Below are listed a few highlights of our civil and criminal achievements for consumers in 2011.
Credit Repair and Debt Adjustment
Georgia’s Debt Adjustment Act requires companies offering debt adjustment services to file annual insurance and audit records with OCP and to cap all fees for its services at no more than 7.5% of the monthly amounts paid by consumers for distribution to their respective creditors. Action was taken against a number of companies that were operating in violation of this law.
- OCP issued a civil penalty order against New Path Financial in the amount of $788,000 for violations of the Debt Adjustment Act, including its failure to submit statutorily required filings and collecting fees in excess of 7.5%.
- OCP took action against Bright Future Financial, LLC, a California-based company, and Blake Dirickson, its principal. Although Bright Future Financial, LLC actually operated as a front-end referral house, it marketed itself as a provider of debt adjustment/ debt settlement services to Georgia residents. OCP found that the company had charged consumers advance fees that were in excess of the amount permitted by law and had failed to file statutorily required proof of insurance policies and escrow accounts. In settlement of this matter, the company paid $45,000 in restitution to 29 consumers and $25,000 in administrative costs.
- Both Ameriguard Negotiations, LLC, doing business as Innovation Financial Consulting, a Florida-based debt settlement company, and Penso Holdings, Inc., doing business as Capital Debt Settlement, also violated the Debt Adjustment Act by overcharging consumers, failing to disburse payments to consumers' creditors within 30 days, and failing to file proof of the required insurance policies and escrow accounts. Capital Debt Settlement agreed to stop providing services immediately to Georgia residents until it either brought its fee structure into compliance or attained exempt status under Georgia law. Furthermore, it paid $144,000 in restitution to 95 consumers, a $35,000 civil penalty and $15,000 in reimbursement for administrative costs. Innovation Financial Consulting agreed to cease doing business in Georgia, to finish servicing all of its Georgia contracts through completion and without charge (with consumer savings of over $33,000), and to pay a $2,000 civil penalty.
- Capital Debt Relief, LLC and NT Services, LLC, doing business as Financial Strategies, marketed and provided debt adjustment services to Georgia residents without filing the requisite documents with the State. The business plans and fee structures utilized by these companies also failed to comply with the statutory provisions of the Debt Adjustment Act. Capital Debt Relief agreed to repay 107 Georgians a total of $98,626 overcharged, to pay the State an administrative fee of $50,000, and to cease providing services to Georgians immediately until it was in compliance with the Debt Adjustment Act. Financial Strategies refunded $124,817 to 160 consumers, paid administrative costs of $25,000 and also agreed to immediately halt services in Georgia unless and until its fee structure and plan complied with Georgia law.
Credit repair services are illegal in Georgia, unless offered by a company that is exempted by virtue of having a 501(c)(3) IRS designation.
- Our investigation into Shannon, Shannon & Associates, Inc. revealed that the company was offering illegal credit repair services to Georgia consumers in exchange for a fee. The company signed an Assurance of Voluntary Compliance in which it agreed to refrain from violating the credit repair statute and to pay an administrative fee of $2,000. There was no consumer restitution since OCP was able to stop the practices before the company collected payment from consumers.
- Thomas R. Wells, doing business as TRW Ventures, LLC and TRW Credit Group, Inc.,entered into an agreement to refrain from providing credit repair services to Georgia consumers.
Debt Collection Practices
- Nelson, Hirsch & Associates, Inc., a Georgia debt collections company, and its owner, Tanya Santiago, entered into an Assurance of Voluntary Compliance, resolving charges that the company committed multiple violations of the federal Fair Debt Collection Practices Act and the Georgia Fair Business Practices Act. The investigation stemmed from a series of reports from consumers that Nelson, Hirsch & Associates harassed and deceived them by:
- Failing to disclose that it was a debt collector attempting to collect a debt;
- Threatening consumers with arrest, imprisonment or charges of fraud if they did not pay the debt;
- Refusing to send consumers written proof of the debt owed;
- Collecting more than the amount owed or authorized;
- Threatening to call the consumer’s employer and have the consumer’s wages garnished;
- Falsely representing to consumers that it was affiliated with a law firm and/or that the caller was a fraud investigator;
- Continuing to contact consumers even after they told the company to stop calling them;
- Calling consumers at unusual hours, such as before 8:00 AM or after 9:00 PM;
- Calling consumers at work when they knew their employers prohibited such contact;
- Speaking to consumers in a harassing and abusive manner;
- Threatening consumers’ family members; and
- Calling repeatedly (sometimes as much as 50 times a day).
Under the settlement, Nelson, Hirsch & Associates and Santiago are required to cease business operations. Furthermore, Santiago must refrain from engaging in any aspect of debt collection activities in Georgia or in connection with Georgia consumers for at least five years. The company and Santiago will forego collection of 5,809 consumer accounts that they had purchased from creditors who had previously written off the debts. These accounts totaled over $4.3 million dollars. The company also paid a $26,000 civil penalty and reimbursed OCP for investigative and legal expenses in the amount of $24,000.
- The State of Georgia entered into a nationwide settlement with Hollywood Video resolving allegations that the company engaged in improper debt collection practices. Hollywood Video’s collection agent, National Credit Solutions, reported negative credit information to credit bureaus on a widespread basis without prior customer notice or an opportunity to challenge the debt; this practice resulted in credit rating damage to consumers. Under the settlement Hollywood Video will rescind all previously filed negative credit reports and will not submit any future consumer credit reports. It will not charge collection fees or interest on principal amounts consumers owe and will not charge consumers double for late fees. The company also agreed to refrain from using abusive practices in collection of the past-due accounts. The settlement affects approximately 3.3 million consumers in all 50 states, including 84,103 Georgia consumers. The savings to Georgians was $9.56 million.
- OCP initiated action against a Cobb County debt collection company, Investigative Recovery Services, LLC, doing business as On Point Investigations, for harassing, oppressive and abusive debt collection practices and for making misleading representations to consumers, such as threatening debtors with imminent arrest. The company is required to change its business practices and operate in compliance with the Georgia Fair Business Practices Act and the federal Fair Debt Collection Practices Act, and pay $30,000, of which $5,000 is consumer restitution and $25,000 is administrative fees.
Deceptive Auto Sales and Advertising
- OCP investigated the automobile auctioning company Atlanta Auction Access, Inc., doing business as Atlanta Auction Access and Brazer Enterprises, for odometer violations. The company failed to disclose vehicles' true cumulative mileage on odometer disclosure statements; represented that vehicles were "exempt" from the required odometer mileage disclosure, when such was not the case; and sold non-exempt vehicles without valid passing emissions inspection certificates. The company agreed to abide by the odometer laws, to refund five Georgians $2,500 and to pay $10,000 as reimbursement of investigative expenses.
- Toyota of McDonoughadvertised and conducted a "car giveaway" promotion. To qualify for the promotion, consumers were required to go to the dealership and test-drive a vehicle. Although the company provided a written disclosure to consumers, it did not contain all of the statutorily required disclosures, nor was the document provided to consumers before they traveled to the business. In settlement of this matter, the company paid a $7,500 civil penalty and $2,500 for administrative costs.
- The dealerships Headquarter Kia and Headquarter Nissan failed to pay the Lemon Law fees collected from consumers and ran several deceptive advertisements, which included offering vehicles for sale to the general public that included special incentives that were not available to the general public and promoting a lifetime warranty without providing the proper disclaimers. As resolution, the parent company, SE & A Automotive, LLC, agreed to pay consumer restitution in the amount of $19,600 and an administrative fee of $35,000.
- Duke Automotive Sales & Leasing, Inc. and Mr. Timothy Dukesold automobiles to consumers in Augusta and the surrounding areas until the company went out of business in March 2011. Soon thereafter numerous consumers complained that the company had failed to pay off loans on traded-in vehicles, failed to transfer title or forward payment for automobile warranties, failed to refund consumers who had made down payments on cars but had been unable to get vehicle financing, and failed to perform promised repairs. Duke Automotive Sales & Leasing, Inc. and Mr. Timothy Duke, individually, entered into a settlement in which they agreed to resolve current and future complaints and to pay $78,276 in consumer restitution and a civil penalty of $10,000.
- Nissan Southadvertised that it guaranteed credit approval or would pay consumers $3,500. These representations were not accompanied by any disclosures or disclaimers as required by law, and they violated a previous agreement the company had entered into in 2008. During the investigation, it was also discovered that the dealership had been improperly charging a Lemon Law fee on the sale of used vehicles. The company agreed to act in compliance with Georgia law and to pay $3,500 in consumer restitution and a $10,000 civil penalty.
- Stogner Management, Inc., doing business as LaGrange Toyota, published advertisements that used the term "Cash for Clunkers" in an effort to give consumers the impression that its dealership was offering the federal trade-in program from 2009. In fact, that federal program ended in November 2009 and has not been reinstated. The company agreed to refrain from misrepresenting its goods and services in future advertisements and paid an administrative fee of $1,000.
- The Momentum Group, Inc. which does business as Horizon Suzuki and Gwinnett Suzuki was investigated due to allegations that the dealerships overcharged consumers for title fees and improperly charged consumers emission inspection fees for exempt vehicles. Both practices violate the Fair Business Practices Act and a settlement agreement previously entered into by the company with this office. Momentum Group settled the matter by agreeing in a court-filed Assurance of Voluntary Compliance to refrain from charging both title application fees in excess of the amount prescribed by the Georgia Department of Revenue, Motor Vehicle Division, and emission inspection fees on vehicles that are exempt. Furthermore, the company was required to pay $15,000 in reimbursement of investigative expenses.
- An T. Imports of Atlanta, LLC, which does business as Team Toyota Mall of Georgia,disseminated advertisements offering lifetime warranties, but failed to adequately disclose the life to which the representation referred. The ads also claimed that the warranties were simultaneously both "factory" and "non-factory." Team Toyota resolved our investigation by entering into an agreement to comply with the Fair Business Practices Act and to pay a civil penalty of $5,000 and an administrative fee of $5,000.
- Courtesy Fordconducted a promotion by sending consumers "scratch & win" mailers. These mailers informed consumers they had won one of several listed prizes, but they failed to list all promotion disclosures required by Georgia law. Additionally, the mailer contained misleading advertising claims. The matter was resolved with the company paying a $2,500 civil penalty and $150 in consumer restitution.
- An OCP investigation into the advertisements of Morrow Motor Sales, Inc., doing business as Toyota South, revealed that advertisements on lifetime warranties failed to adequately disclose the life to which the representation referred. Additionally, the ads claimed that the warranties were "free" and that vehicles could be purchased for a specific price plus a document fee, both of which claims are in violation of the Fair Business Practices Act. Toyota South signed an Assurance of Voluntary Compliance, in which it agreed to comply with Georgia law and to pay a civil penalty of $10,000 and an administrative fee of $5,000.
A number of other settlements were accepted from automobile dealers for improper or deceptive advertisements involving issues such as the charge of a “doc fee” in addition to an advertised price, Truth-in-Lending Act disclosure violations, improper comparison advertisement, and the use of inconspicuous disclosures. Each dealership was required to bring its electronic and print ads into compliance and pay a civil penalty.
In 2011 OCP resolved cases against two companies that conducted “penny auctions” via the Internet.
- An OCP investigation revealed that Wavee.comfailed to send a number of purchased products to consumers in a timely manner and failed to clearly and conspicuously disclose that consumers were purchasing bid credits when they registered on Wavee's website. The company entered into a court-filed Assurance of Voluntary Compliance requiring it to cease operations and to pay $202,210 in consumer restitution, $35,000 as a civil penalty and $15,000 in administrative expenses. Additionally, Wavee.com paid $50,000 to the State for the establishment of a trust account. Consumers who unintentionally purchased bid credits from Wavee.com were eligible for restitution from this trust account by submitting a completed claim form and requisite documentation to the office by August 30, 2011.
- iTicketBid.com auctioned various sporting events tickets and merchandise on the Internet but failed to register with and obtain a license from the Georgia Auctioneers Commission. The company also failed to send products to consumers who had won auctions and purchased items. An Assurance of Voluntary Compliance resolved the investigation and the company was required to pay $22,927 in consumer restitution and a $2,000 civil penalty.
Unfair and Deceptive Marketing Practices
- After Gwinnett County revoked its contract with Red Oak Sanitation, Inc., a private waste collection and disposal company, the residents of unincorporated Gwinnett County were entitled to have their trash bins collected and receive a refund of their $25 or $50 deposit. OCP’s investigation revealed that the company had failed to refund those deposits in a timely manner and that it had made no effort to develop a plan for the timely collection of trash bins or the return of the refundable deposits. Red Oak Sanitation, Inc. entered into a settlement with OCP, agreeing to establish a trust account for customers who had not received refunds of their deposits. The company returned almost $60,000 to consumers during the course of the investigation. It also set up a trust account with an initial deposit of $5,000 and agreed to increase the amount as necessary, based on the number of claims received for refunds.
- Atlanta Cattle Exchange, Inc. conducts door-to-door sales of meat products to consumers who reside in Georgia and other states. In 2008 the company resolved allegations that it failed to provide consumers with two copies of the Buyer's Right to Cancel form and failed to process refunds when requested within the 3-day cooling-off period. In February 2011 OCP launched another investigation after receiving complaints that the company was again engaging in these same activities. The company was required through the new settlement to cease prohibited practices, and pay consumer restitution, an administrative fine of $15,000 and a civil penalty of $50,000.
- OCP alleged that the locksmith company A-Team Locksmith, LLC and Mani Levi violated Georgia law by making shoddy repairs and by placing deceptive telephone directory advertisements, quoting one price for service fees and then charging consumers more once the technician was on location. Under the negotiated settlement, the company agreed to shut down its operations in Georgia, pay $4,074 in restitution to 13 consumers and $5,000 as administrative costs.
- OCP took action against the personal training company Atlanta Fitness, Inc., doing business as Custom Built Personal Training ("Custom Built"), and its principal, Steven D. Dow, for violations of Georgia's health spa statutory provisions. The company provided personal training services to Georgia residents from health spas in several locations; this investigation focused on the Douglasville branch of Workout Anytime. Consumers alleged that the company had transferred their memberships to a location more than 10 miles away from the center where they had signed up to become members, in violation of Georgia law. Our investigation confirmed that violation and revealed that the company's contracts failed to contain the disclosures and cancellation rights required under the Fair Business Practices Act. The company signed an Assurance of Voluntary Compliance requiring it to stop using any non-compliant contracts to sign up new clients, to bring all of its current client contracts in Georgia into compliance, to pay $8,786 in restitution, and to pay $10,000 for administrative costs.
- Appliance Services Pro, Inc.advertised appliance repair services under a variety of different company names. OCP began its investigation of the company after receiving complaints that the company charged consumers for "free" repair estimates and failed to honor advertised warranties. The company entered into an Assurance of Voluntary Compliance in which it agreed to abide by the warranties detailed on their receipts and invoices, to disclose any restrictions or conditions on all estimates, and to establish programs to ensure that employees comply with the terms of the Assurance. In addition, the company paid $758 in consumer restitution and a civil penalty of $15,000.
- The Minneapolis-based household appliance retailer ApplianceSmart Factory Outlet has six Georgia locations. An investigation into the practices of the company showed it violated Georgia law by running advertisements that contained misrepresentations. Examples of the problematic ads included advertising a "Warehouse Clearance Event" when its merchandise was only available at regular prices; falsely representing that the event was a "Factory Outlet;" and representing that the company had "unique manufacturer relationships," when such was not the case. In settlement of this matter, the company agreed to remove misleading statements from its advertisements and to pay $2,500 in civil penalties and $5,000 as reimbursement of investigative expenses.
- David Ross, doing business as Cannon-Mania,sold cannons through the Internet. OCP opened an investigation into the practices of Ross in May 2010 after receiving complaints of non-delivery of product and his failure to provide refunds. The investigation confirmed these allegations and also revealed that Cannon-Mania was no longer in business. Furthermore, it was discovered that Ross had started another company named Flash60, LLC, also to sell cannons on the Internet. Ross entered into an Assurance of Voluntary Compliance requiring him individually and Flash60, LLC to refrain from violating Georgia law. He was also required to place explicit disclosures on his website concerning the availability of products and refunds. Ross paid $831 in consumer restitution and a civil penalty of $6,000.
- Kap Staffing, which offered career consulting services to Georgia consumers for a fee, failed to disclose, as required by law, that the company does not guarantee actual job placement. To resolve this violation, the company agreed to make the requisite changes to its contracts and advertisements and pay a $2,000 administrative fine.
- Planned Furniture Promotions, Inc.conducted "going-out-of-business sales" and "liquidation sales" for businesses in excess of the statutorily allowable time of 90 days. The company agreed to bring its business activities into compliance with the law and to pay a $2,000 civil penalty.
United States v. Kara S. Adams, Jason J. Eyer, James A. Schoenholz, Roger Watson, Leiah Watson, Brittany Dunphy and others.
U.S. District Court, Northern District of Georgia, Atlanta Division, Criminal Indictment # 1:10-CR-006-CAP: Operation of Fraudulent Debt Adjustment as Artifice to Defraud Consumers
Defendants, operating together and through various named entities, principally one known as “Versadebt Corp.” purported to operate a debt adjustment business. They held themselves out as providing negotiated credit card interest rate reduction programs. In fact, the Defendants did nothing to obtain reduced credit card interest rates for consumers but, to the contrary, while operating out of an office building in Cobb County Georgia, stole approximately $25 million from consumers in 40 states.
As a part of the inducement to participate in Defendants’ “programs,” consumers were assured that there were no out-of-pocket cost associated with the Defendants’ interest rate reduction program but that its cost, typically between $749 and $1495, would be paid for out of the vast savings to be achieved by the consumers. Consumers were further promised a full refund of the purchase price if they did not achieve at least $4,000 in credit card savings.
When consumers ultimately began to complain, in 2009, about the operation of the program and their failure to achieve promised savings, the Defendants then provided them with a bogus “financial analysis,” purportedly showing that they were soon to reduce their debt burdens, but this, too, was in effect worthless. Defendants ultimately refused to refund any money to consumers, though this had been guaranteed in their telemarketing and subsequent mailing campaigns.
Pursuant to an indictment and further superseding indictment, the foregoing six persons were initially charged with twelve counts of conspiracy to commit fraud, wire fraud, and obstruction of justice. A further indictment against Defendant Adams, the head of the ring, reached a total of 21 counts and added additional counts of fraud and the improper structuring of financial transactions, all violations of various provisions of Title 18 of the United States Code.
The three leading defendants, Adams, Eyer and Schoenholz, when learning of this indictment, fled to the Philippines where they had already set up a similar business. However, when extradition proceedings were commenced, the three voluntarily returned to this country and to Georgia to face the charges. Amidst several postponements of trial, first Defendant Dunphy, then both Defendants Watson and ultimately Defendant Schoenholz, entered guilty pleas and agreed to assist the prosecution. Ultimately, on the eve of trial in October 2011, Defendant Eyer, husband of Defendant Adams, also entered a guilty plea and accepted a sentence of 10 ½ years imprisonment. Defendant Adams refused a plea bargain offer whereunder she would serve 7 ½ years in prison and insisted upon trial. Following a two-week jury trial, she was convicted of 19 of 21 counts and, was subsequently sentenced to a term of 17½ years in the federal penal system.
All Defendants were subjected to civil forfeiture proceedings and it is understood between $3.5 million and $5 million has been recouped. This prosecution commenced with a civil investigation in our office in 2009 which, after several months, became criminally focused in nature. Thereupon, our agency sought and received cooperation from the Atlanta Region U.S.P.S. Postal Inspection Branch and from the Atlanta Regional Office of the U.S. Secret Service. The lead witness at the Adams trial was a criminal investigator from OCP.