Texas Attorney General Files Charges Against Four Debt Settlement Groups

Texas Attorney General Greg Abbott today charged four debt settlement companies with orchestrating fraudulent debt settlement schemes. The defendants’ Web sites promised that they could eliminate their customers’ unsecured debts – such as credit card accounts – in as little as three years. According to the state’s enforcement action, the defendants unlawfully misrepresented and overstated the nature of their services.

The following debt settlement companies are named in today’s enforcement action: Dallas-area based BC Credit Solution, LLC and FH Financial Service; Scottsdale, Ariz.-based Four Peaks Financial Services; and Louisville, Ky.-based DebtORSolution.

“At a time of economic hardship, these defendants are charged with orchestrating unlawful debt reduction schemes,” Texas Attorney General Abbott said. “Texas law provides important protections that prevent debt settlement firms from misleading customers about their services. Today’s enforcement action cites four defendants for materially misrepresenting the nature of their services – and misleading customers about the protections they are guaranteed by Texas law.”

Court documents filed by the state indicate that the defendants misrepresented the availability and consequences of bankruptcy, made misleading credit repair claims, and misstated the effect of entering a debt settlement program. For example, the defendants misrepresented the time frame within which customers would complete their debt resolution program. Because each debtor’s individual circumstances are unique, it is impossible to honestly guarantee a specific settlement type or time frame.

The state’s enforcement action also cites the defendants for misleading customers about alternative debt relief mechanisms. For example:

  • BC Credit Solution stated: “[Ch. 13] force[s] you to pay back the full balance plus any interest that you accrued.” In fact, Chapter 13 of the U.S. Bankruptcy Code allows debtors to reduce the amount they must pay back to unsecured creditors.
  • DebtORSolution claimed that Chapter 7 bankruptcies will lead to a debtor’s property being auctioned off. In fact, Chapter 7 allows debtors to keep exempt property.
  • FH Financial stated: “You will probably lose your large assets such as cars, home, investment accounts.” In fact, debtors are allowed to keep exempt property, which includes a residence under state homestead laws.
  • Four Peaks Financial stated: “[B]ankruptcy. . . destroys your credit for years to come,” whereas their debt settlement program “allow[s] your credit score to dramatically improve.” In fact, debt settlement can also have a negative impact on debtors’ credit.

According to the state’s enforcement action, the defendants failed to clearly disclose the material terms of their debt settlement programs, including potentially negative effects from increased risk of lawsuits, decreased consumers’ credit scores, debt forgiveness-related tax liabilities, increased collection efforts, interest, and late payment fees.

The Office of the Attorney General is seeking restitution for customers harmed by the defendants’ unlawful business practices, civil penalties of up to $20,000 per violation of the Texas Deceptive Trade Practices Act (DTPA) and attorneys’ fees.

Defendants FH Financial and Debtor Solution also are charged with misrepresenting their affiliation, or positive standing with the Better Business Bureau (BBB), which constitute additional DTPA violations.

Four Peaks is accused of exposing its customers’ sensitive personal information, including name and credit card numbers, on its Web site. The state’s enforcement action charges Four Peaks with violating the Texas Identity Theft Enforcement and Protection Act, which carries penalties that range between $2,000 and $50,000 per violation of the act.

Three of the companies have BBB reports. FH Financial and Four Peaks Financial both have an “F” rating while DebtORSolution has a “C-.”

Debtors should carefully research a debt reduction firm before entering into a contract or signing any documents. Multiple options are available to struggling debtors, including credit counseling, debt management, debt settlement or bankruptcy.

View actual lawsuit filings here:
BC Credit Solution
LH Financial Service
Four Peaks Financial Solutions


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See also  New York Attorney General Wins $200,000 Penalty Against Debt Settlement Company

10 thoughts on “Texas Attorney General Files Charges Against Four Debt Settlement Groups”

  1. I’ve recently become convinced that I will never be able resolve my mounting debt without help and have begun investigating options. Now I am beginning to believe that I will never find that help.

    If 85 to 90% of these business will go out of business if the current proposal is enacted, how does one find those proverbial ‘needles in the haystack’ in the resulting 10- 15% that stay afloat without having to wait?


    • Julie,

      The real solutions come down to paying at least the minimum balance on your cards and if you can afford that, then investigate a debt management program. Outside of that bankruptcy is the logical solution.


      • have you actually seen your bank statements? How long it will take to pay off your debt by making your minimums? Mine was over ten years combined, use the CNN money debt calculator. You talk about up front fees, what about the outrageous fees and interest rates the credit cards charge. No one thinks about that. That is down right robbery. I actually signed up for the debt settlement and they actually settled two of my cards. Its all about who has the most money, and the banks have all the lobbyist power. Whatever happened to Capitalism? I mean getting sued over a couple of words, ridiculous!

  2. Ya, and you are right. It is going to be a big problem. These guys cannot support the promises that they have already made if you change up their bloated rip off fee structure. Now I understand why the FTC is trying to ban upfront fees, but I think that goes a little far. I know the ftc wants to protect consumers, but I think a straight up ban would do more harm than good.

    I don’t see anything wrong with a legitimate company charging a refundable retainer to bring on a client. As long as it is small and the majority of the fees are not collected until after settlements. That will make it a bit more feasible as legitimate companies do incur costs when they actually work with clients. The costs are nowhere near what most of these guys charge though. It will be interesting to see what happens.

    I don’t know if 85% of companies will go out of business. My take is that they are a bunch of cry babies trying to play the victim card after ripping off consumers for years. The reality is that if any of these trade organizations like TASC or USOBA would have actually stepped up and provided some self regulation, then the FTC wouldn’t need to do what it is doing.

    When USOBA says that 85% of companies are going to go out of business, what they actually mean is, their current bloated fee, lopsided business model will go the way of the dinosaur.

    They will just have to stop shelling out 70% to 80% of their revenue in advertising. Most consumers are not aware that that is really how much of their fee goes to advertising many of these programs. A huge side benefit to this regulation is that maybe they won’t be able to afford all those “freaking commercials”. I cringe every time I hear one of those because I think to myself, how many struggling consumers are going to call that, and have no clue what they are getting themselves into.

    They will have to focus more on customer service and getting referral business by providing good results for existing clients. Hey there is an idea! Take care of your existing customers and they will refer you more business.

    Do we have contractors in America? Ya last I checked we do. Do contractors charge 100% of their fee before they finish the remodel on your kitchen? If a contractor said Steve, I am awesome at what I do, you are going to have the best kitchen on the block I promise. I know my reputation sucks, but that is because all of my past clients are just jealous that I am going to give you a better kitchen. So pay no mind to all these complaints by past clients.

    Now in order to provide you with this excellent kitchen, I think it is going to cost 25,000 dollars. So just go ahead and give me a check and we will show up tomorrow and really knock this thing out for you.

    No consumer in their right mind would write that check, yet for some reason when it comes to debt settlement, slick sales guys with the gift of gab and some wordsmith slight of hand are able to make it sound like a smart financial choice.

    You know, they will have to do what most businesses in this country do. Provide a good service at a fair price, treat people right and it can be a win win for you and your customer. If you don’t do it, you go out of business!!

    So ya, most of them will go out of business because they don’t know how to run a business with the clients best interests in mind. So they will have to go find another way to screw people and get away with it.

    There are a few bad apples in every industry, but in debt settlement, it is opposite. There are a few good apples and they are buried in stench of the bad ones.

    Wow, Steve, you got me going on that one. Sorry for the monster comment. 🙂 I should turn it into a post and put it under the Rantings catagory 🙂
    .-= Damon Day´s last blog ..Debt Collection Statute of Limitations =-.

    • Damon,

      The current proposal is to allow $50 per month from the time a client is taken on. If they ditch their bloated fees and get lean this should carry them. Not much work to do in the first 24 to 36 months anyway.

      The other issue the FTC did not tackle is the amount of the final settlement fee to be charged. There is no upper percentage. A company could charge 50% of the debt forgiven and unless the consumer is wise to this going in it won’t end well for them.


  3. Hey Steve,

    Most of these guys are really out there blatantly ripping off consumers. Because of this, so many of these companies have sprung up all trying to get their slice of the pie. Now that it has gotten so out of hand the State AG’s and the FTC is taking notice. I am seeing more and more state action against these guys and as you know the FTC met last week to propose sweeping new legislation.

    It will be interesting to see what comes of it and how many of these rip off artists go out of business. Unfortunately they will just pop up into the next thing. I think the next big thing we are going to start seeing ads all over the place for is Settling your IRS tax debt. I already see some, but I think a lot of these guys are going to get run out of credit cards because of new laws, and jump into settlement of taxes.

    I don’t think I would be far off by saying at least 95% of debt settlement programs, are blatant rip offs at best.
    .-= Damon Day´s last blog ..Debt Settlement Companies – Top 5 ways they can Screw you! =-.

  4. Steve, Debt settlement seems like the fastest way to stop high interest rates and fees while getting a pay off date. Is it safer to use a Debt settlement attorney vs. a debt advisor company? If so, what Firm can one trust? Any suggestions for South Texas?

    • Kaj,

      One would think so based on all the bold statement made in advertising but I think the section from a debt settlement contract I reviewed tells you the real story. Remember, the best settlement offers come when someone is 90 to 120 past due.

      Client has represented to Everest Debt Solutions that Client is unable to meet the minimum payments required by Client’s creditors. If Client does not make required minimum payments to Client’s creditors, Client may be breaking the terms of the Client’s agreements with them and Client’s action will probably be reported to the consumer reporting agencies as late, delinquent, charged-off or past due balances. Client’s creditors may also raise 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.

      You can read the entire contract review here.



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