Debt Relief USA Inc. has agreed to settle Federal Trade Commission charges that it lured consumers into paying thousands of dollars in upfront fees to reduce their credit card debt but in many cases left them deeper in debt.
The settlement bans the company from doing business and company principals James Wojcik and Valerie Leath from marketing any financial products and services. Litigation continues against the two other principals, Kelly Reilly and Alvin Bell.
According to the FTC’s complaint, Debt Relief USA and its principals made deceptive claims that consumers who enrolled in their program could eliminate 40% to 60% of their credit card debt and be out of debt in 24 to 48 months. The FTC complaint charges that few consumers received those results.
Under the settlements, Debt Relief USA, Wojcik and Leath are required to protect and properly dispose of customers’ personal information.
The settlements also impose a $19.7 million judgment against Wojcik and Leath, which will be suspended because of their inability to pay. If it is determined that the financial information they gave the FTC was not accurate, the full amount of the judgment will become due.
Debt Relief USA has declared bankruptcy. Through settlement of a separate action brought against it by the Texas attorney general’s office, consumers have received $3.7 million in refunds from the company’s bankruptcy estate and will receive additional distributions soon.
Changes made last year to the FTC’s Telemarketing Sales Rule prohibit companies that sell debt-relief services over the telephone from charging fees before they settle or reduce a customer’s credit card or other unsecured debt.
The ban on advance fees protects all consumers who have enrolled in a debt relief service since Oct. 27, 2010.
