the total costs to receive, or the material restrictions, limitations or conditions to receive, an extension of credit. The third-party telemarketers have thereby violated Sections 310.4(a)(4), 310.3(a)(2)(i) and 310.3(a)(1)(i) and (ii) of the Telemarketing Rule, 16 C.F.R. §§ 310.4(a)(4), 310.3(a)(2)(i) and 310.3(a)(1)(i) and (ii). 41. In numerous instances, in connection with providing various services to third-party telemarketers, including creating and providing scripts to be used in the telemarketing of advance fee credit cards, providing names and telephone numbers of potential customers, providing customer service, and processing and depositing unsigned bank drafts into CCC’s bank accounts, defendants provide substantial assistance or support to the third-party telemarketers knowing, or consciously avoiding knowing, that the third-party telemarketers are engaged in acts or practices that violate Sections 310.4(a)(4), 310.3(a)(2)(i) and 310.3(a)(1)(i) and (ii) of the Telemarketing Rule, 16 C.F.R. §§ 310.4(a)(4), 310.3(a)(2)(i) and 310.3(a)(1)(i) and (ii), as set forth in paragraph 40 above. 42. The defendants have thereby violated Section 310.3(b) of the Telemarketing Sales Rule, 16 C.F.R. § 310.3(b). CONSUMER INJURY 43. Consumers throughout the United States have suffered and continue to suffer substantial monetary loss as a result of the defendants' unlawful acts or practices. In addition, the defendants have been unjustly enriched as a result of their unlawful acts or practices. Absent injunctive relief by this Court, the defendants are likely to continue to injure consumers, reap unjust enrichment, and harm the public interest. THIS COURT'S POWER TO GRANT RELIEF 44. Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), empowers this Court to grant injunctive and other ancillary relief, including consumer redress, disgorgement, and restitution, to prevent and remedy any violations of any provision of law enforced by the Commission. 45. Section 19 of the FTC Act, 15 U.S.C. § 57b, authorizes this Court to grant such relief as the Court finds necessary to redress injury to consumers or other persons resulting from defendants' violations of the Telemarketing Sales Rule, including the rescission or reformation of contracts, and the refund of money. 46. Section 4(a) of the Telemarketing Act, 15 U.S.C. § 6103(a), authorizes the Court to grant to the State of Arkansas, on behalf of its residents, injunctive and other equitable relief, including damages, restitution, other compensation, and such further and other relief the Court deems appropriate. 47. This Court, in the exercise of its equitable jurisdiction, may award other ancillary relief to remedy injury caused by the defendants' law violations. PRAYER FOR RELIEF WHEREFORE, plaintiff Federal Trade Commission, pursuant to Sections 13(b) and 19 of the FTC Act, 15 U.S.C. §§ 53(b) and 57b, Section 6(b) of the Telemarketing Act, 15 U.S.C. § 6105(b), and the Court’s own equitable powers, and plaintiff State of Arkansas pursuant to Section 4(a) of the Telemarketing Act, 15 U.S.C. § 6103(a), and the Court’s own equitable powers request that the Court:
Respectfully submitted, STEPHEN CALKINS ANTHONY E. DIRESTA _______________________________ RONALD E. LAITSCH FEDERAL TRADE COMMISSION WINSTON BRYANT _______________________________ |