AmeriDebt Gets $15 Million IRS "Gimme"

AmeriDebt • AmeriDebt • Debticated --- • AmeriDebt Founder Settles FTC Charges for $35 Million • AmeriDebt to Close as Part of FTC Settlement • IRS Hits AmeriDebt for $15 Million • FTC, Texas & Minnesota Sue AmeriDebt • AmeriDebt Retreats Under Legal Assault • Missouri Sues AmeriDebt

September 17, 2004
AmeriDebt is running up some big debts of its own. The latest is a $15 million claim filed by the Internal Revenue Service as part of its crackdown on supposedly not-for-profit debt management firms.

The Ameridebt claim stems from the IRS's expectation that the firm will lose its tax-exempt status. IRS Commissioner Mark Everson says that to qualify for tax-exempt status, a credit counseling firm must limit its services to low income customers or, as its primary activity, provide education to the public on how to manage personal finances.

The Washington Post reported recently that the IRS is investigating 50 credit counseling companies for allegedly taking advantage of debt-ridden consumers while funneling fees to affiliated for-profit ventures.

The Federal Trade Commission filed a multi-million dollar lawsuit against Ameridebt last November, charging it with using deceptive practices that masked high fees and hid its connections to for-profit enterprises. Illinois, Missouri, Texas and Minnesota are also suing the company.

Following the state lawsuits, AmeriDebt laid off more than half its 50 employees, gave up some of its Maryland office space and said it would stop accepting new clients.

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