Nearly a dozen debt settlement companies in Florida were systematically defrauding consumers, leading the Federal Trade Commission and the state attorney general to recently shut down those operations.
Both regulators succeeded in obtaining a court order that requires the 11 companies (owned by three individuals) to stop marketing their debt settlement “services,” which in fact preyed on thousands of vulnerable people eager to stop creditor harassment and avoid bankruptcy. The case is a cautionary tale of why it’s best to avoid working with a non-attorney when you’re seeking a manageable debt settlement agreement.
According to the complaint, filed in the U.S. District Court in the Southern District of Florida, the companies conned consumers into believing they could avoid having to pay thousands of dollars in outstanding credit card bills. Instead, they were told to pay the debt settlement companies money every month, and those firms promised to negotiate a deal with the credit card companies. On the surface, this seems like a good deal – legitimate too. But Florida Attorney General Pam Bondi says it wasn’t, and some consumers, after paying hundreds or thousands of dollars, learned their credit card debts were never paid and their accounts were deeply in default. Their credit was completely decimated. Some had no choice but to file for bankruptcy. Others were sued.
Essentially, these individuals were promised that their financial woes would be eased by making these monthly payments, and in the end, they were far worse off than when they started.
Many of these companies fronted as if they were non-profit entities. They wooed consumers by promising consolidation loans with low interest rates. In some cases, these “debt relief” companies would contact customers from other companies and poach them by claiming they were taking over for those entities and servicing the accounts.
The order secured by the FTC and the state attorney general is a preliminary injunction that stops the companies from working in any kind of debt settlement activity or from holding themselves out to be a non-profit entity when they aren’t.
As our debt defense attorneys in Miami know, relying on one of these firms is a huge gamble – one you can scarcely afford if you’re already underwater on your bills. Yes, there are some debt relief firms that might be able to offer some help in a way that’s more affordable, but they often fail to deliver on lofty promises. An attorney is bound by high standards of ethics – as well as the law – to provide you with sound legal advice.
The FTC offers a series of warnings specifically about debt settlement companies – even those that are run legitimately. Some of those concerns include:
- Programs often require money deposited in a special savings account for 36 months or longer before all your debts are settled. People often have a tough time making these payments, and if they drop out before the program, they could be out the money they already paid.
- Creditors are under no obligation to settle with you. That means there is always the risk the debt settlement firm won’t be able to help you settle your debts – even if you follow all their directions.
- Debt settlement firms often try to settle a lot of the smaller debts first, and meanwhile leaving the larger debts to accrue even higher fees.
- These companies ask and sometimes even require that you stop making payments directly to creditors. That means your credit is going to take a hit, and you could even be sued. If the creditor wins, they can start garnishing your wages.
If you feel buried under debt, you don’t have to go it alone. But you should still be cautious whom you trust.
If you’re battling debt collection in Miami or the surrounding areas contact Jacobs|Keeley for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday at 5 p.m. on “Debt Warriors with Bruce Jacobs and Court Keeley,” discussing foreclosure topics that matter to YOU.
Court order shuts down 11 debt settlement companies, May 24, 2017, By Mark Huffman, Consumer Affairs
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