In the Matter of the Complaint Against A-1 CREDIT ADVISERS, INC. and P. O. Box 240 at Miami Beach, Florida 33139 P.S. Docket No. 2/168January 14, 1974 Daniel S. Greenberg, Esq. , Law Department, United States Postal Service, Washington, D. C., for Complainant No appearance for Respondent
Before: William A. Duvall, Chief Administrative Law Judge
This proceeding was initiated on November 19, 1973, when a complaint was filed by the Assistant General Counsel for the United States Postal Service in charge of the Consumer Protection Office, who will hereafter be referred to as Complainant, against A-1 Credit Advisers, Inc., P. O. Box 240, at Miami Beach, Florida, the Respondent. es have been made, but the substance of the decision is unchanged.
In the complaint it is charged that the Respondent is engaged in conducting a scheme or device for obtaining money or property through the mails by means of false representations contrary to the provisions of Section 3005 of Title 39, United States Code.
The complaint and notice of hearing were served upon the Respondent on November 27, 1973. On December 3, 1973, an answer to the complaint was filed by the Respondent, which answer constitutes a general denial of the charge of engaging in the conduct of a scheme or device for obtaining money or property through the mails by means of false representation. With the answer there was also filed a motion for a change of place of hearing requesting that the hearing be conducted in Dade County, Florida. Respondent states that the Respondent is of limited financial means and cannot stand the expense of traveling to and staying in Washington, D. C. for the necessary period of time.
Complainant opposed the granting of the motion for change of venue and on December 7 and order was issued denying the request for a change of venue.
In the order denying the request for a change of venue, reference was made to 952.15 of the Rules of Practice, wherein it is said that a party desiring a change of venue must submit a statement outlining the evidence to be offered in such place, the names and addresses of the witnesses who will testify and the reasons why such evidence cannot be produced at Washington, D. C. This section of the Rules continues that the Presiding Officer shall give consideration to convenience and necessity of the parties and the relevance of the evidence to be offered. In the order of December 7, 1973, denying the requested change of venue, the concluding paragraph reads as follows:
"This ruling will be reconsidered if Respondent, on or before December 14, makes the required showing in accordance with the cited Rules of Practice."
This order was mailed to the Respondent on December 7, 1973, and there is in the files of this case a signed receipt for certified mail indicating that the President of the Respondent company received the order on December 11, 1973.
Despite the fact that the Respondent has had ample notice that compliance must be had with the Rules of Practice governing the request for a change of venue, no further communication has been received from the Respondent since the receipt by the Respondent of the order of December 7, 1973. In view of that fact, the hearing proceeded as scheduled in accordance with the provisions of 952.11 of the Rules of Practice which provides in subsection (b) as follows:
"If the respondent files an answer but fails to appear at the hearing, the presiding officer shall receive complainant's evidence and render an initial decision."
Generally speaking, the business being conducted by the Respondent consists of the advertising and sale through the mails of a system which allegedly will permit a remitter to establish a good credit rating for himself easily and within a period of 30 days.
Specifically, the Complainant charges the Respondent with the making of the following representations through the mails, which representations are alleged to be materially false as a matter of fact:
(a) That the information contained in respondent's manual will enable the remitter to eliminate all debts:
1. regardless of amount;
2. without resorting to bankruptcy;
3. in a manner which, if known, would not reflect unfavorably upon the credit practices of the remitter;
(b) That the instructions contained in respondent's manual will enable the remitter to establish excellent credit regardless of:
1. past or present credit problems;
2. past or present employment;
3. past or present financial circumstances;
(c) That said credit will be established:
1. anywhere;
2. within 30 days;
3. without investigation;
(d) That the remitter will be able to obtain all types of credit cards quickly and easily;
(e) That the results enumerated in subparagraphs (a) through (d), inclusive, will not in any way be based upon trickery or deceit;
(f) That the methods recommended by respondent are completely legal;
(g) That the remitter can effect the results enumerated in subparagraphs (a) through (f), inclusive, entirely through his own resources, without any additional assistance;
(h) That the remitter will have no expenses, other than those involved in the purchase of the manual, in obtaining the results promised.
First, it must be determined whether the Respondent makes the representations which have been set forth in the charges of the complaint. The Respondent first attracts the attention of the respective remitters by advertising material, an example of which was Complainant's Exhibit C-1, which was taken from the National Enquirer, dated July 18, 1973. This advertisement will be attached to this decision as Appendix A.
If the remitter is sufficiently attracted by this advertisement, he responds to it by writing to the Respondent indicating his interest. In responding to this letter, the Respondent sends to the remitter a prepared circular which was received in evidence as Complainant's Exhibit C-2, a copy of which is attached to this decision as Appendix B.
This is all of the advertising material employed by this Respondent in connection with the business under consideration. This advertising material will now be examined to see whether the Respondent makes the representations that are set forth in the charges of the complaint.
In the advertising which is Appendix A, there is language from which charge (a) in the complaint was extrapolated. There is no limitation as to the amount of one's debts which, allegedly, may be paid and this advertisement states that these debts may be eliminated while, at the same time, the remitter may avoid bankruptcy.
While there is no direct statement that the remitter may eliminate his debts in a manner which, if known, would not reflect upon the credit practices of the remitter, the general tenor of Exhibits C-1 and C-2 (Appendices A and B) is to the effect that the methods to be employed by the remitter in following the Respondent's plan are completely legal and, therefore, it is a reasonable inference that the following of this plan would not reflect upon the credit practices of the remitter.
In regard to charge (b) in the complaint, the language contained in this charge is taken, in part, directly from the advertisement and, in part, from paragraph 2 of Appendix B.
Those portions of charge (b) which are set forth in subparagraphs 2 and 3 of that charge are inferences that reasonably may be drawn from the overall tenor of Appendices A and B.
Charge (c) consists of language that appears, verbatim, in Appendix A to this decision.
Charge (d) also is based upon language that appears, verbatim, in Appendix A to this decision.
The language in charge (e) of this complaint is based upon the assurance that the instructions and methods used in the plan are 100% legal and that statement is, of course, the basis for the inclusion in the complaint of charge (f).
As indicated above, charge (g) in the complaint is an allegation that the Respondent represents falsely that the remitter can effect the results enumerated in subparagraphs (a) through (f), inclusive, entirely through his own resources without any additional assistance. The purpose of the business of the Respondent is to sell this material to any interested remitter and the remitter is to utilize the means and methods described in the system sold by the Respondent to achieve the results which the Respondent promises. Therefore, it is inconsistent to allege that the Respondent is saying to the remitter that he can effect the desired results entirely through the remitter's own resources and without any additional assistance.
The charge which is incorporated in charge (h) of the complaint is based upon language that appears in paragraph 7 of Appendix B.
Considering the advertising materials used by the Respondent in the light of the effect that they would most probably produce on persons of ordinary minds, as required by the decision of Donaldson v. Read Magazine , 333 U.S. 178, it is found that the Respondent does make the representations set forth in paragraph 2(a), (b), (c), (d), (e), (f) and (h).
It is found that the Respondent does not make the representation which is incorporated in paragraph 2(g) of the complaint.
The question now present is whether these representations which have been found to have been made by the Respondent are true or false.
In connection with this issue, the Complainant called as a witness a Mr. Walter Vaughan, Vice-President of the Consumer Credit Division of the American Security and Trust Company, located at 7th and Massachusetts Avenue, Washington, D. C. In connection with Mr. Vaughan's testimony, there was offered and received into evidence as Exhibit C-11, a credit application to the American Security and Trust Company of Washington for an installment loan. A copy of the face of this application will be attached to this decision as Appendix C.
Mr. Vaughan testified that in considering whether to approve a loan application, certain criteria are followed. These include the general character of the applicant, the employment stability of the applicant, the repayment capability of the applicant, the credit background of the applicant in terms of his income and expenses and the present indebtedness of the applicant. If, for example, a loan applicant is over-extended credit wise, no responsible lending institution would extend additional credit and assume such a risk for such an applicant.
In order to determine the credit standing of loan applicants, lending institutions consult with credit rating organizations where a good deal of insight may be gained as to the financial standing of the applicant. If the information contained in such a rating is unfavorable, such information would have an adverse effect on the likelihood of the bank to extend a loan to the applicant. If a loan applicant should recently have moved into a community or for some other reason might not be listed in the information of the credit rating organizations, this fact also could very easily be an impediment to the extension of credit by a lending institution.
The booklet which contains the system being sold by this Respondent assumes that there will be no credit check of the loan applicant, whereas, the evidence indicates that the making of a credit check of the loan applicant is certainly the rule before any lending institution extends credit to an applicant or makes a loan to an applicant. If there is some question in the credit check about the loan applicant, these matters are investigated by checking with other sources, other lending institutions, retail stores or other types of businesses by whom a question has been raised as to the eligibility for credit of the applicant. In addition, these matters are discussed with the applicant and if the lending institution has reservations about the making of the loan, it is not uncommon for the prospective lending institution to advise the applicant to resolve the question that may have been raised and come back sometime later which may be as much as six months or more later.
On page 18 of the booklet which sets forth the plan of the Respondent, there is the following statement: "If you are earning approximately $11,000 per year, you can apply for Diner's Club, American Express, Carte Blanche credit cards." So this statement by the Respondent is clearly in derogation of the representation that the remitter will be able to obtain all credit cards easily and quickly. If the remitter is earning as much as $11,000 a year, he may not even need those credit cards, but if it requires that amount of money, as the Respondent says it does, to apply successfully for these credit cards, then there would be many remitters who would be attracted to the Respondent's product who would not meet the minimum requirements to successfully apply for one of these more well known credit cards.
On pages 14 through 17 of the booklet setting forth the system being sold by the Respondent, there is outlined what is called, "A way of obtaining a new easy credit without investigation within 30 days." This system entails the borrowing of $360.00 from one bank and making certain payments to that bank, and, shortly thereafter, going to a second bank and making a similar loan and then within a few days, going to a third bank and obtaining a third loan.
In regard to banks number two and three, the plan written by Respondent says it will not be necessary to mention the earlier loans or loan previously obtained. (Ex. C-10, p. 16) In addition to trickery and deceit that are involved in any such method of operation, recommending that an individual follow this practice is encouraging such an individual to violate 1014 of Title 18 of the United States Code, which makes it a crime punishable by fine or imprisonment or both to make a false statement to obtain a loan from any institution, the accounts of which are insured by the Federal Savings and Loan Insurance Corporation, any banks that are insured by the Federal Home Loan Bank System, the Federal Deposit Insurance Corporation, the Federal Savings and Loan Insurance Corporation, or the Administrator of the National Credit Union Administration. The fact that such advice is contained in the booklet setting forth the system being sold by the Respondent is very disturbing to the witness presented by the Complainant.
On pages 5 to 7 of the booklet incorporating the system that is sold by the Respondent, there is described what is called the "One payment plan" in which it is assumed that the person owes $5,000.00 and that he can, in some way, then, envisions that the debtor will employ an attorney who will go to the creditors and say that the debtor is hard pressed for funds but that he has this amount of money which will permit him to pay off all the loans on the basis of 25[ on the dollar. And the suggestion is that the creditors will be satisfied to settle the indebtedness, in full, on this basis. The testimony of record in this case indicates that creditors are not quite so easy to agree to this plan. What the creditor ordinarily does is to counsel with the debtor and, if necessary, arrange with him extended payment plan under which the regular payments will be decreased and the term of payment would be increased, but the suggestion by the witness was that there is not a great inclination on the part of the lenders, really, to make such settlements of their indebtedness.
The testimony of record in this case establishes that the remitter will not be able to eliminate all of his debts regardless of the amount. The evidence also establishes that a very careful look is made by prospective lenders into the credit standing and the repayment capabilities of their loan applicants. Credit is not established easily and in a short period of time. The witness indicated that lending institutions consider a long history or responsibility in financial matters as being one of the criteria by which a decision to make a loan is reached.
The evidence of record establishes that the employment of the loan applicant is an important factor that is considered by lenders; that an investigation is made; that whatever time is necessary to complete that investigation is taken; and that no assurance can be given that an investigation can be completed within 30 days.
The Respondent, itself, indicates in its plan that not all types of credit cards will be obtained quickly and easily. Certainly, the following of the steps of the plan being sold by the Respondent involved trickery and deceit in the withholding of information that is regarded as extremely important by lending institutions, and it even involves advice to violate a criminal statute.
It has been established in the Respondent's own literature that the original $6.98 for the plan of operation being sold by the Respondent is just an initial investment in many cases and that there must be, in addition to that expenditure of $6.98, the ability to procure other sums which vary in the amount depending on the size of the remitter's indebtedness and upon his ability to call upon his family, friends and acquaintances for loans.
In addition to what heretofore has been said, it should be pointed out that if, in spite of the many obstacles thereto, and in spite of the great unlikelihood thereof, a remitter should follow the advice in Respondent's program and succeed in establishing credit for himself by such devious means, the Respondent would then be engaging in a practice, recently condemned, of setting into motion a chain of events in which "it is not the seller but the buyer who makes the false representation." Thus, the Respondent receives money through the mails by assisting the remitter to make false representations to lending institutions. United States v. International Term Papers, Inc. , C.C.A. 1, 477 F.2d 1277 (1973).
In view of all of the foregoing considerations and taking into consideration the evidence of record in this proceeding, the following findings of fact and conclusions of law are reached:
1. The Respondent is engaged in conducting a business through the mails.
2. In the conduct of its business, the Respondent makes, or makes in substance, the representations which are set forth in subparagraphs (a), (b), (c), (d), (e), (f) and (h) of paragraph (2) of the complaint.
3. The Respondent does not make the representation which is set forth in subparagraph (g) of paragraph (2) of the complaint.
4. The representations found to have been made by the Respondent are materially false as a matter of fact.
5. If remitter accomplishes his purpose by the means set forth in Respondent's program, Respondent is placing into the remitter's hands the means by which the latter may mislead and perpetrate a fraud upon others.
1. The Respondent is engaged in conducting a scheme or device for obtaining money or property through the mails by means of false representations contrary to the provisions of 3005, Title 39, United States Code.
Upon the basis of the foregoing findings of fact and conclusion of law, it follows that an order as provided in 39 U.S. Code, 3005 should be issued against this Respondent.
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