F.T.C. v. RCA Credit Serv., LLC

Decision Date21 July 2010
Docket NumberCase No. 8:08-CV-2062-T-27AEP
Citation727 F.Supp.2d 1320
PartiesFEDERAL TRADE COMMISSION, Plaintiff, v. RCA CREDIT SERVICES, LLC a Florida Corporation, et al., Defendants.
CourtU.S. District Court — Middle District of Florida

James L. Chen, K. Michelle Grajales, Peter W. Lamberton, Federal Trade Commission, Washington, DC, for Plaintiff.

Rick Lee Crosby, Jr., Seminole, FL, pro se.

ORDER

JAMES D. WHITTEMORE, District Judge.

BEFORE THE COURT is Plaintiff's Motion for Summary Judgment (Dkt. 99), to which pro se Defendant Rick Lee Crosby, Jr., has responded (Dkts. 100, 104). Plaintiff brought this action against Defendants under (1) the Credit Repair Organization Act ("CROA") for Defendants' allegedly misleading statements, illegal billing practices, and failure to make required disclosures and (2) the Federal Trade Commission Act for allegedly deceptive practices. Plaintiff alleges that Defendants violated the FTC Act and CROA by representing to consumers that they could increase consumers' credit scores into the 700s in as little as 30 days by associating consumers with positive credit information belonging to unrelated individuals or entities and by removing all negative information from consumers' credit reports. As set forth below, Plaintiff's Motion for Summary Judgment is GRANTED in part.1

Background

Plaintiff Federal Trade Commission (the "FTC" or the "Commission") is an independent agency of the United States created by the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. § 41 et seq. The FTC is charged with enforcement of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), which prohibits deceptive acts and practices in or affecting commerce. Pursuant to Section 410(a) of the Credit Repair Organizations Act (the "CROA"), 15 U.S.C. § 1679h(a), the FTC also has the authority to enforce provisions of the CROA relating to credit repair organizations. Section 410(b) of the CROA, 15 U.S.C. § 1679h(b), grants the FTC authority to enforce the CROA in the same manner as it enforces the FTC Act. Section13(b) of the FTC Act authorizes the FTC to bring suit in federal district court to enjoin violations or threatened violations of the FTC Act. 15 U.S.C. § 53(b).

Corporate Defendant RCA Credit Services, LLC ("RCA") is a Florida limited liability company organized in September, 2005.2 Defendant Rick Lee Crosby, Jr. ("Crosby") is a resident of Florida, the founder and owner of RCA, and one of two managing members of the company.3 Crosby established RCA by filing Articles of Organization with the Florida Secretary of State in September, 2005, listing himself as the registered agent. See Childs Decl. Att. E; Crosby Dep. at 23-24; Pl. Ans. (Dkt. 35) ¶ 6; Dkt. 112 ¶ 9B-C.

The FTC commenced this action by filing a Complaint and Motion for Temporary Restraining Order ("TRO") on October 16, 2008. The motion for TRO (Dkt. 7) was granted and, following a hearing, a preliminary injunction was entered (Dkt. 29). On February 25, 2009, a default judgment was entered against Defendant Brady Wellington in the amount of $204,517.13. (Dkt. 63).

The March 1, 2010 Order granting counsel for RCA and Crosby's motion to withdraw directed RCA to obtain new counsel within ten days. (Dkt. 98). 4 The Order repeated an earlier caution that RCA could not appear except through counsel and warned that RCA's failure to timely obtain new counsel would result in the Court entertaining a motion for default judgment pursuant to Fed.R.Civ.P. 55. (Dkt. 98). A subsequent order informing Crosby of the requirements of Fed.R.Civ.P. 56 warned that any response to the FTC's motion for summary judgment that purported to be filed on behalf of RCA by a person not admitted to practice in this Court would be stricken. (Dkt. 101). Finally, at the June 11, 2010 pretrial conference, the Court informed Crosby that RCA's failure to obtain counsel would result in a default judgment being entered against RCA. Notwithstanding, RCA has not complied with the Court's March 1, 2010 Order. Accordingly, Crosby's responses to the FTC's motion for summary judgment, to the extent they purport to be filed on behalf of RCA, are disregarded.

Except where otherwise noted, the following facts are undisputed. RCA solicited consumers nationwide through two internet websites, www. RCACredit. com and www. RCAcredit services. com. See Childs Decl. Att. B, D.5 Interested consumers called RCA's toll-free number, heard a recorded message, and were invited to leave contact information.6 An RCA representativethen contacted the consumers and pitched RCA's services. See Stahl Decl. ¶¶ 4-6; Crosby Dep. at 89.

RCA's websites invited consumers, with RCA's assistance, to "Boost Your Credit Score Into the 700's in as little as 30 days." Childs Decl. Att. B at 1, 7 (www. rcacredit. com); Childs Decl. Att. D at 1 (rcacreditservices.com). The same message was repeated in an audio message on RCA's website, see Childs Att. C 3:4-7; in emails to consumers, see Oct. 21, 2008 Supplemental Declaration of Melvina Jones ("Jones Supp. Decl." [Dkt. 18-2] ), Att. H at 2; Crosby Dep., Ex. 8; in prerecorded messages consumers heard when they called RCA, see Stahl. Decl. Att. A 4:1-9; Childs Decl. Att. 3:14-15; and in live telephone calls with RCA representatives, see Pl. Motion for TRO, July 31, 2008 Declaration of Jeannette Harris ("Harris Decl.") ¶¶ 3, 7-8 (RCA representative Brady Wellington told Harris that her credit score would improve to over 700 within a month); Pl. Motion for TRO, July 31, 2008 Declaration of Carmela Marolda ("Marolda Decl.") ¶ 11 (Wellington told Marolda that her credit score would rise to over 700 within 30 days); Pl. Motion for TRO, Aug. 25, 2008 Declaration of Kenneth Thiefault ("Thiefault Decl.") ¶ 11 (RCA representative told Thiefault RCA could raise his credit score above 700 within 30 days).

Defendants represented that consumers could achieve this result through two actions. First, Defendants offered to sell consumers associations with positive credit information belonging to unrelated entities or persons. Specifically, Defendants offered to register the consumer as an "authorized user" of one to three lines of credit with positive payment history, with the assurance that the association with the line of credit would increase the consumer's credit score. See Stahl Decl. Att. A at 12, 11. 13, 15; Childs Decl. Att. A at 7; Harris Decl. ¶ 8; Jones Decl. ¶ 9; Marolda Decl. ¶ 9; Mitchell Decl. ¶ 6; Pl. Motion for TRO, July 21, 2008 Declaration of Donald Smith ("Smith Decl.") ¶ 8. These lines of credit are referred to as "trade lines." (Dkt. 99 at 7). To the extent consumers became authorized users on such accounts, however, they did not have access to the underlying lines of credit, because they did not receive the account numbers or credit cards. 7

Although the first page of RCA's website promised to increase consumers' credit scores into the 700s in as little as 30 days, another page on the website states that it may and usually does take longer. That webpage, under the heading "Questions," states that "it generally takes 60 to 90 days for the trade lines to report" and asks clients to allow "a minimum of 60 to 90 days" for the trade lines to appear on their credit reports. Childs Decl. Att. B at 15, Att. D at 6; see also Childs Decl. Att. B at 4; Stahl Decl. Att. A at 12 (RCA representative stated that "it takes about 30-60 days" for the information to be reported); Childs Att. A at 8 (RCA representative told undercover FTC investigator that "it takes ... around 30 to 90 days"); cf. Pl. Motion for TRO, Aug. 24, 2008 Declaration of Bryne Mitchell ("Mitchell Decl.") ¶ 5 (Wellington told Mitchell it would cost $800 to get his credit score into the 700s within 30-90 days);

RCA's website promised "100% Guaranteed Results." Childs Att. B at 1, Att. D at 1; RCA Response to Pl. 1st RFA No. 30. The website provided a "100% guarantee" that every trade line purchased would be reported to the three major credit reporting agencies and that the consumer's credit score would increase as a result. Childs Decl. Att. B at 15, Att. D at 6; seealso Childs Decl. Att. B at 3. However, RCA's "Questions" webpage states that, because

[e]very clients [sic] credit report is different ... each clients [sic] credit scores [sic] increase will very depending on how many negative accounts that [sic] have on their credit report. Once you become a client, we will coach you through the necessary steps needed to help you remove and dispute any negative accounts that you have.

Childs Decl. Att. B at 15, Att. D at 6; see also Childs Decl. Att. B at 16 ("Everybody's credit score increase will vary depending on how many trade lines are purchased and how many negatives are removed."); Childs Decl. Att. D at 7 (same).

Second, Defendants invited consumers, with Defendants' assistance, to "Remove ANY or ALL Negative Accounts From Your Credit Report." Childs Att. B. at 1, 7 (www. rcacredit. com); Childs Decl. Att. D at 1 (rcacreditservices.com); see also Stahl Att. A at 4; Mitchell Decl. ¶ 7. For example, in October, 2008, RCA sent consumers email solicitations announcing that Crosby could "COMPLETELY REMOVE EVERY NEGITIVE [sic] FROM YOUR [CREDIT] FILE IN 7 Days and Raise Your FICO Score Instantly!" through a "7-day credit repair special promo." See Smith Supp. Decl. Att. A, B; Jones Supp. Decl. Att. I, J; RCA Response to Pl. 1st RFA No. 70; Crosby Dep. at 93-99 & Exs. 8-12. The email solicitations assured consumers that Crosby "can REMOVE all negatives, charge offs, judgments, tax liens, foreclosure and EVEN BANKRUPTCY" from consumers' credit files within seven days (or 10-14 days, for a bankruptcy) and guaranteed the removal within that time. RCA Response to Pl. 1st RFA Nos. 71-73.8 Negative information, such as delinquent accounts or late payments, is considered in calculating a consumer's FICO score.9

After a consumer decided to engage RCA's services, RCA representatives collected fees ranging from $500 to $3,000 or more,...

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