Attorney General Lockyer Announces $1.89 Million Settlement in Telemarketing Fraud Case

For-Profit And Nonprofit Defendants Will Pay $1.44 Million In Consumer Restitution

Thursday, August 26, 2004
Contact: (916) 210-6000,

(MONTEREY) – Attorney General Bill Lockyer today announced court approval of a $1.89 million settlement of a consumer fraud lawsuit against a Florida-based telemarketing firm and the "nonprofit" credit counseling foundation it used to generate sales of its own products.

"These faceless entities exploited thousands of debt-strapped Californians," said Lockyer. "This excellent settlement holds them accountable for their fraud, requires them to pay back their victims and ensures they do not victimize other consumers."

Lockyer, along with Santa Clara County District Attorney George W. Kennedy and Monterey County District Attorney Dean Flippo, today simultaneously filed the lawsuit and settlement in Monterey County Superior Court. Superior Court Judge Robert O'Farrell approved the settlement.

The defendants who agreed to the settlement are Integrated Credit Solutions, Inc. (ICS), the telemarketing firm, and Lighthouse Credit Foundation (Lighthouse), the "nonprofit" debt consolidator.

The settlement requires ICS and Lighthouse to pay a combined $1.443 million in restitution to more than 7,000 California consumers. ICS and Lighthouse also will pay a combined $275,000 in civil penalties and $175,000 in reimbursement for investigation and prosecution costs. Additionally, the settlement permanently bars ICS and Lighthouse from engaging in the alleged unlawful business practices.

The telemarketing scheme, according to the complaint, violated state laws that prohibit false advertising and unfair business practices. The complaint also alleged ICS violated state and federal laws which prohibit disseminating unsolicited pre-recorded phone messages.

Additionally, Lighthouse violated state law by charging excessive monthly fees, and by failing to comply with licensing, registration, bonding and financial reporting mandates for nonprofit credit counselors, the complaint alleged.

ICS disseminated to Californians unsolicited pre-recorded phone messages containing untrue, misleading or deceptive statements, according to the complaint. The messages told consumers the call was being made on behalf of Lighthouse.

Consumers were told they had been approved by Lighthouse to consolidate their credit card payments at an annual interest rate as low as 1.5 percent. In order to enjoy the lower interest rate before their next billing cycle, consumers were told they had to immediately call a certain number.

The pre-recorded messages, however, served as a marketing tool for ICS. When consumers responded to the pre-recorded messages, they were connected with ICS instead of Lighthouse. Callers discovered that, rather than being pre-approved for Lighthouse's debt consolidation plan, they had to pay ICS up-front fees before they would be referred to Lighthouse. Additionally, ICS falsely told consumers that, as a pre-condition to enrolling in the Lighthouse program, creditors required consumers to buy ICS' "Money Matters" tool kit. Further, contrary to the claim made in the pre-recorded message, consolidating a consumer's credit cards to an interest rate of 1.5 percent is not a realistic possibility, the complaint alleged.

Californians who paid ICS' up-front fees and arranged with Lighthouse to consolidate their credit card payments also paid Lighthouse a monthly fee of up to $38. California law caps the monthly fee for debt consolidation services at $20.

Under the settlement's restitution provisions, ICS will pay a total of $1.020 million to former customers who have not already received a refund. Each former customer will receive $140. Additionally, ICS must fully refund current customers' up-front fees, if those customers adhere to the requirements of finishing the Lighthouse debt consolidation program. Current customers who do not satisfy those requirements will receive $140. Finally, Lighthouse must pay a total of $422,400 in restitution to customers who paid monthly fees that exceeded the maximum $20 allowed by state law.

Lockyer urged consumers to not assume an organization offering debt consolidation services is operating lawfully just because it is "nonprofit." He added consumers should ask the organization for written information on its program, including all fees. Most importantly, said Lockyer, consumers should consult with a credit counselor and obtain advice on all their options, such as self-budgeting, before entering a debt consolidation agreement. The Federal Trade Comission offers online advice on choosing a credit counselor at

Consumers who believe they have been victimized by debt consolidation solicitations can file a complaint with the Attorney General's Office online at, or by writing to the Public Inquiry Unit, P.O. Box 944255, Sacramento, CA 94244-2550.

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