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Posts Tagged ‘Federal Trade Commission’

How’s this for ironic? Debt Relief USA, a debt settlement company that was supposed to help consumers get out of credit card debt, has itself gone belly up, filing for bankruptcy protection.

But that’s not all.

Debt Relief USA had been accused by the Federal Trade Commission of generating millions of dollars in ill-gotten profits. The company allegedly lured people into paying thousands of dollars in upfront fees, and then never actually reducing those clients’ credit card bills. In fact, the feds say that in many cases, Debt Relief USA left its clients even deeper in debt.

Now comes word from the FTC that Debt Relief USA has settled the FTC charges. As a result, the company is permanently banned from marketing any kind of financial products or services whatsoever. The company’s principals were also hit with a $20 million judgment.

That’s the good news for consumers. The bad news, from a justice standpoint, is that consumers won’t likely recoup a dime of that money from Debt Relief USA. Why? Since the company went bankrupt, it has been excused from paying that multi-million dollar judgment.

On a brighter note, if authorities find out the financial information the company gave the FTC wasn’t true and accurate, the full amount of the judgment will become due. Also, through settlement of a separate action brought against Debt Relief USA by the Attorney General of Texas, consumers did get $3.7 million in refunds from the company’s bankruptcy estate and more money will be distributed soon.

Overall, this case shows us why it’s not a good idea to fall for someone promising something “too good to be true.” In this instance, according to the FTC, Debt Relief USA engaged in deceptive practices by promising consumers that the company could eliminate 40% to 60% of their credit card debt and be out of debt in two to four years. Unfortunately, those promised results very rarely materialized.

High upfront fees are just one reason to stay away from debt settlement companies. Here are other reasons to avoid debt settlement firms.

Read the official FTC press release.

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The Federal Trade Commission is imposing new regulations that will prohibit most for-profit debt relief companies from charging a fee before they have reduced a client’s unsecured debts.

The FTC says the rules, which take effect Oct. 27, will prevent consumers from paying large up-front fees for debt reduction promises that are not fulfilled. They do not limit the size of fees, only their timing.

The debt settlement industry says the rules will force most companies out of business because it will take at least a year to collect any fees.

Read the rest of this article on The Detroit News http://bit.ly/97bEuS

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Question: I have an outstanding debt of $750 with a college which is currently handled by a collection agency. The agency is telling me my debt is now $1,000.  Is it legal for the debt collector to add fees and refuse to settle for my original amount?

Answer: What debt collectors can and can’t do sometimes depends on the laws of your own state, as well as the types of debts in question. For example, debt collectors can’t legally do anything to you (such as sue you in court or get a judgment against you) once the statute of limitations has expired on a credit card debt. But with student loans, there is no statue of limitations, so bill collectors can pursue you forever over those debts. I assume your debt fits into the latter category, since you said your $750 bill was with a college.

Federal law prohibits debt collectors from charging you any thing above the amount you actually owe, unless that’s permitted by the laws of your own state or the terms of your original agreement with your creditor. You said you signed no such contract with your creditor. Double-check the fine print of any agreement or paperwork you have. There are often clauses that give creditors or bill collectors the right to impose additional “collection” costs on borrowers. The federal Fair Debt Collection Practices Act is the national law that governs bill collectors. This law is enforced by the Federal Trade Commission, so if you have any complaints about a debt collector, reach out to the FTC (http://www.ftc.gov).

Also, although there is no federal requirement that collection agents be licensed or registered, many states to require this. Check the laws in your state and see if they require debt collection agencies to be licensed or bonded. A good place to start is this document from the PrivacyRights.org. If your state isn’t on the list, contact your state Attorney General via the National Association of Attorneys General (http://www.naag.org). Ask for the collection agency to show you in writing that it’s licensed and put everything else in writing too, as opposed to just calling you on the phone and demanding payment.

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Considering how widespread identity theft has become (claiming 10 million victims annually in the U.S. alone), it may be a good idea to purchase identity theft insurance. A handful of insurance companies nationwide offer this coverage. Since the average victim of identity theft spends about 200 hours and $1,000 cleaning up the mess brought on by this heinous crime, identity theft insurance reimburses you for a range of things like attorney’s fees, phone bills, and time lost from your job. Coverage usually goes up to around $25,000. Also, some credit monitoring services also include identity theft insurance coverage.

Consider Buying ID Theft Insurance

Buying any form of insurance is really all about the numbers. The same is true for life insurance, health insurance, car insurance, and yes, even identity theft insurance. When you purchase insurance, you’re making a calculated decision. You’re betting, essentially, that a given peril (such as having a car accident or being victimized by identity theft) may in fact happen to you (although you’re hoping that it won’t). The insurance company that sells you the insurance is making a bet too. They’re betting that the danger or peril in question won’t, in fact, happen to you (and they’re hoping it won’t also). At the very least, they’re happing that a specific danger won’t happen to too many of their insured clients. Despite the odds of something happening or not happening, insurance companies know that in any given year, for any type of insurance, they’re going to pay out a certain number of claims. The two big questions really are: who will file a claim and how much of a payout will that person be seeking? When it comes to identity theft, it’s almost a crap shoot on that first question.

Identity Theft Can Strike Anyone – Even the Rich and Famous

Anyone can be struck by identity theft, from the anonymous “Average Joe” to well-known celebrities and very rich individuals. Some famous people who have been victims of identity theft include:

• Ben Bernanke, the chairman of the Federal Reserve Board
• Warren Buffett, the billionaire investor and head of Berkshire Hathaway
• Tommy Hilfiger, the clothing designer and fashion guru
• J.K. Rowling, the author of the Harry Potter book series
• Oprah Winfrey, the popular talk show host and media mogul
• Tiger Woods, the professional golf legend

The Odds Are You May Be Victimized Too

Clearly, identity theft is an equal opportunity hazard confronting us all. Concerning that second question, about how much in claims will be paid out, insurers have a bit more insight. If the numbers on identity theft are to be believed, and current wisdom has it that about 10 million Americans succumb to identity theft each year, then that suggests the average person has a 3% chance of becoming an identity theft victim in any given year. So far, the “odds” work in the insurance company’s favor. But when looking at those numbers over time, the numbers change exponentially. Those 3% odds grow dramatically each year, magnifying the likelihood of being struck by identity theft over a span of, say, 20 or 30 years. In other words, the odds are that you will, at some point, be hit by identity theft. If and when it happens, that coverage could prove invaluable.

Getting Help in the Aftermath of Identity Theft

Hopefully, you’ll never be ensnared by the heinous crime of identity theft. If you are the victim of identity theft, however, act immediately. Alert the credit bureaus so they can put a notice in your credit files. Notify your local police department, so that you have a record of the contact the Federal Trade Commission (877-ID-THEFT or www.ftc.gov), and seek help from the Identity Theft Resource Center (858-693-7935 or www.idtheftresource.org) in San Diego.

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