Collections & Credit Risk | Friday, December 14, 2012
A U.S. district court has temporarily halted a debt relief operation that allegedly charged consumers hundreds of dollars based on claims that it could obtain rates as low as zero percent.
A Federal Trade Commission complaint names as defendants Southeast Trust LLC (formerly "The Debt School LLC") and also doing business as Financial Freedom Credit Counseling, along with the companies’ principal, Paul A. Wexler. The court order stops the operation and freezes the company's assets as the FTC moves forward with the case.
The FTC estimates that the operation’s gross revenues since January 2008 were at least approximately $11.8 million, according to documents filed with the court.
The complaint alleged that the defendants claimed to be a non-profit group that targeted consumers with robocalls, and with ads on websites such as southeasttrust.com and thedebtschool.com. The defendants promised a single monthly payment, an interest rate ranging from zero percent to six percent, and that consumers would be debt free in three to five years.
The FTC alleged that despite charging consumers an illegal, up-front enrollment fee that varied from $250 to $400, the defendants did not provide any services.
Consumers who responded to ads on the defendants’ websites or who received a robocall from them got a recorded message from “Kathy with Financial Freedom,” which said, in part, “You may recall receiving a letter saying you’ve been approved to consolidate your credit cards down to as low as a 1.5 percent interest rate," according to the complaint. "This is not a new loan. You’ve already been approved by a certified non-profit agency.”
The recorded message provided a toll-free number, which eventually routed consumers to “certified credit counselors,” who were no more than telemarketers, the FTC charged.
Under the pretext of getting the debt consolidation process started, the “certified credit counselors” asked consumers to provide their bank account numbers and other personally identifiable information, according to the complaint. The consumers were told their accounts would not be debited until they signed contracts for the defendants’ debt relief services, but in numerous cases, the consumers’ accounts were debited without their authorization.
The FTC charged the defendants with multiple violations of the Federal Trade Commission Act and the Telemarketing Sales Rule for misrepresenting to consumers that:
• they would not debit their accounts;
• they would provide interest rates ranging from zero percent to six percent; and
• they were a non-profit debt relief organization.
The complaint also alleges that the defendants violated the Telemarketing Sales Rule by:
• charging up-front fees for debt relief services before they provided any debt relief;
• calling consumers who were listed on the Do Not Call Registry;
• misrepresenting their identity, the purpose of their call, or the nature of the goods and services they were selling; and
• making illegal robocalls.
By Darren Waggoner
A U.S. district court has temporarily halted a debt relief operation that allegedly charged consumers hundreds of dollars based on claims that it could obtain rates as low as zero percent.
A Federal Trade Commission complaint names as defendants Southeast Trust LLC (formerly "The Debt School LLC") and also doing business as Financial Freedom Credit Counseling, along with the companies’ principal, Paul A. Wexler. The court order stops the operation and freezes the company's assets as the FTC moves forward with the case.
The FTC estimates that the operation’s gross revenues since January 2008 were at least approximately $11.8 million, according to documents filed with the court.
The complaint alleged that the defendants claimed to be a non-profit group that targeted consumers with robocalls, and with ads on websites such as southeasttrust.com and thedebtschool.com. The defendants promised a single monthly payment, an interest rate ranging from zero percent to six percent, and that consumers would be debt free in three to five years.
The FTC alleged that despite charging consumers an illegal, up-front enrollment fee that varied from $250 to $400, the defendants did not provide any services.
Consumers who responded to ads on the defendants’ websites or who received a robocall from them got a recorded message from “Kathy with Financial Freedom,” which said, in part, “You may recall receiving a letter saying you’ve been approved to consolidate your credit cards down to as low as a 1.5 percent interest rate," according to the complaint. "This is not a new loan. You’ve already been approved by a certified non-profit agency.”
The recorded message provided a toll-free number, which eventually routed consumers to “certified credit counselors,” who were no more than telemarketers, the FTC charged.
Under the pretext of getting the debt consolidation process started, the “certified credit counselors” asked consumers to provide their bank account numbers and other personally identifiable information, according to the complaint. The consumers were told their accounts would not be debited until they signed contracts for the defendants’ debt relief services, but in numerous cases, the consumers’ accounts were debited without their authorization.
The FTC charged the defendants with multiple violations of the Federal Trade Commission Act and the Telemarketing Sales Rule for misrepresenting to consumers that:
• they would not debit their accounts;
• they would provide interest rates ranging from zero percent to six percent; and
• they were a non-profit debt relief organization.
The complaint also alleges that the defendants violated the Telemarketing Sales Rule by:
• charging up-front fees for debt relief services before they provided any debt relief;
• calling consumers who were listed on the Do Not Call Registry;
• misrepresenting their identity, the purpose of their call, or the nature of the goods and services they were selling; and
• making illegal robocalls.
By Darren Waggoner