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Cortese v. Edge Solutions

September 24, 2007


The opinion of the court was delivered by: Hurley, Senior District Judge


Plaintiff Vincent Cortese ("Plaintiff" or "Cortese") brought the present putative class action against Defendant Edge Solutions, Inc. ("Defendant" or"Edge") alleging various violations of the Federal "Credit Repair Organizations Act" and the New York General Business Law. Presently before the Court is the Defendant's motion for summary judgment, which turns on whether Edge is a "credit repair organization" as defined in the Credit Repair Organizations Act, 15 U.S.C. § 1679 et seq. ("CROA" or the "Act').*fn1 For the reasons set forth below, the motion is denied.


The following material facts, drawn from the parties' summary judgment submissions, are undisputed unless otherwise noted.

Edge Solutions is a New York corporation. After having spoken with Plaintiff on the telephone regarding Plaintiff's indebtedness, Edge sent Plaintiff an application package and forms for a program offered by Edge known as the Debt Melt Down Program (the "Program"). The package included the Debt Melt Down Program Agreement Letter (the "Agreement") along with other documentation explaining the program. On February 26, 2001, Plaintiff signed the Agreement and the other documents required for participation in the Debt Melt Down Program.

The Debt Melt Down Program Letter Agreement describes the Program as "structured in a way to eliminate your debt over time through settlement arrangements with your creditors." Under the program, Cortese was to set aside $500 per month for the program, which amount would be automatically deducted from his bank account each month.

After three monthly payments were made, Edge was to establish a bank account in Cortese's name and use the account to pay down Cortese's debt.*fn2 Edge was to use its best efforts to negotiate a reduction in the principal balance of the credit obligations included in the program.*fn3 Edge was then responsible for issuing checks and paying fees to the creditors on Cortese's behalf. The Agreement expressly provided that it was Cortese's responsibility to make the agreed upon monthly payment and that the failure to do so can jeopardize agreed upon settlements. The Agreement states that for its services, Edge was entitled to 40% of the actual savings realized by Cortese through these negotiations with actual savings defined as "the full balance owed the creditor less the settlement amount." Plaintiff claims, however, that Edge took "substantial portions of each payment made by Plaintiff as fees."

The Agreement also contained the following provisions:


It is understood that no representation about any aspect of your credit rating can be made. Depending upon circumstances, credit can be enhanced, damaged, or not be altered, but in any case, it is beyond the control or scope of this program. It is also understood that Edge Solutions Inc. will make its best efforts to keep creditor communication and reaction, which may in some extreme cases include legal action against you to a minimum but cannot guarantee or assure such communication or reaction. . . .


The Debt Free Life Membership and Coaching Program is a service that is included in your Debt Melt Down Program. The cost of the program, $49.95 per month billed every month you are in the program, is figured into your program monthly payment stated above. You are not obligated to any additional monies into the Program for this service beyond your planned monthly payment. The intent of the program is to enhance program performance and to educate you, the client, to assure present and future success. The program includes, but is not limited to, scheduled coaching sessions as prescribed by your Financial Coach, the Money Mastery educational kit and workshop, [and] a regular newsletter containing valuable information about combating debt problems and building future wealth . . . .

POST DEBT MELT DOWNTM PROCEDURES . . . If the fee paid to Edge was $600.00 or greater, you are entitled to participate in The Post Closing Credit Restoration Program. The purpose of this program is to assure that your credit reports properly reflect the settlement and paid accounts that involved this program. This program is voluntary for you and its success is dependent upon your proper participation and follow through as dictated. Edge Solutions Inc. cannot guarantee any specific results with regard to this program.

Among other things, the package also included a letter entitled "How The Debt Melt Down Program Works." This letter explains, in paragraph 4, that "[t]his program cannot make any assurances as to the state of your credit while on this program. It is likely that your credit score and rating will deteriorate while on the program. Upon completion of the program, Edge will work with you for 12 months in a best effort rehabilitation of your credit rating." Plaintiff signed this letter on February 26, 2001. At the bottom of the letter, just above Plaintiff's signature is a sentence which reads "I have read, understand and agree to the above terms of this program."

Also in the package was a three page article entitled "How To Instantly Stop Harassing Calls and Letters From Third Party Bill Collectors" and a "Dear Customer" letter. The article states that you can stop unwanted phone calls and letters by invoking the fair Credit Collection Practices Act. After briefly describing the Act, the Articles goes on to state: "If you invoke the law very early . . . you may prevent an inquiry from a collection agency even showing up on your credit file or a note indicating that the account was turned over to outside collections. . . . This is good damage control for your credit history since either notation on your report would be considered very negative by a potential future lender." The "Dear Customer" letter states in part, "We will make every attempt to minimize any damage to your credit while you are on the program, though it is probable for some deterioration to occur. This is not unusual and we will help modify it upon completion of the program."

Cortese has submitted an affidavit stating that, based on Edge's representations, he believed that Edge's services would "result in a clean credit report at the end of their process" and "Edge's ability to repair any credit blemishes that [he] might have through the use of their 'Post Closing Credit ...

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