Monday, June 15

THE ULTIMATE TURN DOWN

On June 3, the Federal Trade Commission announced that Gary Walton, dba Pinnacle Financial Services, has settled charges that he ran an advance fee loan "turndown room." In an advance fee loan scam, telemarketers convince victims that they are guaranteed or are highly likely to get a loan if they pay an upfront fee. The victims then receive a letter from a "turndown room" stating that their loan applications were denied.

In January 1998 the FTC, several state officials, and Canadian law enforcement agencies brought charges against 37 telemarketing firms and individuals allegedly engaged in advance fee loan scams. As part of "Project Loan Shark II," seven Canadian telemarketers were accused of taking loan fees from US consumers and then paying Walton to notify them that an unidentified private lender had turned down their applications. Walton also operated his own advanced fee loan scam, advertising in tabloids and on the Internet, charging consumers $89 and then mailing out the rejection letters himself.

To settle these charges, Walton must post a $75,000 performance bond to guarantee refunds before offering any new services related to credit. He also has agreed not to falsely represent that consumers have a high likelihood of obtaining loans regardless of their credit histories, or that he has a high rate of success in obtaining or arranging loans.

In addition, he is barred from:

• falsely representing or failing to disclose any fact important to a consumer's decision to pay a fee for any loan or other extension of credit;

• requesting or receiving payment in advance after guaranteeing or representing a high likelihood of success in obtaining a loan; helping a telemarketer when he knows or consciously avoids knowing that a telemarketer is engaging in deceptive practices;

• misrepresenting the nature or conditions of a good or service.

There's more information available about this case in the FTC press release.

NOTE: The stipulated final judgment is for settlement purposes only and does not constitute an admission by the defendant of a law violation. The settlement has the force of law when signed by the judge.

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