Attorney General Lisa Madigan and Acting Secretary of the Illinois Department of
Financial and Professional Regulation (IDFPR) Michael T. McRaith warned consumers facing
significant credit card debt about the risks of debt settlement offers as she announced two
lawsuits filed against debt settlement firms. Attorney General Madigan s lawsuits allege that
these companies engage in deceptive marketing practices, charge excessive fees and do little or
nothing to improve consumers financial standing.
Too many people who find themselves under a mountain of credit card debt are tempted to turn
to debt settlement companies that often worsen their financial problems, Madigan said. After
being enticed by these companies promises to reduce debt, consumers too often end up owing
more than their original credit card debt.
“We congratulate the Attorney General for her important work on behalf of consumers”,
McRaith said. Illinois families always need reliable sources of financial advice, but the current
crisis emphasizes the need for our consumers to work with licensed debt counselors subject to
regulatory oversight. In bad times and good times, IDFPR vigorously will pursue any unlicensed
debt settlement company looking to prey upon our communities.
Madigan said her office has seen an increase in advertisements for debt settlement companies
that promise to significantly reduce consumers credit card debt and provide them with an
alternative to bankruptcy protection. Typically, after consumers enroll in debt settlement
programs, the companies charge excessive upfront fees and advise consumers to stop paying
their credit card bills. Despite this advice, the debt settlement companies fail to begin
negotiations with consumers credit card companies for several months. As a result, credit card
companies add fees and penalties to consumers credit card balances and often even begin
collection efforts to recoup the debt, all of which puts the consumers in a worse financial
situation. In many instances, while consumers were enrolled in debt settlement programs, credit
card companies have sued the consumers to collect the balance on the consumers accounts.
Madigan filed two lawsuits in Sangamon County today challenging these types of deceptive
practices. Madigan sued the following defendants:
the Chief Operating Officer of SDS West; SDS West s Chief Executive Officer,
Raymond Dorso; Nationwide Support Services, Inc., an Irvine, Calif.-based debt
settlement servicer; and Joanne Garneau, President of Nationwide Support Services.
Reilly, the President of Debt Relief USA.
SDS West Corporation and Nationwide Support Services
According to Madigan s complaint, SDS West and its business partner Nationwide Support
Services inform consumers that their debt mediation services will help to reduce consumers
debt by nearly 50 percent and that consumers will be debt-free in 12 to 36 months. SDS West
primarily markets the business partnership’s debt settlement services, while Nationwide Support
Services allegedly conducts the settlement negotiations with creditors. Madigan s complaint
alleges that most consumers are unaware that Nationwide, not SDS West, performs the actual
negotiations on their behalf.
The defendants tout their services as universally better than credit counseling and bankruptcy
protection, and they allegedly promise consumers that they will contact all the consumers credit
card companies and negotiate substantially reduced settlements of the outstanding credit card
balances. From 2006 to the present, hundreds of Illinois consumers have enrolled in the
defendants debt settlement program.
When consumers enroll in the program, they allegedly are instructed to stop making payments to
the credit card companies and, instead, make monthly payments to the defendants program in
order to build up a lump sum for use by Nationwide Support Services in negotiating a settlement
with the credit card companies. However, the first payments go toward a substantial fee of
approximately 15 percent of the consumers total credit card debt. Consumers also are charged a
monthly $50 maintenance fee. Madigan s complaint alleges that consumers did not understand
(1) that their monthly payments would be used to pay fees before any performance of services on
their behalf, and (2) that it takes several months to accumulate a lump sum payment to begin
negotiating a payoff with the credit card companies.
Debt Relief USA
In the second lawsuit, Madigan alleges that Debt Relief USA promised consumers that its
services would help reduce credit card debt by 40 to 60 percent and that consumers could be
debt-free in as little as 36 months. However, according to the complaint, Debt Relief USA failed
to negotiate substantial reductions on most consumers accounts. Madigan s complaint alleges
that most Illinois consumers dropped out of the program before Debt Relief USA settled any
debt on their behalf, but after the consumers paid Debt Relief USA s nonrefundable fees. From
2005 to 2008, at least 470 Illinois consumers enrolled in the Debt Relief USA program.
When consumers enroll in the Debt Relief USA program, the defendants allegedly instruct
consumers to stop paying their credit card bills and, instead, pay a monthly fee to Debt Relief USA based on how much they owe. The defendants allegedly apply the first several monthly
payments toward Debt Relief USA s upfront fee of up to 10 percent of the consumer s credit
card debt. The defendants also apply each monthly payment toward Debt Relief USA s monthly
maintenance fee of $29.95 to $39.95. The remainder of the monthly payment goes into an escrow
account until enough money accrues to make a settlement offer to the credit card company,
which often takes several months. During this time, the complaint alleges, Debt Relief USA fails
to attempt to settle any debts on consumers behalf. In addition, when Debt Relief USA reaches
a settlement on one of the consumer s accounts, the company charges the consumer a settlement
fee that is equal to 13 percent of the amount by which Debt Relief USA was able to reduce the
consumer s debt through settlement negotiations.
In both cases, Madigan s complaints allege that the defendants have violated the Illinois
Consumer Fraud and Deceptive Business Practices Act by misrepresenting the services they can
provide to consumers and the impact that those services will have on consumers credit. Each
complaint asks the court to enter a permanent injunction barring the defendants from engaging in
debt settlement in Illinois and to order the defendants to pay restitution for aggrieved consumers,
civil penalties of $50,000 for violating the Consumer Fraud Act, and an additional $50,000 for
each violation committed with the intent to defraud.
Assistant Attorney General Rebecca Pruitt is handling the cases for Madigan s Consumer Fraud
Bureau in Springfield.
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USA Debt Professionals does the same thing. I worked for them for exactly 60 days and they laid me off. The owner Brad Neumann told me I was a $10,000 tax break for his company and he was excited about that. I didn’t realize that meant he would lay me off after i worked 60 days. What kind of person lies to a trusted employee and it make me think if he could lie to me then he can easily lie to clients. He tells every client he talks with that they are to not make any payments to creditors and not to communicate with creditors, then he trys to trick client with a recorded call and get them to call along with his business games. He told me about business games on many occasions. I feel very betrayed and lied to.
Valerie,
Can you please explain what “business games” means? Interesting.
Steve