The Federal Trade Commission has come down hard on two Santa Barbara, Calif., companies accused of making fraudulent claims about how to obtain government-seized homes for a fraction of their true worth.

Both companies settled with the FTC rather than go to trial, entering into stipulated judgements which do not constitute admissions of guilt. Nevertheless, one company, Clarendon House, dba First National Data Group, will pay nearly $4 million in consumer redress, and the owners of Arlington Press, dba Consumer Data Services, must turnover three vintage Jaguars worth as much as $90,000 to the government.

In conjunction with several other federal, state and local law enforcers, the consumer watchdog agency also has moved against more than 50 scam artists who falsely claim they can help mortgage borrowers wipe away their poor credit and obtain new histories with new identifications numbers. The catch is that credit-impaired consumers who follow their advice are breaking the law.

The Jags will be sold by the government, with the proceeds going to the redress fund. And there are plenty of consumers who deserve to be recompensated, for these firms and others like them prey on thousands of people with a variety of misrepresentations designed to persuade them to fork over $100 or more for information that is essentially free.

Homes and other property taken by the government from criminals or to satisfy tax liens, among other reasons, generally sell at or close to their fair market value. And information about the government's sales programs is available at no charge from the agencies involved. "Ads that claim you can buy Jaguar at a government auction for $200 are fraudulent," says C. Steven Baker, director of the FTC's Chicago Regional Office.

The two companies are among five charged last November by the agency as part of Operation Auction Guides, a law enforcement and consumer education program intended to shut down scam artists and inform citizens about the need for caution in dealing with claims like these.

According to the FTC complaints, the companies advertised through direct mail and in classified ads. Consumers who called a tool-free number were pitched to purchase printed "guides" that supposedly would help them buy homes and cars for very little money or "pennies on the $."

"My advice regarding solicitations received in the mail: Don't be misguided by offers that sound too good to be true," said Pamela Prince of the U.S. Postal Service.

In conjunction with the effort to wipe out such swindlers, the FTC issued a new brochure, "Auction Guides: Not So Hot Properties," that advises consumers to contact individual government agencies about their sales programs. Information about upcoming auctions usually can be found in the business or classified sections of local or national newspapers as well as local radio and television. But remember, you'll probably pay close to full value.

In the credit repair ripoff, crooks use claims like "anyone can have a new credit file virtually overnight" or "credit start over" to induce unsuspecting consumers to pay $100 or more for a kit or package containing advise on how to apply for a new identification number from the Internal Revenue Service, Social Security Administration and credit reporting agencies. Not only are they advised to use the new number in place of their old one when applying for credit, they're told how to develop entirely new profiles by obtaining a new driver's license and securing "starter credit" accounts from companies that don't delve too deeply into an applicant's past.

All this is illegal, of course, and has been prosecuted vigorously by federal authorities. "These credit repair con games are spreading like wildfire on the Internet and in unsolicited junk e-mail," said Jodie Bernstein, director of the FTC's Bureau of Consumer Protection. "We want consumers to get the message that using a false social security number -- such as a taxpayer I.D. number -- to apply for credit violates federal law and will only compound their problems."

Published: May 17, 1999

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