FTC Sues Debt Relief Organizations

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June 16, 2016

debt-reliefLast week, the Federal Trade Commission (“FTC”) and the Florida State Attorney General filed a complaint against 13 separate yet interrelated debt relief companies, as well as their 7 principals (collectively, the “Defendants”), alleging that the Defendants have engaged in a fraudulent debt relief scheme.  According to the complaint, using misleading robocalls, the Defendants have solicited consumers and have received more than $15.6 million since January 2013 for services promised by the Defendants but never delivered.

How did the Debt Relief Organizations Violate the Law?

FTC’s Allegations against the Debt Relief Organizations

According to the complaint, “[a]fter gaining a consumer’s trust through these misrepresentations [via telemarketing robocalls], Defendants guarantee they will substantially and permanently lower the consumer’s credit-card interest rates.  Defendants also promise they will save the consumer thousands of dollars in interest in a short period.”  The Complaint further alleges:

Defendants’ debt-elimination pitch is simple, persuasive and wholly deceptive.  Defendants tell consumers about an alleged government “fund” that contains money that consumers can use to pay off their credit-card debt within 18 months.  Defendants claim that the fund is paid for by credit-card companies who were found to be charging excessive interest rates.  These claims are false because no such fund exists.

The FTC also claims that the Defendants violated the Telemarketing Sales Rule by requesting and collecting an up-front fee for their debt elimination services.  The Court has temporarily enjoined the Defendants from continuing their allegedly fraudulent business practices.

Protect Yourself

We have recently advised that the FTC has been aggressive in bringing lawsuits against companies for failing to deliver on promises of debt relief.  In fact, in announcing this recent litigation, the FTC boasted that “[t]his latest case marks the 39th action taken since January 2015 as a part of a coordinated multinational enforcement effort.”  In this regulatory climate, it is extremely important that companies advertising debt relief or credit repair of any kind consult with competent counsel to avoid the scrutiny of the FTC or any other federal or state regulatory agency.

If you are interested in learning more about this topic, please visit the Telemarketing Law practice area of our website.  If you have been served with process concerning your debt relief/credit repair services or your marketing practices in general, please e-mail us at info@kleinmoynihan.com or call us at (212) 246-0900.

The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney.  Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.

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