FTC settles with four debt negotiators over false claims
Companies caused financial ruin, bankruptcy for consumers, Feds say
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
- How do I tell when card debt legally expires? – The statute of limitations in your state and your card agreement are the starting points, but individual cases can be complex ...
- Credit paranoia or credit smart? Which precautions are worth it – How to make sure that the desire to protect your credit information doesn't turn into an obsession ...
- Appeals court rejects $7.25 billion swipe-fee settlement – An appeals court overturned a 2012 swipe-fee settlement that allowed merchants to surcharge Visa and MasterCard credit card transactions ...