Sued or Sanctioned

Revitafi Loses Out On Purchasing Arete Financial Freedom Debt Settlement Clients

Written by Steve Rhode

It appears that a company named Revitafi was temporarily in the running to purchase the settlement clients from Arete Financial Freedom. See the full Arete story here.

The Receiver in the case disclosed “Based on Ariana’s information and Revitafi’s lack of candor, we have informed Revitafi we will not be moving forward on their offer.” – Source

Additional documents linked below disclosed, “While Revitafi made an all-cash offer of $1,250,000, which I accepted in principle, Arete Defendants’ counsel later claimed that a senior employee at the company was subject to a California Department of Business Oversight order barring him from employment, management or control of any finance lender or broker. While the bar was not in and of itself disqualifying and the employee’s role at the company subject to dispute, I believe Revitafi was not candid with me during the initial discussions and again when I raised the question about the senior employee. As such, I decided not to move forward with Revitafi.”

The Receiver has been shopping the book of settlement clients in an effort to raise funds in the FTC case against Arete Financial Freedom that started over their student loan assistance business.

The Receiver said, “The Receiver has a duty to control and preserve the value of the Arete assets so as to maximize estate funds available for consumer redress – and, in this case, protect the Arete debt settlement customers.” – Source

The Arete position appears to be, “Because the FTC’s Complaint and restraining order papers offer no evidence of violations within the purview of the FTC by Arete’s Debt Settlement Busines—or an operational connection to other corporate defendants running student loan services—it should not be sold; instead, the Arete Individuals should be permitted to operate it.”

The people behind Arete apparently feel victimized by the FTC, Receiver, and efforts to liquidate their settlement business.

“The Receiver’s unwillingness to hand over control of the Debt Settlement Business, as he originally suggested, to the Arete Individuals who are in the best position to maintain the accounts of Arete’s debt settlement clients with funds in Debt Pay Gateway apparently stems from pressure from the FTC. Despite the Complaint being bereft of any allegations concerning the Debt Settlement Business, the FTC seeks to prevent the Arete Individuals from operating any business that could allow them to support their families and earn income that could be used to fairly litigate this action. That is, the FTC knows that with the Arete Individuals’ assets frozen, it can extract whatever result it wants and that allowing them to earn income through operation of a separate business would level the litigation playing field. The FTC should not be permitted to dispense with due process for their convenience.”

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At the very least, the Arete position seems to be one that would drag out the process to sell the settlement business and that could further harm the 7,700+ consumer caught in this mess.

It has been stated, “Both companies stressed, consistent with what we have heard time-and-again from Debt Pay Gateway’s counsel, that the sooner the transition occurs the better for customers as the customers have been without any form of customer service for almost two months and this could result in negative consequences with creditors.”

According to court documents, Arete is suggesting that a slower sale process should be the one followed.

“Finally, the Receiver fails to address 28 U.S.C. § 2004 (“Section 2004”), let alone satisfy it. This statute sets out several requirements before a receiver is permitted to sell property. Among other things, (i) a receiver must seek appointment of three disinterested appraisers to value assets, (ii) the assets must be sold at more than two-thirds of the appraised value, (iii) the sale terms must be published in a newspaper, and (iv) there must be an overbid procedure process. The Receiver has not complied with any aspect of Section 2004.”

The Arete position seems to be that the FTC only claimed fraudulent activity in their student loan business and not the settlement business. However, the issue might be with how intertwined the operations and flow of money were between the two. Untangling them to find out what illegal funds were flowing to which entity could be a near-impossible task.

The big question for consumers is how long a settlement program can be paused before it causes harm to the underlying consumers. Missed payments or settlement offers can create large financial harm to a consumer on the edge.

I can completely understand Arete’s desire to hold onto the settlement business. But if the concern of the clients was the primary factor then assisting a rapid sale would be a consumer-first position.

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And this current situation is impacting consumers. As the Receiver reports, “On or about November 7, 2019, DPG and the FTC agreed that customer funds could be disbursed to fulfill existing settlement agreements with creditors. While this solved part of the problem – funds continued to be disbursed to creditors – customers could not contact their debt settlement relief provider, Arete. As a result, DPG has reported it has received tens of thousands of calls from customers seeking services that a debt settlement relief provider would typically provide. DPG has repeatedly warned that the situation continues to deteriorate, and customers may be permanently harmed if a new debt settlement company does not take over the accounts immediately. Moreover, DPG has informed us that unless the debt settlement accounts are transferred to a new provider in the very near future, it will terminate all customer accounts and return the funds; this will disrupt customers’ debt settlement agreements with creditors, very likely resulting in customers breaching their agreements, and ultimately allowing creditors to proceed against the customers.”

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It was determined with consultation between the Receiver and Debt Pay Gateway that a prompt sale of the settlement business would cause consumers the least amount of harm.

“After further discussion with DPG’s counsel, the Receiver concluded that the solution with the least harm to the customers and maximum return to the Receivership Estate would be to sell Arete’s debt settlement accounts to a similar business. A legitimate debt settlement relief business could provide these customers with advice and direction, and work with them to settle and satisfy outstanding creditor obligations.”

The leading company in the running to purchase the accounts is New Era. The company would pay $1,200,000 for the portfolio.

“The proposed sale of the debt settlement account portfolio will be as-is and with no representations or warranties. New Era will assume the contract(s) between Arete and DebtPayPro and Debt Pay Gateway. The Arete customer agreements will be assigned to New Era and New Era will be entitled to service the accounts should the customers wish to accept their services.”

“New Era has confirmed it will abide by all state and federal laws and that the company is not presently subject to any disciplinary actions or regulatory lawsuits in state or federal court.”

Veritas LegalPlan has also said that “they will be able to seamlessly transition the accounts and protect the customers” and work closely with New Era.

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About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

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