Two Baltimore County residents alleged to have misled consumers in a "gold card" credit-marketing scheme have agreed to give up the business and $100,000 in frozen assets to settle a fraud complaint filed by the Federal Trade Commission.
Between 8,000 and 10,000 people -- most of them in Maryland and the Washington area -- did business with the companies operated by the defendants, who advertised on television and ++ newspapers with such appeals as, "Need credit for the holidays?" and "Instant $1,500 line of credit," the FTC said yesterday.
Agreeing to the settlement were Stuart Simon, also known as Stuart Blumberg; Robert Dawson, also known as Bob Edwards; and their Pikesville-based companies, First Capital Financial and Midas Financial, which also operated under the name Creditline Maryland. The FTC agreed to drop charges against a third
defendant, Henrietta Timmerman, the mother of Simon.
Simon is serving a 10-year state prison term for the theft of automatic telephone dialing equipment and illegal use of such devices to solicit business.
The companies used automatic-billing 976 telephone numbers to charge customers $49.95 for a "First Capital Gold Card" -- which they suggested was similar to MasterCard, Visa or American Express gold cards. But the First Capital card could only be used, with an additional payment of $30, to order goods from the defendants' own catalogs, according to the FTC complaint.
The appeal to customers with difficulty obtaining credit included assurances that the companies could help them build a good rating by reporting prompt payments to a credit reporting agency. But the FTC said no such reporting took place.
The defendants falsely claimed that several area businesses would accept the First Capital card as a "reference" after three months' use, according to the complaint in U.S. District Court.
The agreement calls for the defendants to be banned for life from engaging in credit-related businesses and to turn over about $100,000 in company assets that had been frozen under a federal court order since the complaint was filed.
David Medine, the FTC's acting associate director for credit practices, said the money will be used to compensate defrauded consumers. The FTC has records identifying people who did business with the credit companies and expects to contact most who may be eligible for partial refunds, Mr. Medine said.
He said television advertising -- not customer complaints -- prompted the investigation.
The case, filed in July 1990, was the first enforcement action by the FTC involving "gold card" operations and the use of 900 or 976 telephone exchanges in a credit scheme.