The Texas Attorney General’s Office has charged a Houston-based debt collection firm for deceiving and threatening delinquent payday loan customers.

Payday loans are short-term loans that offer struggling consumers advances on their paychecks and can provide a measure of temporary debt management, such as emergency funds for bill payments.

According to Attorney General Greg Abbott’s complaint, representatives of First Integral Recovery LLC, a third-party debt collection company specializing in payday loan collection, allegedly called delinquent payday loan customers and unlawfully claimed the company was associated with law enforcement agencies. The company’s representatives then allegedly threatened debtors with arrest, prosecution, and imprisonment if debtors failed to pay. Additionally, representatives of First Integral Recovery allegedly intimidated debtors by using profanity during debt collection calls.

The company was also charged with failing to properly verify whether alleged debtors actually owed the debts, even after debtors requested additional information or insisted they had not incurred the debts in question, and for routinely refusing to identify the alleged creditor or whose behalf they were calling (“Texas Attorney General Charges Houston Debt Collection Firm with Deceiving Consumers,” Office of the Attorney General of Texas press release, Dec. 12, 2011).

Under Texas law, it is illegal for debt collectors to deceive, harass, or intimidate debtors, and debt collection companies are required to identify the names of creditors and verify individual debts. Texas law also requires that third-party debt collectors post a surety bond with the Texas Secretary of State to legally operate in the state, something that First Integral Recovery allegedly did not do during a seven-month period in 2010.

Abbott’s complaint seeks civil penalties for violations of the Texas Deceptive Trade Practices Act and the state’s Finance Code.

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A Margate-based debt consolidation company that recorded more complaints with the Federal Trade Commission than any other South Florida business in 2010 has reached a settlement agreement with the Florida Attorney General’s Office that requires the debt relief company to refund over half a million dollars to frustrated customers.

According to the Attorney General’s complaint, United Financial Systems Inc. took customers’ money for promised debt consolidation services but then failed or was late in paying off their debts, leaving customers with delinquent payments and ruined credit. When customers complained, United Financial System failed to provide promised refunds.

The Better Business Bureau of Southeast Florida reported receiving 736 consumer complaints about United Financial Systems over a three year period. The debt relief company was also the target of 440 complaints to the Federal Trade commission in 2010 (“Margate Debt Relief Company Refunding Customers,” Sun Sentinel, Dec. 14, 2011).

Under terms of the settlement agreement, United Financial Systems is required to provide more than $595,000 in refunds to about 500 customers. If the debt relief company fails to make timely payments, a court ordered judgment will be entered against the company and its principals for the full amount of refunds plus an additional $500,000 in civil penalties.

“The people who sought financial relief from this debt consolidation company were already facing difficult financial times, which were exacerbated when the company failed to refund their money. I am pleased that we are helping 500 consumers receive nearly $600,000 in restitution,” Attorney General Pam Bondi said in a statement. (“Attorney General Bondi’s Office Reaches Settlement with United Financial Systems,” Office of the Attorney General of Florida press release, Dec. 14, 2011).

The Florida Attorney General’s Office will distribute settlement monies to defrauded customers in two payments. The first payment will consist of a partial payment on March 31, 2012. The second payment will consist of a final pro rata payment on Sept. 30, 2012.

To be eligible for refund payments, defrauded customers must submit a sworn affidavit documenting their loss that must be postmarked by Jan. 20, 2012. Customers defrauded by United Financial Systems should contact the Florida Attorney General’s Office immediately if they have not already submitted an affidavit. Affidavits can be downloaded at www.myfloridalegal.com/UnitedFinancialSystems. Affidavits and other infomration can also be obtained by contacting the office’s Economic Crimes Division directly by calling (954) 712-4600 or emailing FTL.EC@myfloridalegal.com.

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Credit Cards can make holiday shopping simple and painless. Until that first credit card bill arrives. Taking on credit card debt over the holidays can be fraught with peril. The best thing to do is avoid using credit cards for holiday shopping, but, if you have to take on credit card debt while playing Santa this year, make sure to avoid these four credit card debt mistakes.

1. Spending more than you planned

Spending more money than you budgeted is one of the easiest ways to take on unwanted holiday credit card debt. Marketers are really good at getting you to spend more than you want during the holidays — that’s their job, after all. Be careful of falling for the buy-one-get-one-at-a-discount deals and point-of-purchase items that call out to you while you wait in line at the cash wrap. Your best bet is to make a shopping list and a budget and stick to it. Also, consider shopping on a full stomach, as low blood-sugar levels can impair your judgment.

2. Amassing retail credit cards

Retail stores try really hard to get you to use their credit cards for holiday shopping. They’ll offer significant savings off your total bill if you sign up for one, but you have to sign up right then and there. But those retail credit cards often come with huge interest rates that can eat up any savings the cards offer on your first transaction. Two-thirds of retail cards have interest rates of 23 percent while the average bank card has an interest rate of about 15 percent. Pass on these tempting offers at all costs.

3. Accepting delayed-interest offers

This time of year, bank and retail credit card mailers come pouring in with “no interest until such-and-such a time” offers. Additionally, a lot of big ticket items, like bed mattresses and lawn mowers, can come with their own delayed-interest offers. However, these offers are very carefully calculated to make banks and retailers a lot of money. Either the delayed interest rate is built into the cost of the item or interest still actually occurs during the “free” period but doesn’t have to be paid until the end. Your best bet, like retail credit cards, it to pass on these offers.

4. Spending money you don’t have

Using credit cards for holiday shopping so that you can spend money you don’t have is the granddaddy of all holiday credit card debt mistakes. There’s really no way around this: if you don’t have it, don’t spend it. You might feel pressured into buying gifts you can’t afford, but we’re pretty sure that the recipients of those gifts wouldn’t want you to go into credit card debt in order to finance them. Buying someone an Xbox is very generous, but a really bad idea if you have to finance the purchase at 15 percent interest.

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The Federal Trade Commission (FTC) has reached a settlement agreement with six defendants who were charged with participating in a fraudulent mortgage debt relief scam that bilked millions from desperate homeowners.

The defendants, operating under a corporate umbrella called U.S. Homeowners Relief Inc., were sued by the FTC last year for offering fraudulent mortgage relief services that were part of a “Government Mortgage Relief Program” that was tied to the “Obama Act” or the “federal stimulus program,” even though the defendants had no affiliation with the government. The defendants promised homeowners a 90 percent or higher chance of getting reduced mortgage payments, interest rates, and principal loan amounts in exchange for advance fees of up to $4,250.

The FTC alleged that once the victims paid the advance fees the defendants received no actual debt relief services. Furthermore, the defendants allegedly failed to deliver on promises of full refunds and didn’t respond to victims calls or emails. According to the FTC’s complaint, the defendants simply disconnected their telephones and changed the name of their business while continuing to defraud homeowners.

As part of the scam, the defendants allegedly claimed to have working relationships with lenders that enabled them to get special treatment, including loan modifications with favorable terms. In advertising mailers that were tailored to individual recipients, the defendants allegedly mislead victims into believing that they had been “PRE-SELECTED” for a home loan modification and by erroneously specifying the victims’ supposedly new 30-year fixed payment (“FTC Settlement Requires ‘U.S. Homeowners Relief’ Defendants to Pay Millions,” FTC press release, Dec. 15, 2011).

The six defendants include Aminullah Sarpas, New Life Solutions Inc., Damon Grant Carriger, DLD Consulting LLC, and D.G.C. Consulting Inc., and Macie Majeco Bain. The settlement order against Sarpas and New Life Solutions imposes a $3.9 million judgment; the order against Carriger, DLD Consulting, and D.G.C. Consulting imposes a $2.1 million judgment; the order against Bain imposes a $3.6 million suspended judgment, pending continuing litigation. The defendants are also permanently banned from selling any mortgage assistance or debt relief products.

Litigation also continues against U.S. Homeowners Relief and associated companies Waypoint Law Group Inc. and American Lending Review Inc.

Consumers who believe they have been a victim of fraudulent, deceptive, or unfair business practices, or who would like to report such activities, can file a complaint with the FTC, in English or Spanish, by visiting the FTC’s online Complaint Assistant or by calling (877) 382-4357.

Further Reading

Stipulated Final Judgment and Order for Permanent Injunction and Other Equitable Relief: Federal Trade Commission v. Aminullah Sarpas, et al. Filed December 11, 2011.

Stipulated Final Judgment and Order for Permanent Injunction and Other Equitable Relief: Federal Trade Commission v. Damon Grant Carriger, et al. Filed December 11, 2011.

Stipulated Final Judgment and Order for Permanent Injunction and Other Equitable Relief: Federal Trade Commission v. Macie Mejeco Bain. Filed December 11, 2011.

Complaint for Injunctive and Other Equitable Relief: Federal Trade Commission v. U.S. Homeowners Relief Inc., et al. Filed November 27, 2010.

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Getting out of debt can be tough for some Americans. After all, U.S. households currently owe an astronomical $2.3 trillion in credit card debt, auto loans, education loans, and other non-real estate debt. Regardless if your debt problems are caused by unemployment, overspending, or both, there are six tips that can get you started down the road of a successful debt diet.

In part one of our six personal debt relief tips we offered the first three pieces of advice for completing a much-needed debt diet, including calculating your debt, cutting up your credit cards, and trimming the fat. For part two we discuss the final three tips, including seeking professional help, finding additional income, and rewarding yourself to keep your momentum going.

4. Consider professional help

Credit counseling organizations and debt relief companies can likely help you organize and pay off your debts if you’re in financial trouble. Nonprofit credit counselors recommended by the National Foundation for Credit Counseling can help you develop a debt management plan. Debt relief companies offer services such as debt consolidation, debt management, and debt settlement that can help you get a handle on your debt and eventually become debt-free.

5. Bring in additional income

Of course, a good way to get out of debt is to find a way to bring in additional income while you cut your expenses. Being creative is key. You’ll stay focused on your debt diet goal if you remember that the extra work and the extra cash are going to pay off your debts. Try to find a way to take on extra or overtime shifts, get a part-time job, or sell stuff you don’t use on eBay. You can even consider selling other assets, but make sure to not go overboard. Dipping into retirement accounts to pay your credit card debt isn’t advisable.

6. Be kind to yourself

A debt diet is like a food diet, the best changes are the ones that you can incorporate in your everyday life. And, just like a food diet, you should allow yourself some occasional breathing room. Go out to eat once a month or save for an affordable vacation. If you cut off too much and make too many inflexible changes, you’re likely to go off your diet and start making poor decisions. And don’t be afraid to try and save money for emergencies and retirement while you’re paying off your debt. Even $10 or $20 a week will make a difference in the long term.

Getting professional help, finding additional income, and rewarding yourself will help you successfully follow thorough on your debt diet and eventually help you shed all those unwanted debt pounds for a leaner, stronger, healthier financial future.

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Currently, U.S. households owe an almost unbelievable $2.3 trillion in non-real estate debts like credit card debt and auto loans. For some Americans, getting out of debt is just plain hard. Whether your debt is the result of unemployment, overspending, or both, here are six personal debt relief tips that will help you start — and successfully complete — a much-needed debt diet.

For part one, we offer three tips about calculating your debt, cutting up your credit cards, and trimming the fat. Make sure to check back for part two, where we offer three more tips on seeking professional help, finding additional income, and rewarding yourself to keep your momentum going.

1. Calculate how much you owe

The first step to beginning your debt diet is to sit down and determine how much you actually owe. Whether you use a money management program, a spreadsheet, a free service like Mint.com, or a pad of paper and a pencil, gather all the information from your various debts and record your current balances. Include credit card debt, student loan debt, auto loan debt, and any personal loans. Record minimum monthly payments, interest rates, and terms. Now you know how much you owe and which debts are costing you the most to carry.

2. Cut up your credit cards

Whether you use your credit cards to pay for living expenses because you’re out of work or use them to pay for things you want but don’t need, one of the only ways you’re going to get out of debt is to avoid going into debt any further. You’re best bet is to cut up your credit cards and cancel your accounts (and pay off your balances under current terms) to prevent further use. Some financial experts caution against closing accounts because doing so could lower your credit score and advise that you keep at least one credit card for emergencies. The important thing is to prevent access to credit cards if you have a problem with spending. Instead, opt for a cash-and-carry lifestyle and use debit cards if you have to.

3. Make a budget and trim the fat

Make a budget based on your income and track your spending for 30 days. It can really open your eyes to how you’re spending — and wasting — money. That $4 cup of coffee you buy every day at work could end up costing you nearly $28,000 over a 35-year career. Investing the same amount of money could earn you $247,000 at 3 percent interest over the same period. And that’s just coffee. Your debt diet should include cutting out expenses such as eating out and pricey cell phone plans. You should cut back on groceries, utilities, gas, clothing, and gifts, and drop services that you don’t use, like gym memberships. You should also change your behavior and stop smoking, playing the lottery, and spending money on other costly habits.

Calculating your total debt, cutting up your credit cards, and trimming the fat will get you enough personal debt relief to get you started on your healthy debt diet. Check back for part two for three more tips that will help you follow through on your debt diet and get you where you want to be financially.

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An Austin, Texas, man has been charged in United States District Court with operating a mortgage debt relief scam in Los Angeles and elsewhere that falsely promised the owners of more than a thousand distressed properties that they could be protected against foreclosure sales.

Frederic Alan Gladle allegedly recruited homeowners with properties that were facing imminent foreclosure and falsely promised them that his services could delay the foreclosures for up to six months. As the result of the four-year scam, which continued until Gladle’s arrest in October, Gladle and his associates collected more than $1.6 million from distressed homeowners. Gladle stated in court that he intends to plead guilty to one count of bankruptcy fraud and one count of aggravated identity theft as part of a plea agreement.

In exchange for a monthly fee of around $750, Gladle, either directly or through salespersons, had a homeowner sign a deed granting a 1/100th interest in the house to an unsuspecting debtor in bankruptcy that Gladle had found by simply searching bankruptcy records. The debtors had no idea that their names and information were being used by Gladle. Gladle would then print out the unsuspecting debtor’s bankruptcy petition, attach it to the 1/100th deed in the debtor’s name, and fax the documents to a homeowner’s lender to stop foreclosure proceedings.

The scheme worked because the filing of a bankruptcy leads to an “automatic stay” that protects a debtor’s property. When Gladle fraudulently attached his victim’s mortgages to the unsuspecting debtors using the 1/100th deeds, the homeowners were temporarily protected from foreclosures and the lenders were forced to get permission from the bankruptcy court, which delayed their ability to proceed with foreclosures and recover their money. When homeowners wanted to void the 1/100th deeds, Gladle would forge the signatures of the unsuspecting debtors to void the deeds.

To help perpetrate his scheme, Gladle used five aliases to avoid detection, including stealing the identity of at least one person and setting up a cell phone account in the victim’s name.

“This is the latest example of heartless criminal activity by an individual who sought to capitalize on the misfortune of those affected by hard economic times,” said Steven Martinez, Assistant Director in Charge of the FBI’s Los Angeles Field Office. “Mr. Gladle defrauded victims trying to save their homes, further exploited those in debt by stealing their identities, and wreaked havoc on both banks and the Bankruptcy Courts by manipulating the system. The FBI will continue to investigate criminal activity associated with the housing market and to encourage homeowners to beware of fraudulent offers” (“Austin, Texas, Man Charged With Fraud And Identity Theft In Nationwide Foreclosure-Rescue Scheme,” U.S. Attorney’s Office of the Central District of California press release, Dec. 9, 2011).

Gladle faces a statutory maximum of five years in federal prison for the bankruptcy fraud charge. The aggravated identity theft charge carries a mandatory minimum sentence of two years.

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The debt that seniors leave behind when they pass away is becoming big business for debt collectors, who sometimes use questionable tactics to go after family members and pressure them into debt settlement agreements even though spouses and other survivors may not be legally required to pay.

When people die, debts usually die with them, unless there is a co-signer, a typical arrangement with many home mortgages and some credit cards, or the debts are entered into probate, in which case debt collectors can file a claim to recover the money. As seniors take on more debt faster than ever before — an average of $40,130 in 2007, the latest year for which figures are available — creditors face greater burdens from unpaid accounts left behind by deceased borrowers that nobody is legally required to pay. Creditors can either write off the accounts as losses or hire a death-debt collector to attempt to recover some of the money.

More creditors are opting for the death-debt collection route because of its advantages. Death-debt collectors act as a shield for creditors from the dirty work of going after grieving survivors who may not be legally required to pay the debts and prevent the creditors from possible public relations problems. And, although death-debt collectors in many cases extend debt settlement offers for less than the amount owed, the roughly 40 percent cut that the debt collectors take of the collected payments still leaves creditors with 60 percent of whatever is collected. Death-debt collectors also have a stake, as a 40 percent cut represents about twice the normal collection rate for other kinds of delinquent consumer debt.

However, while the death-debt collection business may be booming, the tactics some collectors use to pressure survivors to pay debts they don’t owe have come under the scrutiny of the Federal Trade Commission (FTC), which has yet to provide firm regulations for the way death-debt collectors contact survivors. Some death-debt collectors have been accused — and sued — for making harassing phone calls. Others have come under fire for the way they go after grieving spouses and other relatives by preying on their emotional state and claiming they have a moral obligation to pay, a practice often codified in debt collectors’ training materials and carefully calibrated scripts, a tactic one debt collector refers to as “empathetic active recovery.” Other collectors have been sued for falsely telling survivors that they are legally required to pay the debts of the deceased (“For the Families of Some Debtors, Death Offers No Respite,” The Wall Street Journal, Dec. 3, 2011).

Trade Group: Death-Debt Settlement Offers Ensure Credit for Older Americans

Still, the FTC allows death-debt collectors to contact family members to find out who is managing the estate so that collectors have an opportunity to collect debts that are legally owed. It’s a problem for the industry because many debtors are failing to formally designate someone to handle their affairs after death, leaving debt collection firms unable to determine who to contact. The FTC has declined requests by lawyers to ban collection calls to surviving family members and to impose a cooling-off period during which relatives can’t be contacted by debt collectors.

“While people might think it is horrible for collectors to speak with surviving spouses, we have no power to change that,” said J. Reilly Dolan, acting director of the FTC’s financial-practices division.

In all cases, FTC rules and regulations that apply to the debt collection industry also apply to death-debt collectors.

ACA International, the death-debt collection industry’s main trade group, defended the practice of collecting the debts of deceased consumers. The group said that death-debt collection helps other seniors by ensuring that lenders will continue to extend credit at competitive interest rates to older Americans.

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A Texas woman who sought mortgage debt relief from Bank of America has sued the bank after it approved her request for a loan modification for her Austin home but then rescinded the approval and eventually began foreclosure proceedings against her.

The lawsuit by Maria Gonzales alleges that the bank wrongly invalidated the loan modification agreement it had approved for Gonzales, and fraudulently sought to foreclose on her home, because the agreement wasn’t signed by her husband, Albert Gonzalez. However, Albert Gonzalez died of a heart attack in 2007, three years before Gonzales sought the loan modification. In fact, it was Albert Gonzales’ death that led to the request for mortgage debt relief in the first place.

According to the lawsuit, Gonzales and her husband bought their home in August 2006 with an adjustable rate mortgage from Countrywide Financial Corp., the former $500 billion home loan giant that eventually collapsed into bankruptcy. Countrywide Financial was bought by Bank of America in 2008 and cost the bank $108 million to settle federal charges that Countrywide Financial overcharged customers who were struggling to keep their homes.

Bank of America became the servicer of Gonzales’ loan when it bought Countrywide Financial. When Gonzales fell behind on her mortgage payments in 2010, she sought a loan modification from the bank, which was approved in January. In June, Bank of America notified Gonzales that the loan modification had been canceled because it had not be signed by her husband, who was listed as co-borrower on the original loan.

According to the lawsuit, the bank notified Gonzales of its decision to cancel the loan modification after she had sent the company a copy of her husband’s death certificate.

Bank of America then notified Gonzales of its intention to list her home for foreclosure auction (“Austin Woman Sues Bank of America Over Foreclosure Procedures,” The Austin-American Statesman, Dec. 1, 2011).

Visiting District Court Judge Gus Strauss granted an injunction preventing Bank of America from proceeding with the foreclosure process against Gonzalez until Dec. 15, when another hearing on the case was scheduled.

Gonzales’ lawsuit against Bank of America was filed on the same day that a Massachusetts lawsuit was filed accusing five of the nation’s largest banks, including Bank of America, of deceptive and fraudulent foreclosure practices.

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The U.S. Department of the Treasury will be part of a new federal task force charged with shutting down illegal mortgage debt relief scams posing as government assistance plans.

The Treasury Department will team up with the Office of the Special Inspector General for the Troubled Asset Relief Program and the Consumer Financial Protection Bureau to investigate and shutter mortgage modification scams that trick struggling homeowners into thinking the scams are debt relief programs associated with the federal government (“Task Force Set Up to Investigate Mortgage Scams,” Reuters, Dec. 1, 2011).

According to regulators, troubled homeowners who try to apply for the federal Home Affordable Modification Program (HAMP) have been defrauded by companies that collect fees for false promises of lower mortgage principals or lower monthly mortgage payments. Applying for HAMP is free through the federal government.

The Treasury Department said that it will issue a “fraud alert” to homeowners who are eligible for mortgage modifications through HAMP that will advise how to contact the task force if they suspect a scam.

The announcement of the task force comes at a time when government efforts to provide help to consumers facing the risk of foreclosure have received significant criticism, banks are being investigated for foreclosure-related malfeasance, and the housing industry remains depressed from falling prices and high unemployment.

Regulators released several consumer tips for struggling homeowners:

• Homeowners can apply for HAMP for free at (888) 995-4673 or online at www.makinghomeaffordable.gov
• It’s illegal for a company to charge advance fees to modify a mortgage
• Outside companies can neither modify mortgage loans or “pre-approve” HAMP applications; only the mortgage company that services a mortgage can modify it
• Outside companies offering HAMP application services can’t increase a homeowner’s chance of getting a mortgage modification, no matter what the companies say
• Watch out for companies using fake U.S. seals or logos that illegally promote a false connection with the federal government
• Companies that advise homeowners to stop paying their mortgages are scams and should be avoided at all costs (“Feds Target Mortgage Modification Scams,” The Baltimore Sun, Dec. 2, 2011)

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