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UPDATE: FTC Charges Firm Deceived Credit Card Customers

 (Updated to add additional comment beginning in 10th paragraph.)

   By Judith Burns
   Of DOW JONES NEWSWIRES

WASHINGTON -(Dow Jones)- The Federal Trade Commission announced charges Tuesday against an Oregon company it claims deceived customers with promises they could repair their credit histories and obtain cash advances using the firm's "platinum-level" card.

Low Pay, Inc., based in Beaverton, Oregon, and doing business as LPC Inc., lowpaycard.com, and mylpcard.com, was charged in the Oct. 28 complaint, filed in federal district court in Oregon, along with its owners and related companies.

The FTC is seeking court-ordered refunds for Low Pay's customers and a permanent ban on the allegedly unlawful practices by the firm. Low Pay, without admitting to any wrongdoing, agreed to an interim order last week barring it from deceiving customers about the card's terms, the FTC said.

The lawsuit, approved on a 4-0 vote by the commission, alleges that Low Pay promised consumers they could build their credit with a "pre-approved" credit card offering a $7,500 credit line and cash advance benefits. The catch: Although the card appeared to be a regular credit card, the FTC said it could be used only to purchase products from the defendants' catalog--at greatly inflated prices--and only for a portion of the purchase price.

Payments weren't reported to credit agencies, so the card didn't help build or repair customers' credit histories, and the cash advance feature was nothing more than an opportunity to apply for a high-cost "payday loan" from a third- party lender, the FTC alleged.

The lawsuit also claims Low Pay failed to give customers adequate notice that it would debit their bank accounts for 30% of each purchase, plus shipping, and would charge nearly $400 of fees to obtain and activate the card. It said the company's printed disclosures were "confusing, contradictory, out of context, and buried in pages of fine print" and that Low Pay withheld details until consumers signed on for the card and provided their bank account numbers.

Despite assurances that the card and purchases came with a 30-day money-back guarantee, the FTC said Low Pay sometimes used "hardball tactics" to scare consumers from seeking refunds, including by threatening to report them to a credit firm for "non-payment." More than 60,000 consumers cancelled the card, yet only about 1,400 have received refunds of the $120 activation fees they paid, the FTC said.

Makan Delrahim, an attorney who represents Low Pay Inc. and its president Mardan Afrasiabi, said his clients are cooperating with the FTC and hope the complaint can be resolved shortly without a trial.

"We're continuing to work with the agency on addressing its concerns with regard to disclosures and marketing practices," Delrahim said.

Low Pay was directly owned by Afrasiabi and defendant Ramin Rahimi until last year. Michael Mallow, an attorney representing Rahimi, said Low Pay agreed to the interim order because the company doesn't believe it was engaging in the conduct identified in the order.

"Simply put, Low Pay and its principals believe the FTC's case as articulated in its complaint and as described in its press release is not persuasively supported by the evidence or an objective review of Low Pay's marketing material," Mallow said in a statement. He added that Low Pay hopes to achieve " an amicable and economically viable resolution of this dispute."

-By Judith Burns, Dow Jones Newswires; 202-862-6692; Judith.Burns@dowjones.com

  (END) Dow Jones Newswires
  11-03-091626ET
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