Government Grant & Loan Scam Banned From Credit Business

New York Attorney General Spitzer and the Federal Trade Commission (FTC) today announced settlements in cases brought against an Elmira-based company accused of preying on financially-troubled consumers with false promises of credit assistance.

According to Spitzer, Financial Services Network USA, Inc. (FSN) and its President, Paul Navestad, deceptively marketed a "Borrowing Made Easier Program" and a "Free Cash Grant Program" to unsuspecting consumers. These consumers were led to believe that by signing up for these programs and paying an advance fee, they would automatically receive a loan or cash grant.

Instead, all they received was a packet of information on how to apply for a loan or grant. Most consumers did not even qualify for these loans or grants. Consumers who actually applied were told that there was no money to make the loan.

FSN and Navestad were the targets of a case brought in 1996 by the New York State Attorney General’s Office which resulted in a settlement that required them to cease their deceptive business practices. The company continued to deceive consumers, however, by offering programs that claimed consumers were "pre-approved" for non-existent loans and grants.

In fact, the Free Cash Grant Program was promoted on letterhead and with a return address indicating that it was somehow connected to a federal program. Once consumers signed up for either of the programs and discovered the deception, they were unable to contact FSN or Navestad to obtain a refund. All telephone calls were handled by an automated system that directed consumers to leave a name and number for someone to call them back. None of the calls were returned.

Attorney General Spitzer’s office brought a motion for contempt in federal court for the Western District of New York against FSN and Navestad for violating the prior court order. At the same time, the FTC brought an action for violations of the Federal Trade Commission Act and Telemarketing Sales Rule.

"This settlement demonstrates that my office will do everything in its power to uphold the integrity of court orders and rid New York of businesses defrauding the public," Spitzer said.

FSN and Navestad will pay $350,000 in settlement of the charges, of which $250,000 will go toward a consumer restitution fund. The remaining $100,000 will be paid to New York State to cover the costs of the investigation.

The settlement permanently bans FSN and Navestad from advertising, marketing, promoting, offering for sale or selling of any credit-related goods or services in, to or from the State of New York, or assisting others in engaging in any of those activities. It also prohibits the company and its owner from misrepresenting in any fashion that consumers will receive grants or loans after the payment of a fee.

"I would like to commend the Federal Trade Commission for its cooperation in bringing these cases to a conclusion. It is an excellent example of federal and state cooperation to fulfill our joint mission of protecting the public," Spitzer said.

Any consumers seeking a refund are encouraged to contact the Federal Trade Commission at (877) FTC-HELP (1-877-382-4357) .

Individuals with any question may contact the Attorney General’s consumer help line at (800) 771-7755.

The Attorney General’s case was handled by Michael J. Danaher, Jr. Assistant Attorney General in the Binghamton Regional Office.