FTC Sues Companies and Officers For Alleged Phony Debt Relief Scheme

blogpost4-12The Federal Trade Commission (“FTC”) recently filed a complaint for permanent injunction and other equitable relief against multiple companies, including DebtPro123 LLC, and their officers, alleging that they engaged in a scheme aimed at defrauding consumers by marketing, promoting and/or selling purported debt relief services.

Details of Debt Relief Scheme

According to the Complaint, Defendants promoted and sold their debt resolution programs to consumers via telemarketing calls, Internet websites and information packets.  Defendants represented that such programs would completely resolve consumers’ credit card and other unsecured debts, like medical bills and student loans, within 18-36 months and for 30%-70% of the amount owed.

The FTC further alleges that Defendants represented that they would improve consumers’ credit by having negative data about them completely removed from all three major reporting credit bureaus.  Defendants charged non-refundable fees for their services, sometimes up to $10,000.00.

Upon signing up for the debt relief services, Defendants allegedly instructed consumers to stop paying their creditors and to cease all communications with them.  Defendants allegedly falsely advised consumers that they had a legal department in house which would work with consumers’ creditors toward the reduction of their debt.

The FTC alleges that Defendants did not reduce the typical consumer’s debt as promised.  To the extent that Defendants were successful in negotiating settlements with consumers’ creditors at all, the total amount of the resulting debt was often higher because the fees and interest on such debt had compounded after consumers had stopped paying their debts at the commencement of Defendants’ program.  Ultimately, according to the FTC, many consumers were faced with lawsuits filed by their creditors and ended up deeper in debt because of Defendants’ acts and/or omissions.

A Disappearing Act: Defendants, Not Consumer Debt

According to the Complaint, when consumers learned that Defendants had not resolved their debts, they frequently requested refunds.  In response, Defendants created many obstacles to receiving a refund.  As a result, frustrated consumers turned to their respective state attorneys general and the Better Business Bureau for resolution, which ultimately led to the instant FTC acion.

The Complaint alleges nine separate counts for relief against Defendants, which include alleged violations of the FTC Act, the Telemarketing Sales Rule and the Credit Repair Organizations Act.

If you are interested in learning more about this topic, or if you are facing FTC litigation or other regulatory complaint, 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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David Klein

David Klein is one of the most recognized attorneys in the technology, Internet marketing, sweepstakes, and telecommunications fields. Skilled at counseling clients on a broad range of technology-related matters, David Klein has substantial experience in negotiating and drafting complex licensing, marketing and Internet agreements.

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