Loan Broker Operations Eyed In Multi-state Probe
As part of a multi-state crackdown on companies that prey upon cash-strapped individuals with promises of loans and credit cards for an advance fee, Attorney General Spitzer today announced a lawsuit against three related Manhattan companies.
The three companies are accused of a series of improper financial dealings, including: illegal advance-fee loan brokering; unlicensed credit counseling and budget planning; and improper apartment referral services. Spitzer has obtained a temporary restraining order blocking the companies from such activities and is seeking a permanent order along with refunds for customers and penalties.
The lawsuit filed in State Supreme Court in Manhattan is one of 10 cases being filed as a result of a massive probe by officials in the Federal Trade Commission and in six states and Canada.
"A good credit rating is increasingly important in today's economy," Spitzer said. "For those who have credit problems, there is no quick fix. These individuals must be on guard against businesses that try to profit from a consumer's financial problems."
Spitzer's office filed suit against three Manhattan-based companies: Credential, Inc., 545 Eighth Avenue; Credit Masters Counseling and Services, Inc.; and Credit Masters Financial Services. The suit also names the owner of the companies, Leroy Noel Cox, of 99 Whaler Cove, Babylon.
Cox's companies are accused of targeting consumers with damaged credit histories and offering them various services for a fee. For example, Credential offered "pre-approved loans" with substantial up-front fees (between $149 - $199) that violated federal and state law. The company failed to provide loans in return. In some cases, Credential would obtain access to a consumer's checking or credit account and process the advance fee without the consumer's authorization.
Credential is also accused of conducting illegal credit repair services. In offering these services, Credential reportedly created imaginary new credit identities for consumers and encouraged them to use these false identities to apply for credit. Although consumers would pay Cox's companies as much as almost $400 for this service, they were never approved for loans or credit using the new phony credit profiles.
Credential also offered budget planning and debt consolidation services without a license. This is a service whereby a consumer pays one lump sum or periodic payments to a budget planner who, in turn, is responsible for paying back the consumer's debt. Due to significant abuses in the past, budget planning services are legal only for private attorneys and not-for-profit corporations registered with the state.
Under the name "Broker's Free Apartments Company," Cox is accused of providing unlicensed and illegal advance-fee apartment referral services.
Individuals who believe they have been victimized by Credential, Inc.; Credit Masters Counseling and Services, Inc.; Credit Masters Financial Services; or Broker's Free Apartments Company are encouraged to call the Attorney General's consumer hotline at (800) 771-7755 to file a complaint.
This case was handled by Assistant Attorney General Andy Lugo of the Consumer Frauds and Protection Bureau.