UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON

Plaintiff, the Federal Trade Commission ("Commission"), for its complaint alleges as follows:

1. The Commission 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 Section 410(b) of the Credit Repair Organizations Act, 15 U.S.C. § 1679h(b), to obtain permanent injunctive relief, restitution, rescission, disgorgement and other equitable relief for defendants' deceptive acts or practices in connection with the sale and offering for sale of credit repair services in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), and the Credit Repair Organizations Act , 15 U.S.C. § 1679 et seq.

JURISDICTION AND VENUE

2. This Court has jurisdiction of this matter pursuant to 28 U.S.C. §§ 1331, 1337(a) and 1345, and 15 U.S.C. §§ 53(b), 57b and 1679h(b).

3. Venue in this district is proper under 28 U.S.C. § 1391(b) and (c), and 15 U.S.C. § 53(b).

THE PARTIES

4. 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 Credit Repair Organizations Act. 15 U.S.C. § 1679h(a). The Commission is authorized to initiate federal district court proceedings, by its own attorneys, to enjoin violations of the FTC Act and the Credit Repair Organizations Act in order to secure such equitable relief, including consumer redress, as may be appropriate in each case. 15 U.S.C. §§ 53(b), 57b and 1679h(b).

5. Defendant CRA Champion Credit, Inc. ("CRA Champion"), is a Washington corporation with its office and principal place of business located at 1215 120th Avenue, Suite 100, Bellevue, Washington. CRA Champion transacts business in the Western District of Washington through the advertisement, promotion, offering for sale, and selling of credit repair services to consumers in the United States.

6. Defendant CRA Financial Services, Inc. ("CRA Financial"), is a Washington corporation with its registered office located at 1215 120th Avenue, Suite 100, Bellevue, Washington. CRA Financial transacts business in the Western District of Washington through the advertisement, promotion, offering for sale, and selling of credit repair services to consumers in the United States.

7. Defendant Avshalom Hazan is president, treasurer, secretary and chairman of the board of directors of CRA Champion and CRA Financial. Individually, or in concert with others, Avshalom Hazan formulates, directs, controls or participates in the acts and practices of CRA Champion and CRA Financial alleged below. He resides and transacts business in the Western District of Washington.

8. Defendant Joel Younker was the vice president of CRA Champion. Individually, or in concert with others, Younker formulated, directed, controlled or participated in the acts and practices of CRA Champion alleged below. He resides and transacts business in the Western District of Washington.

9. Defendants CRA Champion and CRA Financial have operated as a common business enterprise while engaging in the acts and practices alleged above, and are therefore jointly and severally liable for said acts and practices.

COMMERCE

10. At all times relevant to this complaint, defendants have maintained a substantial course of trade in selling credit repair services, in or affecting commerce, as "commerce" is defined in Section 4 of the FTC Act, 15 U.S.C. § 44.

DEFENDANTS' BUSINESS PRACTICES

11. Since at least 1993, defendants have advertised, promoted, offered for sale, and sold credit repair services to consumers in the United States.

12. Defendants have offered services to remove derogatory information from, or improve, consumers' credit histories, credit records, and credit ratings. Consumers have contacted defendants by telephone and have been told by defendants' representatives that defendants can remove bankruptcies, charge-offs, late payments, and other negative information from consumers' credit reports, even where such information is accurate and not obsolete.

13. Typical and illustrative of defendants' claims about their credit repair services are the following:

a. "It makes absolutely no difference whether it [adverse information on a credit report] actually happened or didn't. I mean, if it's a late pay and there was a late pay and it's -- you know, it can still come off." [Attached as Exhibit A to this Complaint, at 5 (hereinafter "Exhibit A")].

 

b. "MS. RIVERS: . . . Now, is a bankruptcy -- how is that treated or can that come off?

 

DOUG: It can, yes. . . . And generally it does. So far all the ones we've worked on -- and we've been in business for five years -- have all come off." [Exhibit A at 6].

 

c. "So what we do is we go through and we take care of all the underlying accounts first and then actually go after the bankruptcy filing." [Exhibit A at 7].

 

d. "We'll work on it for 18 months. And a bankruptcy, depending upon how many accounts are under it that we have to take off first, usually runs eight to 12 months." [Exhibit A at 8].

 

e. "MS. RIVERS: But -- normally you're able to get most things off, right?

 

DOUG: Mm-hmm. I would say 95 percent of the information we work on comes off. . . . And that's -- that's fairly conservative." [Exhibit A at 13].

14. Consumers have agreed to purchase defendants' services based on these representations. Defendants have usually charged as much as $1000 or more for these services.

15. Before providing any of the promised services, defendants' representatives request and obtain at least partial payment for these services.

VIOLATIONS OF THE CREDIT REPAIR ORGANIZATIONS ACT

16. The Credit Repair Organizations Act, signed by the President on September 30, 1996, took effect on April 1, 1997, and has since that date remained in full force and effect.

17. Defendants are "credit repair organizations" as that term is defined in Section 403(3) of the Credit Repair Organizations Act, 15 U.S.C. § 1679a(3).

18. The purposes of the Credit Repair Organizations Act, according to Congress, are:

(1) to ensure that prospective buyers of the services of credit repair organizations are provided with the information necessary to make an informed decision regarding the purchase of such services; and (2) to protect the public from unfair or deceptive advertising and business practices by credit repair organizations.

15 U.S.C. § 1679(b).

19. Section 404(a)(3) of the Credit Repair Organizations Act prohibits all persons from making or using any untrue or misleading representation of the services of the credit repair organization. 15 U.S.C. §  1679b(a)(3).

20. Section 404(b) of the Credit Repair Organizations Act prohibits credit repair organizations from charging or receiving any money or other valuable consideration for the performance of any service which the credit repair organization has agreed to perform before such service is fully performed. 15 U.S.C. § 1679b(b).

21. Pursuant to Section 410(b)(1) of the Credit Repair Organizations Act, 15 U.S.C. §1679h(b)(1), any violation of any requirement or prohibition of the Credit Repair Organizations Act constitutes an unfair or deceptive act or practice in commerce in violation of Section 5(a) of the FTC Act, 15 U.S.C.§ 45(a).

COUNT ONE (Credit Repair Organizations Act)

22. In connection with the performance of services as a credit repair organization, as that term is defined in Section 403(3) of the Credit Repair Organizations Act, 15 U.S.C. § 1679a(3), defendants have made or used untrue or misleading representations of their services, including, but not limited to, representing that defendants can obtain permanent removal of bankruptcies, charge-offs, late payments, and other negative information from consumers' credit reports, regardless of whether such information is accurate and not obsolete.

23. In truth and fact, defendants cannot obtain permanent removal of bankruptcies, charge-offs, late payments, and other negative information from consumers' credit reports, regardless of whether such information is accurate and not obsolete.

24. Defendants have thereby violated Sections 404(a)(3) of the Credit Repair Organizations Act, 15 U.S.C. § 1679b(a)(3).

COUNT TWO (Credit Repair Organizations Act)

25. In connection with the performance of services as a "credit repair organization," as that term is defined in Section 403(3) of the Credit Repair Organizations Act, 15 U.S.C. § 1679a(3), defendants have charged or received money or other valuable consideration for the performance of services that the credit repair organization has agreed to perform before such service was fully performed.

26. Defendants have thereby violated Section 404(b) of the Credit Repair Organizations Act, 15 U.S.C. § 1679b(b).

VIOLATIONS OF THE FTC ACT

27. Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), prohibits unfair or deceptive acts or practices in or affecting commerce.

28. Misrepresentations of material fact constitute unfair or deceptive acts or practices prohibited by Section 5(a) of the FTC Act.

COUNT THREE (FTC Act)

29. In connection with the advertising, marketing, promotion, offering for sale, or sale of credit repair services, defendants have made untrue or misleading statements to induce consumers to purchase their services, including, but not limited to, representing that defendants can obtain permanent removal of bankruptcies, charge-offs, late payments, and other negative information from consumers' credit reports, regardless of whether such information is accurate and not obsolete.

30. In truth and fact, defendants cannot obtain permanent removal of bankruptcies, charge-offs, late payments, and other negative information from consumers' credit reports, regardless of whether such information is accurate and not obsolete.

31. Therefore, defendants' representations as set forth above are false and misleading and constitute deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).

INJURY

32. Consumers have suffered substantial monetary loss as a result of defendants' unlawful acts or practices. Absent injunctive relief by this Court, defendants are likely to continue to injure consumers and harm the public interest.

THIS COURT'S POWER TO GRANT RELIEF

33. Sections 13(b) and 19 of the FTC Act, 15 U.S.C. §§  53(b) and 57b, and Section 410(b) of the Credit Repair Organizations Act, 15 U.S.C. § 1679h(b), empower this Court to issue a permanent injunction against defendants' violations of the Credit Repair Organizations Act and the FTC Act and, in the exercise of its equitable jurisdiction, to order such ancillary relief as rescission, restitution, disgorgement of profits resulting from defendants' unlawful acts or practices, and other remedial measures.

PRAYER FOR RELIEF

WHEREFORE the Commission respectfully requests that this Court, as authorized by Sections 13(b) and 19 of the FTC Act, 15 U.S.C. §§  53(b) and 57b, and Section 410(b) of the Credit Repair Organizations Act, 15 U.S.C. § 1679h(b), and pursuant to its own equitable powers:

(a) Permanently enjoin defendants from violating the Credit Repair Organizations Act and Section 5(a) of the FTC Act as alleged in this Complaint;

(b) Award all relief that the Court finds necessary to remedy the defendants' violations of the Credit Repair Organizations Act and Section 5(a) of the FTC Act, including, but not limited to, rescission of contracts, the refund of monies paid and the disgorgement of ill-gotten gains; and

(c) Award the Commission any other equitable relief that the Court may determine to be proper and just.

DATED: ___________, 1998.

Respectfully submitted,

DEBRA A. VALENTINE
General Counsel

CHARLES A. HARWOOD
Regional Director

Nadine S. Samter, WSBA # 23881
George J. Zweibel, WSBA # 12444
Kathryn C. Decker, WSBA #12389
ATTORNEYS FOR PLAINTIFF
FEDERAL TRADE COMMISSION