• 26
  • August
    2011

The Wall Street Journal reports that the Federal Trade Commission (FTC) stopped operations at credit card debt relief business Debt Relief USA Inc., after a proposed settlement based on accusations that the business failed to lower debts for paying customers, and in fact often increased debts.

According to the Federal Trade Commission's complaint, Debt Relief USA claimed deceptively that consumers involved in the program would eliminate between 40 and 60 percent of their credit card debt and be through in two to four years. The FTC also claimed that the company violated changes made last year to telemarketing sales rules, which prevent companies offering debt-relief services by phone from charging fees prior to settling or reducing a consumer's credit card of otherwise unsecured debt.

That settlement reportedly includes a $19.7 million judgment against two company principals. That judgment was suspended, however, based on inability to pay, though it could be reinstated if an investigation reveals they provided inaccurate financial information to the FTC. Under the proposed settlement, the two Debt Relief USA principals were ordered to stop marketing financial products and services. Two others are still involved in litigations.

The proposed FTC settlement does not provide monetary relief for consumers since those came through the Texas attorney general's office's payouts from the company's bankruptcy proceedings. Debt relief USA had filed for Chapter 11 bankruptcy back in June of 2009.

A separate settlement with the Texas attorney general's office had the company refund consumers $3.7 million from the company's bankruptcy proceedings. Sources said additional distributions are forthcoming.

Source: Wall Street Journal, "FTC Halts Credit-Card Debt Relief Business," Tess Stynes, August 23, 2011.