USA   |   UK   |   Australia   |   Canada
ADVERTISEMENT

FTC settles with four debt negotiators over false claims

Companies caused financial ruin, bankruptcy for consumers, Feds say

By

The U.S. Federal Trade Commission on Thursday announced the settlement of a nationwide case involving four companies that allegedly claimed they could reduce consumers' debt by up to 60 percent. The false claims led many people who signed up for the services into financial ruin and bankruptcy, according to the FTC.

The four debt negotiation companies were among seven companies and three people charged with violating the deceptive and unfair practices clause of the Federal Trade Commission Act. The case dates back to September 2006, when the first enforcement actions were taken against the companies. 

"All of the defendants in the nationwide operation were charged with misrepresenting how much they could reduce consumers' debt, and  not adequately disclosing the likelihood that consumers would be sued if they took the defendants' advice and stopped paying creditors," according to an FTC news release. "The FTC also charged the defendants with not disclosing that consumers' account balances would grow from interest, interest rate increases, late fees and other charges ..."

National Support Services LLC, Homeland Financial Services LLC, Financial Liberty Services LLC and United Debt Recovery LLC agreed to settle the case, without admitting violations of the law. In September 2007, the two men who founded and controlled the four companies paid judgments totalling $110,000 as a result of the FTC charges.

As part of the settlement, the companies are prohibited from falsely:

  • Representing that enrolling in a debt negotiation program will allow consumers to pay off their credit card or other debts for a significantly lower amount.
  • Claiming that consumers' creditors will negotiate settlements to accept significantly less money.
  • Claiming that debt negotiators can make better settlement deals with creditors than consumers themselves can.
  • Claiming negotiators have relationships with creditors that allow them to secure favorable settlements.
  • Stating that negative information a on client's credit report as a result of using a debt negotiation service will be removed once the program ends.
  • Claiming that creditors are unlikely to sue borrowers participate in debt negotiation programs or who fail to make minimum payments on their debts.

The companies are also barred from failing to clearly disclose the full terms of their debt negotiation services with potential clients. 

To comment on this article, write to: Editors@CreditCards.com

   

Published: September 25, 2008


If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.

Three most recent Legal, regulatory, privacy issues stories:
  • 6 ways to thwart pickpockets – Cybercriminals and data breaches get all the headlines today, but don't forget low-tech, fast-fingered pickpockets are still out there, blending in the crowd, eager to snatch your wallet ...
  • U.S. Bank refunds $48 million for add-ons – The Consumer Financial Protection Bureau extended its crackdown on bank add-on products to U.S. Bank, which charged for credit protection products that consumers didn't always receive ...
  • Fed holds course toward rate hike in 2015 – The Federal Reserve indicated that it will keep interest rates at historic lows for the time being to support the job market, but higher rates are coming ...

Share This Story




Follow Us!


Credit Card Rate Report

Updated: 09-30-2014

National Average 15.05%
Low Interest 10.37%
Balance Transfer 12.73%
Business 12.80%
Student 13.24%
Cash Back 14.91%
Reward 15.02%
Airline 15.46%
Bad Credit 22.73%
Instant Approval 28.00%

ADVERTISEMENT
ADVERTISEMENT