Attorney General Janet Mills announced today that she has filed suit against Credit Solutions of America, Inc. (CSA) and its president, Douglas Van Arsdale, for unfair and deceptive practices in the marketing and provision of debt settlement services to hundreds of Maine consumers. This lawsuit follows an investigation conducted by staff in the Attorney General’s Office and at the Bureau of Consumer Credit Protection within Maine’s Department of Professional and Financial Regulation, which licenses debt management service providers. The lawsuit alleges that CSA violated the law by using deceptive and unfair practices in marketing debt settlement services, and for failing to register as a debt management service. The suit seeks to recover fees paid by Maine consumers to CSA, as well as civil penalties and costs.
“Whether we are in steady financial times or uncertain ones, debt management service providers must operate in a lawful and responsible manner,” said Attorney General Mills. “We will use every tool that we have to protect consumers from illegal business practices that sink vulnerable consumers deeper into debt.”
CSA allegedly charged consumers more for its debt settlement services than allowed for by Maine law. The State alleges that CSA misrepresented the benefits of its program to consumers and failed to clearly and conspicuously disclose important conditions and terms of contracts. The State also alleges that CSA engaged in unfair business practices by exploiting vulnerable individuals in dire financial straits who will drop out of CSA’s program before their debts are settled but after CSA has been paid, in full or in part, for its services.
CSA has claimed that it will settle unsecured debt, usually credit card debt, by as much as 60% of the original debt amount. CSA’s contracts require consumers to pay CSA upfront fees before all their debts are settled. Many consumers have paid CSA in full months before CSA settles their debts. Consumers who enroll in CSA’s program are told to stop paying their creditors in order to save money each month towards settlement negotiated by CSA, which typically takes three to four years. Meanwhile, stopping all payment can result in default leading to more aggressive collection activities and legal action by creditors. Consumers are told to stop talking to their creditors and to refer all communications to CSA. CSA, however, frequently fails to respond to consumers’ inquiries about CSA’s communications with creditors. Many times, settlements obtained by CSA are no better than what a consumer could obtain by dealing directly with her or his creditors.
Many Maine consumers who enrolled in CSA’s program dropped out long before their debts were settled. Many have found themselves in worse financial circumstances than they were before they hired CSA, due to higher account balances resulting from rising interest rates, penalty charges for missed payments, poor credit ratings, and lawsuits brought against them by creditors.
Maine’s Debt Management Services Act requires that providers of debt management services register with the Superintendent of the Bureau of Consumer Credit Protection and procure a $50,000 surety bond for the protection of consumers. CSA has never registered and has no surety bond. Maine law prohibits debt management service providers from charging more than a $75 set-up fee and more than 15% of the amount by which the consumer’s debt is reduced as part of each settlement. CSA charges 15% of the consumer’s total debt, a difference that costs Maine consumers thousands of dollars.
“Maine consumers face difficult financial challenges in these hard economic times. In looking for solutions to large debt, they should not be deceived and exploited by companies who prey on their misfortunes and provide no real assistance.” Mills said.
Superintendent Will Lund of the Bureau of Consumer Credit Protection cautions consumers who are considering hiring a debt management provider to review the roster of registered companies found on its website, www.Credit.Maine.gov, or to contact the Bureau at 1-800-332-8529 (1-800-DEBT-LAW) to make sure that the provider is properly registered.
“The Bureau of Consumer Credit Protection does not tolerate unlicensed and deceptive practices. We will continue to work with the Attorney General and other partners to stop violations of laws and to protect the public,” Superintendent Lund commented.