Model 1 Inc. and Creative Talent Management, two Fairfax County modeling agencies that have come under federal and local government scrutiny for their aggressive recruiting tactics, have agreed to forgive $3 million in consumer debts under a settlement with the Federal Trade Commission.

The settlement, entered Friday by Judge James C. Cacheris in the U.S. District Court for the Eastern District of Virginia, bans Model 1 and CTM from advertising or offering screen tests, casting calls or auditions when these activities are offered with the sale of any product or service, such as acting or modeling classes.

Both companies--and their presidents, Jason Hoffman of Model 1 and Ralph Edward Bell of CTM--also agreed to post a $500,000 bond before they ever sell modeling or acting classes again.

In a separate settlement, stemming from a contempt complaint filed by the FTC in July, the two talent-search companies also agreed to refund money to consumers who signed up for screen tests after May 31. The FTC expects these refunds to total about $200,000.

The settlements come three months after the FTC filed a complaint against Model 1, CTM and its presidents, accusing them of engaging in a "fraudulent scheme to lure consumers" into signing up for expensive training classes, costing up to $1,600, without much hope that they would get significant modeling work. The FTC also said the firms misrepresented that they were highly selective in scouting and screening for models and actors, when a review of more than 200 complaints revealed that no candidate who paid a deposit was ever rejected.

The FTC complaint also named Erickson Agency Inc., a booking company, and its president, Patricia Erickson (the estranged wife of Bell). That matter is still pending, with both sides unable to reach an agreement, an FTC official said yesterday. Erickson has denied the charges, saying they don't apply to her company, which does not train models but books 3,000 to 5,000 modeling jobs annually.

In response to the FTC complaint, all three firms agreed last May to sharply curb their sales pitches for their training classes--while denying that they had engaged in any illegal or wrongful conduct.

Shortly afterward, the FTC accused Model 1 and CTM of contempt by "flagrantly violating" their promise and soliciting consumers for screen-test auditions.

David T. Ralston Jr., an attorney for Model 1, CTM, Hoffman and Bell, said yesterday that "on balance we are satisfied with the outcome" of the settlement. "It's been a difficult period for Model 1, but I think, all things considered, it's a fair outcome."

Ralston said that Model 1 and CTM are no longer in the recruiting business. CTM had been all but dormant for the past few years, and Model 1 shut down its recruiting operations earlier this summer after the FTC complaint.

"The high-profile aspect of the business has been ended," Ralston said.

But the company is still giving acting and modeling classes to those consumers who signed up and already paid for the classes. Ralston said the classes should last until the end of the year to handle the more than 1,000 people who have signed up.

After that, he said, the future of Model 1 "remains to be seen."

The FTC complaint stemmed from hundreds of complaints filed with the Better Business Bureau and Fairfax County's office of consumer affiars.

The companies' scouting techniques "were egregious," an FTC official said. "The fact is they offered classes and have placed a number of people in modeling and acting jobs, but that doesn't negate the fact that consumers were misled as to why they were being recruited. They thought they were being brought in for jobs and only afterwards did they learn that they were brought in to take classes" which cost hundreds of dollars.

The FTC official said the $3 million debt-forgiveness program could affect several thousand consumers who entered into CTM or Model 1 contracts since 1995.