On March 7, the Federal Trade Commission (FTC) announced that the United States District Court for the Eastern District of Texas entered a stipulated order prohibiting a national debt relief provider from making misleading claims about its debt relief services. The court also entered a $9 million judgment against the defendants, with all but $510,000 suspended based on their financial conditions.
The complaint, brought by the FTC, alleged that defendants violated section 5(a) of the Federal Trade Commission Act (FTC Act), 15 U.S.C. § 45(a), and the Telemarketing Sales Rule (TSR), 16 C.F.R. Part 310. The FTC claimed that defendants’ direct mail, website, and phone solicitations exaggerated potential savings through its debt settlement services, and misrepresented the success rate of typical customers. According to the FTC, defendant’s advertised testimonials reflected atypical customers without any disclaimer about typical results that a consumer should expect. The solicitations also allegedly falsely claimed that participating consumers could cut their debt in half or “be debt-free in around 36 months.”
The FTC also alleged that Defendants advertised a “special purpose savings account” controlled by the customer and “simply” monitored by the defendants. Instead, defendants allegedly withdrew monthly fees from this account. The FTC further alleged that defendants violated the Telemarking Sales Rule by charging fees in advance of providing services and without providing a face-to-face sales presentation by a knowledgeable representative with adequate knowledge about the program.