AmeriDebt, Inc. will shut down its debt management operation as part of a settlement of Federal Trade Commission charges that it deceived consumers into paying at least $170 million in hidden fees.
The FTC charged that the company misrepresented that it was a nonprofit credit counseling organization that would teach consumers how to manage their finances for no up-front fee.
The settlement requires AmeriDebt to transfer all current clients accounts to a third party and bars the company from participating in any aspect of the credit counseling business in the future.
The settlement does not include other defendants in the case. The FTCs case against Andris Pukke, DebtWorks, and the relief defendant, Mrs. Pukke, will continue.
In a complaint filed in November 2003, the FTC charged that AmeriDebt, Inc., DebtWorks, Inc., and Andris Pukke deceived consumers with claims that AmeriDebt was a nonprofit organization that could help consumers get out of debt without an up-front fee. The FTC charged that, rather than operating for charitable purposes as advertised, AmeriDebt was funneling profits to affiliated for-profit entities, including DebtWorks and Andris Pukke.
According to the FTC, AmeriDebt deceived new clients into making a voluntary contribution to enroll in the program. The FTC alleged that AmeriDebt kept these initial contributions as fees without consumers knowledge, rather than disbursing the money to consumers creditors as promised.
The FTCs complaint also charged that, despite promises to teach them how to manage their money to avoid future debt, the defendants simply enrolled all customers in debt management plans (DMPs). In the DMP, consumers made a single monthly payment to AmeriDebt for all their unsecured debts; the payment was then to be disbursed to the consumers creditors.
The FTC charged AmeriDebt with deceptive practices and also with violating the Gramm-Leach-Bliley (GLB) Act by failing to provide consumers with required privacy notices. In addition, the complaint named Andris Pukkes wife, Pamela Pukke, as a relief defendant.
In June 2004, AmeriDebt filed for bankruptcy protection in the U.S. Bankruptcy Court for the District of Maryland. At the request of the FTC and others, the bankruptcy court removed existing management and appointed a Trustee to oversee AmeriDebt.
For updates to the case, the FTC consumer hotline number for AmeriDebt is: 1-877-862-0886.
