Federal Trade Commission v. Keith H. Gill Richard Murkey

Rule of Law:

Credit repair organizations violate the Credit Repair Organizations Act (CRO Act) and the Federal Trade Commission Act (FTC Act) by making untrue or misleading representations about their services, such as promising to legally remove accurate, non-obsolete negative information from credit reports, and by charging or receiving payment for services before they are fully performed.

Facts:

• Since 1995, Keith H. Gill, a California-licensed attorney, operated a law office, which began offering credit repair services to consumers.
• Richard Murkey operated a credit repair business from Gill's law offices from at least 1995 to 1999, using radio broadcasts, newspaper ads, telephone, and personal meetings to advertise services throughout the U.S.
• Murkey, during radio broadcasts and direct communications, told consumers that any type of negative information, including accurate and not obsolete items like bankruptcies and foreclosures, could legally and permanently be removed from credit reports, often promising results in six weeks to two months, even if the consumer still owed money on the account.
• Defendants deliberately did not ask consumers whether negative items on their credit reports were accurate or complete.
• After an initial 'free consultation,' Defendants typically demanded advance payments (between 25% and 50% of estimated costs) from consumers for their credit repair services, and billed them regularly regardless of service completion.
• Defendants' services primarily involved sending numerous dispute letters in consumers' names to credit reporting agencies, falsely alleging inaccuracies or non-ownership of accounts, without consumers' review or authorization.
• Gill maintained full access to Murkey's office and records, reviewed correspondence, communicated with CRAs, and considered consumers who signed retainer agreements with his firm to be his clients, thereby avoiding state registration requirements for Murkey's business.
• After an initial injunction, Gill and Murkey created a 'nonprofit' organization, Credit Restoration Corporation of America (CRCA), and continued to operate their credit repair business and collect money from clients through it.

Procedural Posture:

• On March 2, 1998, the Federal Trade Commission (FTC) filed an action against Keith H. Gill and Richard Murkey in the U.S. District Court for the Central District of California, seeking a permanent injunction and consumer redress for alleged violations of the CRO Act and FTC Act.
• On April 21, 1998, Defendants Gill and Murkey stipulated to preliminary injunctions barring certain practices.
• The FTC moved for summary judgment on August 30, 1999.
• Defendant Murkey filed an `ex parte` application to continue the summary judgment hearing, which the district court granted in part, rescheduling it for October 4 and extending response dates.
• Defendant Murkey's subsequent `ex parte` application for an additional extension was denied by the district court.
• Defendant Murkey filed his opposition with approximately 3,500 pages of unauthenticated exhibits two days late, followed by a declaration attempting authentication, to which the Commission objected.
• The district court excluded Murkey's exhibits for lack of authentication and as hearsay.
• After a hearing on October 7, 1999, the district court granted the FTC's motion for summary judgment in its entirety on November 3, 1999, permanently enjoining Defendants from the credit repair business and ordering them jointly and severally to pay $1,335,912.14 as equitable monetary relief.
• Defendants Murkey and Gill appealed the district court's decision to the United States Court of Appeals for the Ninth Circuit.