The Federal Trade Commission stopped an operation involving individuals and companies that allegedly deceived consumers into paying for bogus credit cards, and then charged them illegal fees.
The six defendants, labeled as "credit card marketers" by the FTC, agreed to a settlement that will provide money for consumer redress, FTC officials said Tuesday.
The defendants marketed a credit card that could be used only to buy products from their Low Pay merchandise catalog. According to the FTC's complaint, the defendants falsely claimed that the card could be used to fully finance purchases; that it would provide access to a no-fee, low cost or guaranteed cash advance benefit or unsecured line of credit; and that consumers could improve their credit ratings by using it.
The defendants did not clearly disclose that they would debit advance fees, a non-refundable annual fee and 30% of a catalog product’s price from consumers' bank accounts.
The defendants also claimed they would refund a $120 activation fee to consumers who returned the card and catalog in a "timely fashion" - and illegally charged an advance fee for a guaranteed line of credit.
Under the settlement, Mardan M. Afrasiabi, the Mardan Afrasiabi Living Trust, Low Pay Inc., LP Capital Holdings Inc., Ramin Rahimi and Century Luxury Inc. are permanently barred from misrepresenting that a credit card can be used to fully finance purchases or provides access to a no-fee, low-cost, or guaranteed cash advance benefit or that consumers will improve their credit ratings.
The settlement order against Afrasiabi, the Mardan Afrasiabi Living Trust, Low Pay Inc. and LP Capital Holdings involves a $28.5 million judgment that will be suspended when Afrasiabi and the Mardan Afrasiabi Living Trust surrender funds in an investment account and pay either $130,400 or the proceeds of the sale of Afrasiabi’s home - or turn the home over to a court-appointed receiver for sale.
The settlement order against Ramin Rahimi and Century Luxury Inc., also imposes a $28.5 million judgment that will be suspended against Rahimi when he pays $460,000. The full judgments will become due immediately if the defendants have misrepresented their financial condition.
They also cannot misrepresent any connection with the sale of a product or service and must disclose all fees and costs - and the refund or cancellation policy - before consumers are asked to pay.
The defendants are barred from violating the Telemarketing Sales Rule, disclosing or benefitting from customer information and failing to dispose of it properly and trying to collect money on any account established before the order was entered.
