Court Orders Halt to Sale of ‘Free’ Credit Cards : Finance: Agoura Hills firm is one of several accused of preying on cash-strapped consumers.
Visa U.S.A. and Mastercard International said Monday that they have obtained a temporary restraining order stopping an Agoura Hills firm from drawing people into an alleged pyramid scheme offering “free” credit cards.
The scheme by Platinum Associates Inc. is said to have taken in as much as $3 million from 30,000 people nationwide.
The order, obtained in U.S. District Court in San Francisco last Friday, effectively shuts down the company’s operations nationwide, at least temporarily. The order came one day after a state Superior Court judge halted the firm’s operations in California and froze its assets in the state at the request of the California attorney general’s office.
The alleged scheme is only the latest to snare financially strapped people with the promise of instant credit. “There are a lot of scams out there,” said Cindy A. Liebes, an attorney with the Federal Trade Commission in Atlanta, which on Monday settled charges in an alleged “gold card” scam involving an Alabama firm.
While these scams are not new, they appear to be proliferating, as operators attempt to exploit consumers suffering from an economic slump that has cost thousands of jobs.
The suits filed by the state and Visa and Mastercard against Platinum Associates said the firm recruited participants in the alleged scheme by promising “free” secured credit cards and “free” life insurance for a $24.95 fee. According to the suits, participants were also told that they could become rich by signing up others, receiving $1,100 for each new recruit.
The suits maintain that Platinum Associates, also known as P.A.I., is not authorized to market credit cards or insurance. The suits also state that P.A.I. does not have a relationship with any bank or insurance company authorized to market the financial products.
Authorities said that no one has yet received a credit card or insurance, though Platinum did not promise either until after Jan. 1. In addition, only a few people have been paid anything for bringing new people into the scheme, authorities said.
Visa and Mastercard are seeking to have Platinum Associates barred from using their names in its solicitations. The state is seeking to have the scheme halted permanently and the money returned to consumers.
A representative of Platinum could not be reached for comment. A fax sent to its office was unanswered. Its telephone was answered with a recorded message stating that no meetings would be held and no money collected because of the court orders.
Authorities identified Platinum’s founder as Robert L. Darnall, who recruited participants at seminars at hotels in California and at least three other states. California Deputy Atty. Gen. Albert Sheldon said that Darnall was fined by authorities in Washington state last year in connection with a “house of your dreams” scheme.
The FTC case involved National Credit Services of Ozark, Ala., which marketed secured cards and merchandise catalogues to people with bad credit. The FTC said consumers received postcards telling them to call a 900 number to get recorded information about a credit card. When they called, consumers were told to call a second 900 number, running up a tab of nearly $60. The FTC said that while consumers did receive secured cards, the marketing was deceptive because consumers weren’t told the cost of the call, nor were they told upfront that they would receive a secured credit card, which requires a deposit.
Sheldon Lustingman, a New York lawyer representing National Credit, said the firm has changed its sales pitch to comply with the FTC order. The company admitted no wrongdoing.
