One of the nation’s largest consumer debt-buying companies has reached a settlement with the Federal Trade Commission and agreed to pay $2.5 million over allegedly deceptive debt collection practices, including threatening to sue consumers whose debt was too old to be legally enforceable.

Asset Acceptance LLC, which buys millions of consumer accounts for pennies on the dollar, was sued by the FTC for allegedly making a series of misrepresentations when attempting to collect old debts. The alleged misrepresentations included everything from falsely claiming it could substantiate ownership of debts, to providing information to credit reporting agencies that it knew may be inaccurate, to threatening consumers with debt collection lawsuits when it knew the age of the debt made it immune from legal action because the statute of limitations on the debt had expired (“Under FTC Settlement, Debt Buyer Agrees to Pay $2.5 Million for Alleged Consumer Deception,” FTC press release, Jan. 30, 2012).

The FTC’s complaint alleged violations of the Federal Trade Communications Act, the Fair Debt Collection Practices Act, and the Fair Credit Reporting Act. Under the terms of the settlement, Asset Acceptance must investigate disputed debts, notify consumers when debt is placed on credit reports, disclose to consumers that it will not sue for debts that are too old, which are referred to as “time-barred” debts.

“Most consumers do not know their legal rights with respect to collection of old debts past the statute of limitations,” said David Vladeck, Director of the FTC’s Bureau of Consumer Protection, in a statement. “When a collector tells a consumer that she owes money and demands payment, it may create the misleading impression that the collector can sue the consumer in court to collect that debt. This FTC settlement signals that, even with old debt, the prohibitions against deceptive and unfair collection methods apply.”

As a result of the lawsuit against Asset Acceptance, and to help inform consumers of their rights concerning old debts, the FTC has released a new publication for consumers, “Time-Barred Debts: Understanding Your Rights When It Comes to Old Debts.”

Consumers who believe they have been the victim of a scam or who wish to report fraudulent, deceptive, or unfair business practices can file a complaint in English or Spanish by calling toll-free (877) 382-4357 or by filling out the FTC’s online Complaint Assistant.

Further Reading

Complaint for Civil Penalties, Injuntive and Other Relief: United States of America v. Asset Acceptance LLC. Filed January 30, 2012.

Consent Decree: United States of America v. Asset Acceptance LLC. Filed January 30, 2012.

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A Louisiana debt relief company that offered to repair consumers’ credit card debt histories has been hit with a cease-and-desist order by the state’s Attorney General for allegedly failing to provide a necessary $100,000 bond required under state law.

The cease-and-desist order was issued to A American Debt Consolidation in New Iberia on Jan. 24 by the Louisiana Department of Justice, Office of the Attorney General, Public Protection Division, Consumer Protection Section. The order was issued after the Better Business Bureau of Acadiana reported that the debt relief company advertised credit repair services on its website. The BBB regularly monitors Acadiana business that require special state licensing to ensure that they comply (“Cease-and-Desist Order Issued for Credit Repair Company,” The Advertiser, Jan. 30, 2012).

In light of the finding and the subsequent order from the Attorney General’s Office, the BBB of Acadiana is warning residents to use “extreme caution” when doing business with credit repair companies that promise to erase bad credit histories:

• Beware of promises that your credit history will be clean following credit repair services
• Beware of companies that charge advance fees before performing any service
• Do not follow the instructions of companies that tell you to avoid contacting the three major credit reporting agencies
• Do not pay credit repair companies for services you can perform for free
• Do not follow a credit repair company’s suggestions to use and Employee Identification Number instead of your Social Security number to invent a new credit history

The BBB cautions residents that, in general, the only way to improve bad credit is to pay bills on time and legally dispute inaccurate information appearing on credit history reports.

Residents that believe they have been the victim of a credit repair scam or wish to file a complaint against a debt relief company or a credit repair company can visit the Attorney General’s office at ag.state.la.us. To file a complaint or report a scam with the Better Business Bureau, residents can visit bbb.org.

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A U.S. district court has agreed with the Federal Trade Commission’s request to freeze the assets of an Arizona telemarketing operation that allegedly charged consumers illegal advance fees for bogus credit card debt relief services.

The FTC sued Phoenix-based Premier Nationwide Corporation and its owner, Eric C. Synstad, for allegedly charging consumers hundreds of dollars in illegal up-front fees in exchange for false promises that the company would significantly reduce their debt by either reducing the interest rates on their current credit cards or provide them with low-interest credit card consolidations (“At FTC’s Request, Court Freezes Assets of Telemarketing Operation,” Federal Trade Commission press release, Jan. 18, 2012).

The FTC’s complaint alleges that when Premier Nationwide Corporation cold-called consumers, the company said that, in exchange for an up-front fee ranging from $149 to $599, it could consolidate debts on a new credit card with interest rates as low as 9 percent or work with a consumer’s existing credit card issuers to obtain lower interest rates and monthly payments. The company also promised consumers that it would provide full refunds — minus a 20 percent “processing fee” — if it could not significantly reduce consumers’ debts.

However, consumers who signed up for the credit card debt consolidation service were simply provided with a list of banks and told to apply for low-interest credit cards on their own. Meanwhile, consumers who signed up for the interest rate reduction service were told they would have to pay an additional monthly fee to a different company that would provide the actual service. In many cases, consumers who sought promised refunds were denied.

The FTC alleges that the defendants violated the Federal Trade Commission Act and the Telemarketing Sales Rule, which prohibits companies that sell debt relief services over the phone from charging fees before achieving promised results.

The U.S. district court has ordered Premier Nationwide Corporation to halt its illegal conduct while the FTC moves forward with its case.

The FTC encourages consumers who believe they are a victim of fraudulent, deceptive, or unfair business practices to file a complaint in English or Spanish by visiting the FTC’s online Complaint Assistant or by calling toll-free (877) 382-4357.

Further Reading

Complaint for Injunctive and Other Relief: Federal Trade Commission vs. Premier Nationwide Corporation, et al. Filed January 2, 2012.

Proposed Ex Parte Temporary Restraining Order: Federal Trade Commission vs. Premier Nationwide Corporation, et al. Filed January 3, 2012.

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A bogus Florida debt relief law firm that falsely promised it could reduce consumers’ debts by more than half has been banned from providing debt relief services in North Carolina and forced to give up $1.2 million in charges and refunds, North Carolina Attorney General Roy Cooper announced Tuesday.

Under a consent judgment approved by Wake County Superior Court Judge Howard Manning, The Consumer Law Group of Boca Raton is barred from offering any debt settlement or debt negotiation services in North Carolina and is has agreed to pay $600,000 in refunds to North Carolina consumers. Additionally, the Consumer Law Group agreed not to collect $600,000 in charges from North Carolina consumers and pay the state $50,000 to cover its legal expenses (“Bogus Law Firm Gives Up $1.2 Million Taken From NC Consumers,” Office of the Attorney General of North Carolina press release, Jan. 24, 2012).

Cooper filed a lawsuit against the Consumer Law Group in Oct. 2010 after an investigation by his office revealed more than 650 North Carolina consumers had paid the so-called law firm significant up-front fees for debt relief, debt settlement, and debt negotiation services but had received little or no help. Under state law, it is illegal for debt relief companies to charge advance fees, but many companies try to skirt the law by claiming to be law firms.

The investigation found that the Consumer Law Group deceptively claimed that its services were performed by attorneys and that its debt relief program was sponsored by the federal government. The Consumer Law Group told consumers to not pay their debts or talk to creditors and to pay the company instead. However, because the company rarely worked out debt settlement agreements, many consumers were actually left worse off than before and some were even sued by their creditors.

“Debt relief scams take advantage of struggling consumers, adding to their burden instead of helping them get out of debt,” Cooper said in a statement. “I’m pleased that we’ve been able to win money back for these consumers, money that can hopefully help them pay off bills and get on better financial footing.”

For more information or to file a complaint about the Consumer Law Group or othe debt relief companies, North Carolina residents can call the Attorney General’s Consumer Protection Division toll-free at (877) 5-NO-SCAM or fill out a consumer complaint form online.

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Talk show host and former broker Suze Orman has been called out over her promotion of a “credit building” prepaid debt card with her name on it that charges users $36 a year to access their own money and does nothing to build users’ credit histories.

The personal finance celebrity says she wants to change the credit rating system to reward people who have only one credit card or who pay with cash and that her Approved Card, which is issued by The Bancorp Bank, is just the thing to usher in such sweeping changes. However, Orman only “hopes” that credit-rating firm TransUnion, after a two-year data-reporting trial, will decide to use the card’s cash transaction history on credit reports.

Orman’s prepaid debit card, which comes with a series of fees — including a base $3 monthly fee, fees to add money to the card any way other than direct deposit, out-of-network ATM fees, and a series of other small fees and transaction costs — was slammed by many financial experts. John Ulzheimer, president of consumer education for SmartCredit.com, called the talk show host’s card “the cream of the crap” of the prepaid debit card market, which targets lower-income individuals who may not understand that they can get a debit card from a bank for free while bypassing usage fees at the same time.

But now Orman and the editors of O, The Oprah Magazine, are taking heat over the promotion of Orman’s card in the magazine. In response to a question earlier this month from Ron Lieber of The New York Times about whether Orman thought the viewers of her CNBC show would be troubled by the profit she made off of their everyday transactions — and that providing her own product to compete with the banks and credit cards she often criticizes might be a conflict of interest — Orman said that she promised not to promote her card on air.

However, in the February issue of O, Orman mentioned her Approved Card at length in columns she herself wrote. The first mention was in response to what appears to be a question from a reader who is trying to help her son with his credit history. More than half of Orman’s answer discussed the Approved Card, even though it doesn’t currently assist with building a user’s credit history and may never do so. The second mention comes in an essentially advertorial sidebar called “You Are Approved to Save Money” that touts the features of the Approved Card that Orman says she’s most excited about.

When Lieber contacted Orman to ask about her self-promotion in O, Orman said in an email that she “will respect the editorial rules of CNBC” and not talk about the card on her show, but that she would talk about her card anywhere she could.

“Because unless people get it and USE IT, then my mission of changing credit scoring in this country cannot be accomplished,” Orman said. “You seem to suggest it is unethical to talk about it. Well my friend, I think it would be unethical NOT to talk about it. This credit system in this country has got to change. And I am an evangelist for change” (“Suze Orman Takes to O Magazine to Promote Her New Card,” The New York Times, Jan. 23, 2012).

When Lieber contacted O for an explanation of the magazine’s editorial rules — and why they had let Orman blatantly promote her product at length, even though it doesn’t solve the reader’s problem, without providing context for Orman’s motivations — a magazine spokesman told him that Orman “has been a columnist for more than a decade, offering solid personal finance advice in our pages.” The spokesman went on to say that while the magazine’s columnists make recommendations, it’s up to the readers whether to follow them or not.

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Realtors and tax advisors are urging homeowners who are underwater or facing foreclosure to consider a short sale to take advantage of an important tax debt relief incentive that expires at the end of the year.

Under the federal tax code, money that you borrow to buy a home isn’t reported as income because of the obligation to repay the loan. However, if your home is foreclosed, resulting in a cancelation of your debt by the lender, the IRS requires that you report the canceled debt as income because you’re no longer obligated to repay it. The same holds true if you who receive mortgage debt relief services or otherwise have a portion of your home mortgage debt forgiven through refinancing; the amount of forgiven debt is considered taxable income.

However, the Mortgage Forgiveness Debt Relief Act allows delinquent homeowners who have received principal reductions to avoid paying income taxes on canceled or forgiven mortgage debt. If your lender agrees to a short sale, for example, you won’t have to pay taxes on the difference between the selling price and what you owe. At least until Dec. 31, when the act expires. Starting Jan. 1, 2013, all canceled and forgiven mortgage debt will once again be considered taxable income.

If you’re considering getting some mortgage debt relief, asking your lender for principal forgiveness as part of a refinance, or asking your lender for a short sale, now’s the time to do it, according to Florida Attorney Kevin Jurinski.

According to Jurinski, homeowners will have to work fast to get lenders to act in time for homeowners to take advantage of the tax relief act before it expires. “It’s not unusual that [getting your lender to agree] might take six months, nine months and I’ve had some that went over a year. That’s unusual, but you aren’t assured,” Jurinski said. “The idea is to move forward now. Don’t take the chance of waiting until the end of the year. Get your deal closed now” (“Realtors Pushing Short Sales,” WBBH, Jan. 16, 2012).

While there may be no hard-and-fast numbers when it comes to processing times for short sales or foreclosures, as of October it was taking lenders an average of 647 days to process a foreclosure, according to Lew Sichelman, a senior housing correspondent for SourceMedia and former real estate editor of the Washington Star.

In essence, it may already be too late for homeowners to try and convince their lenders to process a foreclosure to take advantage of the tax relief act, Sichelman said. But that may not be entirely a bad thing, he said, because foreclosing or short-selling a home just to get a tax break may not be in everyone’s best interest (“Debt-Relief Window Closing Soon,” Chicago Tribune, Jan. 13, 2012).

Since different people have different tax situations, Sichelman said that homeowners who are facing a foreclosure or considering a short sale should consult a tax professional before making any decisions to press their lenders for such resolutions.

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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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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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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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