Case:
State of Minnesota, by
its Attorney General,
Hubert H. Humphrey III,
Plaintiff,
vs.
Excel International Services, Inc.,
d/b/a Excel Credit Services;
Bonnie J. Burke; Lisa D. Smidt,
a/k/a Lisa Smith; and
John Does 1-3,
Defendants.
NATURE OF CASE
This is a civil consumer protection case in which Attorney
General Hubert H. Humphrey III, on behalf of the State of
Minnesota, seeks declaratory and injunctive relief, restitution,
civil penalties, costs and reasonable attorney fees. Defendants
engage in a scheme to defraud consumers by offering consumers a
method to obtain a new credit file and, by doing so, conceal
adverse information from potential creditors. Defendants falsely
represent that their services are lawful and fail to disclose
material facts concerning their offer, including the fact that
consumers who obtain a new credit file using defendants’ methods
may violate state and federal law. Finally, defendants have
failed to register, to post a bond, and to otherwise comply with
Minnesota law regulating credit services organizations, Minn.
State.
5. Defendant Lisa D. Smidt, also known as Lisa Smith, is an
adult individual whose address is presently unknown and, upon
information and belief, is a principal officer or owner of Excel.
On information and belief, defendant Smidt personally engaged in,
controlled, directed, caused, or authorized the acts and
practices of Excel, including the acts and practices alleged in
this Complaint. Defendant Smidt transacts or has transacted
business in Minnesota.
6. Defendants John Doe 1-3 are additional persons, whose
names will be submitted when their identities become known to
plaintiff.
VENUE
8. Venue is proper in Ramsey County pursuant to Minn. Stat.
(1994) because plaintiff’s cause of action arose in part
in Ramsey County.
BUSINESS PRACTICES
9. Defendants purport to offer consumers who have poor
credit histories, including those who have filed bankruptcy, an
opportunity to obtain credit through the creation of a new credit
file. Defendants advertise this program through America Online,
an on-line computer communications service.
10. Defendants’ America Online advertisement instructs
consumers to contact defendants through America Online for more
information.
11. After receiving an inquiry from prospective customers
via American Online, defendants respond with correspondence
through the U.S. mail. Consumers receive a cover letter and a
colored brochure describing defendants’ “file segregation/NEW
CREDIT FILE program.” Copies of defendants’ cover letter and
brochure are attached as Exhibits 1 and 2 respectively and are
incorporated here by reference.
12. In defendants’ letter to consumers, they represent that
their program allows consumers to “establish a BRAND NEW CREDIT
FILE in 30 days or less” and thereby to “once again qualify for
credit cards, auto loans, personal loans and home mortgages”
(Exhibit 1). Defendants further represent that they “personally
establish your NEW CREDIT FILE and guide you in adding new
positive credit to that file.”
13. In defendants’ brochure, they represent to consumers
that a “new credit file will not show any negative credit or
bankruptcy that you may have on your present credit file.”
(Exhibit 2.) Defendants’ brochure describes three
segregation plans: the Basic Plan ($195 individual, $295 joint);
the Credit Plus plan ($295 individual, $395 joint); and the EXCEL
Presidential plan ($395 individual, $495 joint). All three plans
assert that Excel will take all necessary steps to establish a
new credit file for consumers. Defendants also advise consumers
that they may call Excel Credit Services “for a complementary
no-obligation consultation.”
14. After calling the telephone number listed in defendants’
solicitation materials, consumers are told by defendants that
they can obtain a new credit file after receiving a taxpayer
identification number (TIN) from the federal government to use
instead of their social security numbers for banking and credit
purposes. Defendants describe a “Fresh Start Guide” for $79.95
which contains the information necessary for consumers to obtain
a TIN and establish a new credit file themselves.
15. To obtain information in addition to that contained in
Exhibits 1-2 about defendants’ services, consumers must pay
defendants at least $79.95.
16. Defendants have represented that their “file
segregation/NEW CREDIT FILE program” is legal. Specifically:
a. Defendants state in Exhibit 1: “This is your 100%
legal ’second chance’ at maintaining GOOD CREDIT.”
b. In Exhibit 2, defendants represent: “It is now
possible and state law. It is a federal crime to make false statements
on certain loan and credit applications, to misstate one’s social
security number, or to make a false statement to an agency or
department of the United States. It is a crime under Minnesota
law to fraudulently obtain credit.
18. While affirmatively representing that their services are
legal, defendants fail to disclose to consumers the material
facts that consumers who follow defendants’ file segregation plan
may violate several state and federal laws.
19. Defendants have engaged in the conduct described in this
Complaint with the intent that consumers would rely upon
defendants’ written and oral representations in connection with
the sale of defendants’ services to the public.
20. Defendants have engaged in business in Minnesota without
registering with the Minnesota Department of Commerce as a credit
services organization. Defendants have also failed to submit a
surety bond to the Minnesota Department of Commerce.
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This post was written by admin on December 18, 2008
