Complaint Against Credit Repair Companies Violating State and Federal Credit Repair Laws

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on behalf of themselves and all )

others similarly situated, )

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Plaintiffs, ) C. A. No.

)

v. )

)

) JURY TRIAL DEMANDED

CONSUMER ADVOCATE )

FOUNDATION SERVICE, )

and )

CREDIT COLLECTIONS  DEFENSE )

NETWORK, )

and )

CREDIT COLLECTIONS   )

RECONCILIATION NETWORK, )

and )

BEACON CONSULTING )

SERVICES, LLC )

and )

R.K. LOCK & ASSOCIATES, )

and )

ROBERT K. LOCK, JR., ESQ. )

and )

PHILLIP MANGER )

and )

TRACY WEBSTER )

) CLASS ACTION

Defendants. )

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AMENDED COMPLAINT – CLASS ACTION

I.  INTRODUCTION

1.   This is a consumer class action brought for Defendants’ violations of the Credit Repair Organizations Act, 15 U.S.C. § 1679, et seq. (“CROA”) and Illinois Credit Services Organizations Act, 81 ILCS § 605/1, et seq. (“CSOA”).  This law is designed to protect the public from unfair or deceptive business practices by credit repair organizations.

II.   JURISDICTION AND VENUE

2. Jurisdiction of this Court arises under 28 U.S.C. §§ 1331, 1337, and supplemental jurisdiction exists for the state law claims pursuant to 28 U.S.C. § 1367.

3.   Venue lies in this district pursuant to 28 U.S.C. § 1391(b).

III.   PARTIES

4. Plaintiffs h/w, are natural persons residing at _______________IL 61362.

5.

Defendant Consumer Advocate Foundation Service (“CAF”) is a business entity that regularly conducts business in the State of Illinois, with its principal office located at P.O. Box 280686, Columbia, S.C. 29228.

6. Defendant Credit Collections Defense Network (“CCDN”) is a business entity that regularly conducts business in the State of Illinois, with its principal office located at 22 South Franklin Street, Cattaraugus, NY 14719.

7. Defendant Credit Collections Reconciliation Network (“CCRN”) is a business entity that regularly conducts business in the State of Illinois, with its principal office located at 7144 North Harlem Avenue, Suite 323, Chicago, IL 60631.  Based upon information and belief, CCRN is the successor in interest to CCDN, and was opened circa October 2008.

8. Defendant Beacon Consulting Services, LLC (“BCS”) is a business entity that regularly conducts business in the State of Illinois, with its principal office located at 1254 Hunters Bldg E, Hoffman Estates, IL 60192.

9. Defendant R.K. Lock & Associates (“RKL”) is a law firm that regularly conducts business in the State of Illinois with offices located at 7144 North Harlem Avenue, Suite 323, Chicago, IL 60631.

10. Defendant Robert K. Lock, Jr. Esquire (“Lock”) is an Illinois licensed attorney with offices located at 7144 North Harlem Avenue, Suite 323, Chicago, IL 60631.  Lock is a partner of RKL and a founding member of CCDN.

11. Defendant Phillip M. Manger (“Manger”) is an attorney with offices located at 19 Taunton Hill Road, Newtown, CT 06470.  Manger is a founding member of CCDN.

12. Defendant Tracy Webster (“Webster ”) is an individual in the employ of CCDN, which regularly conducts business in the State of Illinois, with his principal office located at 22 South Franklin Street, Cattaraugus, NY 14719.

13. At all times pertinent hereto, Defendants used instrumentalities of interstate commerce or the mails, to sell, provide or perform, or represented that they could or would sell, provide or perform, a service, in return for the payment of money or other valuable consideration, for the express or implied purpose of improving a consumer’s credit record, credit history or credit rating, or providing advice or assistance to a consumer for that purpose.

14. At all times pertinent hereto, Defendants were acting by and through their agents, servants, and/or employees, who were acting under the direct supervision and control of Defendants.

IV.   FACTUAL ALLEGATIONS

A. The Credit Repair Enterprise and Activities Carried Out By All Defendants As to Plaintiff and the Class

15. As with many credit repair operations, Defendants act in concert with one another to perpetuate illegal credit repair activities.  Unsuspecting consumers are lead to believe that Defendants can legally remove inaccurate, derogatory, and otherwise hurtful, tradelines, debts and accounts reporting on their credit reports.

16. Defendants enlist consumers through their websites, www.ccdnlaw.com, www.ccrnlaw.com, www.billsaregone.com and www.creditcardsaregone.com, to pay Defendants for the credit repair services described more fully below.

17. Through their websites, Defendants persuade consumers that they have the ability to eliminate the debts of the consumer through their program.  Defendants further misrepresent themselves to be above the law, stating in their Frequently Asked Questions (“FAQ”) section that attorneys and courts cannot harm Defendants.  (A true and correct copy of Defendants’ FAQ is attached hereto as Exhibit A and incorporated herein).

18. When a consumer enrolls in Defendants’ services, he/she signs a contract (“Contract”), which provides for payment of an initial fee.  With the initial fee comes the inclusion of seven (7) accounts (“Accounts”) to be disputed by Defendants.  Additional accounts can be included within the program for an additional fee of $100.00, which Defendants term a “gift.”  (A true and correct copy of the Contract is attached hereto as Exhibit B and incorporated herein).

19.   Upon enlisting Defendants’ services, consumers are instructed to cease payments on the Accounts and to refrain from making any applications for credit.  Additionally, consumers are warned to not: (1) request copies of their credit reports without permission from Defendants; (2) apply for credit; and/or (3) speak to any government agency, creditor, or third party debt  collector regarding the Accounts.  If any of are taken, the consumer is considered in breach of contract and must pay a $100.00 “reinstatement fee” to continue within the program.  See Contract, Exhibit B.

20. In addition to paying the above fees charged by the Defendants, the consumer agrees to share fifty percent (50%) of all “back-end monies” with Defendants.  These “back-end monies” result from federal lawsuits instituted by Defendants following the dispute process.  See Contract, Exhibit B.

21. Following the dispute process, many of the Accounts may remain on the consumer’s credit reports.  These Accounts become the subject of third party debt collection, which is the exact situation contemplated by the Defendants.  At this point, the consumer is directed to use a provided outline (“Complaint Outline”) to memorialize all contact with the third party debt collectors. Once completed, the consumer forwards the same to the Defendants.  (A true and correct copy of the Complaint Outline supplied by Defendants is attached hereto as Exhibit C and incorporated herein).

22. Following completion of the Complaint Outline, federal actions are instituted through a network of attorneys culled by Defendants RKL, Lock, and Manger to file said actions.  Said network of attorneys include, but are not limited to, Defendants RKL, Lock, and Manger.

23. Defendants, pursuant to the Contract, receive fifty percent (50%) of all monies resulting from the above federal actions.  Consumers are directed to forward said monies to Defendants within seven days of receipt.  See Contract, Exhibit B.

B. Factual Allegations As To The Plaintiff

24. In early 2006, Plaintiffs visited Defendant CAF’s website.

25. Soon thereafter, circa May 2006, Plaintiffs were persuaded to engage Defendants’ credit repair services.

26. On or about May 2006, Plaintiffs signed the Contract and completed the accompanying forms.

27. The Contract did not comply with the contractual requirement provisions of CROA.

28. The Contract provided, inter alia¸ that Plaintiffs would pay to Defendants an initial fee prior to any service by Defendants. Additionally, the Contract provided that Plaintiffs would pay Defendant $100.00 per Account to be disputed over the initial seven Accounts.

29. On or about July 28, 2006, Plaintiffs paid Defendants $1,433.33 (“Initial Payment”).  Thereafter, on or about August 31, 2008, Plaintiffs made an additional payment of $500.00 for the dispute of additional Accounts by Defendants.

30. Defendants did not fully perform any services for Plaintiffs before charging and receiving the Initial Payment.

V.   CLASS ACTION ALLEGATIONS

31. Plaintiffs bring this action individually and as a class action, pursuant to Rules 23(a) and 23(b) of the Federal Rules of Civil Procedure, on behalf of the following Class:  all persons in the United States of America who, beginning five years prior to the filing of this Complaint and continuing through the resolution of this action, paid money which was received by the Defendants and/or for whom Defendants performed any credit repair services.  For purposes of Count Two of this Complaint, Plaintiffs also bring this action solely on behalf of a Illinois Subclass of all such persons residing in the State of Illinois.

32. The Class is so numerous that joinder of all members is impracticable.   The Class numbers in the tens of thousands.  The identities of the Class members may be obtained from Defendants’ records.

33.   There are questions of law and fact common to the Class which predominate over any questions affecting only individual Class members.  The principal common questions are: (1) whether Defendants violated the CROA by charging or receiving payment for services from a consumer before fully performing such services; and (2) whether Defendants made false and misleading statements to Plaintiffs and the Class members.  The principal common questions for the Illinois subclass are: (1) whether Defendants violated the CSOA by charging or receiving payment for services from a consumer before fully performing such services; and (2) whether Defendants made false and misleading statements to Plaintiffs and the Class members.

34. Plaintiffs’ claims are typical of the claims of the Class, which all arise from the same operative facts and are based on the same legal theories.

35. Plaintiffs will fairly and adequately protect the interests of the Class.  Plaintiffs are committed to vigorously litigating this matter and have retained counsel experienced in handling class actions and claims involving unlawful business practices.  Neither Plaintiffs nor their counsel has any interests which might cause them not to vigorously pursue this claim.

36. This action should be maintained as a class action because the prosecution of separate actions by individual members of the Class would create a risk of inconsistent or varying adjudications with respect to individual members which would establish incompatible standards of conduct for the parties opposing the Class, as well as a risk of adjudications with respect to individual members which would as a practical matter be dispositive of the interests of other members not parties to the adjudications or substantially impair or impede their ability to protect their interests.

37. The Defendants have acted on grounds generally applicable to the Class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the Class as a whole.

38. The questions of law or fact common to the members of the Class predominate over any questions affecting only individual members.

39.   A class action is a superior method for the fair and efficient adjudication of this controversy.  The interest of Class members in individually controlling the prosecution of separate claims against Defendants is small because damages under the CROA and CSOA may be small.  Management of the Class claims is likely to present significantly fewer difficulties than those presented in many class claims.

VI.   CLAIMS

COUNT ONE

Credit Repair Organizations Act

40. Plaintiffs repeat and reallege all paragraphs above as if fully set forth herein.

41. At all times pertinent hereto, Plaintiffs were “consumers” as that term is defined by section 1679a(1) of the CROA.

42. At all times pertinent hereto, Defendants were “credit repair organizations” as that term is defined by section 1679a(3) of the CROA.

43. The CROA regulates the business practices of credit repair organizations.

44. During the relevant time period, Defendants violated the CROA in numerous respects, including but not limited to the following.

A. Prohibited Practices – untrue or misleading statements

45. Section 1679b(a) of the CROA prohibits untrue or misleading statements with respect to any consumer’s credit worthiness, credit standing or credit capacity to any consumer reporting agency or any person.

46. Defendants violated this provision by using promotional literature and advertising which contained uniformly false, untrue, deceptive and misleading statements regarding the credit repair services at issue and the Plaintiffs’ rights.

47. Defendants further violated this section by using false pretenses and falsely communicating to consumer reporting agencies that Plaintiffs were victims of fraud when requesting implementations of  fraud alerts.

B. Payment Violations – payment in advance, § 1679b(b)

48. Section 1679b(b) of the CROA states that “No credit repair organization may charge or receive any money order or other valuable consideration for the performance of any service which the credit repair organization has agreed to perform for any consumer before such service is fully performed.”

49. When a consumer retains the services of a credit repair organization, he or she is not required to make any payment for said services until the services have been fully performed, as required by section 1679b(b) of the CROA.

50. Despite this clear and unambiguous requirement, at all times relevant hereto, it was and is the practice and policy of Defendants to require and collect payment from consumers before any work has been fully performed on the consumers’ behalf.

51. Defendants’ payment scheme requires their customers to pay an initial fee which is collected before items are taken off the client’s credit report, and therefore is assessed before full performance of services.

52. At the time Plaintiffs made their $1,433.33 Initial Payment and a $500.00 subsequent payment, Defendants had not fully performed services.

53. As a result of the violations of the CROA, Defendants are liable to Plaintiffs and the Class for the greater of actual damages or the amount paid to Defendants, punitive damages, costs and reasonable attorneys’ fees, pursuant to section 1679g(a) and (b) of the CROA.

COUNT TWO

Illinois Credit Services Organizations Act

54. Plaintiffs hereby incorporate by reference each and every allegation contained in the foregoing paragraphs as if set forth fully herein.

55. The Illinois CSOA regulates all persons who, for money or valuable consideration, provides or performs, or represents that he or she can or will provide or perform, the service of improving a consumer’s credit record.  Persons or entities performing these services are called “credit services organizations.”  81 ILCS § 605/2.

56. At all times pertinent hereto, Defendant was a “credit services organization” as defined in section 605/5(3) of the CSOA.

57. The CSOA prohibits credit services organizations, as well as their salespersons, agents and representatives, from, among other things, charging for or accepting payment in advance of full and complete performance of their services 81 ILCS § 605/5(1); making, counseling or advising any buyer of credit services to make any statement which is untrue or misleading to a consumer credit reporting agency, 81 ILCS § 605/5(3); and from making or using any untrue or misleading representations in the offer or sale of the services which operates or would operate as a fraud or deception upon any person in connection with the offer or sale of the services of a credit services organization, 81 ILCS § 605/5(5).

58.   The provisions of the Illinois CSOA are not inconsistent with the provisions of the CROA and, under section 1679j of the CROA, Defendant is not exempt from the compliance requirements of the CSOA.

59. Defendant is prohibited from engaging in the activities described in sections 605/5 (1), (3), and (5) of the CSOA.  However, Defendant has violated those sections by: accepting payment prior to completion of its services and making uniformly false, untrue, deceptive and misleading statements regarding the credit repair services at issue and the Plaintiffs’ rights.

60. A violation of any provision of the CSOA is deemed by law to be a violation of the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS § 505/2 et seq., which provides for recovery of actual damages and attorneys’ fees and costs.  815 ILCS § 505/10(a) and (c).

61. By virtue of the violations of law as aforesaid, and pursuant to the CSOA, Plaintiffs and the Illinois Subclass are entitled to an award of actual damages in the amount paid by them to Defendant, reasonable attorneys’ fees and costs, and all other relief permissible under Illinois law.  815 ILCS § 505/10(a) and (c).

VII.   JURY TRIAL DEMAND

62. Plaintiffs demand trial by jury as to all issues so triable.

VIII.   PRAYER FOR RELIEF

WHEREFORE, Plaintiffs respectfully pray that relief be granted as follows:

(a) That an order be entered certifying the proposed Class under Rule 23 of the Federal Rules of Civil Procedure and appointing Plaintiff and their counsel to represent the Class;

(b) That an order be entered declaring that Defendants’ actions as described above are in violation of the CROA and the CSOA that the contracts shall be treated as void and may not be enforced by any court or any other person, pursuant to 15 U.S.C. § 1679f(c);

(c) That an order be entered enjoining Defendants from continuing to charge and receive amounts for services that have not been fully performed and from entering into contracts with Plaintiffs and members of the Class in violation of the CROA and CSOA;

(d) That judgment be entered against Defendants for actual damages pursuant to 15 U.S.C. § 1679g(a)(1) and the CROA and CSOA;

(e) That judgment be entered against Defendants for punitive damages pursuant to 15 U.S.C. § 1679g(a)(2) and the CROA and CSOA;

(f) That the Court award costs and reasonable attorney’s fees under the CROA and CSOA; and

(h) That the Court grants such other and further relief as may be just and proper.

Respectfully submitted,

FRANCIS & MAILMAN, P.C.

BY:

Attorneys for Plaintiff and the Class