Nearly $13 million returned to consumers after settlement
FTC wins its largest credit counseling deception case
More than 287,000 consumers who used credit counseling and debt management companies are receiving refunds this week after the U.S. Federal Trade Commission resolved the largest debt management deception case in the agency's history.
Debt management companies charge debt-ridden consumers a fee for helping them get out of debt. Services typically include negotiating with credit card companies and other creditors to reduce the amount of debt owed or work out payment plans for the debt. The debt management company collects the consumers' payments and forwards the money to creditors.
According to the FTC's press release, AmeriDebt Inc. and DebtWorks Inc. and owner Andris Pukke returned nearly $12.7 million to consumers. Another $7 million will be returned to consumers involved in class-action settlements with the companies and related consumer credit counseling agencies.
AmeriDebt and other companies "engaged in deceptive practices in promoting and offering credit counseling and debt management plans (DMP)," according to the FTC. The FTC originally filed a complaint against Pukke and AmeriDebt in November 2003. According to investigators, the company made false claims that it was a nonprofit organization and advertised no upfront fees. "The complaint alleged AmeriDebt kept its clients' first payment under their DMPs as its own fee, rather than disbursing the money to consumers' creditors as promised," according to the FTC.
More than 460,000 consumers received debt management plans from one of 11 credit counseling agencies serviced by DebtWorks between Jan. 31, 1998, and Oct. 7, 2004. According to the FTC, the other agencies included: AmeriDebt Inc., Debticated Consumer Counseling Inc., A Better Way Credit Counseling Inc., Credicure Inc., Mason Credit Counseling Inc., Nexum Credit Counseling Inc., Neway Inc., The Credit Network Inc., Visual Credit Counseling Inc., Preactive Inc., and Debtscape Inc.
A court-appointed receiver has been investigating Pukke and his assets (overseas property and property held by his family and friends) for more than two years to determine what can be liquidated and returned to consumers. A judge issued a contempt order against Pukke in March 2007 for allegedly hiding assets from the receiver.
Consumers who feel they may be eligible for compensation from AmeriDebt or who have questions about the settlement can (888) 309-3816. Consumers who receive debt management plans from another agency can call (888) 305-3082.
To comment on this article, write to: Editors@CreditCards.com
Published: September 10, 2008
- FICO’s Scott Zoldi: Card-not-present fraud a growing threat – FICO analytics chief Scott Zoldi discusses the state of fraud protection amid the EMV shift and the use of trended data ...
- Supreme Court considers credit card surcharges – If New York's surcharge ban falls, other states could domino, bringing retailers a step closer to charging extra to use plastic ...
- Credit bureaus to refund $17.7 million for score marketing – TransUnion and Equifax lured consumers into buying costly credit scores not really used by lenders, consumer watchdog says ...