Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Alleged Debt Reduction Scam Operators Agree to Pay FTC, Quit Debt Services Field, (Oct 17, 2012)

By E. Darius Sturmer, J.D.

The owner of an Ohio-based company that the FTC alleged was engaged in the fraudulent Internet marketing of debt reduction services has agreed to a settlement requiring him to pay more than $390,000, to stop marketing debt-related services, and to refrain from making any misrepresentations in marketing any financial product, good, or service. According to an FTC complaint filed on September 27, 2012, the company—United Debt Associates—and its owner fraudulently claimed on 17 websites they operated that consumers could quickly get out of debt by working with one of several debt settlement companies.

The websites UDA operated were “lead generators” paid by debt settlement companies to refer consumers who responded to the deceptive ads, according to the complaint, earning approximately $24.60 per lead generated. Through the websites, the defendants directed consumers to either provide their contact information online, or call a toll-free number for help with their credit card debt. Consumers who called either were routed directly to the debt settlement companies or were asked to provide preliminary information to the defendants, the complaint stated.

Purported consumer testimonials on the defendants’ websites, which conveyed the impression that consumers could successfully and quickly reduce or eliminate their debts by using the supposed debt settlement services the defendants advertised, were not genuine, the FTC alleged. The defendants did not have support for the claims they made that the debt settlement companies would substantially reduce or eliminate consumers’ debts, according to the complaint. Instead, they merely posted claims provided by the debt settlement companies, or copied information from other debt relief websites.

Further, the FTC claimed, the defendants used numerous specific deceptive claims to entice consumers, including:

(1) “Once creditors agree to make a deal, you can get out of debt from 12 to 36 months.”

(2) “The U.S. government decided to introduce a stimulus package to boost the financial institutions and prevent them from breaking down. Part of this stimulus money is being utilized by the [c]redit card companies to offer debt settlements to the users.”

(3) Debt settlement companies “can take all of your outstanding debt and not only eliminate at least 50% of it but also provide a realistic repayment plan for the rest of your debt.”

And (4) “If you play your cards right, your debt problems will vanish before the first year ends.”

District Judge Edmund A. Sargus, Jr., of the U.S. District Court for the Southern District of Ohio, in Columbus, entered a Stipulated Final Judgment imposing monetary and injunctive relief on October 4, 2012.

In addition to the judgment of more than $390,000, the settlement bans the defendants from engaging in or assisting others to engage in any debt relief service, and bars them from making any misrepresentations when marketing a financial product, or any good or service. The settlement also requires substantiation for any benefit, performance, or efficacy claim for financial products, and it prohibits disclosure of customer information and requires the defendants to destroy all such information they have within 30 days after the settlement order is approved by a judge.

The case is Case No. 2:12-cv-00893.

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