A federal judge in Chicago has decided to allow federal
regulators to continue to lock down an online company accused of working with
others who listed fake rental properties on Craigslist to dupe customers into
signing up for a credit monitoring service.
On Feb. 21, U.S. District Judge Matthew F. Kennelly granted
the Federal Trade Commission’s request for a preliminary injunction against the
Credit Bureau Center LLC and its principal, identified as Michael Brown, to
allow a receiver to continue to control CBC’s assets and keep CBC and any of
Brown’s other ventures out of business.
The ruling comes a little over a month since the FTC filed
suit against CBC and Brown. The complaint centers on allegations of fraud
against the business, as well as violations of the Fair Credit Reporting Act,
the Free Annual File Disclosures Rule and the Restore Online Shoppers’
The FTC obtained a temporary restraining order against Brown
and CBC on Jan. 11, granting a court-appointed receiver control of the company’s
assets and effectively shutting the company down pending further proceedings.
In its complaint, the FTC alleged Brown and CBC, which
purported to offer free consumer credit reports through such sites as
eFreescore.com, CreditUpdates.com and FreeCreditNation.com, also partnered with
various affiliates allegedly running schemes to deceive customers into enrolling
in credit monitoring programs costing around $20-$30 per month.
According to the lawsuit, the FTC alleged two particular
affiliates, identified as Danny Pierce and Andrew Lloyd, defrauded customers
repeatedly under a scheme involving fake rental property listings on Craigslist.
When a potential tenant would respond to an ad, the complaint alleged Lloyd
would impersonate the owner or manager of the nonexistent rental property and
invite the tenant for a tour. However, before agreeing to conduct the tour, the
prospective tenant was required to provide information to obtain a credit
report through CBC.
When the customer signed up for the report, they would also
be enrolled in CBC’s credit monitoring service, and charged automatic monthly
The scheme raked in more than 146,000 sales for CBC from
2014-2017, the complaint alleged, generating more than $6.8 million in revenue
for CBC and $2.3 million for Pierce and Lloyd.
According to the complaint, consumer complaints to the
Better Business Bureau and the FTC prompted the federal action.
Brown and CBC have denied knowledge of the fake Craigslist
ads, and resulting fraud, pinning the blame on Pierce and Lloyd.
As such, Brown asked the judge to lift the restraining order
and deny the preliminary injunction.
However, Kennelly said he believed the FTC’s case to this
point has demonstrated Brown and CBC likely knew enough to allow the FTC to
keep control of CBC and its assets for now.
He pointed to text messages sent between Brown and Pierce in
which Brown allegedly instructed his affiliates to “increase or decrease the
level of traffic to its website depending on CBC’s needs” or “directed Pierce
to change the content of the landlord letter that directed consumers to its
website,” including a change specifically intended to “reduce complaints of
phishing against CBC.”
The judge also pointed to evidence indicating CBC had
received at least 87 calls to its customer service center referencing the
Craigslist ads just in the 60 days preceding the FTC’s lawsuit. And the judge
noted Brown and CBC were aware of more than 200 BBB complaints regarding the
fake Craigslist ads.
When combined with other evidence presented to date, the
judge said the FTC had thus far presented a case that Brown, individually, had
been either aware of or “recklessly indifferent about … the deceptive activity.”
“The FTC has established a reasonable likelihood of
succeeding on a contention that CBC hid its head in the sand and deliberately
avoided knowledge of complaints so that it could keep raking in the benefits of
Lloyd's and Pierce's activities,” the judge wrote.
Further, while court documents indicated Brown has argued
the FTC’s actions are harming his other business enterprises, the judge said
the receiver so far had not been able to separate CBC’s activities from that of
Brown’s other businesses, based on Brown’s supplied financial and accounting
“The only evidence that the TRO has had a negative impact on
CBC's affiliates is Brown's own testimony, which is unsupported on the present
record,” Kennelly wrote. “Brown did not identify any particular injured
affiliates (aside from Lloyd and Pierce, who made their money via deceptive
conduct) and did not describe the extent to which each was harmed.”
Brown and CBC are represented in the action by the firms of
Barclay Damon LLP, of Buffalo, N.Y.; Taft Stettinius & Hollister LLP, of
Chicago; and the Law Office of Parker R. MacKay, of Kenmore, N.Y.
The receiver, identified in court records as Robb Evans
& Associates LLC, is represented by the firm of Hiltz & Zanzig LLC, of