Financial Firms Settle FTC ChargeConsumer Money Markets and several related firms agreed yesterday to pay $350,000 in fines and forgive $1.6 million in consumer debts as a result of a federal complaint accusing the companies of misleading customers who paid fees to obtain credit lines.
Agents from Consumer Money Markets, Las Vegas, offered thousands of dollars in credit and cash advances in exchange for membership fees ranging from $149 to $169, according to the Federal Trade Commission, which, along with the Nevada attorney general, filed the complaint Aug. 30 in federal court in Las Vegas.
Contrary to the advertised offer, consumers received credit lines that could be used for purchases from CMM's catalog and from no other retailer. Instead of cash advances, members could obtain so-called "payday" loans of $20 with annual interest rates of 360 percent or more, the FTC alleged.
According to the complaint, CMM sent direct mail to consumers obtained from lists. The mailers promised a credit line of $5,500 at 14.99 percent interest, regardless of credit history, the FTC said.
Consumers called a toll-free number and, after agreeing to the membership fee, received approval from CMM call center agents, who repeated the promises made in the mailer in a 15- to 20-minute pitch, the FTC said. The agents did not tell consumers about the high rates for cash advances or that they could only purchase from CMM's catalog.
CMM had promised consumers that they could receive cash advances of $150 per transaction, the FTC said. However, they were only able to get a $20 advance for a $6 fee, which had to be repaid in 30 days, the FTC alleged.
From 1996 -- the year CMM was founded -- to 1999, the company collected more than $12 million in fees from 80,000 consumers, the FTC said. Less than 8 percent of the members purchased a product from the catalog or took a cash advance, according to the FTC.
Also named in the suit were CMM owner Ana Miller; Gary Allen Balazs, CMM director of operations; William S. Kelly, the list broker who provided CMM with consumer names; Data Tech Solutions Inc., Las Vegas, Kelly's wholly-owned corporation; Interstate Check Services, Las Vegas, CMM's cash-loan affiliate, and its owner and manager, Raymond Elia; and Continental Direct Services, Las Vegas, which purchased the assets of CMM in July 1999.
The firms also have agreed to disclose interest rates and fees and not to misrepresent the service or exaggerate the contents of the catalog, the FTC said. The settlement awaits a judge's approval.
Attempts to reach Continental Direct Services' office were unsuccessful.