In a move that could be a very interesting trend setter, the state of Vermont has forced two debt settlement companies to refund all fees paid by state residents. While Vermont is a small state and not a whole lot of residents worked with these two companies, it is an interesting approach by a state to protect its citizens from debt settlement companies operating unethically.
An amazing feature of this agreement by Vermont is the fact the settlement companies will have to pay $2,000 to any consumer that is or was sued by a creditor after signing up with the companies.
Debt Settlement USA, Inc., and Financial Freedom of America, Inc., two companies that offer to negotiate debt settlements for consumers, have entered into settlements with the Vermont Attorney General’s Office that will result in refunds to consumers and payments to the State totaling over $370,000. In doing so, the businesses—based respectively in Dallas, Texas, and Scottsdale, Arizona—are settling claims that they violated state law by engaging in the business of debt adjustment without a license, and failed to comply with the Vermont Consumer Fraud Act. These are the seventh and eighth settlements between the Attorney General’s Office and debt settlement firms this year.
According to Attorney General William Sorrell, Debt Settlement USA and Financial Freedom of America violated the Vermont Consumer Fraud Act by not following the State’s three-day right to cancel requirements and by failing to have prior proof to support online claims about the results they could achieve for consumers. Debt Settlement USA’s website stated that the company could “reduce your debt by 60% of the current total,” and Financial Freedom of America’s website claimed that its clients could “have up to 60% of your credit card bills completely wiped out.”
Debt Settlement USA entered into contracts with 114 Vermont consumers and charged 12 to 14 percent of the dollar amount of the debt placed with the company. Financial Freedom of America entered into contracts with 16 Vermonters and charged an “administrative fee” of 7.9 percent of the principal amount of the debt, an added “negotiation fee” of 15 percent, and a “maintenance fee” of $29.95 or $39.95 per month.
Under the settlements, both companies must pay full refunds to all of their Vermont customers and civil penalties and costs to the State. Debt Settlement USA’s refunds will total over $230,000, plus $70,000 to the State; Financial Freedom of America’s refunds will total over $42,000 in refunds, plus $30,000 to the State. In addition, both companies will pay $2,000 to any Vermonter who was sued by a creditor after signing up with the company, and will offer to complete, without charge, negotiations with the creditors of its Vermont customers.