Consumer Finance Insights
January 14, 2016

Florida Attorney General Obtains $7.8 Million Judgment Against Credit Counseling Companies

On January 11, the Florida Attorney General announced the filing of a consent order against two credit counseling and debt management companies and their controlling officer, resolving allegations that the defendants violated Florida’s Deceptive and Unfair Trade Practices Act by marketing and selling putative debt management and/or credit counseling services, which claim to reduce consumers’ debt faster than consumers would be able to do without their services.  As part of providing these services, the defendants claimed to negotiate repayment plans with consumers’ creditors and then manage the monthly payments under the plans.  The Attorney General alleged that although the defendants collected monthly payments from consumers, defendants consistently failed to pay consumers’ creditors.  On some occasions, they even failed to negotiate a repayment plan in the first instance, as promised.  As a result, consumers who had purchased defendants’ services found themselves with delinquent accounts, large penalties, interest fees, and negative information on their credit reports.

Under the consent order, the corporate defendants are required to dissolve their legal status and cease conducting business, while the individual defendant is prohibited from marketing or selling debt management, credit counseling, or credit repair services, among other things.  The defendants are also required to provide $663,588 in restitution to affected consumers; $7 million in civil penalties; and $112,000 in attorneys’ fees and costs to the Attorney General, for a total settlement value of $7,775,588.  At least a million dollars of the judgment (including full consumer restitution) must be paid before a portion of the judgment can be suspended.