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Two debt settlement companies, Financial Freedom of America Inc. and Debt Settlement USA Inc., agreed to pay $370,000 to settle claims by the Vermont Attorney General's office that the companies violated state law. The amount includes both refunds to consumers and payments to the state.
According to Attorney General William Sorrell, Debt Settlement USA, based in Dallas, and Financial Freedom of America, based in Scottsdale, Ariz., violated the Vermont Consumer Fraud Act by not following the state's three-day right to cancel requirements and by failing to have prior proof to support online claims about the results they could achieve for consumers. Debt Settlement USA's Web site stated that the company could "reduce your debt by 60% of the current total," and Financial Freedom of America's website claimed that its clients could "have up to 60% of your credit card bills completely wiped out."
Debt Settlement USA entered into contracts with 114 Vermont consumers and charged 12% to 14% of the dollar amount of the debt placed with the company. Financial Freedom of America entered into contracts with 16 Vermont residents and charged an "administrative fee" of 7.9% of the principal amount of the debt, an added "negotiation fee" of 15%, and a "maintenance fee" of $29.95 or $39.95 per month.
Under the settlements, both companies must pay full refunds to all of their Vermont customers and civil penalties and costs to the state. Debt Settlement USA's refunds will total more than $230,000, plus $70,000 to the state. Financial Freedom of America's refunds will total more than $42,000 in refunds, plus $30,000 to the State. Also, both companies will pay $2,000 to any Vermont resident who was sued by a creditor after signing up with the company, and will offer to complete, without charge, negotiations with the creditors of its Vermont customers.
