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AmeriDebt Fraud
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Posted by Ross
(207.44.154.35) on November 19, 2003 at 17:48:40:
Credit counseling frauds.
For the owner’s profit, Non-Profit status. NEW YORK Reuters — The Federal Trade Commission Wednesday filed a lawsuit against AmeriDebt, saying the consumer credit counselor misrepresents its fees and its status as a nonprofit.
The Germantown, Md.-based company, a counseling service for consumers having difficulty paying their debts, already faces lawsuits in at least four states.
In its complaint filed in federal district court in Maryland, the FTC is seeking to block AmeriDebt from misrepresenting its fees, services and nonprofit status, and require that it disclose upfront fees and provide privacy notices. It is also seeking "consumer redress."
On Nov. 1, AmeriDebt stopped enrolling new members and advertising, blaming "negative publicity." A week earlier, it said it would lay off most of its staff, and focus on its existing 92,000 clients.
The FTC said AmeriDebt charges upfront fees for its services, despite claims to the contrary in its advertising.
It also said the company does not teach consumers how to handle their finances but instead enrolls them in "debt management plans" under which they make monthly payments for their debt, which then get disbursed to creditors.
The FTC also said AmeriDebt operates to make money for affiliates including DebtWorks Inc, which it said serviced customer accounts through last year, and Andris Pukke, who runs DebtWorks and was instrumental in founding AmeriDebt.
"We will not allow consumers to be duped into 'contributing' hundreds of dollars to these so-called nonprofits," said Howard Beales, director of the FTC's bureau of consumer protection, in a statement. "Consumers' money didn't go to creditors. It just ended up lining the pockets of the defendants."
An AmeriDebt spokeswoman declined further comment, saying she had not seen the complaint.
Sellers did not immediately return a call seeking comment.
Pukke could not immediately be reached.
Separately, the FTC said Ballenger Group LLC, which serviced AmeriDebt accounts this year, agreed to pay $750,000 in connection with its role with the company.
Illinois sued AmeriDebt in February, amd Missouri sued in September. Minnesota and Texas are also filing lawsuits against AmeriDebt on Wednesday, the FTC said
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