FTC Issues Refunds to Allegedly Misled Debt Counseling Customers
The Federal Trade Commission announced its plans to mail checks totaling more than $480,000—averaging approximately $84.27 per check—to thousands of customers who were allegedly misled by a national debt counseling company’s claims about its products and services and charged illegal upfront fees before receiving any debt relief services.
In its initial complaint, the FTC alleged that the defendants (a debt counseling company and three individuals named individually and as members/officers of the company) violated the FTC Act, the Telemarketing and Consumer Fraud and Abuse Prevention Act, and the Telemarketing Sales Rule when the company made misrepresentations in its telemarketing and direct mail solicitations about the amount of money that customers could save by using the company’s services, among other practices. For example, the FTC claimed that the company’s solicitations included false and misleading examples of instances where customers’ debts were reduced by up to 55%, as well as claims that a typical customer might be entitled to entirely eradicate his or her debt within 36 months. Further, the FTC complained that the counseling company requested and/or received “payment of fees or consideration for debt relief services” before performing any services for the customers as required by applicable law.
The FTC’s refund announcement follows the debt counseling company’s settlement and stipulation with the FTC in March 2017, in which the Federal District Court for the Eastern District of Texas, among other things, banned the company and named individuals from making further misrepresentations about its products and services and ordered the defendants to pay $9 million as equitable monetary relief to the FTC. The $9 million judgment was partially suspended upon payment of $510,000, due to the defendants’ purportedly poor financial condition.
The stipulated order in this matter, Federal Trade Comm’n v. United Debt Counselors, is accessible here. A discussion of the original FTC settlement can be found here.
