Attorney General's News Release

June 10, 1996

Nixon sues KC businesses charging advance fees for loans and credit cards as part of multi-state, FTC crackdown

St. Louis, Mo. — Missouri Attorney General Jay Nixon today joined with the Federal Trade Commission and 15 other state Attorneys General in a nationwide sweep against businesses that solicit advance fees for loans and credit cards from consumers.

Nixon made the announcement with FTC Chairman Robert Pitofsky and the other Attorneys General in St. Louis at the annual meeting of the National Association of Attorneys General.

Nixon is suing two Kansas City-area businesses that allegedly charged consumers as much as $269 for loans and credit cards which the consumers did not receive. Named as defendants in the federal lawsuits were Credit Source, located in Liberty, and Medical Plus Network, located in Kansas City.

“While their methods may differ, both these businesses represented to consumers who were strapped for cash or credit that they could obtain credit cards or loans after paying a fee in advance,” Nixon said. “Once the consumer paid the fee, however, they usually received only applications for credit cards or loans — something they could have obtained for free.”

Nixon said both businesses targeted people with poor credit histories and then used telemarketing to solicit customers throughout the United States. The FTC's new Telemarketing Sales Rule, which took effect last Dec. 31, makes it illegal for any telemarketer who guarantees consumers a loan or other credit to ask for money in advance.

According to the lawsuit, Credit Source, also known as TRI, would offer consumers an unsecured Visa or Mastercard and a prepaid long-distance calling card, with a $35 monthly charge applied to their local telephone bill for three consecutive months. Several consumers who declined the offer were billed $105 on their local telephone bills anyway, Nixon said.

Consumers were led to believe they had a high likelihood of receiving the credit card after they paid the $105 to Credit Source. Once this fee was paid, consumers received a letter containing a telephone number to call to receive a credit card application, Nixon said, rather than an actual credit card.

Medical Plus Network represents to consumers that, for an advance fee of $269, they are highly likely to receive loans or credit cards with low interest rates, with a money-back guarantee. Once they pay, consumers receive a packet listing various banks which Medical Plus Network claims have low interest rates. Again, Nixon said, consumers receive only application information rather than a loan or credit card and find that the “money-back guarantee” is extremely limited in scope.

“Advance fee loan scams prey on the very people who can least afford to be throwing away money,” Nixon said. “Law enforcement agencies on a state and national level are using the new Telemarketing Sales Rule to go after scam artists who take much and deliver little.”

Nixon said there are several tips for consumers to avoid being taken by advance fee loan scams:

• Legitimate lenders never “guarantee” or say that you are likely to get a loan or a credit card before you apply, especially if you have bad credit, no credit or a bankruptcy.
• If you don't have the credit offer in hand, or confirmed in writing, and a telemarketer asks you to pay an advance fee, don't. Such a solicitation is illegal.
• Check out unfamilar area codes, as they may be from Canada or the Caribbean and may indicate fraud that crosses international borders.

The lawsuit against Credit Source and several other businesses and individuals around the country under the TRI name includes Missouri, Illinois, Tennessee and Virginia. The lawsuit, filed in federal court in Springfield, Ill., seeks restitution and penalties from the Credit Source.

The lawsuit against Medical Plus Network was filed in federal court in New York City and includes Missouri, New York, New Jersey, Pennsylvania and Wisconsin. The suit also seeks restitution and penalties from the business.

In addition, the FTC filed five suits against advance fee loan businesses and state Attorneys General filed another seven suits. The other states involved in the sweep are Arkansas, California, Connecticut, New Mexico, North Carolina, Ohio, Texas and Vermont.

Missourians who have complaints or inquiries about advance fee loan scams can contact the Attorney General's Consumer Protection Hotline at 800-392-8222.

Inquiries from consumers should be directed to consumer@ago.mo.gov or 1-800-392-8222 (from within Missouri) or 573-751-3321 (outside Missouri).

All media inquiries should be directed to the Communications Office.

E-mail      Phone: 573-751-8844         Fax: 573-751-5818