FTC Acts Against Alleged Credit Repair Scams

Alarmed by a rise in credit repair scams on the Internet, state and federal regulators took aim Monday against 16 companies--including a Los Alamitos firm--that allegedly sold bad or illegal advice to consumers struggling to recover from bankruptcy and other credit problems.

The companies used Web sites or unsolicited junk e-mail to target individuals with credit problems, offering to sell them credit repair “kits” that would erase their past financial problems, Federal Trade Commission officials said.

Most of the kits--costing $21.95 to $129.95--instructed consumers to create new identities for themselves by changing their names and addresses, using fake Social Security numbers or obtaining federal taxpayer I.D. numbers and passing them off as Social Security numbers.

But such actions violate state and federal laws and could put consumers at risk of criminal prosecution, regulators warned.

“People are being told to do things that are not legal,” said Andrea Burke, an attorney in the consumer fraud division of the Orange County district attorney’s office, one of nine state and federal agencies involved in Monday’s action.

Los Alamitos-based DG Publishing was one of six California companies named in complaints.

Owner John D. Govatos denied breaking any laws and said he was merely reselling credit repair manuals authored by someone else.

“We feel it’s our constitutional right to sell a book about anything we want,” Govatos said. “You can buy books about making an atomic bomb. Performing the act may be illegal, but selling information about how to do it is constitutionally protected.”

Nevertheless, Govatos said he no longer sells the manuals and has shut down his Credit Washer Web site.

Representatives of the major U.S. credit bureaus say there is no legal method to remove legitimate blemishes from a credit report.

“If it’s accurate, it stays on,” said Maxine Sweet, executive vice president of consumer education at Experian Inc., the Orange-based credit bureau.

The crackdown follows a similar move in February against 40 credit repair firms nationwide. FTC officials said they decided a second effort was needed because of the rapid growth of the scams on the Internet.

“When we looked on the Internet in March, we found this problem is not going away,” said Steven Baker, director of the FTC Chicago office, which organized the enforcement effort.

The FTC is seeking injunctions to prevent the firms from selling the credit repair kits. It also plans to impose civil fines, which would be used to make refunds to consumers.

The other California defendants are Fontana-based West Coast Publications, owned by Gilberto Lopez; San Diego-based Crescent Information Services; Los Angeles firms Internet Publications, owned by James Fite, and F.P.R., owned by Frederick P. Ray; and U.S. Publishing & List Exchange, a Santa Clara County firm owned by Vincent Conti Jr.

Company representatives did not return calls or could not be reached for comment.

* ONLINE SCAM: Federal regulators say Malibu-based Netfill wrongly billed up to 900,000 credit-card holders. A3