I’ve got to admit when I read the news of Everest Debt Solutions settling with the FTC over false and deceptive advertising claims I did say out loud, “I Told You So!”
You see back in September of 2009 I answered a reader question “What Do You Think of Everest Debt Solutions? – Margo” and expressed my concerns over their claims. The response in the comments from Tim Daniels and anonymous Everest Debt Solutions representative was to threaten and attack me and even publish my home address online.
And then after the flurry of attacks I wrote “Everest Debt Solutions and FDN Solutions. These Debt Settlement Companies Are Really Starting to Piss Me Off Now” and the attacks continued.
As I said in that article:
What I am left wondering is how many people can actually work at the UPS store mailbox center or in that small house listed as an additional business address. Either we are not getting the entire story about these companies or the statements being made on their site are not earnest. On face value it goes way beyond general advertising hyperbole to make such bold statements about size and experience but can’t seem to produce anything to back those statements up.
Karma Wins Again
The FTC has just announced a complaint filed against FDN Solutions,Everest Debt Solutions, 1800debtsettlement.com, everestdebtrelief.com, and Timothy Daniels.
The complaint filed by the FTC alleges:
Since at least 2007, Defendants have offered debt relief services to consumers having difficulty with their personal finances. Defendants’ services include a commercial debt settlement program whereby they offer, for a fee, to resolve consumers’ unsecured debts by negotiating settlements of their balances for less than the consumer owes. Defendants have induced consumers to join their debt relief program by claiming that they will substantially reduce consumers’ debts.
Defendants have advertised on the Internet through paid search results on Google’s search engine and Google ads on third party websites. Defendants’ advertisements have included the following representations:
- “Reduce Debt 70% Want Proof?”;
- “Ohio Residents Can Reduce Debt By 70%!”;
- “Reduce Your Debt Up To 60%”; and
- “Save up to 70% On Credit Card Debt.”
After clicking on these Google adveriisements, consumers have been directed to one of Defendants’ numerous websites, which have included, but are not limited to, the following: everestdebtsolutions.com, everestdebtrelief.com, everestsolutions.com, and 1800debtsettlement.com.
Defendants have made various statements on their websites regarding the savings consumers would obtain by emolling in Defendants’ program. On everestdebtsolutions.com, the following bar chart has appeared prominently:
The chart has been accompanied by text stating, “With Everest Debt Solutions If You Owe $40,000 YOU COULD PAY:” and the bar labeled “EDS” states $22,000 (i.e., a savings of 45 percent). Defendants have not explained the two other bars in the chart, but the chart clearly indicates that, if using alternatives to Everest Debt Solutions, consumers would pay more than $22,000, i.e., $68,400 or $107,006.
Next to the chart on the homepage, the website has included a section for “News & Updates Regarding Everest Debt Solutions.” This section has listed a “34% Settlement With HSBC” on October 28, 2010 as a recent update, indicating that a recent customer paid 34% of the debt owed.
Under the link “Proven Results” on the homepage, Everestdebtsolutions.com has included the following examples of “Recent Settlements”:
- “total balance due $8,071 .44 . . . was settled for $404.00 in 3 payments” (i.e. a savings of95 percent); and
- “total balance due [of] ~$26,654.51 . . . was settled for $9,332.58,” (i.e. a savings of65 percent);
On the same page, the website has included purported settlement letters from creditors. The letters have shown a settlement for $2,687.40 on a current balance of $l3,436.98 (a savings of 80 percent) and a settlement for $7,200 on a balance of$23,896.08 (a savings of 70 percent).
Everestdebtsolutions.com also has included the following statements throughout its website:
- “perk of using Everest” is to “reduce debts up to 50%” ;
- On the “Start Now” page, Everest states, “We Can REDUCE
- Your Debt By as Much as 40% to 70%!”;
- “Debt settlement can reduce your debt by 60%”; and
- “Generally, we reduce your debt by 40-60%.”
A footnote appended to the last statement has stated that the estimate was “based on yearly averages of settlements done for our clients nationwide.”
In addition, Everestdebtsolutions.com has contained statements which purported to be actual and genuine testimonials from customers of Everestdebtsolutions.com and which tmmpeted good expeliences and substantial savings achieved. For example, one testimonial on the website stated:
Everest Debt Solutions was able to drop my credit card debt down 62%! They are truly a Godsend! God Bless. Alicia S., Lake Charles, LA.
Alicia S., however, is not in fact a customer of Everestdebtsolutions.com, and the testimonial is not actual and genuine.
Defendants’ websites have provided consumers with a toll-free telephone number they can use to contact Defendants. Everestdebtsolutions.com also has displayed an online contact form where consumers could enter their name, email, telephone number, state, and amount of debt to “apply online” and receive a “free quote.” Defendants have used the infonnation provided to contact consumers directly.
Defendants’ representatives reinforce the claims of substantial reductions in debt via telephone. For example, one representative has. stated: “We…actually negotiate the balances of your debt down 40 to 60 percent of what you currently owe.”
After FDN receives a consumer’s application materials, which include, among other things, a fine print contract entitled “Debt Settlement Agreement,” that application is transferred to a back-end servicer for negotiation of the consumer’s debts.
Consumers emolled in Defendants’ debt relief program make monthly payments to a third party for two to three years in order to save up funds for the settlement of their debts and Defendants’ fees. Since October 27,2010, Defendants charged a fee equal to 30 percent of the savings achieved for each settlement.
In many instances, consumers who enroll in debt settlement programs experience a number of negative consequences that are common to the debt settlement industry. When consumers make monthly payments into their third party savings accounts rather than paying their creditors, their balances increase and creditors might engage in collections efforts or initiate legal actions against consumers to recover outstanding debts. Indeed, at least one version of Defendants’ Debt Settlement Agreement states, in small, buried language:
“If Client does not make required minimum payments to Client’s creditors…Client’s actions will probably be reported to consumer reporting agencies as late, delinquent, charged-off or past due balances. Client’s creditor may also raise the interest rate on Client’s account and impose other penalties (late charges). Client’s account balance may continue to grow as the creditor adds accrued interest, late fees, over-limit fees and penalties…Client’s balance may increase during the term of this Agreement.
Consumers who enroll in Defendants’ program are part of a financially vulnerable population and most are in no position to endure the increased financial hardship that results from failing to pay creditors for months or years. In fact, many consumers drop out of Defendants’ program before obtaining any settlements of their accounts or obtaining the promised reduction in debt.
Defendants’ above representations were unsubstantiated and have misrepresented a material aspect of a debt relief service. Among other things, Defendants have not factored in their fees when they have calculated the amount by which a consumer’s debt would be reduced. Nor have they factored in customers who do not complete the program. – Source
Everest Debt Solutions Settles
As a result of this suit the FTC reached a settlement agreement. The FTC announcement is below.
Debt Relief Operation Settles with FTC for Allegedly Deceiving Consumers by Using Bogus and Unsupported Claims
FDN Solutions, LLC Web Advertisements Claimed Company Could Reduce Debt by 40 to 60%
The Federal Trade Commission put a stop to the allegedly deceptive practices of a debt settlement operation that lured consumers with exaggerated claims about how it could help reduce their debts. The defendants behind the operation have agreed to a settlement that prohibits them from making any further misleading claims.
The FTC case against FDN Solutions, LLC and Timothy Daniels is part of the agency’s continuing crackdown on scams that target consumers in financial distress. The defendants claimed, mostly through Google ads and websites they used, such as everestdebtsolutions.com, 1800debtsettlement.com, and everestdebtrelief.com, that they could reduce consumers’ debts, typically by 40 percent to 60 percent, according to the FTC complaint. However, the FTC charged that these savings claims were misleading, because they did not take into account the consumers who dropped out of the program, or the fact that the fees each client paid totaled 30 percent of the savings achieved.
The settlement order imposes a judgment of $3.3 million. Upon their payment of $85,000, the remainder of the judgment is suspended based on the defendants’ inability to pay. If it is later determined that the financial information the defendants provided the FTC was false, the full amount of the judgment will become due.
Operating from offices in Tustin, California and Tampa, Florida, Daniels and FDN Solutions used paid search results on Google’s search engine and Google ads on third-party websites to advertise their services, telling consumers, “Reduce Debt 70% Want Proof?” and “Save up to 70% On Credit Card Debt,” according to the complaint. A bar chart on one of the defendants’ websites showed that a consumer with a $40,000 debt would pay only $22,000 by using the defendants’ services.
The FTC alleged that Daniels and his company, also doing business as Everest Debt Solutions, 1800debtsettlement.com, and everestdebtrelief.com, violated the Federal Trade Commission Act by making unsupported savings claims and by using a fake consumer testimonial. One supposed testimonial attributed to “Alicia S., Lake Charles, LA” said, “Everest Debt Solutions was able to drop my credit card debt down 62%! They are truly a Godsend! God Bless.”
The defendants’ websites provided consumers with toll-free numbers they could call for more information. When they called, the defendants violated the Telemarketing Sales Rule by misrepresenting the amount of money or the percentage of the debt amount that a consumer could save by using their services, according to the complaint.
Who is Laughing Now?
The irony here is that if Everest Debt Solutions had just addressed my published concerns back in 2009 this would probably have never resulted in the FTC complaint and settlement. You’ve got to wonder why some companies fight so hard to make easy changes to bring their messages and statements into compliance and instead knowingly continue down a path which leads to no good end.
Under the terms of the FTC settlement the entities and individuals named must now provide the following if they wish to remain in the debt relief business.
IT IS FURTHER ORDERED that Defendants and their officers, agents, servants, employees, and attorneys, and those persons or entities in active concert or participation with any of them who receive actual notice of this Order by personal service, facsimile transmission, email, or otherwise, whether acting directly or through any corporation, subsidiary, division, or other device, in connection with the advertising, marketing, promotion, offering for sale, or sale of any financial related product or service or tax relief product or service, are hereby permanently restrained and enjoined from misrepresenting or assisting others in misrepresenting, expressly or by implication, any material fact, including but not limited to:
- The terms or rates that are available for any loan or other extension of credit;
- Any person’s ability to improve or otherwise affect a consumer’s credit record, credit history, credit rating, or ability to obtain credit;
- That any person can obtain a modification of any secured loan or mortgage or postpone or cancel the foreclosure of any property by renegotiating, settling, or in any other way altering the terms of payment or other terms of such debt;
- That any person can obtain a reduction of any tax debt by renegotiating, settling, or in any other way altering the terms of a debt owed to any taxing entity; or
- That a consumer will receive legal representation.
- Any material aspect of the nature or terms of any refund, cancellation, exchange, or repurchase policy, including, but not limited to, the likelihood of a consumer obtaining a full or partial refund, or the circumstances in which a full or partial refund will be granted to the consumer;
- That any person is affiliated with, endorsed or approved by, or otherwise connected to any other person; government entity; public, non-profit, or other non-commercial program; or any other program;
- That they themselves provide the product, service, plan, or program;
- That any person providing a testimonial has purchased, received, or used the product, service, plan, or program;
- That the experience represented in a testimonial of the product, service, plan, or program represents the person’s actual experience resulting from the use of the product, service, plan, or program under the circumstances depicted in the advertisement;
- The total costs to purchase, receive, or use, or the quantity of, the product, service, plan, or program;
- Any material restriction, limitation, or condition on purchasing, receiving, or using the product, service, plan, or program; or
- Any material aspect of the performance, efficacy, nature, or characteristics of the product, service, plan, or program. – Source
Defendants will be required to provide the FTC with the following information for the next ten years.
- Each Defendant must: (a) designate at least one telephone number and an email, physical, and postal address as points of contact, which representatives of the Commission may use to communicate with Defendant; (b) identify all of that Defendant’s businesses by all of their names, telephone numbers, and physical, postal, email, and Internet addresses; (c) describe the activities of each business, including the products and services offered, the means of advertising, marketing, and sales, and the involvement of any other Defendant (which the Individual Defendant must describe if he knows or should know due to his own involvement); (d) describe in detail whether and how that Defendant is in compliance with each Section of this Order; and (e) provide a copy of each Order Acknowledgment obtained pursuant to this Order, unless previously submitted to the Commission;
- Additionally, each Individual Defendant must: (a) identify all telephone numbers and all email, Internet, physical, and postal addresses, including all residences; (b) identify all titles and roles in all business activities, including any business for which such Defendant performs services whether as an employee or otherwise and any entity in which such Defendant has any ownership interest; and (c) describe in detail such Defendant’s involvement in each such business, including title, role, responsibilities, participation, authority, control, and any ownership. – Source
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