Authorities continue to crack down on so-called debt settlement firms, but still their ads appear on radio and television, promising consumers they can solve their debt problems -- for an upfront fee.
In Florida, Attorney General Bill McCollum says he's stopping two such firms, at least temporarily. McCollum says his office has obtained a temporary injunction against Texas-based Credit Solutions of America, Inc., and Credit Solutions of America, LLC.
A Florida court ruled that these companies are prohibited from charging Florida residents an unfair up-front fee for purported debt settlement services. The ruling was issued from the bench earlier this week, and a written order will follow.
"Financially strapped Florida consumers are turning to these so-called debt-relief businesses as a last resort to try to regain control of their finances, only to lose more money in excessive up-front fees with little or no relief from their debt," McCollum said. "This ruling represents significant progress in reigning in these abusive practices."
Advance fees targeted
This is the second temporary injunction obtained by McCollum in recent months prohibiting debt settlement firms from charging Floridians unlawful fees. In April, Clearwater-based American Debt Arbitration (ADA), and Arizona-based Nationwide Asset Services, Inc. were similarly prohibited from charging unlawful fees.
The lawsuits against Credit Solutions and ADA were both filed in October 2009, and each petitions the court for full victim restitution, permanent injunctive relief, and civil penalties for violation of Florida's Deceptive and Unfair Trade Practices Act. The Attorney General's Economic Crimes Division is pursuing these enforcement actions, and litigation remains active.
Just last month, the Federal Trade Commission (FTC) announced the adoption of a new rule to protect consumers in credit card debt who seek debt relief help. Consistent with changes recommended to the FTC, beginning this October, for-profit companies that sell debt relief service by phone will be prohibited from collecting any fees before successfully settling or reducing a consumers outstanding debt obligation.
Additionally, starting in September, the FTC will require companies to disclose how much the process could cost and how long it may take consumers to see results.
