The Federal Trade Commission charged three debt-relief operations with making unsubstantiated claims to lure consumers nationwide into paying thousands of dollars in upfront fees, but failing to reduce credit card debts as promised, the agency announced Thursday.
The defendants in one of the two cases are Financial Freedom of America Inc., now known as Financial Freedom Processing Inc., and Corey Butcher. The second case names Debt Consultants of America Inc., Debt Professionals of America Inc., Robert Creel, Corey Butcher, Brent Butcher and Nikki Creel.
According to the complaints, the defendants made deceptive claims that consumers who enrolled in their programs could eliminate 30% to 60% of their credit card debt and be out of debt within 18 months to 36 months.
The defendants marketed their services via websites and TV and radio ads that urged consumers to call toll-free numbers for a free consultation and to enroll in their debt relief programs.
One operation claimed to use “secret programs most credit card companies won’t tell you about.” The other operation touted its “established relationships” with creditors and claimed that its program would “save you literally thousands of dollars.” The defendants charged consumers up-front administrative fees, monthly maintenance fees, negotiation fees, and in some instances, a cancellation fee.
The FTC’s complaints charge that few consumers received the promised results. Many consumers canceled or dropped out of the programs before their debt was reduced because they couldn’t afford to pay the defendants’‘ sizable advance fees and accumulate money to pay off their debts.
The FTC recently announced changes to the Telemarketing Sales Rule that prohibit companies that sell debt relief services over the telephone from charging fees before they settle or reduce a customers’ credit card or other unsecured debt. The ban on advance fees is designed, according to the FTC, to protect consumers who enrolled in a debt relief service after October 27.
