FTC Enters into Settlement with National Debt-Relief Provider

Recently, in response to a complaint filed by the Federal Trade Commission (FTC) in the Federal District Court for the Eastern District of Texas, a national debt-relief company and three of its shareholders and officers entered into a settlement order with the FTC. The defendants neither admitted nor denied any of the allegations in the complaint.

The complaint alleged that the defendants had undertaken several illegal business practices in violation of the Federal Trade Commission Act (FTC Act) and the Telemarketing and Consumer Fraud and Abuse Prevention Act (Telemarketing Act). The alleged illegal business practices include advertising activities that misrepresented how many customers obtained debt-relief, testimonials that did not contain disclaimers of atypical results, requesting advance fees, and misrepresenting the amount of control consumers retained over “special savings accounts.”

The defendant company marketed its debt-relief service through the use of telemarketing, direct mail, and internet solicitations to potential customers across the United States. The FTC’s complaint alleged that most of these marketing tactics violated both the Telemarketing Act and the FTC Act.

According to the allegations in the complaint, the company made several misrepresentations, including a “very high success rate” for customers enrolling in their products to lower their debt, a low cancelation rate, and a claim that those who choose to take advantage of the debt-relief products are out of debt within three years and their debt is “cut in half.” Customers desiring to receive more information about the debt-relief programs were told they would receive an in-person meeting with an experienced sales representative who could fully describe the program’s features. Allegedly, instead of speaking to an employee of the defendant company, independent notaries public were contracted to meet with perspective clients and show a video created by the company that reiterated some of the same alleged misrepresentations.

Additionally, one aspect of the debt-relief program was marketed as allowing consumers access to a special purpose savings account, over which the consumer alone has complete control. The FTC alleges that the company retained partial control over the savings account and withdrew a monthly advance fee.

Under the settlement order, the defendant company is banned from making misrepresentations about debt-relief and/or other financial products or services and making unsubstantiated claims about any of its own products or services. Further, the defendants may only conduct face-to-face sales presentations with a representative of the company who is authorized to make factual representations and discuss material terms of the programs. The agreement imposes a $9 million judgment representing the amount of the alleged harm to consumers.

The entire Complaint and Order may be found here:
https://www.ftc.gov/system/files/documents/cases/united_debt_services_filed_doc_1_complaint.pdf.

https://www.ftc.gov/system/files/documents/cases/united_debt_services_proposed_stipulated_order.pdf.