A marketing company that solicits customers for automobile dealers has agreed to settle Federal Trade Commission charges that it falsely told low-income and “credit-challenged” consumers that they were pre-approved for auto loans and improperly obtained their names from a consumer reporting agency.

The defendants are Direct Marketing Associates Corp. and its president and owner, John M. Rainey, Jr.

The company, according to the FTC's complaint, prepared sales solicitations for automobile dealers telling consumers that a specific finance company would lend them money to buy a car - but the finance companies featured in the ads lacked business licenses and didn’t actually make any loans.

The firm obtained lists of consumers from a credit reporting agency by falsely representing that the lists would be used to make prescreened firm offers of credit to consumers.

The settlement order bars Direct Marketing Associates and Rainey from telling consumers they are pre-approved for, or are likely to receive, an extension of credit or financing unless the defendants know that a lender can make good on the offer for all eligible customers.

The order also prohibits the defendants from obtaining credit reports from consumer reporting agencies without a purpose authorized by the Fair Credit Reporting Act. The order imposes a $157,000 civil penalty that is suspended based on the defendants’ inability to pay. The full judgment will be imposed if they are found to have misrepresented their financial condition.

The FTC's complaint and final order were filed in the U.S. District Court for the District of Arizona, Phoenix Division.

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