FTC Settles With Debt Reduction Companies

Debt-Set and Resolve Credit Counseling sold debt reduction services through Web sites and television and radio advertisements with claims such as “Reduce Debt Now” and “Eliminate Harassing Calls.”

When consumers called a toll-free number they were encouraged to enroll in a “debt consolidation program” if their unsecured consumer debt was up to one month overdue, or a “debt settlement program” if overdue longer.

The FTC sued them for violating federal regulations by falsely promising to obtain lump-sum settlements, such as “fifty cents on the dollar” or “50 to 60 percent” of consumers’ total unsecured debt, or to negotiate with creditors for lower interest rates.

The FTC complaint also accused them of claiming that they would not charge consumers any up-front fees before obtaining the debt relief and that participation in their program would stop creditors from calling or suing them to collect debt.

The settlement prohibit the defendants from engaging in the violations alleged in the complaint, and require them to disclose truthfully key terms of the program: all fees and costs they charge, including when and how such fees and costs will be paid by consumers; the approximate time period before settlements will be achieved; and the fact that consumers’ balances typically will increase before settlements for all accounts are achieved.