Illinois Attorney General Lisa Madigan today filed four lawsuits against seven debt settlement firms, alleging they are misrepresenting the services they provide to consumers and the impact those services will have on credit ratings. Six executives with the companies also are named as defendants.
The complaint in each case alleges the defendants violated the Illinois Consumer Fraud and Deceptive Business Practices Act by practicing deceptive marketing and charging excessive fees. Each complaint asks the court to: prohibit the defendants from engaging in debt settlement in Illinois; order the defendants to pay restitution to consumers - including civil penalties of $50,000 for violating the Consumer Fraud Act, another $50,000 penalty for each violation committed with the intent to defraud and a $10,000 penalty per violation committed against a person 65 years or older.
The defendants are: Clear Your Debt LLC, Swiftrock Financial Inc. and Orion Processing LLC - based in Austin, Texas and Lago Vista, Texas - and managing members, Derin Scott and Shannon Scott; Long Beach, Calif.-based Endebt Solutions LLC, doing business as DebtOne Financial; Debt Consultants of America Inc. in Dallas and owner Robert J. Creel; and, American Debt Arbitration (ADA) in Clearwater, Fla. and ADA President and Director Glenn P. Stewart, and Nationwide Asset Services (NAS) Inc. in Phoenix, along with NAS President William Anderson and Gary K. Brown, secretary and director at the firm.
"These companies are unfairly luring financially strapped consumers with misleading claims that they can effectively eliminate consumers’ debt," according to Madigan, who filed the suits in Sangamon County (Ill.) Circuit Court. "The reality is that, after enrolling in a debt settlement program, consumers too often find themselves in even worse financial straits. It’s time to clean up this industry so that people struggling to pay off their debts aren’t being sold a false bill of goods."
Last month, Madigan's office introduced legislation to "end abusive and unfair practices used by the debt settlement industry that wreak havoc on financially strapped consumers." The proposed bill would prohibit debt settlement firms from charging upfront fees, basing final compensation on the amount saved from settling a debt and advising consumers to stop paying their creditors.
In a similar case recently in Vermont, the Attorney General's office in December settled claims with two debt settlement companies, Financial Freedom of America Inc. and Debt Settlement USA Inc. The companies agreed to pay $370,000, an amount includes refunds to consumers and payments to the state, Debt Settlement Companies Settle Vermont AG's Claims, Dec. 10, 2009.