November 19, 2003
Agency Alleges that “Credit Counseling” Firm Misrepresents Costs and Nature of Its Services
The Federal Trade Commission has filed a complaint in federal court charging that a national organization that promotes itself as a non-profit credit counseling agency is engaged in deceptive practices. According to the FTC’s complaint, the defendants have misrepresented that they charge no up-front fee for their services, that they operate as a non-profit, and that they teach consumers how to handle their finances. Additionally, the FTC charges that the organization failed to provide privacy notices to consumers as required by the Gramm-Leach-Bliley (GLB) Act. Separately, a service provider for the defendants has agreed to settle FTC charges regarding its role in the operation. The FTC also has reissued two updated consumer alerts on credit counseling.
The FTC’s complaint charges Maryland-based AmeriDebt, Inc.; DebtWorks, Inc.; and Andris Pukke; and also names Pamela Pukke (a/k/a Pamela Shuster) as a relief defendant. AmeriDebt has widely advertised its credit-counseling services on a national basis. DebtWorks serviced consumer accounts on behalf of AmeriDebt until the end of 2002. Andris Pukke currently owns and was chairman and CEO of DebtWorks, and was instrumental in founding AmeriDebt.
According to the Commission’s complaint, the defendants claim that AmeriDebt is a non-profit organization dedicated to assisting consumers with their personal finances. The FTC alleges that AmeriDebt does not operate for charitable purposes, but rather to make money for affiliated for-profit companies and individuals, including DebtWorks and Andris Pukke. In addition, the complaint alleges that the defendants do not teach consumers about their finances or how to handle debt in the future, despite claiming that they do. Rather, the defendants enroll all of their clients in “debt management plans” (DMPs). In a DMP, the client makes a single consolidated monthly payment to the defendants for all of their unsecured debts included in the plan, which the defendants then disburse to the creditors.
The FTC’s complaint further alleges that the defendants charge an up-front fee to consumers enrolling in a DMP, despite claims to the contrary in their advertising. The defendants allegedly urge consumers to make an initial payment to enroll formally in the program. Rather than disbursing that payment to creditors, the FTC alleges, AmeriDebt keeps it as its fee. Although the contract with consumers refers to this payment, it is described as” voluntary” and is inconsistent with the earlier claims that there are no up-front fees.
The FTC further alleges that the defendants violated the GLB Act by failing to provide consumers with the required privacy notices regarding the collection, disclosure, and protection of consumers’ nonpublic personal information.
“We will not allow consumers to be duped into ‘contributing’ hundreds of dollars to these so-called ‘non-profits,'” said Howard Beales, director of the FTC’s Bureau of Consumer Protection. “There was nothing voluntary and nothing charitable about these payments. Consumers’ money didn’t go to creditors, it just ended up lining the pockets of the defendants.”
The FTC’s complaint asks that the court permanently enjoin the defendants from misrepresenting their fees, services, or non-profit status; require that the defendants disclose that they retain the consumer’s first payment; and order the defendants to provide privacy notices to consumers. The complaint also asks that the court award consumer redress.
In a related matter, defendants Ballenger Group, LLC, and its parent, Ballenger Holdings, LLC, have agreed to settle FTC charges regarding Ballenger Group’s role in the AmeriDebt operation. According to the FTC, Ballenger has acted as the servicer for AmeriDebt’s DMPs since the beginning of this year. In a separate complaint, the FTC alleges that Ballenger was closely associated with the other defendants and that it repeated some of AmeriDebt’s misrepresentations in direct statements to consumers on the telephone. In particular, it misrepresented that AmeriDebt is a non-profit entity and failed to disclose that the first payment is retained by AmeriDebt as a fee, according to the FTC. The settlement enjoins Ballenger from misrepresenting that there are no fees; that no profits are being made from the goods or services provided; and that money paid by a consumer on a DMP will be disbursed to creditors. The settlement further orders the defendants to pay $750,000 in consumer redress and contains standard recordkeeping provisions to assist the FTC in monitoring their compliance.
The FTC has published valuable consumer education material to assist consumers seeking credit counseling. The two publications reissued today – “Knee Deep in Debt” and “Fiscal Fitness: Choosing a Credit Counselor.”
In addition to the FTC’s action, the attorney general of Minnesota and the Attorney General of Texas are filing suit against AmeriDebt and related parties today. Earlier this year, the attorneys general of Illinois and Missouri filed suits against AmeriDebt. That litigation is ongoing.
March 21, 2005
AmeriDebt, Inc. will shut down its debt management operation as part of a settlement of Federal Trade Commission charges that it deceived consumers into paying at least $170 million in hidden fees. The FTC charged that the company misrepresented that it was a nonprofit credit counseling organization that would teach consumers how to manage their finances for no up-front fee. The settlement requires AmeriDebt to transfer all current clients’ accounts to a third party and bars the company from participating in any aspect of the credit counseling business in the future. The settlement does not include the other defendants – the FTC’s case against Andris Pukke, DebtWorks, and the relief defendant, Mrs. Pukke, will continue.
In a complaint filed in November 2003, the FTC charged that AmeriDebt, Inc., DebtWorks, Inc., and Andris Pukke deceived consumers with claims that AmeriDebt was a nonprofit organization that could help consumers get out of debt without an up-front fee. The FTC charged that, rather than operating for charitable purposes as advertised, AmeriDebt was funneling profits to affiliated for-profit entities, including DebtWorks and Andris Pukke. According to the FTC, AmeriDebt deceived new clients into making a “voluntary contribution” to enroll in the program. The FTC alleged that AmeriDebt kept these initial “contributions” as fees without consumers’ knowledge, rather than disbursing the money to consumers’ creditors as promised.
The FTC’s complaint also charged that, despite promises to teach them how to manage their money to avoid future debt, the defendants simply enrolled all customers in debt management plans (DMPs). In the DMP, consumers made a single monthly payment to AmeriDebt for all their unsecured debts; the payment was then to be disbursed to the consumers’ creditors. The FTC charged AmeriDebt with deceptive practices and also with violating the Gramm-Leach-Bliley (GLB) Act by failing to provide consumers with required privacy notices. In addition, the complaint named Andris Pukke’s wife, Pamela Pukke, as a relief defendant.
In June 2004, AmeriDebt filed for bankruptcy protection in the U.S. Bankruptcy Court for the District of Maryland. At the request of the FTC and others, the bankruptcy court removed existing management and appointed a Trustee to oversee AmeriDebt.
The stipulated final order bars AmeriDebt from participating in the credit counseling, debt management, or credit education business. As part of the settlement and the bankruptcy case, the company will shut down its operations by transferring all existing DMPs to a third party. The Trustee, Mark Taylor, Esq. of the law firm of Arent Fox PLLC, has already taken steps to transfer AmeriDebt’s existing DMPs to a reputable credit counseling agency consistent with the terms of the order.
In addition, the stipulated final order prohibits AmeriDebt from misrepresenting that it is a nonprofit organization; that it does not charge up-front fees for its services; and that it will counsel consumers about their finances. The company also is prohibited from violating the GLB Act in the future. The order requires the company to file a plan of liquidation with the bankruptcy court. In addition, the order contains a judgment of $170 million, but the FTC will collect on this amount, if at all, through the AmeriDebt bankruptcy case. Finally, the order contains standard recordkeeping requirements to assist the FTC in monitoring the defendant’s compliance.
December 30, 2005
Pamela Pukke Will Forfeit All Rights to Assets Held by Receiver
Relief defendant Pamela Pukke, the estranged wife of AmeriDebt, Inc. founder Andris Pukke, has agreed to forfeit all rights to assets currently held in receivership and will cooperate with the Federal Trade Commission in its continuing case against her husband and his company, DebtWorks, Inc., under the terms of a court settlement filed and announced today.
In addition, she will give up her ownership interest in two homes the Pukkes own in Maryland and Florida and will be subject to a $4 million judgment if she is found to have misrepresented her financial condition. The FTC alleged that she received significant assets – as much as $4 million – from AmeriDebt’s deceptive operations, but did not actively participate in or control the defendants’ deceptive debt-management scheme. The money collected from Mrs. Pukke will be used to provide consumer redress.
The Commission’s Complaint
In a complaint filed in 2003, the FTC charged that AmeriDebt, Inc., DebtWorks, Inc., and Andris Pukke deceived consumers with claims that AmeriDebt was a nonprofit organization that could help consumers get out of debt without an up-front fee. The FTC charged that, rather than operating for charitable purposes as advertised, AmeriDebt funneled profits to affiliated for-profit entities and individuals, including DebtWorks and Andris Pukke. According to the FTC, AmeriDebt deceived new clients when it required an up-front payment to enroll in the program. AmeriDebt then kept these initial payments as fees without consumers’ knowledge, rather than disbursing the money to consumers’ creditors as promised.
The complaint also charged that, contrary to their claims that they provided counseling, the defendants simply enrolled customers in debt-management plans (DMPs). Once in a DMP, consumers made a single monthly payment to AmeriDebt for all their unsecured debts; the payment was then disbursed to the consumers’ creditors. The FTC charged AmeriDebt with deceptive practices in violation of the Federal Trade Commission Act and with violating the Gramm-Leach-Bliley Act by failing to provide consumers with required privacy notices.
After the complaint was filed, the court appointed a receiver to collect and maintain the assets of the defendants. In June 2004, AmeriDebt filed for bankruptcy protection. At the request of the FTC and others, the bankruptcy court removed existing management and appointed a trustee to oversee AmeriDebt. In March 2005, AmeriDebt settled the FTC’s charges by – among other things – agreeing to shut down its debt management operations. Litigation continues, with the trial against Andris Pukke and DebtWorks currently scheduled to begin on January 3, 2006.
Other Terms of the Order
In addition to the terms described above, the court order requires Pamela Pukke to cooperate with authorities in her husband’s bankruptcy case. She also will testify against her husband in the Commission’s continuing case against him and DebtWorks. Finally, the order specifies that the Commission and counsel for a nationwide class action that is pending against Andris Pukke will agree on a redress program that fairly distributes funds to consumers.
September 13, 2006
Andris Pukke Barred Permanently from Credit Counseling and Debt Management, Relinquishes His Assets for Consumer Redress
The Federal Trade Commission today put a successful end to the largest case against deceptive credit counseling and debt management brought by the agency. The FTC announced a settlement with Andris Pukke, founder of AmeriDebt, Inc., and with a related company owned by Pukke, DebtWorks, Inc. The agreement, if approved by a federal court in Maryland, would require Pukke to give up virtually all of his assets for a consumer redress program for victims of the deception, a fund that ultimately could total as much as $35 million.
The agreement also bars Pukke permanently from engaging in credit counseling, debt management, and credit education activities, prohibits him from violating the Telemarketing Sales Rule, and prohibits him from engaging in other conduct in connection with telemarketing.
“Our case alleges that these defendants used their credit counseling business to deceive nearly 300,000 consumers about the services they provide, the fees they charged, and their status as a non-profit company,” said Lydia B. Parnes, director of the FTC’s Bureau of Consumer Protection. “This settlement bans the defendants from the credit counseling business permanently and requires them to give up the money they made from this scheme.”
The settlement ends more than two years of litigation against Pukke, effectively securing virtually all of his personal assets, including homes in Miami Beach and Southern California, for use as consumer redress. This settlement is part of a global settlement that also settles the claims of a nationwide class action, Polacsek et al. v. Debticated, et al., No. 04-0631 (D. Md), which had been consolidated for trial with the FTC’s case.
A receiver, appointed by the court in April 2005, to identify and maintain Pukke’s assets, has collected property worth millions of dollars, and the order authorizes him to continue his efforts to locate additional assets. Any amounts the receiver collects, up to $35 million, would go into the redress fund under the settlement. If the receiver collects assets worth more than $35 million, the excess would go into the bankruptcy estate that was created when Pukke filed for bankruptcy last July.
The Commission’s Complaint
In a complaint filed in November 2003, the FTC charged that AmeriDebt, Inc.; DebtWorks, Inc.; and Andris Pukke deceived consumers with claims that AmeriDebt was a nonprofit organization and that it provided counseling services to consumers seeking to get out of debt. The FTC charged that, rather than operating for charitable purposes as advertised, AmeriDebt funneled profits to affiliated for-profit entities and individuals, including DebtWorks and Pukke. The complaint also charged that the defendants did not provide counseling services, but simply enrolled every customer in a debt management plan (DMP). According to the FTC, AmeriDebt also deceived customers when it claimed that it did not charge an up-front fee. Instead, the complaint alleged, AmeriDebt kept its clients’ first payment under their DMPs as its own fee, rather than disbursing the money to consumers’ creditors as promised. The complaint charged these practices were deceptive in violation of the Federal Trade Commission Act.
In June 2004, AmeriDebt filed for bankruptcy relief. At the request of the FTC and others, the bankruptcy court removed existing management and appointed a trustee to oversee AmeriDebt. In March 2005, AmeriDebt settled the FTC’s charges by, among other things, agreeing to shut down its debt-management operations. In April 2005, at the FTC’s request, the court froze the assets of Pukke and DebtWorks, and appointed a receiver to locate and marshal their assets. Andris Pukke filed for bankruptcy in July 2005, and subsequently the District of Maryland court stayed the bankruptcy case pending the outcome of the FTC trial. Pamela Pukke, Andris Pukke’s estranged wife, was charged as a relief defendant in the case and settled with the Commission in December 2005, by releasing her claims to certain assets and by agreeing to cooperate with the Commission regarding its ongoing actions involving Andris Pukke and DebtWorks.
Other Terms of the Order
The settlement imposes a $172 million suspended judgment against the defendants, which will be triggered if they do not comply with the order. In addition, the monetary judgment is based on financial statements provided to the Commission by the defendants; the order requires them to turn over the value of any asset omitted from either financial statement. Further, the order contains the defendants’ agreement that the assets collected will be held in a constructive trust for consumer victims and used for consumer redress. The Commission, in consultation with the lawyers for the class action, will determine how to set up and implement the redress program. In the event that the money collected instead must go into Pukke’s bankruptcy estate, the FTC will hold a $172 million claim against the bankruptcy estate.
The order allows Pukke to receive some funds to pay specified legal fees and living expenses incurred since April 2005. The order requires Pukke to cooperate with the Commission in connection with this action and with his pending bankruptcy case. The order also requires Pukke to cooperate with the receiver in the ongoing effort to locate all receivership assets, and maintains the asset freeze in place against the defendants. Finally, it contains standard monitoring and record-keeping requirements to allow the FTC to monitor the defendants’ compliance with its terms.
September 10, 2008
The Federal Trade Commission announced today that the agency returned approximately $12.7 million to consumers this week from a settlement with Andris Pukke and his companies, AmeriDebt, Inc. and DebtWorks, Inc. This consumer redress concludes the largest credit counseling/debt management deception case brought by the FTC. In addition, more than $7 million will be returned to consumers as a result of class-action settlements with the defendants and related credit counseling agencies.
Using the defendants’ records, about 287,000 AmeriDebt consumers have been mailed redress checks. The FTC and individual consumers alleged that AmeriDebt, DebtWorks, and related credit counseling agencies engaged in deceptive practices in promoting and offering credit counseling and debt management plans (DMPs).
Consumers who qualified for redress, a total of about 460,000 consumers, obtained a DMP from one of 11 credit counseling agencies serviced by DebtWorks between January 31, 1998 and October 7, 2004. The agencies were AmeriDebt, Inc., Debticated Consumer Counseling, Inc., A Better Way Credit Counseling, Inc., Credicure, Inc., Mason Credit Counseling, Inc., Nexum Credit Counseling, Inc., Neway, Inc., The Credit Network, Inc., Visual Credit Counseling, Inc., Preactive, Inc., and Debtscape, Inc.
Since May 2006, a court-appointed receiver has been working diligently to identify all possible assets that can be liquidated for consumers’ benefit. The receiver obtained a contempt order against Pukke in March 2007 on the grounds that he had been hiding assets from the receiver. The receiver has been locating and liquidating a wide range of complex assets, including overseas property and property held by family and friends of Pukke.
AmeriDebt consumers with questions should call the redress administrator at 888-309-3816. Consumers who obtained a DMP from another agency in the list above should call 888-385-3082.