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DANIEL K. CRANE-HIRSCH

Trial Attorney

Office of Consumer Litigation

Civil Division

United States Department of Justice

PO Box 386

Washington, DC 20044-0386

Telephone: 202-616-8242

Facsimile: 202-514-8742

daniel.crane-hirsch@usdoj.gov

Attorney for Plaintiff United States of America

UNITED STATES DISTRICT COURT

DISTRICT OF ARIZONA – PHOENIX DIVISION

)

UNITED STATES OF AMERICA, ) Civil Action No.

)

Plaintiff, )

v. )

)

DIRECT MARKETING ASSOCIATES, CORP .,)

and JOHN M. RAINEY, JR. )

)

Defendants. )

)

COMPLAINT FOR CIVIL PENALTIES, PERMANENT

INJUNCTION, AND OTHER EQUITABLE RELIEF

Plaintiff, the United States of America, acting upon notification and authorization

to the Attorney General by the Federal Trade Commission (“FTC” or “Commission”), for

its Complaint alleges as follows:

1. Plaintiff brings this action under sections 5(a), 13(b), and 16(a) of the

Federal Trade Commission Act (“FTC Act”), 15 U.S.C. §§ 45(a), 53(b), and 56(a), and

the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. §§ 1681-1681x, to obtain monetary

civil penalties and injunctive or other relief for Defendants’ violations of the FTC Act and

the FCRA.

JURISDICTION AND VENUE

2. This Court has subject matter jurisdiction over this matter under 28 U.S.C.

§§ 1331, 1337(a), 1345, and 1355, and under 15 U.S.C. §§ 45(a), 53(b), and 56(a).

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3. Venue is proper in this District under 15 U.S.C. § 53(b) and under 28

U.S.C. §§ 1391(b) - (c) and 1395(a).

DEFENDANTS

4. Defendant Direct Marketing Associates, Corp. (“DMA”) is a for-profit

corporation organized, existing, and doing business under the laws of the State of

Arizona. Its principal place of business is located at 1829 W. Drake St., Tempe, Arizona

85283. At all times relevant to this Complaint, Defendant DMA has transacted business

in this district.

5. Defendant John M. Rainey, Jr. (“Rainey”) is an owner and director of

DMA. At all times relevant to this Complaint, acting individually or in concert with

others, Rainey has formulated, directed, controlled, or participated in the policies, acts, or

practices of DMA, including the various acts and practices set forth herein. Rainey

transacts or has transacted business in this District.

COMMERCE

6. The acts and practices of Defendants as alleged in this Complaint are and

have been in or affecting commerce, as “commerce” is defined in section 4 of the FTC

Act, 15 U.S.C. § 44.

THE FAIR CREDIT REPORTING ACT

7. The FCRA was enacted in 1970, became effective on April 25, 1971, and

has been in force since that date.

8. Section 621 of the FCRA, 15 U.S.C. § 1681s, authorizes the Commission to

use all of its functions and powers under the FTC Act to enforce compliance with the

FCRA by all persons subject thereto except to the extent that enforcement specifically is

committed to some other governmental agency, irrespective of whether the person is

engaged in commerce or meets any other jurisdictional tests set forth by the FTC Act.

The Defendants in this case are subject to the jurisdiction of the Commission.

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DEFENDANTS’ COURSE OF CONDUCT

9. DMA is a marketing company that provides, inter alia, direct mail

marketing services to automobile dealers located throughout the United States. DMA

contracts with the automobile dealers to mail one or more solicitations for the purchase of

automobiles to consumers who meet certain demographic and/or credit history criteria.

These solicitations are intended to induce consumers to visit the dealers’ showrooms to

purchase vehicles.

10. DMA is responsible for the content of the solicitations that are used in the

marketing programs that it offers to dealers. Each dealer, working with DMA, selects the

solicitation or solicitations to be used in DMA’s mailings for that dealer.

11. The solicitations prepared and disseminated by DMA state that a named

finance entity, such as “Evergreen Automotive Acceptance,” has “pre-approved” the

consumer receiving the solicitation for a loan to purchase a vehicle at the automobile

dealer identified in the solicitation. In numerous instances these solicitations are signed

by Defendant Rainey. The solicitations instruct consumers to contact or visit the

automobile dealers identified in the solicitations.

12. DMA, in consultation with the dealers, establishes the number of consumers

to receive solicitations and the demographic and/or credit history criteria by which the

consumers are selected to receive the solicitations. DMA obtains names and addresses of

consumers who meet those criteria, prints the sales solicitations for the dealers, stuffs the

envelopes, and mails the solicitations to the consumers according to the schedule

established with each dealer.

13. In many instances, DMA has obtained the names of consumers who meet

the selected criteria to receive solicitations from a “consumer reporting agency” as that

term is defined in section 603(f) of the FCRA, 15 U.S.C. § 1681a(f). The information

provided by the consumer reporting agency constitutes a “consumer report” as defined by

section 603(d)(1) of the FCRA, 15 U.S.C. § 1681a(d)(1).

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COUNT I

VIOLATIONS OF SECTION 5 OF THE FTC ACT

14. Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), prohibits unfair or

deceptive acts or practices in or affecting commerce, including false or misleading

statements or representations in advertising or sales solicitations.

15. Through the means described in Paragraphs 9 to 13, Defendants have

represented, expressly or by implication, that the consumers receiving the solicitations

have been pre-approved for automobile financing.

16. In truth and in fact, the consumers receiving the solicitations have not been

pre-approved for automobile financing. The finance companies identified in DMA’s

solicitations, such as “Evergreen Automotive Acceptance,” are not functioning finance

companies, are not registered or licensed as required by law in numerous states where

DMA has disseminated solicitations, and have not made financing available to the

consumers who received the solicitations. Defendants had no arrangement or agreement

with any other party to pre-approve the consumers for automobile financing.

17. Therefore, the representations set forth in Paragraph 15 were, and are, false

or misleading, and constitute deceptive acts or practices in or affecting commerce in

violation of section 5(a) of the FTC Act 15 U.S.C. § 45(a).

COUNT II

VIOLATIONS OF THE FAIR CREDIT REPORTING ACT

18. Section 604 of the FCRA, 15 U.S.C. § 1681b, prohibits consumer reporting

agencies from providing consumer reports to third parties except for certain enumerated

“permissible purposes.” Section 604(c) of the FCRA, 15 U.S.C. § 1681b(c), establishes a

permissible purpose in connection with the making of a “firm offer of credit or

insurance.” That term, also known as a “prescreened offer,” is defined in section 603(l)

of the FCRA, 15 U.S.C. § 1681a(l), as an offer that will be honored (subject to certain

exceptions) if the consumer, based on information in his or her consumer report, is

determined to meet the criteria pre-specified by the offeror.

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19. Section 604(f) of the FCRA, 15 U.S.C. § 1681b(f), prohibits any person

from using or obtaining consumer reports from a consumer reporting agency unless (a)

the reports are obtained for a permissible purpose, i.e., a purpose for which the consumer

reporting agency is authorized to provide reports under the FCRA, and (b) each such

purpose is certified in accordance with section 607 of the FCRA, 15 U.S.C. § 1681e.

20. In the course of their business, Defendants have obtained consumer reports

from a consumer reporting agency by representing that they have a permissible purpose

under section 604(c) of the FCRA, 15 U.S.C. § 1681b, to obtain those reports, namely,

that DMA would serve as the processor of the information received from the consumer

reporting agency on behalf of a finance company, which would use that information to

make firm offers of credit to consumers.

21. Defendants did not have a permissible purpose to obtain consumer reports.

The reports were not used to make firm offers of credit as set forth in section 604(c) of

the FCRA, 15 U.S.C. § 1681b(c). DMA does not provide financing, and the finance

companies identified by Defendants were not functioning finance businesses, did not

provide loans to consumers receiving the solicitations, and were unable to honor the

offers made to consumers in the solicitations. Defendants had no arrangement or

agreement with any other party to ensure that consumers who met pre-set criteria would

receive an offer of credit.

22. By obtaining information from a consumer reporting agency without having

a permissible purpose for which the information was authorized to be furnished,

Defendants have violated section 604(f) of the FCRA, 15 U.S.C. § 1681b(f).

23. Pursuant to section 621(a)(1) of the FCRA, 15 U.S.C. § 1681s(a)(1), the

acts and practices alleged herein also constitute unfair or deceptive acts or practices in

violation of section 5(a) of the FTC Act, 15 U.S.C. § 45(a).

INJUNCTIVE RELIEF FOR FTC ACT VIOLATIONS

24. Defendants have violated section 5 of the FTC Act as described above.

Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), empowers this Court to grant injunctive

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relief and such other relief as the Court may deem appropriate to halt and redress

violations of the FTC Act.

CIVIL PENALTIES AND INJUNCTIVE RELIEF

FOR VIOLATIONS OF THE FAIR CREDIT REPORTING ACT

25. Section 621(a)(2)(A) of the FCRA, 15 U.S.C. § 1681s(a)(2)(A), authorizes

the Court to award monetary civil penalties of not more than $2,500 per violation of the

FCRA in the event of a knowing violation, which constitutes a pattern or practice of

violations. Defendants’ violations of the FCRA, as alleged in the Complaint, were

knowing and constitute a pattern or practice of violations.

26. Each instance in which Defendants procured a consumer report in violation

of section 604(f) of the FCRA, 15 U.S.C. § 1681b(f), constitutes a separate violation of

the FCRA for the purposes of assessing monetary civil penalties under section 621 of the

FCRA, 15 U.S.C. § 1681s. Plaintiff seeks monetary civil penalties for every separate

violation of the FCRA.

27. Under section 13(b) of the FTC Act, 15 U.S.C. § 53(b), this Court is

authorized to issue a permanent injunction prohibiting Defendants from violating the

FCRA.

PRAYER FOR RELIEF

WHEREFORE, Plaintiff respectfully requests that this Court, pursuant to 15

U.S.C. §§ 45(a), 53(b), 1681s, and 1691c, and pursuant to this Court’s own equitable

powers:

1. Enter judgment against Defendants and in favor of Plaintiff for each law

violation alleged in this Complaint;

2. Enter a permanent injunction to prevent future violations of the FCRA and

the FTC Act by Defendants;

3. Award Plaintiff monetary civil penalties from Defendants for each violation

of the FCRA as alleged in this Complaint;

4. Order Defendants to pay the costs of this action; and

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5. Award Plaintiff such additional relief as the Court deems just and proper.

Dated: March 25, 2010

Of Counsel:

JESSICA RICH

Acting Associate Director

Division of Privacy and Identity

Protection

REBECCA E. KUEHN

Assistant Director

Division of Privacy and Identity

Protection

WILLIAM HAYNES

KATRINA A. BLODGETT

Attorneys

Division of Privacy and Identity

Protection

Federal Trade Commission

600 Pennsylvania Ave., NW

Washington, DC 20580

Respectfully submitted,

Attorneys for United States of America

TONY WEST

Assistant Attorney General

DENNIS BURKE

United States Attorney

District of Arizona

EUGENE M. THIROLF, Director

KENNETH L. JOST, Deputy Director

Office of Consumer Litigation

/s Daniel K. Crane-Hirsch

DANIEL K. CRANE-HIRSCH

Trial Attorney

United States Department of Justice

Office of Consumer Litigation

PO Box 386

Washington, DC 20044-0386

Telephone: 202-616-8242

Facsimile: 202-514-8742

daniel.crane-hirsch.@usdoj.gov

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