Consumer Finance Insights
March 23, 2017

FTC Issues Order Against Debt Relief Company for Alleged Misrepresentations

On February 27, 2017, the Federal Trade Commission (FTC) entered into a stipulated order for permanent injunction and monetary judgment with defendants United Debt Counselors, LLC, a debt relief company, and its principals, banning the defendants from making misrepresentations about financial products and services and requiring the defendants to pay a $9 million penalty.  The order concerns the FTC’s allegations that defendants—through mail advertisements and statements on their website and via telephone—misrepresented how much consumers’ credit card debt would be reduced when using the defendants’ services.

Specifically, the FTC alleged that defendants misrepresented that consumers who engaged the defendants’ services would be able to reduce their credit card debt by 50 percent and would be free of all debts within 36 months.  The FTC asserted that this was a misleading statement and that, in reality, fewer than half of consumers using the defendants’ services were free of debt within 36 months.  The FTC also accused the defendants of representing that they would provide consumers with savings accounts that would be within consumers’ exclusive control, but that, actually, the defendants assessed monthly fees on the savings accounts.  Further, the FTC claimed that the defendants told consumers that they would meet with an experienced sales representative to discuss the defendants’ products and services, when in fact the defendants engaged notaries public who did not have sufficient experience with the defendants’ products to meet with consumers.  Finally, the FTC alleged that the defendants charged advance fees to consumers for negotiating credit card debt savings, in violation of the FTC’s Telemarketing Sales Rule (TSR), which requires that consumers meet in person with a knowledgeable sales representative before charging advance fees.

The FTC order prohibits the defendants from making unsubstantiated claims about products and services in general and, specifically, prohibits the defendants from making false representations about financial products or services.  The order also provides that the defendants can charge advance fees only after a knowledgeable salesperson meets with the consumer in person to explain the defendants’ products and services.  In accordance with the amount of alleged harm to consumers, the order imposes a $9 million penalty on the defendants.

The order serves as an important reminder to all financial services providers to be vigilant about ensuring the accuracy of representations made to consumers.

The FTC’s press release is available here.