Last 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.
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.