Credit Card Debt and Federal Trade Commission

Credit Card Debt Scams:  Federal Trade Commission Takes Action

On August 17, 2011 the FTC took Debt Relief USA to court to obtain preliminary and permanent injunctive relief, the refund of monies paid, and disgorgement of ill-gotten monies. Debt Relief USA is alleged to have misrepresented the services they offered and charged more than allowed by statute for their services. What is striking is that the FTC rarely uses the powerful weapons it has at its disposal and not that such companies are ripping people off.

Debt Relief USA, Inc.

Debt Relief USA, Inc. (“DRUSA”) is a Florida for-profit corporation whose principal place of business at 16200 Addison Road, Suites 100 and 105, Addison, Texas. DRUSA transacted business in this district and throughout the United States. DRUSA advertised, marketed, distributed, or sold debt relief services to consumers throughout the United States. Since at least 2005, and continuing until approximately June 2009, DRUSA offered a debt relief service to consumers having difficulty with their personal finances. DRUSA targeted consumers with substantial amounts of unsecured debt, often claiming that participation in their debt relief service would result in the elimination of 40 to 60 percent of consumers’ debts and that participating consumers would be debt free in 24 to 48 months. DRUSA advertised debt relief service on the websites www.4debtreliefusa.com, www.drusainfo.com, and www.debtreliefusa.us as well as through national television and radio advertisements.Consumers who called one of DRUSA’s toll-free numbers were connected to asales representative. These representatives often told consumers that they could save a significantamount of the debt owed to their creditors by making low monthly payments to DRUSA thatwould cover settlement of the reduced debt and DRUSA’s fees. In numerous instances,DRUSA’s sales representatives stated that consumers’ debts would be settled in 36 months andprovided settlement averages such as 40 to 50 percent. Defendants’ sales representatives typically told consumers that, in order for the debt relief service to work, consumers had to stop making payments to creditors and cease communications with creditors. These representatives told consumers to rely on DRUSA to communicate and negotiate with consumers’ creditors. In some instances, sales representatives stated that, based on DRUSA’s special relationships with creditors, DRUSA could negotiate significant discounts for consumers.Consumers who agreed to enroll in DRUSA’s debt relief service were required to authorize a bank account debit over the telephone for the initial monthly payment prior to receiving enrollment documents. Among the enrollment documents were a Client Settlement Agreement forms authorizing recurring monthly withdrawals from consumers’ bank accounts, and a form used to identify the amounts owed to various creditors. DRUSA charged consumers fees, including administrative fees, monthly maintenance fees, and negotiation fees. DRUSA took these fees from the monthly recurring withdrawals consumers authorized. Pursuant to the agreement, administrative fees were non-refundable unless consumers cancelled enrollment in DRUSA’s debt relief service during a seven-day period following enrollment.

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