Debt settlement companies have not maintained a favorable reputation within the general community, and for good reason. Factual evidence has been presented to many a federal court as a result of these companies’ bad acts. Because of these bad acts, the FTC enacted new regulations that would prosecute these companies for illegal practices and place constraints on the practice of demanding funds in advance prior to undertaking any work. These laws give consumers an extra layer of protection against unscrupulous debt settlement companies whose sole mission is to earn a quick buck at the expense of the debt-heavy consumer.
Charges have been filed against many different debt settlement companies by state and federal authorities alike. The defendants in these cases face criminal prosecutions and civil actions, which include possible restitution.
Debt Settlement Companies Showing Flagrant Disregard for Regulations
The defendants in the case of United States v. Mortgage Funding, Inc., et al, were stated to have made false promises to clients regarding their ability to drastically slash their mortgage payments. The defendants dishonestly associated themselves with sizable lenders. The defendants charged an outrageous upfront fee and guaranteed help to financially strapped consumers. The company falsely and misleadingly guaranteed absolute success. These promises were not merely advertising, but false promises that their customers based their trust on. The customers’ trust motivated them to fork over large sums of money to the defendants.
The trusting clients were charged a median amount of $2,600, half of which was asked for beforehand. Clients were assured that any fees paid to the debt settlement companies would be reimbursed if the negotiation process was unsuccessful. Amid the non-existent negotiation process, consumers were informed to stop all communications with the creditor(s) and to cease mortgage payments. Since there was never an actual contract with the creditors to settle, this further caused damage to the clients’ financial situations.
Unfortunately, the allegations were for infractions of the FTC’s rule against telemarketing sales calls to prospects that had registered their wishes with the Federal Government to not be contacted by sales persons. Since the defendants’ advertising was done before this law went into effect, the defendants were not held liable for violations of rules prohibiting receiving payments from customers in advance.
Credit Card Debt Settlement
In United State v. Debt.com Marketing, LLC, et al, the Federal Trade Commission resolved allegations against the mentioned defendants stating dishonest trade habits, which violated the Federal Trade Commission Act and the rule against telemarketing sales calls. The defendants claimed the ability to drastically reduce or even completely eliminate the clients’ debts and stop the nagging contacts by bill collection agencies. The company ran multi-media advertising that portrayed actual customers and explicitly stated that their services were public instead of private services.
In actuality, the defendants did not provide the indebtedness repayment agreements they claimed and were not able to reduce or eliminate the customers’ debts. The defendants merely sold the debts to other indebtedness repayment organizations or sold the debts to financial intermediaries who turned around and sold them again. The defendants did not have any actual knowledge of indebtedness repayment agreements, and most times, did not know the identities of the indebtedness repayment agencies that answered consumers’ inquiries.
The resolution compromise levied an award of over $28 million, to be disbursed after the release of moneys contained within incorporated depository accounts, approximately $500,000.
In the case of United States v. American Tax Relief, LLC, those petitioned against purportedly fraudulently received millions of dollars from consumers by making inaccurate promises that the full amount owed would be eliminated from using their tax resolution procedures. Regarding their multi-media advertisements, the defendant stated they would negotiate clients’ delinquent state and federal taxes in exchange of a miniscule proportion related to the quantity payable. Additionally, they claimed that all attachments of property, wages, and confiscations of property would ultimately end.
The Federal Trade Commission has taken action against this company by seizing money, a pricy vehicle, and attached a lien to houses. The government’s probe into this company’s financial malpractices uncovered additional leased luxury vehicles.
The above cases are illustrations of how the government is increasing its watchdog efforts for the sake of financially weary, unsuspecting debtors who some debt settlement companies prey upon. Unfortunately, there are still means of escape, which some companies know of and will take advantage of. Consumers should perform thorough research when looking for reliable debt settlement companies. Remember to do your homework by searching the FTC’s website for debt settlement companies that were signaled as questionable, or even checking with the BBB for the businesses’ rating. Arming yourself with information about unscrupulous debt relief companies will help you to possibly avoid the headache and heartache of mistakenly trusting scammers. When it comes to choosing reliable debt settlement companies, ‘knowledge is power’.