Federal Trade Commission announced that it is mailing 5,745 checks totaling more than $480,000 to people who lost money to a debt relief scheme that misled its customers and charged illegal upfront fees.
According to the FTC’s announcement, United Debt Counselors exaggerated how much money people would save using its services. The company’s direct mail ads looked like official documents from a bank or attorney and claimed that typical customers would have their credit card debt cut in half and become debt-free within 36 months. Under a settlement with the FTC, the defendants were banned from making misrepresentations about debt relief and other financial products or services and making unsubstantiated claims about any products or services.
The average refund amount is $84.27, and the FTC advises recipients to deposit or cash checks within 60 days. Consumers should be aware that the FTC never requires people to pay money or provide account information to cash a refund check. If refund check recipients have questions about the case, the FTC advises that they should telephonically contact the FTC’s refund administrator, Rust Consulting, Inc., 855-263-3449.
Related News: In March 2017, the FTC reported (“FTC Reaches Settlement with Nationwide Debt Relief Provider”) that United Debt Counselors LLC, a debt relief company, and its principals, allegedly, misled consumers, charged illegal advance fees, and will be banned from those practices under a settlement with the Federal Trade Commission.
The FTC’s complaint against United Debt Counselors LLC alleged that the company exaggerated how much money people would save using its services. The company’s direct mail ads, which reached up to 100,000 consumers per week, looked like official documents from a bank or attorney, and claimed that typical customers would have their credit card debt cut in half and become debt-free within 36 months.
Allegedly, the defendants repeated similar claims on their website and by phone when consumers called in response to the mail; claimed a high success rate and asserted that consumers rarely dropped out of their program; and claimed they provided consumers with a special savings account that only consumers could control. According to the FTC, however, the defendants removed monthly fees from the accounts.
Allegedly, consumers who wanted to buy the debt relief services were told they had to meet with an experienced sales representative, but instead the defendants sent notaries public, who had minimal product knowledge, to show a sales video and witness contract signings. Typically, the defendants charged advance fees before they negotiated any savings on credit card debts. It should be noted that these types of advance fees violate the FTC’s Telemarketing Sales Rule, unless consumers first meet face-to-face with a knowledgeable sales representative who can fully describe the program and answer questions.
According to the FTC, fewer than half of those who bought the services completed the program, and even fewer were debt-free at the end of 36 months.
The defendants, United Debt Counselors LLC, also known as United Debt Services LLC and also doing business as Department of Negotiations; David Melrose; Kirk Lanahan, and Corinne Maples, under a stipulated order, are banned from making misrepresentations about debt relief and other financial products or services, as well as making unsubstantiated claims about any products or services. The defendants only can charge advance fees if they comply with the Telemarketing Sales Rule; sales persons making face-to-face sales presentations must have authority to discuss material terms; they must do so in specific detail; and they must be able to answer consumer questions. The order also imposes a $9 million judgment that represents the amount of alleged harm to consumers. The judgment will be partially suspended upon payment of $510,000, and the full judgment will become due immediately, if the defendants are found to have misrepresented their financial condition.