The owner of a credit repair organization, who alongside a number of corporations, was sued by the Federal Trade Commission for violating the FTC Act, the Credit Repair Organizations Act, the Telemarketing Sales Rule, the Fair Credit Reporting Act, and the Gramm-Leach-Bliley Act has had his motion to dismiss denied by a federal judge.
The Background: Gerald Thompson, who owned and operated Youth Financial Literacy Foundation, and Financial Education Services, was sued by the FTC for allegedly scamming consumers into signing up for credit repair services. The companies were accused of also charging consumers upfront fees without providing the required disclosures.
The Argument: In his motion to dismiss, Thompson argued that he should not be held responsible because Youth Financial is a 501(c)(3) nonprofit and because he was an unpaid volunteer.
The Ruling: Unfortunately for Thompson, the Supreme Court has held that nonprofit organizations fall under the purview of the FTC Act, but beyond that, the allegations against Youth Financial demonstrate that it operated as a for-profit business and Thompson’s role as owner means he can be held accountable for the organization’s purported violations, noted Judge Bernard A. Friedman of the District Court for the Eastern District of Michigan.
- Judge Friedman came to similar conclusions with respect to the Credit Repair Organizations Act, the Telemarketing Sales Rule, the FCRA, and the Gramm-Leach-Bliley Act.
- “The problem for Thompson is that neither the FTC Act, the CROA, the FCRA, nor the GLB Act condition individual liability upon the receipt of compensation from an infringing business entity,” Judge Friedman wrote. “And there are no interpretive authorities supporting that contention. So whether Thompson ever received compensation as a Youth Financial executive is immaterial to the assessment of his own liability under these statutes.”
