Source: CreditandCollectionsWorld.com and SourceMedia, Inc.
The Federal Trade Commission charged four companies and their principals with deceptively marketing a “debt settlement” operation that allegedly failed to provide services it claimed would reduce consumers’ debt, resulting in even more debt for many of them.
Since at least 2000, the companies sold debt settlement services through several Web sites, offering a “Debt Meltdown Program” they describe as “an aggressive method of helping consumers out of the debt trap and away from the bankruptcy path.”
According to the FTC complaint, the companies claim they negotiate with creditors so consumers can end up repaying only “60 cents for every dollar owed,” or that they can reduce unsecured debt “by up to 60% and … [be] debt free in 18 to 30 months.” The companies allegedly promise to negotiate with creditors and begin making payments to them within several weeks after consumers join their program, and promise to provide financial counseling.
As noted in the complaint, consumers were advised to set up a direct debit from their checking account for deposit into a bank account established by the companies, which debit their fees and pay creditors. Consumers are then advised to stop paying their creditors immediately and have no further contact with them, enabling the defendants to negotiate for the consumers.
The companies allegedly often failed to contact each creditor as promised, and consumers often continued hearing from creditors about their debts, the complaint states. In some instances, the companies failed to negotiate settlements with all the consumers’ creditors and didn’t pay them either, resulting in wage garnishment or debt collection action for the consumers.
When consumers told the companies that they received a creditor’s summons, the companies told them not to worry, that this was a “scare tactic.” But in some cases, creditors sued consumers. As a result of signing up for the Meltdown program, many consumers reported becoming more indebted because their creditors charged them late fees, finance and overdraft charges. They also reported their credit rating slipped due to negative information such as late payments, charge-offs, collection and garnishments.
The defendants are charged with misrepresenting their services. The FTC requested an expedited hearing for a temporary restraining order. The hearing will be held Thursday. The companies named in the complaint are Edge Solutions Inc. of Delaware, Edge Solutions Inc. of New York and Money Cares Inc., also called The Debt Settlement Company and The Debt Elimination Center; Pay Help Inc.; and Miriam Lovinger and Robert Lovinger, principals of these firms.