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Small Businesses Bemoan Credit Shakedown

SEATTLE (CN) - "Thousands of small businesses" were "deceived, misled and cheated" by Dun & Bradstreet in a "pay to play" scam that sells useless credit products in exchange for a favorable credit rating, a construction company claims in a federal class action.

O&R Construction claims Dun & Bradstreet used "pure deception" to sell small business the "CreditBuilder" line of products, by falsely claiming there was a problem with the businesses' credit reports.

"Defendants' aggressive marketing campaign features high-pressure sales tactics, including misleading form letters, emails and sales call scripts, which falsely claim that there are problems on a small business's credit report with Dun & Bradstreet, which the CreditBuilder products can remedy," the complaint states. "The defendants sell small businesses expensive products that purport to improve their credit ratings and correct problems on their reports: CreditBuilder for $799/year, CreditBuilder Plus for $1,099/year and CreditBuilder Premium for $1,599/year (collectively, the 'CreditBuilder products')."

Dun & Bradstreet maintains an extensive database of information about the creditworthiness of small business, and licenses the information to use in making credit decisions. It has more than 205 million business records on companies around the world, according to its Feb. 29, 2012 Form 10-K filed with the Securities & Exchange Commission.

Businesses must have a Dun & Bradstreet-assigned Data Universal Number System (DUNS) number to apply for a government contract, according to the complaint.

"Defendants routinely stress the importance of a DUNS number and mislead customers into believing that they can obtain a DUNS number by purchasing a CreditBuilder product. In truth, DUNS numbers are automatically generated by D&B prior to any solicitation of the customer," the complaint states.

Dun & Bradstreet trains its sales force on how to "hard-sell" credit-monitoring products by using false information, the class claims.

"After bringing the weight of the Dun & Bradstreet name to bear upon target customers, the defendants employ other unlawful and deceptive sales tactics to instill fear in the minds of target customers. As set forth below, defendants issue uniform solicitations which falsely claim that: (a) 'inquiries' have been made about the target customer's credit; (b) the target customer has an 'incomplete' credit profile with D&B; and/or (c) the target customer has a Supplier Evaluation Risk ('SER') rating of 'High Risk of Financial Stress.' Each of these claims causes a small business owner reasonable and understandable concern, especially coming from Dun & Bradstreet. In the end, defendants strong-arm thousands of small businesses into purchasing CreditBuilder products each year by falsely claiming that the products will solve the 'problem' or dramatically improve the customer's credit profile," according to the complaint.

"Sales agents are given very little information about the small businesses listed in their sales queues. Despite this lack of meaningful information about the credit profile or needs of individual target customers, defendants train their sales agents to falsely tell every target customer that there have been multiple 'inquiries' into the small business's credit profile. So universal and indiscriminate is this tactic that sales agents frequently inform brand new businesses that there have been inquiries, when the business is too young to have had any, or that a defunct business has had inquiries, when it has been non-operational long enough not to have had any."


O&R Construction claims it was forced to buy Creditbuilder products in order to dispute false information on its credit reports.

"Indeed, defendants' customer service representatives, sales agents and websites throw up numerous road blocks to those business owners who attempt to dispute inaccurate 'delinquencies' without purchasing a CreditBuilder product. Defendants make it virtually impossible for a business owner to dispute negative credit references even though business owners should be allowed to dispute negative references for free," the complaint states.

"DBCC [lead defendant Dun & Bradstreet Credibility Corp.] also applies a nonsense category called DUNS Support Status ('DS Status') to any business who has not purchased a CreditBuilder product, implying that the business is in credit jeopardy or there is something wrong with its DUNS number. Defendants train their sales agents to tell target customers that a business in 'DS Status' will be perceived by the business community as either a start-up with no financial record or a struggling company that is on the verge of failure. Of course, sales agents offer 'verification' to remove this false and misleading appellation through the CreditBuilder products for the cost of one of the products, as well as a 'one time activation fee of $149 just to set up the account.'"

According to the 31-page complaint: "Businesses must 'pay to play' to maintain a favorable credit rating and score," and "Despite following the CreditBuilder product protocols, customers find that the product has failed to improve their business credit score or report, or otherwise perform as defendants promised."

And Dun & Bradstreet plays the game over and over again, the class claims: "CreditBuilder products must be renewed on an annual basis. When existing customers are satisfied with a strong credit score and report, they may choose not to renew their CreditBuilder product subscription. After expiration, these customers find that their D&B credit rating has fallen dramatically and they have been classified by DBCC as in financial risk and possibly failure. This occurs because, when a customer stops paying for CreditBuilder services, defendants intentionally lower the customer's D&B score and rating."

O&R Construction, owned Orin and Robyn Kolaitis, claims it was duped into buying the worthless credit products based on Dun & Bradstreet's false information: "One of the defendants' sales agents told Mrs. Kolaitis over the phone that O&R's credit rating was very low, that the company was rated a 'severe risk' and that there were some negative payment experiences on its credit report. This is a uniform sales misrepresentation used by defendants to induce plaintiff to purchase the CreditBuilder products. These 'negative payment experiences' included (i) a cash account purportedly opened in 2011 in the amount of $50 and (ii) a 'slow pay' account. These negative payment experiences were erroneous.

"When Mrs. Kolaitis explained that the claims were untrue, the sales agent told her that she could (a) contest the erroneous items on her report and (b) submit trade references to improve her score - if she bought the CreditBuilder product."

But O&R claims that even after it bought the product, Dun & Bradstreet lowered its credit rating because it rejected the references she submitted.

"The reason for this rejection was that: Dun & Bradstreet independently collects trade references from about 8,000 creditors that regularly report to it; these references are called 'trade tape.' Defendants have a secret, internal rule that trade references submitted through CreditBuilder will be rejected if they already appear on trade tape. This restriction is not disclosed to customers when purchasing CreditBuilder products," the complaint states.

O&R claims Dun & Bradstreet violated antitrust laws by conspiring to make its CreditBuilder products the only products available on the market that can address D&B's small business credit reports, and by monopolizing DUNS number-related credit monitoring. They want Dun & Bradstreet enjoined from wrongful marketing and sales of credit-monitoring products.

They also want disgorgement and actual and punitive damages for violation of the Washington Consumer Protection Act, negligent misrepresentation, fraudulent concealment, breach of contract and unjust enrichment.

Their lead counsel is Brad Moore, with Stritmatter Kessler Whelan & Coluccio.

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