For Release: August 5, 2003

New York Company That Offered Advance Fee Loans Settles FTC Charges

Defendants, Part of “Operation No Credit” Sweep, Are Enjoined From Deceptive Practices and Required to Pay $120,000 in Consumer Redress

Star Credit Services, Inc. of Holbrook, New York, and its owner, James Shovak are permanently enjoined from deceptively offering or selling advance-fee loans as a result of a settlement with the Federal Trade Commission. The FTC filed charges against the defendants in August 2002 as part of “Operation No Credit.” The Commission alleged that the defendants operated an unlawful advance-fee loan scheme by falsely guaranteeing, for an up-front fee, a loan to any consumer, regardless of their credit history, and falsely promising a full refund if the consumer did not get the promised loan. The settlement prohibits the defendants from misrepresenting material aspects of the goods or services they are offering for sale and misrepresenting any material aspect of the refund policy, and requires payment of $120,000 for consumer redress.

“Operation No Credit” was a joint law enforcement campaign targeting a wide range of credit-related frauds. The cases in this telemarketing sweep encompassed a variety of financial frauds that impacted consumers’ credit, including typical advance-fee credit cards, credit repair,
payday loan, debt adjustment, a debt negotiation, and identity theft scams.

The FTC’s complaint alleged that the defendants, Star Credit and Shovak, using newspaper classified ads and an Internet Web site, induced consumers to pay an advance fee ranging from $50 to $300 to obtain a guaranteed loan of a desired amount regardless of the consumer’s credit history. The defendants also guaranteed a refund to any consumer who did not get the promised loan. The FTC alleged that, in fact, consumers typically did not receive the loans promised, but instead received a packet of material providing contact numbers for lenders and consumer tips on how to apply for the loan. The FTC also contended that only after paying an advance fee did consumers find out that they were required to submit a rejection letter from each and every lender before obtaining a refund from the defendants. According to the FTC, in many instances, the defendants did not issue refunds even when consumers provided the requested letters. According to the FTC, these practices violated the FTC Act and the Telemarketing Sales Rule (TSR).

The settlement announced today permanently enjoins the defendants from: misrepre- senting material aspects of the goods or services they are offering for sale; requesting or receiving payments for loans or extensions of credit when the defendants have guaranteed or represented a high likelihood of success in obtaining the loan or extension of credit; misrepresenting any material aspect of the refund policy; and transferring customer lists.

The stipulated final judgment and order also prohibits the defendants from violating or assisting others to violate the TSR’s prohibitions against guaranteed advance-fee loans and against insufficient disclosure of the terms and conditions of the defendants’ refund policy. In addition, the order prohibits defendant Shovak from using aliases or assumed business names that misrepresent his true identity in the course of business dealings or in publicly filed documents.

The order requires the defendants to pay $120,000 in consumer redress. The order also contains an avalanche clause that imposes a $950,000 judgment if the defendants are found to have misrepresented or concealed material assets. Finally, the settlement contains various recordkeeping requirements to assist the FTC in monitoring the defendants’ compliance.

The Commission vote to authorize staff to file the stipulated final judgment and order for permanent injunction was 5-0. The settlement was filed in the U.S. District Court for the Eastern District of New York, in Central Islip, New York, and signed by the judge on July 31, 2003.

NOTE: This stipulated final judgment and order is for settlement purposes only and does not constitute an admission by the defendants of a law violation. Stipulated final judgment and orders have the force of law when signed by the judge.

Copies of the stipulated final judgment and order are available from the FTC’s Web site at and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1 877-382-4357), or use the complaint form at The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

Media Contact:
Brenda Mack
Office of Public Affairs
Staff Contact:
Barbara Anthony, Carole Paynter or Ann Weintraub
FTC’s Northeast Region - New York

(FTC Matter No: X020108)
(Civil Action No. CV-02-4500)

Last Modified: Friday, June 24, 2011