When bills begin to pile up and collection calls start coming in, people can become so desperate to get out of debt they will believe anything. Some turn to ‘quick-fix’ debt relief companies that promise to solve their financial problems. But for many, not only does the relief never come but it puts them even more in debt- sometimes out thousands of dollars.
The Federal Trade Commission announced a $7.9 million settlement with DebtPro 123, a debt-relief agency that scammed people by making false promises. Here is the anatomy of how the scam worked:
Promotion: DebtPro 123 is not alone. Look for company names intended to lure vulnerable debtors. These agencies will make you think they feel your pain and promise to eliminate your debt easily in just a couple of years.
Pitch: According to the FTC’s complaint, DebtPro 123 told consumers that its “debt resolution program would completely resolve consumers’ credit card and other unsecured debts (including department store accounts, personal loans, medical bills, student loans, and accounts with collection agencies).”
It also boasted: “DebtPro will reduce a client’s total debt by 70 to 80 percent on average including all fees” and “With settlements as low as 10 percent, this means when all is said and done, a client’s savings could be as much as 20 cents on the dollar including our fees.”
Remember the old adage- When it sounds too good to be true, it usually is.
Two-phased program: In the first phase, customers put money in a “Creditor Fund/Settlement Account.” They were told they needed this money for negotiations with their creditors. In phase two, customers were promised that the company was working on their case to settle with creditors and get rid of their debt.
During this time, customers were advised to stop paying their bills and to cease all communication with their creditors. Consumers later found out that nothing had been done on their case. Instead, interest, penalties and fees began to pile up.
Strategy: The real plan was to make money off desperate people. “For many consumers, more than half of their monthly payment went towards defendants’ fees,” said the FTC. “For consumers who were in the program longer than 18 months, defendants also charged a $49 monthly ‘maintenance fee.’ ”
More failed promises: Debts were not reduced quickly. In fact, many times, the debt-relief company did not start settlement negotiations until after the client had received letters from creditors warning of an impending lawsuit for failure to make debt payments.
In the end, people ended up more in debt, some lost their homes, and others had their wages garnished.
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If you are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.
