United Debt Counselors to refund some fees
FTC says debt settlement company targeted credit card users with deceptive claims
Expert on consumer credit laws and regulations.
A Texas company will refund about 6 percent of the $9 million in fees paid by clients who did not get promised debt relief, under a proposed settlement with the U.S. Federal Trade Commission.
The FTC announced the settlement Tuesday with United Debt Counselors LLC, saying the company targeted credit card users nationwide with deceptive claims of debt relief.
The company sent 60,000 to 100,000 mailings a week to consumers, according to the FTC.
The mailings “looked like official documents from a bank or attorney, and claimed that typical customers would have their credit card debt cut in half and become debt-free within 36 months,” the agency said.
In fact, fewer than half of clients completed the program, and not all of them were debt free after 36 months, according to the agency.
The company also charged upfront fees without first sending a knowledgeable sales representative to discuss the service in detail and answer questions, as required under the Telemarketing Sales Rule, according to the government’s complaint and its proposed settlement in U.S. District Court for the Eastern District of Texas. The fees deducted from debtors’ payments were only disclosed fully after clients had enrolled in the program, the FTC charged.
Of the settlement, $500,000 will be refunded to consumers who paid fees to the company without getting promised debt reduction. The clients will be identified and reimbursed by the agency, court papers said.
“We’re not able to fully reimburse people who are requesting refunds,” said Eric Roberson, the FTC attorney in Dallas who conducted the investigation. An undisclosed number of consumers lost an estimated $9 million in fees to the company without receiving the debt relief promised, he said.
The remainder of the $9 million settlement above $500,000 is suspended based on the company’s financial status and disclosure statements filed by three company officials, according to court papers. If the officials are found to have misrepresented their financial status, the full settlement becomes due.
The filing names David Melrose as a member of United Debt Counselors LLC, and Kirk Lanahan and Corinne Maples as officers of the company. They neither admitted nor denied wrongdoing.
If approved by a judge, the order will require the company to reform its business practices in compliance with the law and agree to compliance monitoring.
Based in the Dallas suburb of Frisco, the company started in 2011. It was formerly known as United Debt Services and also used the name Department of Negotiations. It has 107 complaints on file at the Better Business Bureau. Some consumers complained of receiving harassing letters bearing phrases “Urgent” and “Second Notice,” implying they had delinquent debts. Some said they were rebuffed when they asked the company to take them off its mailing list.
Of people who signed up for the company’s debt relief services, some complained that they were not informed of the upfront fees they would be charged before their creditors were paid. One debtor told the BBB he canceled after discovering his payments were mostly going to the company for the first 21 months, losing over $1,200.
See related: Eight myths about settling credit card debt
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