A Colorado-based debt relief company known for the infomercials it ran on local radio stations offering to help consumers get out of debt has agreed to a settlement with the state’s attorney general stemming form allegations that it scammed customers who signed up for its debt help program.

Colorado Attorney General John Suthers filed a lawsuit last year against Real Talk Network and David Allen Burke and Melodie Rose Burke, both 42, for running infomercials that violated state consumer protection laws. The infomercials, which ran on radio stations in Colorado and California, were presented as a program called “Get Real with Dave,” hosted by Real Talk Network president David Burke.

According to the lawsuit, the infomercials told consumers that the company’s debt relief program could get them out of debt in a short period of time, pay off their home mortgage loans in less than 10 years, and dramatically improve their credit scores. Real Talk Network allegedly advertised that its program had a 100 percent success rate.

Under terms of the settlement agreement, the company and the Burkes have been permanently banned from selling, marketing, or advertising debt relief services in Colorado, including debt consolidation, debt elimination, credit repair, debt settlement, and related counseling services.

The defendants also agreed to pay $226,414 in penalties, including $200,000 for customer restitution and $26,414 to the attorney general’s consumer protection division for help with consumer education and anti-trust enforcement efforts (“Real Talk Network Barred From Debt Relief Services, Will Pay $226,414,” The Denver Post, July 28, 2011).

The defendants said they agreed to the settlement to avoid the expense of litigation. The settlement doesn’t contain an admission of liability by the defendants.

Real Talk Network has been given a grade of F by the Better Business Bureau, which cites 116 complaints against the debt relief company since it began operations in 2004.

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South Carolina tax debt relief firm JK Harris Co. agreed Monday to the terms of a settlement with the attorney general of West Virginia over allegations that it misled customers about the tax debt settlement services it provided.

The settlement agreement with attorney general Darrell McGraw is the third this year for the embattled company, which earlier opened its checkbook to settle lawsuits filed by the attorneys general of Texas, for $1.2 million, and Tennessee, which assessed costs and penalties for violations of a 2008 multi-state settlement that included West Virginia. In 2007, JK Harris settled a separate class-action lawsuit for $6 million, but stopped making settlement payments early last year because of financial problems (“JK Harris Settles West Virginia Claims,” The Post and Courier, July 27, 2011).

The various actions against JK Harris have concerned the company’s business practices, which involve allegedly falsely telling consumers that it could settle their federal tax debts for a fraction of what they owed in exchange for an advance fee that wasn’t refunded when the company failed to provide any tax debt help.

Like Tennessee’s lawsuit against JK Harris that resulted in a settlement earlier this year, McGraw’s latest action against the tax debt relief company stems from alleged violations of the 2008 multi-state settlement, which resulted in a consent order prohibiting the company from charging advance fees and telling consumers that they were qualified for the Internal Revenue Service’s Offer in Compromise (OIC) program when they were not. Consumers who qualify for the OIC program have most of their tax liability waived by the IRS and end up paying only a percentage of what is owed. However, in reality, qualifying for the OIC program is difficult; the IRS accepts less than 25 percent of the OIC applications it receives (“Attorney General Darrell McGraw Secures Refunds for Victims of Bogus Tax Compromise Services by JK Harris,” Office of the Attorney General of West Virginia press release, July 25, 2011).

“In the previous consent order, JK Harris agreed to stop falsely representing to ineligible consumers that they qualified for an OIC with the IRS and to stop charging consumers any fees to apply for the … program unless the company could demonstrate that the consumers were, in fact, eligible,” McGraw said in a statement. “Since the entry of that 2008 settlement, the attorney general received complaints from four consumers who paid fees to JK Harris after they were told by the company that they qualified for OICs but actually did not.”

Under the terms of Monday’s settlement agreement, the customers will be provided full refunds totaling $14,180. Other West Virginians who were falsely told by JK Harris that they qualified for the OIC program after the 2008 settlement but who weren’t a part of Monday’s settlement have until Aug. 26 to file a complaint with McGraw’s office.

To file a complaint with McGraw’s office, West Virginians can call the attorney general’s Consumer Protection Hotline at (800) 368-8808 or go online at www.wvago.gov/takeaction.

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Spouses who are looking to escape the tax crimes of their husband or wife may be eligible for some additional consideration when it comes to obtaining tax debt relief from the Internal Revenue Service.

Under the law, spouses are generally liable for the tax debts of their partners when they file joint federal income tax returns. However, spouses who didn’t know their partners were cheating on their taxes or didn’t participate in their partners’ tax crimes may apply for “innocent spouse” designation. The designation relieves spouses from their partners’ tax debt burdens if the spouses can prove they were in abusive relationships and thought they had no option but to sign their partners’ federal income tax returns.

On Monday, the IRS extended tax debt relief consideration for some innocent spouses by eliminating the requirement that they apply for tax debt relief within a two year window after the agency had begun a debt collection action against their partners. The two-year time limit for some applicants was discontinued after lawmakers and advocates complained that it may take years for many spouses who were abused, misled, or divorced to become aware of IRS debt collection efforts (“IRS Eases Liability Rule for Spouse’s Tax Debt,” The Houston Chronicle, July 25, 2011).

Taxpayers who may qualify for additional time in order to apply for innocent spouse designation include those in abusive relationships, those who had no reason to believe their partners didn’t pay their taxes, and those who were never notified about a resulting debt collection effort by the IRS. The IRS sais that the two-year time limit will no longer apply to new or pending applications by these spouses and that those who meet the qualifications for extended time but had an application denied in the past because of the time limit may reapply.

Taxpayers who are still bound by the two-year time limit include those spouses who were unaware that their partners didn’t pay their taxes but found out about debt collection efforts by the IRS within the two-year limit.

“It is critical that taxpayers who are the victim of fraud are given the strongest protections possible under the law,” said Rep. Jim McDermott of Washington, one of a group of 48 House Democrats that signed a letter to IRS Commissioner Doug Shulman advocating for the time limit change. “Today’s decision is a victory for fairness and will provide innocent taxpayers with enough time to seek the relief that they deserve.”

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Financially troubled Arizona homeowners who live in Pima County and are worried about losing their homes can get information on mortgage debt relief and foreclosure prevention by attending a series of workshops this Saturday, July 23.

The Foreclosure Prevention Workshops will be held at the El Rio Neighborhood Center, 1390 W. Speedway Blvd. Counselors will be available to provide homeowners with one-on-one consultations that offer information and assistance for a variety of mortgage debt relief topics:

• Provide information and assistance with mortgage loan modifications, foreclosure preventions, and foreclosure recoveries.
• Help homeowners get emergency assistance to help pay rent, mortgage, and utility bills.
• Help homeowners and families who are victims of mortgage debt relief fraud or mortgage rescue scams.
• Provide access to resources that can help Pima County residents purchase homes, repair them, and make them more energy efficient; find affordable rentals; improve their credit; and save and manage their money. Resources include information, counseling, classes, computers, and workshops (“Get Help to Avoid Foreclosure at Workshops on July 23,” Pima County News, July 18, 2011).

In order to take full advantage of the workshops and maximize assistance from counselors, homeowners should bring the following documents:

• 2010 tax return and all associated W-2 forms
• Two current pay stubs
• Homeowners insurance policy
• A utility bill
• Banks statements for the previous two months
• A detailed list of monthly expenses
• The most recent mortgage statement and any related correspondence
• A hardship letter, in the homeowner’s own words

To register for the workshops, homeowners should call toll-free (800) 300-7868 or locally (520) 624-2947.

The workshops are sponsored by the Pima County Housing Center, Federal Home Loan Bank of San Francisco, Don’t Borrow Trouble Pima County, the City of Tucson, Fannie Mae, and the Southwest Fair Housing Council.

More information on housing assistance in Pima County can be obtained by calling the Pima County Housing Center at (520) 624-2947 of visiting the center in person between 8 a.m. and 5 p.m. Monday through Friday.

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A debt collection firm is the target of a class action lawsuit in Texas for allegedly mailing deceptive pre-approved credit card balance transfer offers that were actually debt collection letters.

The class action lawsuit names as defendants Genesis Financial Solutions (GFS), a Beaverton, Ore., debt collection company; NCO Portfolio Management Inc., a credit card debt buyer based in Horsham, Pa.; and WebBank, a niche financing bank headquartered in Salt Lake City, Utah.

According to court documents, plaintiff Mark Myers received a mailed offer from GFS and NCO that stated “Transfer your debt to a Pre-Approved+ MasterCard!” in bold print at the top of the letter. The lawsuit alleges that the letter was designed to deceive Myers and others in one of two ways, by getting them to either sign up for the “balance transfer” or to throw away the letter, thinking that it was junk mail and just one of many credit card offers sent to them each month.

The lawsuit alleges that the letter was designed so that if Myers and others signed up for the credit card balance transfer, the signature that confirmed acceptance of the Pearl Card Gold MasterCard offer would validate the amount of the alleged debt and restart the clock on the statute of limitations for consumer debt collection, unbeknownst to the debtor, even if the statute of limitations had expired.

Meanwhile, if Myers and others threw the letter in the trash thinking it was junk mail, the act of doing so would have triggered specific rights for GFS and NCO under the federal Fair Debt Collection Practices Act.

Either way, the lawsuit alleges, Myers and others were deceived no matter what action they took (“Class Action Lawsuit Alleges Collection Agencies’ Credit Card Offer Contains Multiple FDCPA Violations,” InsideARM, July 14, 2011).

Debt Collection Mailer Hid Required Consumer Warning in Fine Print

At the heart of the complaint is the misuse of the “Mini-Miranda Warning” that debt collection companies are required by the federal Fair Debt Collection Practices Act to prominently display on all written communications with debtors. The warning is a statement that’s required to identify the name of the debt collector and the company they represent and advises that debtor of his or her right to validate and dispute the alleged debt within 30 days.

According to the complaint, the letters received by Myers and others didn’t clearly display the warning in its entirely where it could be easily viewed and read. The warning was instead printed on the reverse side of the letter in fine print with other boilerplate legal language that could easily be missed or overlooked.

Although WebBank was not a party to debt collection efforts, it’s a co-defendant in the lawsuit because of an alleged partnership with GFS and NCO that would have allowed the companies to use Utah credit card laws, which allow for no caps on interest rates and fees for credit cards in all 50 states.

The lawsuit alleges multiple violations of the federal Fair Debt Collection Practices Act and the Texas Finance code and seeks to recover actual and punitive damages of behalf of class members, who are comprised of all those who received a mailer similar to Myers for a period of one year prior to the date the lawsuit was filed.

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West Virginia Attorney General Darrell McGraw last week filed a petition to enforce a subpoena against a California-based mortgage debt relief company that allegedly charged illegal advance fees for a mortgage loan modification that was never provided.

National Relief Group allegedly told a Glen, W. Va., homeowner that he had been pre-approved for a mortgage loan modification but that payment for services would be required in advance, even though charging advance fees for debt relief services is against the law in West Virginia. The customer paid the advance fee but the company didn’t secure the fraudulently promised loan modification and failed to provide any mortgage debt relief service. The customer eventually lost his home to foreclosure (“Attorney General Darrell McGraw Takes Action Against California’s National Relief Group,” Office of the Attorney General of West Virginia press release, July 14, 2011).

McGraw said that many homeowners who are seeking to modify their mortgage loans in order to lower monthly payments need to be aware that, under West Virginia law, businesses can’t charge advance fees for loan modifications. Furthermore, homeowners also need to understand that loan modification assistance is available for free.

“West Virginia consumers who need help in obtaining loan modifications should be aware there are free resources available,” McGraw said in a statement. “And they should never pay fees for loan modification services in advance.”

Consumers who may be victims of illegal debt relief or loan modification practices or would like to report a scam or complaint are encouraged to contact the attorney general’s office by calling its Consumer Protection Hotline, toll free, at (800) 368-8808 or by filing a report online at www.wvago.gov/takeaction.

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California homeowners and residents burdened by mortgage loan debt, credit card debt, and other kinds of consumer debt will be able to get some debt relief information at a debt help seminar to be held July 23 from 9 am to 5 pm at the San Francisco Airport Marriot in Burlingame, Calif.

The Mortgage Debt Relief Conference, hosted by the FESPIR Organization (which stands for Foreclosure Prevention — Principal & Interest Reduction) will offer a presentation by FESPIR CEO Tim Kirchner, JustUsDebt CEO Dean Newton, and attorney Patricia Rodriguez that will educate and inform homeowners of their options when it comes to saving their homes.

FESPIR is a non-profit organization of consumer advocates, attorneys, financial analysts, and professional debt arbitrators. At the conference, the organization will provide attorneys and debt relief specialists to individuals who need information on mortgage debt relief and other kinds of debt help.

“The Debt Relief Conference offers the perfect opportunity for anyone with an upside-down mortgage or other debt burden to get help on-the-spot from the attorneys and debt relief specialists who will be there,” Kirchner said in a statement.

“If you are under financial stress, facing foreclosure, need mortgage principal and interest reduction, have failed loan modification, have an upcoming trustee sale, or simply need help saving your home, you owe it to yourself to attend this conference” (“Homeowners With Underwater Mortgages Will Get On-the-Spot-Help on July 23rd, 2011,” FESPIR press release, July 14, 2011).

Consumers seeking information about various kinds of debt help are encouraged to register early by going online at www.DebtReliefConference.com or by calling (877) 247-0080.

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A mortgage debt relief company was sued Tuesday by the Attorney General of Ohio for allegedly charging residents advance fees in exchange for false promises that it could secure mortgage loan modifications for them.

According to Ohio Attorney General Mike DeWine’s lawsuit against Diversified Real Estate Consultants LLC (DREC), a foreclosure rescue company registered in Florida and operating out of Ohio, the company offered mortgage debt relief services to Ohio consumers but was never registered to do business in the state.

DREC allegedly charged consumers who were seeing mortgage debt help advance fees ranging from $500 to $3,495 for false promises that it could reduce their monthly mortgage payments or secure lower interest rates on their home mortgage loans. However, consumers never received any help and, despite a “100 percent money-back guarantee,” never received any requested refunds (“Northeast Ohio Foreclosure Rescue Company Sued for Consumer Law Violations,” Office of the Attorney General of Ohio press release, July 12, 2011).

It’s unlawful for companies to charge advance fees for mortgage debt relief services in Ohio and are prohibited from accepting fees until consumers receive and agree to a loan modification offer from their lenders.

“[Diversified Real Estate Consultants] continually misled consumers,” DeWine said in a statement. “It charged substantial upfront fees for services and results that it promised but never delivered. It also encouraged homeowners to default on their mortgage loans, falsely stating that defaulting on their loans would help them get a loan modification. Such statements are completely false and caused homeowners to risk losing their homes.”

DeWine’s office has received 37 complaints against DREC dating back to 2009, including 18 unresolved complaints in which consumers reported total losses of more than $36,000.

Two Ohio companies, DREAM Management USA and Precision Processing Solutions International LLC, are named as defendants in the lawsuit for providing support services in direct connection to DREC’s mortgage debt relief services. The lawsuit charges all three companies and their owner, Daniel J. DePasquale of North Canton, with violations of Ohio’s Consumer Sales Practices Act, Debt Adjusters Act, and Telephone Solicitation Sales Act. The lawsuit seeks a declaratory judgment, injunctive relief, civil penalties, and full restitution for consumers

DeWine reminded Ohioans seeking mortgage debt relief that they can get free foreclosure assistance from Save the Dream Ohio at 888-404-4674. Consumers are also encouraged to report unfair business practices to the Ohio Attorney General’s Office by calling 800-282-0515 or by filling out a complaint online at www.OhioAttorneyGeneral.gov/ConsumerComplaint.

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Encore Capital Group Inc., an embattled debt collection firm embroiled in settlement hearings with attorneys general from 38 other states over its debt collection activities, suffered its latest blow from Texas Attorney General Gregg Abbott, who, in a separate action, charged the company Friday with using unlawful and deceptive debt collection tactics against Texas consumers.

Abbot charged Encore and subsidiaries Midland Funding LLC and Midland Credit Management Inc. with multiple violations of Texas debt collection laws and the Texas Finance Code, including falsifying and robo-signing affidavits and attempting to collect debts based on inaccurate or incomplete account information.

According to court documents filed by the state, Midland Funding purchased credit card debt and other debt portfolios from a variety of creditors for pennies on the dollar, which gave Midland the right to collect on those debts. However, Midland provided very little information in the collection letters it sent debtors, including failing to clearly state the debt to be collected, provide proof that it acquired the debt from the original creditor, and provide supporting documentation.

Furthermore, Abbott’s office alleges that the defendants targeted the wrong individuals for collection and attempted to collect debts that had already been paid. When debtors contacted Midland to dispute the alleged debts, Midland failed to provide any additional information and failed to investigate whether its debt collection efforts were proper, according to investigators (“Attorney General Abbott Charges Encore Capital Group with Violating Texas Debt Collection Laws,” Office of the Attorney General of Texas press release, July 8, 2011).

Debt Collection Firm Used Robo-Signers to Produce False Affidavits for Lawsuits

When individuals refused to pay Midland, the defendants hired attorneys to sue the alleged debtors. Since 2002, attorneys for Midland have filed more than 60,000 debt collection lawsuits in Texas. State investigators allege that the lawsuits were filed using inaccurate information and false affidavits produced by robo-signers.

Robo-signers are typically unskilled hourly workers who sign affidavits attesting to the legal ownership of debts without reviewing any underlying documentation. In sworn testimony, the defendants’ robo-signers said they routinely signed more than 300 affidavits per day but had no personal knowledge of the original debts or if the defendants had actually acquired the debts.

The result is that judges ended up relying on false affidavits in court hearings on the lawsuits brought by Midland. But, since 90 percent of the lawsuits named individuals not represented by counsel and who were unable to challenge the legitimacy of the defendants’ claims, the courts entered default judgments in the vast majority of the lawsuits.

Abbott’s office is seeking to establish a trust fund to compensate Texas consumers for money the defendants allegedly unlawfully coerced from them, collect civil penalties of up to $20,000 for each violation of the Texas Deceptive Trade Practices Act, and collect penalties that can be levied against third-party debt collectors that violate the Texas Finance Code.

Texans are encouraged to report improper or unlawful debt collection or other business practices by calling the attorney general’s toll-free complaint line at (800) 252-8011 or by filing a complaint online at www.oag.state.tx.us/consumer/complain.shtml.

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A Virginia woman is suing a Utah-based debt collection firm in U.S. District Court for allegedly violating the federal Fair Debt Collection Act (FDCA) (“Suit Filed Against Debt Collector,” Northern Virginia Daily, July 6, 2011).

Front Royal resident Michelle Masterson filed a lawsuit against Paul Law Offices, a debt collector based in Salt Lake City, on behalf of her and her mother, Jennifer Hawkins, who began receiving harassing phone calls from the debt collection firm Jan. 5. Masterson began receiving harassing phone calls 10 days later.

Paul Law Offices began calling Masterson and Hawkins over a store credit card debt Masterson allegedly owed to Home Depot. Although Masterson sent a certified letter to the firm on Jan. 21 seeking validation of the alleged debt, the firm hasn’t replied.

The lawsuit alleges that the debt collection firm violated several provisions of the FDCA by calling Hawkins several times to talk to her about her daughter’s alleged debt, harassing Masterson with repeated phone calls, and threatening to garnish Masterson’s wages and harm her credit score if she didn’t pay.

The Better Business Bureau has given Paul Law Offices an “F” rating on its website, citing 44 closed complaints regarding billing and debt collection.

Masterson’s lawsuit seeks statutory damages, costs, and attorney fees.

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