Florida Attorney General Bill McCollum today announced his office has filed two lawsuits on behalf of Florida consumers against five debt settlement-related companies. According to the Attorney General’s lawsuits, the businesses promised consumers they could pay off their debts for a fraction of the amount owed, but instead collected large up-front fees and left customers with little or no money to pay creditors.
“These victims were hit with a one-two punch: they paid substantial up-front fees for services not provided as promised, then ended up with increased debt, ruined credit, lawsuits, bankruptcy and more,” said Attorney General McCollum.
One of the lawsuits was filed against Texas-based CSA-Credit Solutions of America, Inc., a self-proclaimed debt settlement industry leader. The lawsuit alleges that CSA unlawfully charges significant advance fees before completing or, in many instances, commencing performance of its debt settlement services. CSA offers to settle consumers’ debts at approximately 50 percent of their balance within 12-36 months and, according to the lawsuit, falsely represents the success rate of its program.
Under the CSA plan, consumers are instructed to stop paying their creditors and start a savings account supposedly to accumulate enough funds to allow CSA to negotiate a lump sum payoff of the debt. However, for the first three months, CSA withdraws 85 percent of the funds for its own fees, leaving the consumers with little or no money to negotiate a settlement with their creditors. Additionally, while the consumer is trying to save enough for the lump sum payoff, he or she may suffer increased penalties for nonpayment to creditors, lawsuits, damage to credit scores, bankruptcy and more. The Attorney General’s Office has over 140 complaints, but estimates the company has thousands of Florida victims.
“We see clients who are desperate for help after being victimized by disreputable debt relief companies,” said Thomas DiFiore, Staff Attorney and Team Leader for the Bay Area Legal Services Inc. “The Attorney General’s consumer protection initiative is exactly what our clients need.”
The second lawsuit filed names Clearwater-based ADA of Tampa Bay, Inc., which does business as American Debt Arbitration. The lawsuit also names the company’s principal Glenn P. Stewart, as well as Arizona-based entities Nationwide Asset Services, Inc., Service Star, LLC, and Universal Debt Reduction, LLC. The lawsuit alleges the defendants promise to help consumers pay off their debts at significant savings, but fail to adequately disclose the true cost of their services. Also allegedly withheld from consumers is the fact that the companies collect at least the first three months’ of payments as fees, in violation of Florida law, before the consumer can start accumulating any funds for settlement and before any services begin. During the “savings” period, consumers are counseled to cease all payments to and communications with their creditors. As a result, consumers suffer great financial harm and can be subject to increased penalties and lawsuits.
The lawsuit against CSA has been filed in Hillsborough County Circuit Court, and the lawsuit against ADA, et al has been filed in Pinellas County Circuit Court. Both lawsuits petition the court for full victim restitution, injunctive relief, and civil penalties for each violation of Florida’s Deceptive and Unfair Trade Practices Act.
The Attorney General’s Economic Crimes Division has been focusing on abuses within the debt settlement and debt relief industries and continues to actively investigate and pursue cases in this area. Debt relief services under review include debt settlement, debt management, debt negotiation, credit counseling, credit repair, and credit card rate reduction services. The office is currently investigating the practices of over 70 debt relief companies and is litigating five cases.
Consumers should be cautious when signing up with debt settlement firms. Consumers who have been victimized by these companies or other debt relief programs are encouraged to file a complaint with the Attorney General by calling 1-866-NO-SCAM or by filing a complaint online at http://www.myfloridalegal.com.