Master Credit Corporation and Santi Khamvongsa each pleaded “no contest” to the criminal charge of false advertising in a settlement reached with prosecutors the last week of September in Santa Monica Superior Court, according to the Santa Monica City Attorney’s Consumer Protection Unit.

The city attorney’s case involved 12 victims who had paid the defendants a total of $10,775.

Prosecutors charged that the defendants had advertised that they would help repair individuals’ credit records when, in fact, they were actually doing nothing to help improve clients’ credit.

Master Credit also claimed nonprofit status, but in a separate action, the Internal Revenue Service stripped it of this status.

The defendants’ sentence stipulates that the defendants:

n must serve three years formal probation;

n must pay back a total of $10,775 to the victims;

n are forbidden from engaging in any credit-related work in California unless they post a $100,000 bond with the Department of Justice; and

n must cancel all advertisements in California.

The Santa Monica City Attorney’s Consumer Protection Unit began investigating the defendants earlier this year after receiving a complaint from a consumer who had paid Master Credit to perform credit repair work.

Master Credit was using a Santa Monica post office box to conduct its business.

The Consumer Protection Unit filed the first criminal charges on June 29th. The unit’s investigators discovered that Khamvongsa was operating a similar business in Las Vegas.

After the defendants failed to appear in court for their August 2nd arraignment, the City Attorney’s Office obtained arrest warrants and contacted the defendants at their Las Vegas office.

The defendants then voluntarily appeared in court and entered the settlement plea.

Under state law, it is a crime for a person to engage in false advertising, the city attorney’s office says.

Gary Rhoades, an attorney with the Consumer Protection Unit, said there is a long history of self-styled “credit repair” companies defrauding consumers.

“Credit records are important to everyone, and so these credit repair services can be very tempting,” Rhoades said. “This case puts consumers on notice that they should research companies before paying for such services.

“This case also tells credit repair companies that they will face criminal charges if they don’t obey the law.”

Consumers who are considering credit repair should check any company’s name with the Better Business Bureau and the California Department of Justice, Rhoades suggested.