People dealing with substantial debt problems may be vulnerable to scam artists seeking to take advantage of them financially. The Federal Trade Commission (FTC) recently shut down two such debt negotiation companies. The two companies, one of which was based partly in Florida, are accused of offering fraudulent or misleading debt relief services to consumers with high credit card interest rates.
The companies would collect up-front fees in amounts of up to $1995 for their advertised services, but then failed to actually help consumers with their debt or interest charges.
The companies also claimed that they would refund the fees if they failed to obtain at least $2,500 in savings for their customers. However, when customers requested such a refund for the companies' failure to provide the advertised services, they were either denied a refund or were charged a $199 "non-refundable" fee.
The companies were specifically accused of:
- Making misleading marketing calls. When offering debt relief services, the two companies would claim that they could negotiate a lower interest rate with credit card companies. Instead, the accused companies simply advised customers that they could save money on interest by paying off their credit card debt early.
- Placing illegal "robocalls." The calls would often insinuate that the caller was from the credit card company itself, rather than from a paid debt collector, deceiving many victims.
- Contacting consumers who are on the "Do Not Call Registry."
The FTC has prohibited both companies from offering debt relief services in the future and from collecting payments from customers for debt relief services. The companies are also prohibited from selling or otherwise using their customers' personal information. The companies have been fined millions of dollars for their fraudulent activity. Some of each company's assets were seized or forced to be sold under the settlement agreement, including a boat, luxury cars, jet skis, ATVs and two condominiums.
Florida residents who are struggling with substantial credit card debt and high interest rates should be wary of debt negotiation companies who make promises that are too good to be true. Dealing with a debt settlement firm without checking its reputation may only make your situation worse.
Source: WalletPop.com, "Debt Relief Scams Shut Down by FTC," Jorgen Wouters, 28 May 2011