The FTC more commonly known as the Federal Trade Commission, emboldened by new regulations is looking into rogue debt settlement companies that are suspected for undertaking illegal practices. These investigations come after Operation Clean Sweep in 2009 which undertook the collaboration of twenty four state agencies and prosecuted rogue debt settlement companies for crimes under the Credit Repair Organizations Act. The new FTC regulations expose many state criminal laws that were recently updated.
Charges gave already been lodged against a variety of rogue debt settlement companies by both the state and federal authorities. Those suspected face criminal and civil prosecution and this also includes Defendants face criminal and civil prosecution, including possible compensation to be paid to the victims. Some recent cases demonstrate the scale of these enforcement efforts.
Rogue Debt Settlement Companies Flouting Regulations
United State v. Mortgage Funding Inc., LowerMyDebts.com LLC, Debt Remedy Partners Inc., and individuals David Mahler, John Incandela Jr and Jamen Lachs.
In this case, the defendants were charged with making false allegations that they would be able to significantly lower their client’s mortgage payments in the event that the clients were desperate to save their homes. The evidence that was presented proved that the defendants and co defendants had affiliated themselves with several large mortgage providers; however it was proved that there was no such affiliation. The defendants had guaranteed to help the homeowners in return for an upfront fee, this included clients that had previously been turned down for re-financing and those that were in receipt of a foreclosure notice. The company also claimed that they could offer a success rate of 100% in exchange for their fee.
The defendants made charges to the clients an average of $2,600 and the deal was that half of this amount would be paid in advance. In return the clients were promised that any fees they paid would be refunded if it proved that they were unsuccessful in renegotiating mortgage payments with the property mortgage holder(s). In the midst of this supposed renegotiation process, clients were told that they should not contact the creditor and ordered to stop making their mortgage payments.
The charges that were actually filed were for infringement of the FTC’s Telemarketing Sales Rule for contacting consumers who were listed on the National Do Not Call Registry. As the advertising was placed by the defendants before the effective date of the new rules, the company was unable to be charged under the rules that prohibited the payment of upfront fees.
A Credit Card Debt Settlement Front
United States v. Debt.com Marketing, LLC; Media Choice, LLC; 800 Credit Card Debt, LLC; and Stephen Todd Cook
The FTC has established charges that were filed against defendants operating using the names 800 Credit Card Debt and Debt.com suggesting that they were undertaking deceptive business practices that were in violation of the FTC Act and the Telemarketing Sales Rule. In this case the defendants claimed that they could reduce or eliminate clients’ debts and put an end to phone calls from debt collectors. The company ran multi-media advertising campaigns which featured people posing as customers and implied a public, non-commercial basis for the programs by making statements like, “The following is a public announcement…”
The complaint alleges that the defendants did not supply the debt settlement services that it had advertised and was unable to substantiate their claims of reducing or eliminating debt. The defendants had apparently only sold the leads generated by their advertising to other debt settlement companies, or to lead brokers who had in turn resold them. In reality, the defendants had no expertise in debt settlement services and, in most cases, were not even aware of the identity of debt settlement companies that ultimately responded to the consumer’s inquiry.
The settlement agreement was set at $28.2 million judgment against the defendants, which was to be suspended once they had surrendered all of the funds held in the corporate bank accounts, which was estimated at just $500,000.
Rogue Debt Settlement Service Making False Claims
United States v. American Tax Relief LLC
The defendants were suspected to have swindled tens of millions of dollars by making false claims that confirmed that complete tax relief would be achieved if the customers were to use their debt settlement programs. In multi-media advertising campaigns, in accordance with the FTC complaint, the defendant made claims that it could settle clients’ delinquent taxes, both federal and state, for a small commission of the amount owed and this would also mean that any sanctions the client was under and seizures of property would stop.
The FTC seized money and a Ferrari sports car from the defendant who was also a company owner. It has also placed sanctions over two homes, including an estate which was valued at over three million dollars. The owners of the company were also supposedly leasing other expensive cars such as a Bentley, Rolls Royce, two Mercedes, and two Porsches as described in the FTC documents.
These are just a few examples of the increased effort the FTC is putting into protecting consumers from rogue debt settlement companies. Despite the recent crackdowns some rogue debt settlement companies still manage to find loopholes in the FTC debt relief rules, and then use these for their own gain. Consumers should do their research and be aware of which rogue debt settlement companies have been flagged by the FTC, and also know what to look for to avoid being taken in by these scammers.