Direct Marketing Associates, which solicited potential car buyers using credit reports, settled charges lodged by the Federal Trade Commission that the company lied to consumers with low incomes and poor credit by telling them they had been approved for loans. The company and its owner were penalized $157,000, but that fine was suspended due to its inability to pay, the FTC said.
In its complaint filed in federal court, the FTC said Direct Marketing of Tempe, Ariz., also improperly obtained the names of the consumers from credit reporting agencies.
The company solicits prospective customers on behalf of car dealers and, according to the FTC, told potential customers "that a specific finance company would lend them money to buy a car." However, no licensed lender was lined up and no loans were made.
Direct Marketing was paid by individual car dealers seeking to target specific markets. The company's role was to identify potential buyers and contact them by mail.
The settlement prohibits the company "from telling consumers they are pre-approved for, or are likely to receive, an extension of credit or financing unless the defendants know that a lender can make good on the offer for all eligible customers," the FTC said.
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